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NBA’s Board Of Governors To Examine Revenue Sharing System

September 19th, 2017 at 12:15pm CST by Luke Adams

ESPN’s Zach Lowe and Brian Windhorst have published an expansive and well-researched report on NBA teams’ finances, providing details on the league’s revenue sharing system, the impact from national and local television deals, and how a lack of net income for NBA franchises could push the league toward considering relocation or expansion.

The report is wide-ranging and detailed, so we’re going to tackle it by dividing it up into several sections, but it’s certainly worth reading in full to get a better picture of whether things stand in the NBA. Let’s dive in…

Which teams are losing money?

Nine teams reportedly lost money last season, even after revenue sharing. Those clubs were the Hawks, Nets, Pistons, Grizzlies, Magic, Wizards, Bucks, Cavaliers, and Spurs. The latter two teams – Cleveland and San Antonio – initially came out ahead, but paid into the league’s revenue sharing program, pushing them into the red.
Meanwhile, the Hornets, Kings, Pacers, Pelicans, Suns, Timberwolves, and Trail Blazers also would have lost money based on net income if not for revenue sharing, according to Lowe and Windhorst.
As a league, the NBA is still doing very well — the overall net income for the 30 teams combined was $530MM, per ESPN. That number also only takes into account basketball income, and doesn’t include income generated via non-basketball events for teams that own their arenas.
The players’ union and its economists have long been skeptical of NBA teams’ bookkeeping, alleging that clubs are using techniques to make themselves appear less profitable than they actually are, Windhorst and Lowe note. The union has the power to conduct its own audit of several teams per season, and it has begun to take advantage of that power — according to ESPN, the union audited five teams last season, and the new CBA will allow up to 10 teams to be audited going forward.

How does the gap between large and small market teams impact income?

Even after paying $49MM in revenue sharing, the Lakers finished the 2016/17 with a $115MM profit in terms of net income, per ESPN. That was the highest profit in the NBA, ahead of the second-place Warriors, and could be attributed in large part to the $149MM the Lakers received from their huge local media rights deals.
On the other end of the spectrum, the Grizzlies earned a league-low $9.4MM in local media rights, which significantly affected their bottom line — even after receiving $32MM in revenue sharing, Memphis lost money for the season. The Grizzlies will start a new TV deal this year that should help boost their revenue, but it still won’t come anywhere close to matching deals like the Lakers‘.
The biggest local TV deals help drive up the NBA’s salary cap, with teams like the Lakers and Knicks earning in excess of $100MM from their media agreements. According to the ESPN report, the Knicks made $10MM more on their TV deal than the six lowest-earning teams combined.
As one owner explained to ESPN, “National revenues drive up the cap, but local revenues are needed to keep up with player salaries. If a team can’t generate enough local revenues, they lose money.”
Playoff revenue from a big-market team like the Warriors also helps push up the salary cap. Sources tell Lowe and Windhorst that Golden State made about $44.3MM in net income from just nine home playoff games last season, more than doubling the playoff revenue of the next-best team (the Cavaliers at about $20MM).

How is revenue sharing affecting teams’ earnings?

Ten teams paid into the NBA’s revenue sharing system in 2016/17, with 15 teams receiving that money. The Sixers, Raptors, Nets, Heat, and Mavericks neither paid nor received any revenue sharing money. Four teams – the Warriors, Lakers, Bulls, and Knicks – accounted for $144MM of the total $201MM paid in revenue sharing.
While there’s general agreement throughout the NBA that revenue sharing is working as intended, some teams have “bristled about the current scale of monetary redistribution,” according to ESPN. “The need for revenue sharing was supposed to be for special circumstances, not permanent subsidies,” one large-market team owner said.
The Grizzlies, Hornets, Pacers, Bucks, and Jazz have each received at least $15MM apiece in each of the last four years via revenue sharing.
However, not all small-market teams receive revenue-sharing money — if a team outperforms its expectations based on market size, it forfeits its right to that money. For instance, the Thunder and Spurs have each paid into revenue sharing for the last six years.

Why might league-wide income issues lead to relocation or expansion?

