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NBA Lockout And The Flaws Of The League's Business Model

The NBA, like the NFL, operates under a shroud of secrecy when it comes to financial records. Teams protect their books and the detailed financial records that would facilitate any meaningful analysis. It allows the owners to plead poverty and hammer the rising salaries of players despite a lack of substance backing up the claims. But with an NBA lockout looming, something has to give.

We spoke with Jason Reid, one of the Sonicsgate producers, after his trip to Denver for the NBA playoff matchup between the Nuggets and Oklahoma City Thunder. In addition to his thoughts about the trip, we discussed the business model of the NBA and the looming lockout. He offered some insight, gleaned from his work on Sonicsgate and his research into the Seattle arena situation.

“With the business model, it changes so much because it’s not working. With a lockout looming, it’s going to either be players salaries get cut or the players get together and get the NBA to open their books to show the NBA isn’t losing as much as it is on paper,” Reid said. “If it gets to lockout levels, players may see why NBA can’t make money off these sold out arenas”

Seattle tried, unsuccessfully, to view the financial records as Clay Bennett and the Sonics were about to leave town. But as they found out, getting access to the financial records of the NBA is a tremendous fight and may be nearly impossible. Without the records, we’re left to form conclusions from the data available, which still doesn’t back up the league’s claims of poverty.

“In the court case with the Sonics, they tried to open up more of the NBAs books, but they ultimately weren’t successful. It could’ve, potentially, exposed how they’re calculating these figures,” Reid said before turning to Howard Schultz as a specific example. “Schultz bought the team for 200, sold it for 350. Over five years, he made 150 million. These guys aren’t really losing as much money as it seems.”

Reid delved into the business model, which he says is broken, and the use of public funding for arenas as a revenue stream in the NBA during the making of Sonicsgate. It’s an issue at play in nearly every small market — including Sacramento and New Orleans, cities that are each facing uncertain futures.

“The NBA will try to get the players have more of a cap on their salaries. The impeding lockout is interesting because the business model is so broken. In the movie, we get into the broken business model. It relies almost solely on public funding,” Reid said while speaking to the broader issues at play in the NBA. “If the arena is not publicly funded, teams aren’t making money.”

With a labor struggle hanging in the balance, the dreaded c-word, contraction, keeps coming up as a thinly veiled threat. Is it a realistic option or a bargaining chip? Without clear financial records, we’re left to wonder as the NBA clings to public funding and pushes for newer, bigger arenas funding by the public under the threat of relocation or contraction.

For more of the interview, check out the rest of our Sonicsgate interview StoryStream. Be sure to head over to the Sonicsgate website to watch the documentary for free