Why the NBA Is Eager to Say Some Teams Are Losing Money

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Adam Silver.Photo: David Paul Morris/© 2015 Bloomberg Finance LP

The NBA is in a strong place right now. For proof, you could look at the ratings for this year’s Finals, which were the highest since Michael Jordan won his last title with the Bulls. Or at the monster TV rights deal the league signed last year with ESPN and TNT worth $2.66 billion per year. Or you could just listen to NBA commissioner Adam Silver, who on Tuesday described the league as “very healthy.” And so it raised some eyebrows when Silver also said Tuesday that “a significant number of teams” in the NBA were losing money.

We’ve heard this sort of thing before: Last year, Grantland’s Zach Lowe reported that nine teams were expected to lose money on the 2013–‘14 season. But while it’s true that some teams spend unwisely — we’re looking at you, Brooklyn — there’s also likely some creative accounting involved here, and with labor negotiations coming as soon as 2017, the league doesn’t want to seem too strong, or else it’ll be harder to win concessions from the players.

When the league’s collective-bargaining agreement last came up for negotiation four years ago, owners wound up with a larger share of basketball-related income than they’d had before. If the league is seen as totally healthy and profitable, the players will surely want to increase their piece of the pie this time. And so when Silver reveals that a number of teams are losing money, he’s doing so with a purpose. It’s part of that negotiation — or perhaps, more accurate, a sort of pre-negotiation.

The league and the union can both opt out of the current CBA in 2017, and the next negotiation could be a war. Michele Roberts, who became head of the players’ union last year, has thus far been “leading with a machete,” as Will Leitch wrote in New York in November. She’s questioned the major facets of the league’s operation, from the existence of the salary cap to the minimum age for rookies to, yes, the percentage of revenue that players receive.

It’s no surprise, then, that the union issued a response to Silver’s comment about teams losing money. The response read in part:

Virtually every business metric demonstrates that our business is healthy. Gate receipts, merchandise sales and TV ratings are all at an all-time high. Franchise values have risen exponentially in recent years, and the NBA has enjoyed high single digit revenue growth since 2010-11.”

That last part is important. Even if some NBA teams can show they’re losing money — not that they’d open their books publicly — owners are doing just fine, since there are ways to bring in revenue that don’t necessarily affect the ledger of the team itself. (If an owner also controls a team’s home arena, for instance, that also brings in money.) But ultimately, franchise values rise over time, so even an owner who did take a loss in a given year (or even years) should be able to cash out for a handsome sum, as long as he or she hangs onto the team long enough.

Perhaps, as Deadspin writes, Silver is trying to caution the players from opting out of the deal at all. But from the early days of her tenure as head of the union, Roberts has spoken out about a more player-friendly NBA. Since few believe that owners could really be struggling these days, she’s hoping public opinion will be on the union’s side. We may be two years from the earliest possible end of the current CBA, and both sides have said they don’t want to negotiate in public. But in reality, they’ve already started to do so, if only a bit indirectly.