At least one team owner has raised the idea of expansion, since an expansion fee for a new franchise could exceed $1 billion and it wouldn’t be subject to splitting 50/50 with players. A $1 billion expansion fee split 30 ways would work out to $33MM+ per team.
Meanwhile, larger-market teams who aren’t thrilled about their revenue-sharing fees have suggested that small-market clubs losing money every year should consider relocating to bigger markets, sources tell ESPN.
As Lowe and Windhorst observe, the Pistons – who lost more money than any other team last season – are undergoing a relocation of sorts, moving from the suburbs to downtown Detroit, in the hopes that the move will help boost revenue.

What are the next steps? Are changes coming?

The gap between the most and least profitable NBA teams is expected to be addressed at the NBA’s Board of Governors meeting next week, per Lowe and Windhorst. Team owners have scheduled a half-day review of the league’s revenue sharing system.
Obviously, large- and small-market teams view the issue differently. While some large-market teams have complained about the revenue sharing system, they’re outnumbered, with smaller-market teams pushing those more successful clubs to share more of their profits, according to ESPN.
Trail Blazers owner Paul Allen is one of the loudest voices pushing for more “robust” revenue sharing, sources tell ESPN. Some team owners have argued that the system should ensure all teams make a profit, while one even suggested every team should be guaranteed a $20MM profit. There will be “pushback” on those ideas, Lowe and Windhorst note. “This is a club where everyone knows the rules when they buy in,” one owner said.
On the other end of the spectrum, some teams have floated the idea of limiting the amount of revenue sharing money a team can receive if it has been taking payments for several consecutive years.
Any change to the revenue sharing system that is formally proposed at the NBA’s Board of Governors meeting would require a simple majority (16 votes to 14) to pass.

Kings Notes: Depth Chart, Gudaitis, Labissiere

September 14th, 2017 at 2:58pm CST by Austin Kent

Don’t look now, but the Kings have assembled a veritable stockpile of intriguing assets. Recently, Shahbaz Khan of the team’s official website broke down what fans can expect to see on the team’s depth chart.

The Kings are loaded with youth this season, and it’s not just first-rounders De’Aaron Fox, Justin Jackson and Harry Giles that show promise. Sacramento has at least one – if not multiple – young projects at each spot from 1 to 5, from international star and darkhorse Rookie of the Year candidate Bogdan Bogdanovic to the lengthy Skal Labissiere, who flashed promise after the DeMarcus Cousins trade.

The club isn’t without its fair share of veteran leadership, however, and Khan discusses the experience the young Kings will be able to glean from offseason additions like Vince Carter and returning players like Garrett Temple.

There’s more from Sacramento:

While there was plenty of turnover on the Kings roster this offseason, De’Aaron Fox leads Sacramento’s new cast of players, A. Sherrod Blakely of CSN New England writes.
Don’t expect to see 2015 second-round pick Arturas Gudaitis debut with the Kings any time soon, the Lithuanian big man recently signed a two-year deal in Italy without an opt-out clause after the first season, Sportando tweets.
After a solid rookie season, Kings big man Skal Labissiere has changed representation, Sam Amick of USA Today tweets. The Haitian has signed with Thad Foucher and Jason Ranne at Wasserman.

Zach Randolph Avoids Jail Time

September 13th, 2017 at 8:21pm CST by ChrisCrouse

Zach Randolph, who was arrested on possession of marijuana charges last month, has struck a plea deal with California prosecutors and will avoid jail time, according to TMZ Sports. Randolph could have faced up to one year in prison had he been convicted of the misdemeanor.

Ray Brothers, Randolph’s agent, released a statement on the incident following the plea deal (via NBA.com’s David Aldridge on TwitLonger):

“As we have said from the beginning, the reports regarding Zach Randolph were false and misleading. After being accused of marijuana possession, all charges have been dropped. He was never arrested with any marijuana in or on his possession. He has been cited for delaying a police officer. It’s defamatory for someone to say anything to the contrary.”

As part of the agreement, Randolph pled no contest to misdemeanor resisting arrest and agreed to serve 150 hours of community service as part of a diversion program. He will report to a California court in December for a progress update.

The power forward signed a two-year, $24MM deal with the Kings this summer. While he won’t miss games this season because of jail time, it’s possible the NBA suspends or fines him because of the incident.

