On Tuesday, we noted a back-and-forth between the New York Times and the National Basketball Association involving a dispute over how profitable the league has been in recent years. The Times used financial estimates provided by Forbes to conclude that the NBA could potentially be misrepresenting its financial losses; the NBA fired back by disputing the report in a statement, saying that the league had failed to turn a profit in each season of the recently expired collective bargaining agreement, concluding that its losses were "substantial and indisputable."
On Wednesday, Forbes.com reported that it has obtained new, audited financial information concerning the NBA's economic health. The new report references "net income," which it defines as income "after the deduction of all costs" that gives "a more definitive picture."
Sources close to the NBA labor negotiations have provided net income numbers for the league each year over the last five years, plus projected losses for the 2010-11 season. Given that the NBA is saying that they are running at a net loss, as opposed to the NFL, which is saying they are seeing profits declining, the NBA is compelled to open their books as part of labor law, and have done so. The following numbers are audited figures. If the projected figures are correct, the NBA will have lost $1.845 billion over the last six years...The release of these figures marks another step in the right direction for the league, as transparency with regards to their losses has become a hot button topic, especially this week. With that said, the top-level numbers don't do much to further the NBA's case in the public eye, other than to show that their claims of a "broken system" aren't entirely without merit.
The following shows the losses, as well as the number of teams that reportedly have run at a loss the last five years, plus projected losses for the 2010-11 season:
- 05-06: 19 clubs ran at a loss, total losses of $220 million
- 06-07: 21 clubs ran at a loss, total losses of $285 million
- 07-08: 23 clubs ran at a loss, total losses of $330 million
- 08-09: 24 clubs ran at a loss, total losses of $370 million
- 09-10: 23 clubs ran at a loss, total losses of $340 million
- * 10-11 23 clubs ran at a loss, total loss of $300 million
The perception of the league's financial success (TV ratings, website traffic, increased ticket sales) may in fact badly outweigh the league's actual financial success. While it might not be fair, the burden of proof falls on the NBA to fully document and explain its position of hardship. Otherwise, the assumption from a public who can't relate to the sums of money being discussed is that the league is guilty of exaggerating their losses. Skepticism will continue until a full analysis of the league's books are allowed by an independent source.