Despite signals of rising popularity, including two straight years of significant ratings increases, the NBA could be on its way to experiencing major strife due to the economic downturn.
Twelve NBA teams are set to borrow from a $200 million dollar credit line set up by the league to help cash-strapped franchises. Among the teams borrowing are the Orlando Magic and Sacramento Kings, the latter of whom was expected to “lose between $25 million and $28 million” before dumping salary at the NBA trading deadline.
The $200 million “supplements an existing $1.7 billion leaguewide credit facility.”
While this may sound ominous on its face, it should be pointed out neither NBA franchises nor the league itself sought out financial assistance. JP Morgan and Bank of America “reached out to the league to inform the NBA they would be willing to lend money.” The league, “recognizing that borrowing opportunities are scarce and that some teams would benefit from an infusion of cash, took advantage.”
Commissioner David Stern calls JPMorgan Chase and Bank of America’s offer a “show of strength in the credit worthiness of the NBA’s teams,” and notes that many of the teams borrowing “are doing well.”
Even so, the league could be looking at some problems in the near future. In an ESPN.com article, an unnamed source told writer Bill Simmons that “20 of the 30 NBA teams will lose money this season.” In the same piece, Simmons says that “the consensus of people in the know was that multiple NBA franchises (guesses ranged from three to eight) will move cities, get sold to new owners or throw themselves on the mercy of the league” in the next fifteen months.
As soon as 2011, the league could be facing another lockout, at least according to agent David Falk. Falk told the New York Times last week that NBA owners “have the economic wherewithal to shut the thing down for two years, whatever it takes, to get a system that will work long term.” Paraphrasing Falk, several owners currently losing money “would rather shut down the league for a year or two than continue with the current system.”
In the past decade, the NBA’s death has been rumored plenty of times, and in some cases rooted for. Michael Jordan‘s retirement did not kill the league, the 1999 lockout did not kill the league, Ron Artest fighting fans in the stands did not kill the league, and Tim Donaghy did not kill the league. Could the crumbling economy and a lengthy work stoppage be the lethal combination that pushes the Rasputin of sports leagues over the edge?
For what its worth, Simmons says that outside of the NFL, “the NBA will emerge from this financial quagmire in the best shape of any professional sport.” Simmons: “the [NBA] won’t struggle even 1/10th as much as the NHL in years to come — of all the wildest predictions I heard in Phoenix, the craziest came from a connected executive who predicted that fifteen NHL teams would go under within the next two years (and was dead serious) — and Major League Baseball is about to get creamed beyond belief.”
Still, even as the NBA enjoys a television ratings renaissance, the familiar dark clouds that have hovered over the league for the better part of a decade have begun to resurface.