Kings Sign Matt Jones

September 12th, 2017 at 3:10pm CST by Arthur Hill

SEPTEMBER 12: The Kings have officially signed Jones, per RealGM’s transactions log.

SEPTEMBER 10: Former Duke guard Matt Jones has agreed to a training camp deal with the Kings, tweets Jason Jones of The Sacramento Bee.

Sacramento already has 15 players with guaranteed contracts, and both of its two-way slots are filled. That means Jones is likely to wind up with the team’s G League affiliate in Reno if he gets waived before the season and no one claims him.

Jones wasn’t taken in this year’s draft after putting up 7.0 points, 2.8 rebounds, 1.9 assists and 1.7 steals per game as a senior with the Blue Devils.

Raptors Attempted To Sign Vince Carter

September 10th, 2017 at 9:00am CST by Arthur Hill

The Raptors wanted to bring 40-year-old free agent Vince Carter back to Toronto this summer, tweets Ryan Wolstat of The Toronto Sun.

Many observers were surprised when Carter elected to sign with the Kings instead of trying to finish his career with a contender. Money was certainly a factor, as Sacramento offered $8MM for one season, along with the chance to play for former Grizzlies coach Dave Joerger again. The Kings signed Carter, Zach Randolph and George Hill as veteran presences on an otherwise youthful team.

Despite his age, Carter has remained a productive player. He appeared in 73 games for Memphis last season, starting 15, and averaged 8.0 points, 3.1 rebounds and 1.8 assists per night. He could have provided wing depth to a Toronto team that traded DeMarre Carroll to the Nets in July and sent Terrence Ross to the Magic at the February deadline to pick up Serge Ibaka.

Carter has a checkered history in Toronto, winning Rookie of the Year honors in 1999 and spending more than six seasons there before demanding a trade. However, that was almost 13 years ago and it didn’t prevent the management team currently running the Raptors from reaching out to him.

Turner Has Harrowing Experience With Harvey

September 3rd, 2017 at 4:58pm CST by Dana Gauruder

Kings assistant Elston Turner and his family were displaced from their suburban Houston home by Hurricane Harvey, Ailene Voison of the Sacramento Bee reports. Turner gives his account of evacuating his home and describes the havoc and damage caused by the hurricane. He’s been uplifted by the support of the Kings’ brass and coaches, Voison adds.

NBA Draft Rights Held: Pacific Division

September 1st, 2017 at 9:03am CST by Luke Adams

When top college prospects like Markelle Fultz or Lonzo Ball are drafted, there’s virtually no doubt that their next step will involve signing an NBA contract. However, that’s not the case for every player who is selected in the NBA draft, particularly for international prospects and second-round picks.

When an NBA team uses a draft pick on a player, it gains his NBA rights, but that doesn’t mean the player will sign an NBA contract right away. International prospects will often remain with their professional team overseas for at least one more year to develop their game further, becoming “draft-and-stash” prospects. Nikola Mirotic, Dario Saric, and Bogdan Bogdanovic are among the more notable players to fit this bill in recent years.

However, draft-and-stash players can be former NCAA standouts too. Sometimes a college prospect selected with a late second round pick will end up playing overseas or in the G League for a year or two if there’s no space available on his NBA team’s 15-man roster.

While these players sometimes make their way to their NBA teams, others never do. Many clubs around the NBA currently hold the rights to international players who have remained overseas for their entire professional careers and are no longer viewed as top prospects. Those players may never come stateside, but there’s often no reason for NBA teams to renounce their rights — those rights can sometimes be used as placeholders in trades.

For instance, earlier this summer, the Pacers and Raptors agreed to a trade that sent Cory Joseph to Indiana. Toronto was happy to move Joseph’s salary and didn’t necessarily need anything in return, but the Pacers had to send something in the deal. Rather than including an NBA player or a draft pick, Indiana sent Toronto the draft rights to Emir Preldzic, the 57th overall pick in the 2009 draft.

Preldzic is currently playing for Galatasaray in Turkey, and at this point appears unlikely to ever come to the NBA, but his draft rights have been a useful trade chip over the years — the Pacers/Raptors swap represented the fourth time since 2010 that Preldzic’s NBA rights have been included in a trade.

