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[Dead Spin] How (And Why) An NBA Team Makes A $7M Profit Look Like a $28M Loss

Discussion in 'NBA Dish' started by jsmee2000, Jul 1, 2011.

  1. jsmee2000

    jsmee2000 Contributing Member

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    This post is for those of you that enjoy finances or discussions regarding the lock out. For the TLDR ppl. f@ck off! :cool:

    On the site, they also have a couple of financial statements for NJN (05 and 06).

    http://deadspin.com/5816870/exclusive-how-and-why-an-nba-team-makes-a-7-million-profit-look-like-a-28-million-loss

    Exclusive: How (And Why) An NBA Team Makes A $7 Million Profit Look Like A $28 Million Loss

     
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  2. jsmee2000

    jsmee2000 Contributing Member

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    http://www.atthehive.com/2010/12/7/1862259/the-hornets-financial-statements-the-hornets-have-been-unprofitable

    The Hornets' Financial Statements: The Hornets have been unprofitable for a long time

     
  3. TheRealist137

    TheRealist137 Member

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    This is why I chose finance over accounting as my major. Accounting is all illusions, the rules are arbitrary and I hate learning about some rules that a bunch of people made up. Finance is about "real" money and what a business can do with it, accounting is "fake" money designed to satisfy GAAP made by some random people.
     
  4. Damion Laverne

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    Damn! I chose accounting as my major. But there is some BS in there, including "loss on players' contracts". Players are not real estate.
     
  5. Air Langhi

    Air Langhi Contributing Member

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    RDA is the most awesome thing ever. I heard about that a long time ago and I realized pro sports is a very profitable business.
     
  6. Fyreball

    Fyreball Contributing Member

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    That's the point of the article. It's pointing out how RDA allows owners to CLAIM players as depreciating entities when in fact, they are not. It's how somebody like David Stern can, with a straight face, say that the league as a whole is losing money.
     
  7. MiddleMan

    MiddleMan Contributing Member

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    They are Assets.
     
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  8. geeimsobored

    geeimsobored Contributing Member

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    [​IMG]
     
  9. emjohn

    emjohn Contributing Member

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    Stern will never admit it, but moving the Hornets to NO was a colossal mistake, and not letting them stay in OKC (for Katrina PR reasons) was just about as bad.

    No one in the league will say it, but Stern absolutely condoned the OKC group coming in and moving the Sonics. Seattle was doing terribly because of the way the Key Arena contract cut them out of so much local revenue.

    And the number of teams that were borrowing alarming amounts of cash from the NBA would surprise folks.
     
  10. DonkeyMagic

    DonkeyMagic Contributing Member
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    financials are based on those rules though, no matter how silly or wrong they are. If you are going to be a great financier...you better know the accounting behind the numbers you're working with in finance.

    Think of it like this....you can claim that finance is "playing the game" and accounting is keeping the score. Well, how do you know you've won if you don't understand how to keep the score?
     
  11. TheRealist137

    TheRealist137 Member

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    While that might be true, it's still boring as heck.
     
  12. MemphisX

    MemphisX Contributing Member

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    However, the Hornets losses are self inflicted wounds due to the owner killing a great market with great financial support. Even then it took a natural disaster of historical proportions to make them operate on such a poor level in one of the smallest NBA markets.

    If you want to continue thinking the NBA is losing money when revenue, viewership and attendance are at record levels ... Be my guest.
     
  13. Cohete Rojo

    Cohete Rojo Contributing Member

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    This is why I chose George Carlin over finance. Finance is all bull****.:grin:

    In all seriousness: bread and games.
     
  14. rrj_gamz

    rrj_gamz Contributing Member

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    Agreed...IMHO, they are a revenue producing assest...If that asset "breaks", or fails to perform, the owners are still obligated to pay. You are able to depreciate assets...the fact that it's non-cash is irrelevent regarding an item on income statements...Cash flow is totally different but that's a different discussion...as is return on investment...

    It's not a hustle...Depreciating assets is a GAAP. period...
     
  15. melvimbe

    melvimbe Member

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    How can you depreciate an asset that you don't own? These are not slaves, they're employees. It's like Apple claiming a loss because Steve Job's health is failing. Or perhaps claiming a loss in depreciation for a car your leasing. Nonsense.

    And yes, I understand that that's GAAP, and regardless of whether it's considered an acceptable practice to the gov't and possible investors, I would not expect the players to accept that junk.

    Regardless of that, I do believe that many teams are in financial trouble. Why else would we see so many teams make trades for financial reasons? Why do we see such a wide variance in payroll between the haves and the have nots?

    If I were the players, I would negotiate to remedy the situation where players have contracts way above their value. Perhaps that's a rookie scale change, perhaps raising the minimum age, maybe a hard cap. Don't know. At the same time, I would want to have some say in some of the NBA's expenditures. Player's don't have a say in funding the WNBA and other expenditures that don't support the core business, and they should if it's going to factor into negotiations of their salary.

    As has been said many times, looks like the two groups are far apart, it's going to take some time for concessions to come through, and for both sides to recognize the other's issues. Unfortunately, it looks like the owner's can wait it out longer then the players.
     
  16. RunninRaven

    RunninRaven Contributing Member
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    Yeah, but like the article stated, if a drafted rookie is playing above his value because he improves over the course of his first contract, does that players value "increase" on the books and the team has to pay more taxes as a result? No, they don't. The NBA owners are having their cake and eating it too. If you want to claim players are depreciable assets, shouldn't also allow that they can appreciate as well?

    PS. I'm not a finance or accounting person, so I might just being talking out my ass here. Just sounds logical to me.
     
  17. DwangBoy

    DwangBoy Member

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    I guess you never learned about the 'Statement of Cash Flow'..
     
  18. DonkeyMagic

    DonkeyMagic Contributing Member
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    True.
     
  19. Icehouse

    Icehouse Contributing Member

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    This accountant thinks it's funny to hear a finance guy say they deal in real $$ and not illusions, especially considering some of the things that led to our current recession.
     
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  20. OHMSS

    OHMSS Rookie

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    In Europe the contracts of all players are in net terms and the teams have to pay the taxes. In the US, the sports teams can just list GROSS as a "salary" even though the player never gets that and the team never pays that.

    It is a fairy tale imagination the way "salary" works in the USA. People say, "I make $50,000 a year" in the US, when they don't make that. Employers say, "I pay so and so $100,000 a year" when they do not.

    It is fake and imaginary and always has been. That's why the salaries are NET in other places. The US tax system is incredibly corrupt and ludicrous.

    As has been pointed out many times, not a single NBA player earns what the NBA claims they do. They earn way less than that. The "budgets" of the NBA teams are inflated and basically completely made up. In other countries, such shenanigans are not allowed by the governments. But in the US, the rich seem to get away with anything these days.

    In Italy for example, the government handles the books of the sports clubs. Just compare that to how out of line the US tax laws are for the super rich billionaire sports team owners. It's pretty ridiculous and pathetic, when the working people struggle so much.
     
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