NBA union cries foul on losses
Posted: Thursday, July 7, 2011 4:28 pm
By: By BRIAN MAHONEY, AP Basketball Writer
NEW YORK (AP) — The NBA players’ association will keep doubting the league’s financial losses, since it made inaccurate projections before.
Doesn’t matter, the league says, since those projections have nothing to do with the final numbers it turns over to the union and insists can’t be disputed.
Wednesday, Day 6 of the lockout, featured sparring by union and league officials over financial information, a day after a report questioned whether the NBA indeed lost money two seasons ago.
Though the NBA says it lost $340 million in 2009-10, a New York Times blog post Tuesday titled “Calling Foul on NBA’s Claims of Financial Distress” called the league “fundamentally a healthy and profitable business” with an estimated operating income of $183 million that season.
Union spokesman Dan Wasserman said the NBA projected a decline in revenues that season but they actually rose, so the final losses should have been much less than the league said.
“In 2009-10, the NBA repeatedly offered projections that league revenues would decline as much as 5 percent, or $180 million, while also projecting losses of $370 million.
Revenues were actually up in ‘09-10 and the revenue projections were off by as much as $200 million. Yet, the loss figures were only adjusted by $30 million.
So yes, we feel there is more than adequate basis for questioning their projections and financials,” Wasserman said.
Because of the projected losses, the league forecast a steep drop in the salary cap for the 2010-11 season, saying it could fall as low as $50.4 million.
Instead, it was set at $58 million after the higher-than-expected revenues following a seven-game finals between the Lakers and Celtics allowed the league to finish slightly up.
But that didn’t save the league from the overall losses it says are documented in the data it has handed over to the union.
“For Dan Wasserman to suggest that the league’s future revenue projection, made before the start of the 2009-10 season during the worst economy in 80 years (which, by the way, turned out to be off by only 3 and a half percent) somehow relates to the veracity of our year-end audited financials is absurd,” NBA spokesman Mike Bass said. “Mr. Wasserman’s questioning of the league’s audited financials based on this missed projection is a complete non-sequitur.”
The Times story was based on estimates prepared by Forbes and Financial World magazines. Bass said Tuesday the information was inaccurate, saying Forbes “does not have the financial data for our teams and the magazine’s estimates do not reflect reality.” The league added it believed Financial World had gone out of business.
“Precisely to avoid this issue, the NBA and its teams shared their complete league and team audited financials as well as our state and federal tax returns with the players union,” Bass said. “Those financials demonstrate the substantial and indisputable losses the league has incurred over the past several years.”
The league projected losses of $300 million last season after losses of several hundred million dollars in each season of the CBA, which was ratified in 2005. Owners locked out the players last week after they could not agree on a new deal.
The union has frequently questioned the league’s financials, acknowledging losses but not anywhere near what the NBA has stated. The players offered to give up $100 million in salary costs annually in a recent proposal for a new five-year deal, believing that was more in line with the true losses.
The story was also skeptical, saying perhaps about $250 million of the purported losses results “from an unusual accounting treatment related to depreciation and amortization when a team is sold.” The NBA responded that it uses the conventional and generally accepted accounting (GAAP) approach and does not include purchase price amortization from when a team is sold, with Bass saying “put simply, none of the league losses are related to team purchase or sale accounting.”
The league followed up with another response Wednesday, arguing that “the notion that $250 million of losses is due to ‘accounting procedures’ is patently false and so vague an assertion as to be meaningless as a matter of financial analysis.”
Because the NBA had such a successful 2010-11 season, with growth in TV ratings, and merchandise and ticket sales, the league has struggled to convince fans it needs the massive financial changes owners are seeking from the players.
But Bass said the league never had a positive net or operating income in the last CBA, and that 11 teams had net losses of more than $20 million in the 2009-10 season. He added 23 of the 30 teams lost money that season. Forbes estimated there were 17.
“We do not know how they do their calculations,” Bass said.
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