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What are the economics of spending our way to success?

Discussion in 'Houston Rockets: Game Action & Roster Moves' started by glynch, Jun 1, 2012.

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  1. glynch

    glynch Member

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    The only way I can envision us making a dramatic leap into contender status is the following.

    1) Trade for Dwight Howard. Whatever it takes, Lowry, Scola, Parsons < Motiejunas, the two draft picks.

    2) Then spend to resign Dwight. This will require signing two more top free agents at or near max contracts. Aging vets with something in the tank will flock to our new big three.

    I assume that this will involve cap penalties. so the question is how much money would be lost or perhaps made by doing this?

    A contender would produce more revenue by producing sell outs, more advertising revenue, more jerseys. A continuing loser does the opposite.

    I admit I don't understand the total increased revenue a contender brings.

    Is it possible Les, the business man is just not being bold enough? Sometimes it takes spending money to make money. Alternatively we would hope Les is enough of a fan to accept breaking even or losing a bit on his toy, the Houston Rockets.
     
    #1 glynch, Jun 1, 2012
  2. TEXNIFICENT

    TEXNIFICENT Member

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    Sure you're not a Knicks fan?
     
    #2 TEXNIFICENT, Jun 1, 2012
  3. JoeBarelyCares

    JoeBarelyCares Member

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    If Les was hesitant regarding spending over the tax threshold before (although he did, barely), it is difficult to imagine he would go there under the more punitive system that takes effect next year.
     
    #3 JoeBarelyCares, Jun 1, 2012
  4. brantonli24

    brantonli24 Member

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    You'll be surprised. The Dallas Mavericks (one of the most successful teams in terms of wins this decade) lost $8.9 million over the last 5 years. Here Forbes' brief on the Rockets:

    http://www.forbes.com/pictures/emdm45hle/5-houston-rockets/#gallerycontent

    Yes you can spend money to make money, but you can do it the Lakers way (spend money and earn money + championships) or the Mavericks way (spend money and lose even more money, but still get a championship!). Houston isn't blessed with huge TV contracts or rabidly loyal fan base like the Knicks, so Les has to be careful in what those big expenditures will be on. For instance, was Dalembert worth it for les? He cost Les $7 million, but became a bench player once Camby came in.
     
    #4 brantonli24, Jun 1, 2012
  5. heypartner

    heypartner Member

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    Morey was born to figure out the economics of surrounding a superstar with championship quality talent. He's been working with one arm tied behind his back, with no superstar to prime the well pump.

    If he lands Howard, I have to bet black gold will start flowing to the surface of Houston was again.
     
    #5 heypartner, Jun 1, 2012
  6. sugrlndkid

    sugrlndkid Member

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    very true...If Morey was able to land this big fish...he would start what happened in Boston...It just takes one Superstar...to draw others...
     
    #6 sugrlndkid, Jun 1, 2012
  7. jtr

    jtr Member

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    Just to be sure everyone knows. The Lakers are dead meat. They are staring at $86 million in luxury tax and the owners have no other source of income.
     
    #7 jtr, Jun 1, 2012
  8. heypartner

    heypartner Member

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    not true. Jerry Buss is a professional poker player.

    all kidding aside. The Lakers have several minority owners.

    Philip Anschutz (AEG) owns Staples and many sports franchises in California and 25% stake in the Lakers. He is worth $7billion. I think he has first right of refusal on any sell of Buss's shares.

    there are scores of investors lined up to step in. I think Fox is in line. the lakers will never go bankrupt.

    They are not dead meat.
     
    #8 heypartner, Jun 1, 2012
  9. GATER

    GATER Member

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    I don't for one nano-second believe the Dallas Mavericks lost money of the past 5 seasons. I don't care how well written or documented an article is. There are just too many ways to hide the profits. Don't believe me...just ask the NBAPA every time they sit at the negotiation table.

    Simple arithmatic tells us that an $82M annual payroll is covered by 20,000 fans spending an average of $100 for 41 home games. That says nothing of the marketing, shared revenues, broadcast rights and playoff money.

    And on the unbelieveable off chance Mark Cuban lost a couple of mill a year over the past five?...You can do the simple arithmatic of how much interest a billionaire might get. :grin:
     
    #9 GATER, Jun 1, 2012
  10. brantonli24

    brantonli24 Member

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    ^^ Have a read of Forbes bit on the Mavs, you have to take the luxury tax into account which costs the Mavs a hefty $18.9 million last season.
     
    #10 brantonli24, Jun 1, 2012
  11. jtr

    jtr Member

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    I never said bankrupt. Just that their roster has to go until Kobe leaves/retires.

    No matter how many minority owners there are the Buss family lives by that franchise's profit margin.
     
    #11 jtr, Jun 1, 2012
  12. jtr

    jtr Member

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    Cuban is worth 1.4 billion and he personally dismantled that championship team. Nuff said.
     
    #12 jtr, Jun 1, 2012
  13. jtr

    jtr Member

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    And the Rockets gain ~10 million.:grin:
     
    #13 jtr, Jun 1, 2012
  14. topfive

    topfive CF OG

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    Not to mention the increasing value of the franchise. You can lose money in operating costs every year and still make a profit when you eventually sell.
     
    #14 topfive, Jun 1, 2012
  15. glynch

    glynch Member

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    Agreed. Also I think it is the type of loss we would all like to have. e.g He bought the franchise for $50 million, "lost" 20 million in 10 years with resulting tax deductions and now has a team worth $100 million 10 years later.

    Besides we know Cuban is more of a fan and can spend some walking around money just to sit in prime seats and cheer and wheel and deal. Better than fantasy basketball.
     
    #15 glynch, Jun 1, 2012
  16. RocketsMAN!

    RocketsMAN! Member

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    Here's another economic model to follow:
    Raptors have Cap space for Lowry, send him there, then exchange #8 for #14 - sign Lamb
    SnT Dragic for Hedo (I know, but keep following).
    Trade Scola/Dalembert/Morris for Howard.
    Trade Martin and #16 for Avery Bradley, #21 & #22 (Boston will have Cap space after Allen/Garnett released)
    Release Camby/Lee
    Sign Deron Williams
    Bring in Motie
    Sign Teague with #21
    Swap #22 for #33 and #34 from Cleveland (sign Festus Ezeli and Scott Machado)

    That will give us a strong team of:
    Deron Williams/Teague/Machado
    Avery Bradley/Lamb
    Chandler Parsons/Bud/Hedo
    Patrick Patterson/Motie
    Dwight Howard/Ezeli

    and this puts us NEAR or JUST OVER the Salary Cap. Not bad for 2 max contracts.
     
    #16 RocketsMAN!, Jun 1, 2012
  17. HI Mana

    HI Mana Member

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    I definitely remember that Cuban's minority partners have been extremely upset that he willingly covers the annual losses of the team, rather than pay out a dividend on their shares.

    Here is an insanely detailed breakdown of team income/value for the 2011 season. Pretty interesting read.

    http://wagesofwins.com/2011/11/08/the-bottom-line-on-the-nba-finances/
     
    #17 HI Mana, Jun 1, 2012
  18. jtr

    jtr Member

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    And I have watched a ton of Euro games and never saw once that bounce pass between Dirks legs.:grin::grin:
     
    #18 jtr, Jun 1, 2012
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