"Competitive balance? NBA has always been about dynasties"

In this article, David Aldridge of NBA.com explains in detail that "[t]he NBA has always been a league of dynasties, with few teams able to break through and challenge the hegemony of the dominant franchises."

Guess what? He's right.

As Aldridge wrote, "judging competitiveness by championships won, the NBA has never been competitive."

Man, I couldn't've written it any better myself.

To argue otherwise, according to Aldridge, "ignores six decades of history."

And that, folks, is why there is no argument to be had.

7 months ago AK1984 12 comments 0 recs |

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I don't see why the future has to reflect the past.

Not that I’m saying the league can be turned into a level of competitive balance. But the fact it wasn’t in the past isn’t a reason not to try now, if they think they can do so.

by Timmay! on Oct 17, 2011 9:54 PM PDT reply actions

exactly

saying “it’s always been this way” then raises the obvious follow up “should it continue to be this way? is it desirable?”

I know the arguments are that having dynasties and elite teams (but only in the “right” markets of course) make the NBA more money – I won’t dispute that has always been the case.

But the rest of the world is changing outside basketball as well. Fans in those no hope franchise cities kept coming back anyway, which I believe is increasingly less likely to be the case (we are seeing this in certain NBA cities already). there is MUCH more competition for entertainment dollars these days – and it may well be that fans who realize there team has no hope just may decide to move on. Additionally, people move around more and more, which along with other social change factors, lessons those life-long fandoms that people grow up with.

I think it’s prudent and wise for the NBA to look into whether more cyclical competitiveness might just be better for the league going forward into the future.

"Well, you can always sell your team."

by douglast on Oct 17, 2011 10:46 PM PDT up reply actions

The league will change.

The decisions to grow to 30 franchises guaranteed it. The new ownership that is coming into the league also guarantees it. Like it or not, they are already pointing to the future. In that future, they are going to want salaries controlled and more realistically CAP’d not soley to guarantee a level playing field, but to ensure profits. And only by controlling profits and not enabling teams to turn the search for talent to win championships into an arms race of escalating salaries will this happen. This is what we’ve seen with the NFL and the NHL, and it will continue in this direction.

When the NFL began moving in this direction in the early 90’s, it took 4 or 5 years for the future to evolve. The 49’s with Debartolo had consistently played the Mark Cuban game of manipulating salaries to stockpile talent and win championships, but as the new rules came into play, they fell into decline as they had too much salary, and it took years to get it off their books.

The era of ownership being willing to lose (invest) whatever, millions more into these teams on an annual basis than they are able to generate in income is coming to an end.

Some don’t like this. But it will happen. The argument will be that the talent will still go to the large markets because if their salaries are limited, they can get more exposure and more money from endorsements, advertising, etc., has some validity, but if true, it will still not change the direction that ownership is moving to, because the issue is not championships, its profitability – and they write the checks.

I suspect the confusion we sometimes see is when we throw up the issue of parity, and as fans, want to believe we can win the big game. In reality, it will increasingly come down to first profitability, and then championships – if you’re an owner.

by ebenc on Oct 18, 2011 4:54 AM PDT reply actions

Further

The 76er’s just sold for $280 million to Joshua Harris. The article reported that when adjusted for inflation, Comcast made a 57% return on their $130 million investment on the team, which they acquired in 1995. Not only is the purchase price below the $300 million we hear about, but when you divide that return by the 16 years Comcast owned the 76er’s, the return per year is 3.6%.

However, the 76er’s were also reported to be on of the teams losing money for some unknown number of years.

Even if not factoring in losses, 3.6% is a poor over-all return. And Harris did not buy this team to earn 3.6% a year.

So, yes, whatever the history of the league, it is going to change.

by ebenc on Oct 18, 2011 5:05 AM PDT reply actions

great points

let’s assume you can run at team at break even. 3.6% yearly return on a $300 million investment is TERRIBLE.

and of course, it you are having to dump a few million dollars into the team every year as well, then it’s likely a negative return situation.

"Well, you can always sell your team."

by douglast on Oct 18, 2011 8:33 AM PDT up reply actions

A basketball team is not a conventional investment.

3.6 percent isn’t bad when in the end you have something as tangible as a basketball team. That is, compared to some of the exotic investments that have been dreamed up in the past 10 years.

by Oden Mad, Oden Smash! on Oct 18, 2011 9:31 AM PDT via mobile up reply actions

I don't think that makes sense

But I would think of a basketball team as a low-risk investment, albeit a large one, so yeah, low returns would make some sense. Adjust for inflation though, and it’s close to zero return, which seems terrible, like douglast said. Still, unless you’re selling precious metals right now, you’re lucky to be getting much return at all. Buy low, sell high…anyone who is selling anything right now is trying to cut their losses because they can’t afford anymore.

Phase 1: Collect underpants
Phase 2: ???
Phase 3: Profit!

by HailOden! on Oct 18, 2011 10:27 AM PDT up reply actions

It's really a strange setup

It’s undoubtedly a business, but there are essentially no businesses that get bought and sold by individuals any more so they’re constantly being compared to investment vehicles. Removing the “individual owner” requirement, though, and I don’t think anyone would say that Yum Brands/Pepsico is entitled to make a profit on their acquisition of Taco Bell (if they ever decide to sell it) or Fiat is entitled to a profit on their acquisition of Chrysler, or that either business should be prevented from incurring operating losses by their owners, and Chrysler even has to deal with vaguely similar labor relations issues that NBA franchises do.

