PRESUPUESTO Y MEDICIONES

-scores ranging from C (poor) to A (very good)

Small Market Teams:

Oklahoma City Thunder:

Ticket Prices: C- Payroll Spending: B- Owner Performance: C+

Overall: C+

Seattle Supersonics

Ticket Prices: C- Payroll Spending: B Owner Performance: B Overall: B-

New Orleans Hornets:

Ticket Prices: C- Payroll Spending: B+ Owner Performance: B- Overall: C+

Memphis Grizzlies:

Ticket Prices: B+ Payroll Spending: B- Owner Performance: B- Overall: B

Utah Jazz:

Ticket Prices: B- Payroll Spending: C+ Owner Performance: A Overall: B+

San Antonio Spurs:

Ticket Prices: A Payroll Spending: A- Owner Performance: A Overall: A

Milwaukee Bucks

Ticket Prices: B- Payroll Spending: B+ Owner Performance: C+

Overall: B

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Indiana Pacers

Ticket Prices: B Payroll Spending: A Owner Performance: C+

Overall: B+

Portland Trail Blazers

Ticket Prices: B+ Payroll Spending: A Owner Performance: B Overall: A-

Charlotte Bobcats

Ticket Prices: A- Payroll Spending: C- Owner Performance: C+

Overall: B-

Sacramento Kings

Ticket Prices: C Payroll Spending: A Owner Performance: B- Overall: B

Medium Market Teams:

Cleveland Cavaliers

Ticket Prices: B- Payroll Spending: A Owner Performance: A Overall: A-

Minnesota Timberwolves

Ticket Prices: C+ Payroll Spending: A Owner Performance: C Overall: B-

Orlando Magic

Ticket Prices: C- Payroll Spending: A Owner Performance: B+

Overall: C+

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Denver Nuggets

Ticket Prices: C Payroll Spending: B- Owner Performance: B+

Overall: B-

Phoenix Suns

Ticket Prices: A- Payroll Spending: A Owner Performance: B+

Overall: A-

Miami Heat

Ticket Prices: A Payroll Spending: A Owner Performance: B+

Overall: A

Large Market Teams:

Detroit Pistons

Ticket Prices: C- Payroll Spending: B- Owner Performance: B Overall: C+

Atlanta Hawks

Ticket Prices: A- Payroll Spending: C Owner Performance: B+

Overall: B-

Houston Rockets:

Ticket Prices: B Payroll Spending: B Owner Performance: A- Overall: B+

New Jersey Nets

Ticket Prices: n/a Payroll Spending: B Owner Performance: C+

Overall: B-

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Dallas Mavericks

Ticket Prices: B+ Payroll Spending: A Owner Performance: B Overall: B+

Golden State Warriors

Ticket Prices: n/a Payroll Spending: B+ Owner Performance: C+

Overall: B-

Boston Celtics

Ticket Prices: C Payroll Spending: A Owner Performance: A Overall: A-

Philadelphia 76ers

Ticket Prices: B Payroll Spending: A Owner Performance: B- Overall: B+

Los Angeles Clippers

Ticket Prices: n/a Payroll Spending: C Owner Performance: C+

Overall: C+

Los Angeles Lakers

Ticket Prices: C+ Payroll Spending: A Owner Performance: A- Overall: A-

Washington Wizards

Ticket Prices: C Payroll Spending: C+ Owner Performance: C+

Overall: C+

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Chicago Bulls

Ticket Prices: B Payroll Spending: C Owner Performance: B Overall: B-

New York Knicks

Ticket Prices: A Payroll Spending: A Owner Performance: B- Overall: A-

Section VI –

Conclusion

When we judge an NBA franchise in the face of revenue sharing, we must consider its market’s competitive advantages and disadvantages, its attempts at winning and its success in profitability. The Efficient Evaluation Scorecard on p.51-55 shows us that some teams do a better job at putting a good product on the court than others. It is important to note that small market franchises, whose owners scorn the league when they find themselves unable to compete for talent with large-market teams, necessarily receive scrutiny if revenue sharing is used. Large market teams have a cushion in their advantages in population and revenue potential. It is necessary, therefore, that small market teams perform extremely well to earn their revenue sharing receipts. A mostly absent owner cannot simply sit back and collect revenue sharing checks while doing nothing but cutting payroll to earn higher profits. This model eliminates any incentives to do so.

From the eyes of the NBA front office, this model makes revenue sharing more efficient for the league. By focusing on gate revenue, a major aspect of a franchise’s total 55

revenues, the Ticket Price Model determines how well a team is pricing their product, and therefore, maximizing profits. Since the NBA has no hard salary cap in place, teams have a wide range of total payrolls. The Payroll Model shows how much a team should be spending considering market size and other factors. The Ownership Scorecard is a rough look at various metrics to see how well a franchise is extending other efforts to be profitable and competitive. These considerations are far more effective than looking solely at revenue and population (or a combination of the two) for revenue sharing payments.

The league is better equipped to create a more efficient revenue sharing system: It has access to each franchise’s balance sheets, income statements, and other financial information. With these financials, the league could import, for example, total advertising revenues into the “Venue Revenue” portion of my Ownership Scorecard.

Since the Ownership Scorecard is a set of proxies to assign a rough value to a team’s operations, the league could make this measure much more accurate.

This paper considers alternative methods to determine revenue sharing receipts in order to achieve a more efficient system, and this method can be used not only in the NBA, but also in the NFL, MLB and NHL. The NHL and the NFL have “hard”

caps, in which a team is almost exclusively prevented from over spending. However, these leagues still utilize revenue sharing payments and are concerned about ownership disincentives. By looking at a team’s marketing and front office initiatives along with determining how well they are pricing, the NFL/NHL can be more confident in their systems. MLB, with no salary cap but heavy use of (and resistance to) revenue sharing, could benefit from a system like the Efficient Evaluation Scorecard. Although MLB has

56

greater competitive balance, this seems to be a bi-product of the sport, as the disparity between the largest and smallest annual payrolls is astronomical. The MLB can use several of these metrics, like the Ticket Price Model and the Payroll Model, to judge a team’s efforts.

An argument against this system of evaluation comes with the recognition that the luxury-tax threshold and the salary cap are in place to curb overspending and keep payrolls at an even level so that all teams can compete. As mentioned earlier, neither of these tools make a significant difference. In the 2008-2009 season, teams spent a combined $90 million over the luxury tax level. All but two teams were above the salary-cap. The cap is so “soft,” with all its exceptions, that it rarely prevents teams from spending how much they want. Only under certain circumstances does it allow teams keep their players by offering them sufficient salaries. We will undoubtedly see how effective this is in the free-agency summer of 2010. Additionally, in the face of the Payroll Models, an owner can argue that the salary cap prevents him/her from

overspending. If this is in fact true, the current Collective Bargaining Agreement negotiation can bring a change in this “soft” cap. If it is deemed preventative (as well as ineffective) the league has the opportunity to change the rules and thereby enforce a more effective cap for greater talent distribution. The near future holds opportunity for the NBA to achieve its goals of profitability and competitive balance.

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