The 76ers got a lot of criticism for announcing they were going to cut wages of employees, and they quickly reneged after Embiid said he would donate $500.000 to help the workers affected. It’s safe to say most NBA fans believe teams owned by billionaires should take the financial burden of the season being suspended and not distribute it to their employees. But how many teams actually make a profit?
The 76ers were a test run for the rest of the league, and once they got so much heat, other teams pressed pause on similar plans. The Utah Jazz just pressed play. The Jazz sent out a statement announcing layoffs as part of broader corporate cutbacks amid the coronavirus pandemic. One of the rare occasions being in Utah is a comparative advantage. As we wrote yesterday, the past week brought developments that made canceling the season the most likely outcome at this time. If there is no chance of making at least some of the money teams were counting on, cutting wages and layoffs will happen.
We have the example of Steve Ballmer saying the Clippers will cover not only employee costs but also keep all their commitments to partners, for instance, $100k for playoff t-shirts they ordered from a vendor. Ballmer did point out several times he did very well in life and can take the hit. Not all owners will think that way, especially ones who’ve been losing more than NBA games in recent years.
In one of the recent episodes of “The Hoop Collective Podcast,” Brian Windhorst shared that he has the full NBA financial reports for the ’16/’17 NBA season. Someone leaked him everything, the balance sheets for all 30 NBA teams, and he decided to share some of the data to help us understand how much do teams make or lose?
“The Lakers, this is their net income. That includes the taxes that they would have to pay to the government or whatever their net income, and that was the year they did not make the playoffs, was $163 million. They had to give $49 million of that to their partners in revenue sharing, And they took home $115.4 million profit for that year. At the other end of the spectrum, the Detroit Pistons lost $63 million that year.”Brian Windhorst, The Hoop Collective Podcast
The NBA has a revenue-sharing mechanism that transfers money from the big market teams (that are usually making a profit) to the small market teams. But as we can see, even that doesn’t cover the losses teams can make.
$63 million is a lot of money, but I’m not going to shed any tears for Pistons owner Tom Gores. Forbes estimates his wealth at $4 billion; he purchased the team in 2011 for $375 million – they were valued at $1.45 billion in 2020. We have to point out those valuations would be significantly different today, but he’s still not worried about paying the bills.
All owners saw the valuations of their teams explode in the past two decades, but that’s potential earnings that materialize when you sell. Windhorst didn’t share info for all the teams, but we can assume plenty of small-market teams lose money at the end of a season. The Jazz are just the first to come in many that will quietly announce some model of cutting costs that will probably include how much they pay employees. Most of them didn’t get filthy rich by being kind, don’t expect that to change.
P.S. This gives you more insight into why teams strongly dislike the Lakers. Not only do they get all the free agents because they are in Los Angeles. They also make $115 million with a 26 – 56 team.