The NBA hasn't just been fighting the Players Association over a new Collective Bargaining Agreement. It has also been fighting a pretty major PR battle against the media and public over how truthful all these claimed losses are.
The league says 22 of 30 its 30 teams lost money last season. The league says in total, it lost about $370 millon, give or take. The league says owners are currently operating in a broken system that makes it extremely difficult to turn a profit, especially if you're not in a major market.
Some are having a hard time believing that. After a NY Times piece earlier in the week questioned how true some of the league's claims were, things only ratcheted up another notch. The league responded with a rebuttal, providing more facts and numbers in an attmept to quell some of the skepticism. The league claims $1.8 billion in losses over the past six years, but as many have noted, it's kind of hard to just take the league's word for it. We need to see stuff. Like open books.
Well, CNBC's Darren Rovell got ahold of the New Jersey Nets' books from last season and according to the report, the Nets suffered substantial losses over the past few years. (Click here to read the entire document.)
For the 2008-09 season, the documents reflect that the Nets lost $77,227,184. The team earned $78,783,677 in operating income, including $26 million in ticket sales and $32.5 million in total broadcast revenues. Operating expenses were $147 million, off mainly $66 million in salaries and $33.3 million in "amortization of intangible assets." When the team's $13.3 million interest expense is added, the Nets loss for the 08-09 season hits $77.2 million.
So there's that. According to the audited books, the Nets lost almost $80 million for the 2008-09 season. That's a lot of money. But there's still some skepticism over it all because sometimes bookkeepers are creative with their accounting. Rovell explains:
Now let's break it down for you. Assuming the operating income is accurate, there are three questionable line items within the operating expenses that are worth exploring. The most important is the $33.3 million amortization, since it's the largest number and often the number that the players union says is creative accounting.
So let's explain it first and then how it's reported. When a person buys a team, the price paid is distributed throughout various expense lines, the amortization line is one of those places. It's not voodoo accounting, it's actually part of generally accepted accounting practices. But the point is, that the NBA doesn't include that line item when it breaks out the losses to the union. So subtracting that number, the Nets loss that season, as the owners reported to the union, is probably closer to $44 million.
Rovell also notes that two other numbers could be disputed. That includes the $2 mllion in depreciation and the $13.4 million in interest. The union claims neither of those should be included in losses. But while the players dispute those being included, reality is, those are real losses. The value of the franchise is part of it all because it reflects the cost of expenses related to growing revenue. In terms of interest, that's actual money out of the owner's pocket so of course it should be included. It might not be a "real" loss in the same terms of expenses being more than revenue but as part of the whole pie, it counts.
One more note by Rovell to wrap it up though:
Finally, let's explore the bigger number. For the 2008-09 season, NBA owners told the players they lost a single-year record $370 million. Not only that, a record 24 teams lost that amount of money. Consider that amount of money an aggregate loss. Sources have told me that those 24 teams lost approximately $485 million, which leaves the six profiting teams with a net gain of $115 million.
So now take the Nets loss of $44 million that year. That means that the Nets share of the losses were nine percent of the total losses. If all teams used generally accepted accounting practices, is it possible that 23 other teams lost an average of $19.1 million that year? Of course it is.
What we have is another team where the financial picture is becoming clear. But that doesn't mean it's still not blurry. This is one of 30. There's a reason the league is locked out and it's because the players aren't buying everything the owners are selling. Like I've said before, the system has issues. No one would deny that. The players accept that as they've flexed on being willing to roll back their percentage of Basketball Related Income.
The matter is how deep the problem goes and how much give there has to be to fix it all. But the more information there is, the better things will get. Better PR for the league, better information for the public to digest, more pressure to make something happen.