Refuting the 'Suffering Small Market Team' Myth

It's in owners', players', media and fans' best interest that the league be competitive because of things on the court and intelligent decisions off the court. That the game isn't rigged by dishonest officiating, but also not by the depth of a few pockets.

In fact, success in the NBA is little different from the success of businesses related to talent -- physical and mental.

Pacers star forward Danny Granger cites revenue sharing as a suggestion to make the league better by raising the level of competition, feeding the illusion that small markets can't compete in the NBA.

And, yes, this is an illusion, Adam Fuseld wrote Wednesday at Business Insider:

Of course, once he mentions "the bargaining process" the siren sounds. His stance is a position that the NBPA shares. Perhaps Granger is legitimately concerned about the Pacers' and Bucks' financials, but more likely, he's focused on his own bank account. Revenue sharing, in theory, gives more teams a chance to bid on free agents, thereby driving up free agent salaries. Granger is just touting the NBPA agenda.

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But the data shows that those deep-pocketed owners in New York and Los Angeles might as well keep their cash. The size of the market isn't what makes teams profitable, and the size of the payroll isn't what makes them winners.

According to Forbes data, four teams in top-15 U.S. markets lost a combined $125 million from 2005 to 2009, the last years of available information. Meanwhile, the Lakers and the Bulls made tens of millions, but so too did franchises in Sacramento, Utah, San Antonio, and Cleveland.

Check this out:

nba-financials.jpg

As you can glean from these charts, no one statistic correlates with operating income. But you can be sure that spending more money than your competitors do to obtain fewer wins is an unprofitable proposition.

Washington, in the nation's ninth largest media market, had a nearly identical won-loss record to Indiana over the five-year span, but earned $87 million more in operating income. The Wizards generated slightly more income, but also spent $7.6 million less each year on player expenses. If the Pacers simply reduced their payroll to equal that of the Wizards, their $26 million loss would transform into a $12 million profit.

In this five-year span, eight franchises - Phoenix, San Antonio, Denver, Detroit, New Jersey, New Orleans, Chicago, and Utah - finished with more wins than Indiana despite paying substantially less in player salaries between 2005 and 2009. Of those teams, only the Nets lost more than $1 million per year.

Fuseld goes on to note the salary cap and an organization culture of giving a shit makes "efficiency is attainable in any market."

Revenue sharing in Major League Baseball hasn't in any way made organizations who take the most intelligent approach to accumulating wins any more or less likely to spend more money in a way that makes them more likely to win, he added.

Teams with smart front offices make smart decisions. Smart public relations in touch with their market tap into the larger potential shares of their market. Good players are better than bad players.

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