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The NBA Fires Back

Before the long weekend, I wrote a post questioning some of the financial numbers the league has been throwing around leading up to the lockout. Tuesday, Nate Silver of the NY Times posted on the same subject, asking some similar questions. Specifically, the league's numbers do not gibe at all with figures that have been published by Forbes magazine in their annual "Business of Basketball" issue.

Late Tuesday night, the NBA took the unusual step of sending out a press release, refuting the points in Silver's post - going so far as to provide detailed denials of specific quotes from the article. The good news for those of us who have been curious about such things is that the NBA's response provides more information on the financials of the league, albeit at a very general level, than had previously been available to the general public.

The league's basic point in their rebuttal is simple enough - Forbes magazine does not have access to league data nor team data, and the figures published in Forbes are simply not accurate. It's an obvious and valid point. Still - this is Forbes we're talking about. It's not as if these numbers were compiled by some NBA blogger in Long Beach. One suspects that they've got some pretty solid research behind the figures.

But the league went beyond simply saying "The information from Forbes ... is inaccurate.... Forbes does not have the financial data for our teams and the magazine's estimates do not reflect reality." They provided further information about their ongoing losses, and frankly some of it doesn't really pass the sniff test.

The most interesting tidbit in the NBA's release to us here at Clips Nation is some visibility to both Operating Income and Net Income. Given that the Forbes data was so far out of step with the League's claimed losses, one possible explanation was that the league was using Net Income when discussing their losses, while Forbes was using Operating Income (specifically EBITDA, Earnings Before Interest, Taxes, Depreciation and Amortization). The accumulated Forbes data indicated a net profit for the league of close to $183M on an Operating Income basis. Not so says the league's release:

The league lost money every year of the just expiring CBA. During these years, the league has never had positive Net Income, EBITDA or Operating Income.

That's a pretty astounding statement when you think about it. To this point, the league has mostly been flogging the most recent losses - the $340M this year specifically. We suspected that the losses were mostly related to the recession, or were accounting tricks, or were a combination. But come to find out, they're losing money even on a cash flow basis, on all of the above bases, and they've been doing so since the very beginning of the latest CBA, in 2005, before the recession when the economy was great. Wow. I mean, wow.

But hold on a minute. Somehow that doesn't really ring true, does it? First of all, who the hell agreed to a CBA deal under which the league has lost money EVERY SINGLE YEAR? I mean, whoever agreed to that deal should be fired, right? What incompetent signed a deal that lost money for the league from the very outset? Surely whoever that guy was can't possibly still be in charge, right?

That guy, David Stern, is still in charge. Not only that, he's had an interesting habit over those same years, which we now find out were money-losing years for the league, of saying how great things are, especially when there's some reason to suspect otherwise. At his press conference during All Star Weekend 2006, eager to distance the league from the Palace Brawl a year earlier and to show that the fans had not in fact been disenchanted by NBA thuggery, Stern held forth about how "the state of the game is pretty darned good":

We'll set another attendance record this year. Revenues are terrific. Attention is being focused on our game and our players as never before in this country and around the world. We've got 30 marquee franchises...

And if memory serves, he's done the same thing in many subsequent pressers, especially when he's dealing with bad news. Tim Donaghy? Attendance is up! Ratings are strong! Seattle was abandoned? Revenues are up! The league is in great shape! The global economy is in the tank? Our business is strong enough to withstand a recession! Now, in fairness, there's no direct contradiction here - no smoking gun. Revenues can be up and the league could still lose money. But think about. The league has supposedly been losing money since 2005. When has David Stern so much as raised a concern about the state of the NBA until he started posturing for this CBA? You can't be the biggest cheerleader for the financial stability of the league for five years, and then insist that everything has actually been a mess the whole time without having your motives called into question.

So call me skeptical that the league has lost money at the Operating Income level every year since 2005. I'm just not buying it. But the league insists that I should by it. In fact, they say that it is "indisputable."

[T]he 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. Those financials demonstrate the substantial and indisputable losses the league has incurred over the past several years.

I'm reminded of Inigo Montoya's classic query to Vizzini, who tended to overuse the word "inconceivable": "Are you sure you know what this word means? Because I do not think it means what you think it means."

Because, let's face it, neither Nate Silver nor myself decided on our own to dig into potential discrepancies in the NBA claims of losses. The Player's Association has stated throughout the negotiations that they do not agree with the NBA's gloomy figures. That they, in fact, dispute what is supposedly indisputable. A conundrum if ever there were one. The NBA shared the data with the Players Union. The losses are indisputable. And yet the Players Union disputes them. Inconceivable!