This week, we’re taking a closer look at the players whose draft rights NBA teams currently hold, sorting them by division. These players may eventually arrive in America and join their respective NBA teams, but many will end up like Preldzic, plying their trade overseas and having their draft rights used as pawns in NBA trades.

Here’s a breakdown of the draft rights held by Pacific teams:

Golden State Warriors

Mladen Sekularac, G/F (2002; No. 55): Retired.

Los Angeles Clippers

Maarty Leunen, F (2008; No. 54): Playing in Italy.
David Michineau, G (2016; No. 39): Playing in France.

Los Angeles Lakers

Brad Newley, F (2007; No. 54): Last played in Greece.
Chinemelu Elonu, C (2009; No. 59): Playing in Greece.

Phoenix Suns

Ron Ellis, F (1992; No. 49): Retired.
Milos Vujanic, G (2002; No. 36): Retired.
Cenk Akyol, G/F (2005; No. 59): Last played in Turkey.
Dwayne Collins, F (2010; No. 60): Retired.

Sacramento Kings

Alex Oriakhi, F (2013; No. 57): Playing in Uruguay.
Dimitrios Agravanis, F (2015; No. 59): Playing in Greece.
Luka Mitrovic, F (2015; No. 60): Playing in Germany.

Previously:

Information from Mark Porcaro and Basketball Insiders was used in the creation of this post.

Pacific Notes: Ingram, Randolph, Warriors, Kings

August 31st, 2017 at 9:52pm CST by marksuleymanov

Kings‘ forward Zach Randolph was formally charged with two misdemeanors after his August 9 arrest for possession of marijuana, John Schultz of the Sacramento Bee writes.

Charges against Randolph were reduced from possession of marijuana with intent to sell to possession of more than one ounce of marijuana and resisting arrest, per the Los Angeles County Superior Court website.

Possession of marijuana comes with a possible six-month sentence, a fine not exceeding $500, or both. The resisting arrest charge comes with up to one year in jail and a maximum fine of $1,000.

Randolph, 36, signed a two-year, $24MM deal with Sacramento in July, bringing a stable veteran presence to an otherwise rebuilding Kings team. While age has slowed Randolph’s production, he has still posted at least 14.1 PPG and 7.8 RPG the last five seasons. Needless to say, this type of legal issue is not what the Kings had in mind when they committed two years to the NBA veteran.

Below you can read other tidbits of news around the Pacific Division:

In a piece for ESPN Insider (subscription required and recommended) Mike Schmitz examines Lakers‘ forward Brandon Ingram. The second overall pick from last year’s draft did not have the type of season he and the organization hoped for in 2016/17. Schmitz — who expects a breakout season — explains that Ingram’s shooting was impacted by a change of position and simply adjusting from college to the professional level.
Anthony Slater of The Athletic (subscription required and recommended) explains how the Warriors‘ star players can be even better in 2017/18. Golden State has made three consecutive NBA Finals appearances, winning two out of the three.
A state senator in Inglewood, California, says it is possible that a proposal to fast track a new arena for the Clippers will be introduced, Liam Dillon of the Los Angeles Times writes.
Shaun Powell of NBA.com has compiled an offseason recap for the Kings.

Where Things Stand On Kyrie Irving Blockbuster

August 30th, 2017 at 9:02am CST by Luke Adams

It has been eight days since both the Celtics and Cavaliers announced the completion of a trade that sent Kyrie Irving to Boston in exchange for Isaiah Thomas, Jae Crowder, Ante Zizic, and the Nets’ 2018 first-round pick. However, more than a week later, we still can’t classify the deal as “completed.”

As first reported last Friday by ESPN, the Cavaliers expressed concern after their own doctors conducted a physical exam on Thomas’ injured hip. That concern has pushed the Cavaliers to re-engage the Celtics about acquiring further compensation in the blockbuster deal. Although it took a few days for the two sides to make contact again, that reportedly happened on Tuesday.

Here’s a breakdown of what we know about the situation, and when we can expect resolution:

Didn’t the Cavs already know what condition Thomas’ hip was in? Why are they having second thoughts now?