And yet, people are constantly comparing NBA franchises solely to investment vehicles like treasury bonds, that they are very dissimilar to. I’d agree that the current NBA labor deal makes things too difficult to turn a profit for many franchises, but at the same time, I think it’s a little absurd to say we need to guarantee every team gives a return similar to that of an investment vehicle, regardless of the competency of their management. Owners like Robert Sarver and Dan Gilbert stupidly overpaid for their teams and have run them into the ground to various degrees. Why should mismanagement to that scale be immune from losses? (I know it’s moot since the owners control negotiations, but I do think this idea of NBA franchise = treasury bond has been stretched a little too far and needs some push back).

by Royster on Oct 18, 2011 10:42 AM PDT up reply actions

I agree with you, but it cuts both ways

I hear a lot of anti-owner arguments being bolstered by “well, their yearly losses are offset by the money they make selling their franchises”.

You can’t use that argument, then dismiss how dismal the return really is. The reality is, owners don’t buy these teams to make money yearly or on the sale of the team down the road. I’m fine with that. But I think the owners deserve to have a system where they can compete without dumping tens of millions of their non-NBA money into the team every year either.

"Well, you can always sell your team."

by douglast on Oct 18, 2011 11:12 AM PDT up reply actions

Pepsico did not buy Taco Bell to lose money or break even

anymore than Fiat bought Chrysler to lose money or break even. They sell these transactions to their stockholders based on their ability to operate them profitably. Granted, they’re not entitled to profits, but they don’t buy them if they don’t think they can do so either.

And 3.6% is not a good return for any business. You can buy Class A commercial real estate all day and get a guaranteed return of 5% or even 6%, and you take no risk. That’s why Pension funds buy such assets.

But guaranteed? Not at all. Including NBA franchises.

I happen to believe that a continuing underlying issue is that the NBA expanded into too many markets, and that they also try to keep the prices higher at the sale than justified. We see these $300 million to $360 million numbers all the time, yet in most businesses, you have a much wider spread of value than that. LA with its TV contract should clearly be worth $500 million or $600 million, whereas Charlotte maybe $200 million – or less. Typically, businesses are valued based on their ability to generate sales from which they get profits. And, by definition, the larger the market the higher the value. The appearance for the NBA is that it doesn’t work this way.

In any case, the single largest item in the budget is player salaries, and the NFL and NHL have created new models, and it appears the NBA owners decided to move in that direction.

by ebenc on Oct 18, 2011 11:44 AM PDT up reply actions

Except that owners typically don't have shareholders to answer to

And thus are allowed to make all kinds of imprudent financial decisions that would never fly in corporations, like signing Rashard Lewis or Arenas to maximum deals, or paying $450 million for a business valued independently at $360 million (Forbes, an independent evaluator that the NBA paints things much better than they are). Maybe Steve Lacob knows something everyone else doesn’t and really thinks the Warriors are worth the huge premium he paid to outbid Larry Ellison, but more likely he just wanted to own a basketball team in a major metropolitan area. Since the owner enabled monopoly on “broadcast territory” for current teams severely limits the supply of major market teams, you generate an artificial scarcity, driving up prices. As I said, the framework should be laid down that well-run teams are ABLE to be profitable, but all the noise from the owners is implying they want teams to be GUARANTEED to be profitable, both in terms of operating costs and franchise appreciation.

As an aside, the only franchises to be sold recently at inflated prices have been supposedly unprofitable ones. Who knows how lucrative a super profitable franchise like the Bulls may be if Reinsdorf ever decided to sell?

Players (and agents) should absolutely be held accountable if they’re as religious about 53% as the league claims, but I hold just as much scorn for owners like Jerry Reinsdorf, Clay Bennett and Les Alexander who implicitly back owners that incompetently manage their franchises and then whine about not getting rewarded for it and claim that anything north of 48% or so is unsustainable.

by Royster on Oct 18, 2011 12:47 PM PDT up reply actions

In the end,

the NFL and the NHL have established the basis going forward for the NBA. And salaries are the principal expense that the owners are dealing with. The issue is less appreciation, in that the value of businesses are generally based on their profitability. You will get the value if you are profitable. Owners who overpay will always be penalized when attempting to sell. The purchase of the 76er’s for $280 million vs. the purchase of the Warriors for $450 million ensures that. There are a group of owners who over-paid, but I suspect the majority did not. Assuming one can even come up with a rational for the valuation of these franchises that meets normal business practices. In any case, it’s been clear for 21 months now that the owners were simply going to do two things. One was to move the split down to 50/50 or 49/51, and the second was to restrict the ability of owners to pay substantially more than the split amount in salaries.

There are examples of owners who’ve made poor decisions, and there are more who’s names never seem to surface when such discussions are put forward.

In general, all other businesses control their cost of labor as an essential element of ensuring that if they run the business well, it will be profitable. This still doesn’t guarantee profitability, however. Winning teams attract more customers than losing teams in general, and will be more profitable – and cable TV rights vary according to the size of one’s market. As a result, some teams will always be more profitable than others.

I would also point out that I don’t know, and neither do you, what a rational split of revenue should be. Perhaps it’s 48/52, or 50/50, or whatever. For the majority of owners who are not poster children for poor decisions, their profits given their markets – even if they have a good product – will vary.

Small market teams likely need one revenue split, and large market teams another. The top tier will make more money – perhaps too much in the context of these splits. But what seems to be driving this is the 20 or so small or smaller market teams.

by ebenc on Oct 19, 2011 6:23 AM PDT up reply actions