That's not a basketball!
Dave Berri is the General Manager of the Wages of Wins Network. He is a Professor of Economics at Southern Utah University, lead author of both “The Wages of Wins” and “Stumbling on Wins”, and past president of the North American Association of Sports Economists.
Well, the NBA lockout just goes on and on. And I am afraid I doubt the lockout is going to end anytime soon. To keep you amused (entertained? informed?), here are a seven links with some thoughts on our favorite labor dispute.
First, here is a link to my latest for the Huffington Post: How Rich People Ask for More Money. The post examines the NBA’s competitive balance story and supply-side economics (yes, there is a connection… I think).
My Huffington Post column casts doubt on the NBA owners’ story. Malcolm Gladwell recently argued that even if some of what the NBA owners say is true (i.e. some owners are losing money), we should not be concerned. After all, owning an NBA team confers substantial psychic benefits. The entire piece is very good. But the conclusion is well worth repeating:
The big difference between art and sports, of course, is that art collectors are honest about psychic benefits. They do not wake up one day, pretend that looking at a Van Gogh leaves them cold, and demand a $27 million refund from their art dealer. But that is exactly what the NBA owners are doing. They are indulging in the fantasy that what they run are ordinary businesses — when they never were. And they are asking us to believe that these “businesses” lose money. But of course an owner is only losing money if he values the psychic benefits of owning an NBA franchise at zero — and if you value psychic benefits at zero, then you shouldn’t own an NBA franchise in the first place. You should sell your “business” — at what is sure to be a healthy premium — to someone who actually likes basketball.
Jonathan Weiler – at the Huffington Post – agrees with Gladwell’s discussion of psychic benefits. But even with that argument in hand, Weiler still argues that NBA owners may not be losing as much actual money as they claim.
CBS Sportline has two interesting lock-out related stories. First, they note that NBA arenas (which were often funded with taxpayer dollars) stand to lose about $1 billion if the lockout cancels the 2011-12 season. Furthermore, the people operating the arenas – who often are not the NBA teams being hosted – have no place at the bargaining table. So obviously these costs are not considered by players or owners.
In addition, CBS Sportsline also notes that a recent study argues 22 additional markets could support NBA teams. Should someone say “let’s get a new basketball league”?
Finally, Sports Illustrated has a very interesting story on the New Orleans Hornets. The NBA now owns this team. And under the NBA’s direction, the Hornets are thriving. Yes, even with the lockout this team is seeing revenues expand. Doesn’t that suggest that maybe the problem NBA teams are having is with poor management? In other words, the players don’t need to accept less. The owners just need to do a better job of managing their respective franchises.
– DJ
Wages of Wins Journal 
A.K.S.
August 25, 2011
Gladwell is a moron. You should be embarrassed linking to that dreck.
Team owners have “psychic benefits”? Give me a break. Players have “psychic benefits” too. Who cares? The lockout is not about how to split up the psychic benefits of the NBA (I mean, nobody is talking about the owners giving the players the “psychic benefit” of being able to control the team roster in exchange for the players giving the owners the “psychic benefit” of being followed by groupies.) Its about how to split up the money.
dberri
August 25, 2011
AKS,
Gladewell’s argument can actually be found in the sports economics textbook of Michael Leeds and Peter von Allmen. It does matter that owners of sports teams are interested in more than just profits. Given your reaction, I think this argument flew over your head. My sense is you should be embarrassed at this point. But for you to be embarrassed, you would have to understand this discussion (which clearly isn’t happening).
fricktho
August 25, 2011
Gladwell’s argument boils down to – if the reason you own a basketball team is to make money then you own it for the wrong reason. Now the only problem with Gladwell’s argument is that I imagine there are a lot of owners that are in it for the wrong reason, which practically makes it moot. If every owner in the league were like Paul Allen, Dan Gilbert, or Mark Cuban the league would be competitive, thriving, and nobody would care about how much money they aren’t making. They are in it for the thrill of it. The jist – if you want to complain about losing money then sell your team, don’t ask for more. If you don’t have money to lose don’t buy an NBA franchise. The owners are trying to make owning an NBA franchise profitable under any circumstance, regardless of how far into the gutter they run their franchises.
A.K.S.
August 25, 2011
I certainly do understand the point that owners have other interests in owning a team besides just profis. As I pointed out — and you (and Gladwell) ignored — sports players are likewise interested in more than just the money they make.
But who cares if players and owners are interested in more than just profits and salaries? Those are the only things on the table in the CBA negotiation. The owners are not going to offer a bit more money if only the players give the owners some of the psychic benefits of their celebrity. The players are not going to take less in salary if only the owners gave to the players some of the psychic benefits of controlling a team. The psychic benefits of being involved with the NBA to each side in the negotiation are what they are (and have been for quite some time). There is no reason for either side – or for us as fans – to care about them at all when considering the lockout.
Maybe I was a bit harsh to you in my prior comment, and if you took it that way I apologize. But Gladwell’s writing is in general complete pablum, and the article to which you linked was awful.
johnbeumer
August 25, 2011
dberri,
While A.K.S. might not have been pleasant about Mr. Gladwell, he does raise a valid point. Players get “psychic” and real benefits from employment in the NBA. (This happens in other industries too. Salaries for support staff were lower at Harvard then any of the other schools in the Boston area because it was working for “Harvard”.)
If you are going to treat the team owners as different from other business owners, you certainly must treat their employees as different from other employees. These benefits clearly run both ways and unless you can quantify “psychic” benefits, it’s difficult to claim that the owners get more out of it then the players.
fricktho
August 25, 2011
The difference is that the players aren’t the ones asking for more, it’s the owners. Of course their are psychic benefits for players. Players are paid handsomely, but they are both the labor and the product. If a player valued the psychic benefits at zero what would be their main interest? If an owner valued the psychic benefits at zero what would be their main interest? The fact remains the NBA was profitable under the current CBA, with a 57% BRI split. The percentage of the player’s earnings haven’t changed, revenues haven’t declined, so the question has to be asked, where is the money going? The players aren’t making more, the teams aren’t making less, but profits have suddenly disappeared?
As far as these losses go, I’m sure the owners that do derive the most psychic benefits from owning their teams actually contribute the most to the losses.