According to multiple reports, the Celtics were forthright about Thomas’ condition, and the Cavs don’t feel as if Boston tried to deceive them. However, Cleveland doctors are more apprehensive than the Celtics’ doctors are about Thomas’ ability to make a full recovery and avoid re-aggravating the injury.

As Adrian Wojnarowski of ESPN wrote on Tuesday, the two teams shared medical information before completing the deal. However, Cavaliers officials “have made the case” that the Celtics understated the scope of Thomas’ injury, and were overly optimistic about his return timetable. For their part, the Celtics believed that included the Nets’ 2018 first-round pick without any protections made up for the uncertainty surrounding Thomas’ health, Wojnarowski writes.

Thomas spoke to ESPN on Tuesday and expressed plenty of optimism about his recovery, suggesting he expects to return as strong as ever and adding that nothing he’s heard from doctors and hip specialists has given him any reason not to believe that: “It’s out of my control. I just want to talk about what I can control, and I know that this [hip] won’t be a problem into the future.”

Still, according to ESPN’s Zach Lowe, sources say that if Thomas’ recovery doesn’t progress quite as smoothly as hoped, there’s at least a slight chance he could miss most of the 2017/18 season, which would be a disaster for the Cavs. That’s why Cleveland is seeking further compensation.

So what are the Cavs looking for from the Celtics?

An earlier report indicated that the Cavs may ask for Jaylen Brown or Jayson Tatum to be included in the deal, but that was a non-starter. Wojnarowski’s latest report suggests that Cleveland is “determined” to land an extra first-round pick from Boston, and the Celtics have no shortage of extra picks they could offer. In addition to all their own future selections, the C’s also have future first-rounders from the Clippers, Grizzlies, and either the Lakers, Sixers, or Kings.

Still, Boston figures to resist just handing over an extra first-rounder, since those picks would be valuable currency in another trade down the road. The discussions between the Celtics and Cavs have also included second-round considerations, sources tell Wojnarowski.

What happens if the Celtics and Cavs don’t agree on the added compensation?

In that scenario, the Cavs would have two choices: Either accept the deal under its original terms or void it entirely and go back to the drawing board. Even though the two teams announced the trade last week, it could be rescinded by the Cavs if they determine that Thomas failed his physical.

When is a decision due?

The current deadline is Thursday morning at 9:00am central time, so the Cavs and Celtics have 24 hours to work something out. However, if both sides agree to it, that deadline could be pushed back.

Do the Cavs have any good alternatives for Irving if they back out of this deal?

As many NBA reporters have written this week, both the Cavaliers and Celtics have incentive to figure out how to make this deal work for both sides. Thomas, Crowder, and Zizic likely wouldn’t be overly thrilled to return to Boston after the C’s traded them away. The situation would be a little different in Cleveland, since Irving explicitly requested a trade, but that 2018 Nets selection is probably the best draft pick the Cavs could acquire in an Irving deal, so giving it up would be difficult to swallow.

In a story for ESPN today, Zach Lowe explored the Cavs’ alternatives to Boston’s offer for Irving, suggesting that the Celtics’ package is probably the most attractive one out there, even taking into account some uncertainty regarding Thomas’ hip. Here are the other potential trade partners Lowe discusses:

Bucks: Per Lowe, Milwaukee offered a package centered around Khris Middleton and Malcolm Brogdon, but didn’t put their 2018 first-round pick on the table. Even if the Bucks were to do so, that pick figures to be a mid to late first-rounder.
Suns: Phoenix has been unwilling all along to include Josh Jackson, and may not give up its unprotected 2018 first-rounder, so there’s “minimal” Irving buzz surrounding the Suns.
Timberwolves: They’re a wild card until Andrew Wiggins signs the five-year max extension on the table for him, according to Lowe.
Nuggets: Lowe views Denver as the strongest potential threat if the Celtics deal falls through, since the club could offer Wilson Chandler, Jamal Murray, and at least one first-round pick. The Nuggets’ 2018 first-rounder might not be a top-10 selection, but the West will be competitive and Denver isn’t a guaranteed playoff team.
Other likely lottery teams like the Kings, Hawks, Pacers, and Bulls don’t appear to have made offers for Irving, per Lowe.

What’s the most likely outcome?

The Cavs haven’t really tipped their hand yet, but it’s hard to imagine rookie general manager Koby Altman deciding to go back to square one on Irving. My best guess is that the Cavs and Celtics will eventually agree to include an extra piece in this deal to get it done.

The Celtics’ 2018 or 2019 first-rounder would make some sense. Boston expects to be a top-five team, so losing its own first-round pick in one of the next two years wouldn’t be a huge loss — especially given that many of Boston’s recent picks in that range haven’t panned out (see: James Young, R.J. Hunter, and Jordan Mickey). The Cavs, meanwhile, would pick up another asset they could use to try to trade Iman Shumpert or to package for more immediate help, if they so choose.

NBA Teams That Still Have 2017/18 Cap Room

August 18th, 2017 at 10:00pm CST by Luke Adams

During the 2016 NBA offseason, when the salary camp jumped from $70MM to $94MM, 27 teams had cap room available, with only three clubs operating over the cap all year. A more modest cap increase this year to $99MM meant that fewer teams had cap space to use. So far, 14 teams – less than half the league – have used cap room to sign players.

Of those 14 teams, several have since used up all their cap room, including the Celtics, Knicks, Jazz, Lakers, and Timberwolves. However, there are still several teams around the NBA that have room available, or could create it without waiving and stretching any players on guaranteed salaries.

With the help of data from HeatHoops and Basketball Insiders, here’s a quick breakdown of teams that still have cap room available, along with their estimated space:

Atlanta Hawks: $4.6MM. The Hawks could gain slightly more space by waiving Luke Babbitt, whose salary is only partially guaranteed, but Atlanta just signed Babbitt, so that’s not a likely move.
Brooklyn Nets: $6.6MM. The Nets could gain slightly more space by waiving Spencer Dinwiddie, whose minimum salary contract is mostly non-guaranteed. However, I expect Brooklyn to keep Dinwiddie on its roster.
Denver Nuggets: $2.8MM. With Mason Plumlee‘s cap hold still on their books, the Nuggets’ cap room is fairly negligible. Denver could get up to about $8.6MM by renouncing Plumlee, but there’s no indication that’s in the plans.
Indiana Pacers: $7.6MM.
Philadelphia 76ers: $15.1MM. The Sixers could create even more space by waiving a player on a non-guaranteed contract, but the team isn’t about to part with Robert Covington, Richaun Holmes, or T.J. McConnell.
Phoenix Suns: $6.3MM. Alex Len‘s cap hold is taking up $12MM right now, and Phoenix is carrying a pair of non-guaranteed contracts (Elijah Millsap and Derrick Jones), so in theory the Suns could get all the way up to $21.2MM in space by renouncing Len and cutting those non-guaranteed players.
Sacramento Kings: $4.3MM.

The following two teams are essentially capped-out, but could create a very small amount of room if necessary:

Miami Heat: The Heat could create close to $1MM in space by waiving Rodney McGruder and Okaro White, whose salaries aren’t fully guaranteed. That almost certainly won’t happen.
Orlando Magic: The Magic are currently under the cap by about $550K, and could create up to about $1.34MM in space by waiving Khem Birch, whose salary is mostly non-guaranteed. Again, that’s not likely.

The following two teams are technically operating over the cap at the moment, with various trade and mid-level exceptions pushing them over the threshold, but they could create room if they choose to go under the cap:

Chicago Bulls: The Bulls could immediately create about $13.5MM in room by renouncing the rest of their MLE and the $15MM trade exception generated in the Jimmy Butler deal. If the team chose to waive David Nwaba, who is on a non-guaranteed deal, and renounced its free agent cap holds, including Nikola Mirotic‘s, that figure would increase to about $25.8MM.
Dallas Mavericks: Even without renouncing Nerlens Noel‘s cap hold, the Mavericks could get to $11.6MM in cap room by waiving their non-guaranteed players and dipping below the cap. Removing Noel’s cap hold on top of that could get the Mavs up over $22MM in room, but there’s been no indication that Dallas plans to go that route.