The NBA Is Headed For Financial Problems

Distressed Cost Structure

The NBA has been a distressed business since the glory days of the “Bird-Magic” and “Air Jordan” era. It really suffered at the gate with the downturn in 2008 due to the financial crisis, and judging by early attendance numbers this year coupled with irresponsible and out of control cost structures on the player side of the equation for the past 5 years the NBA is badly in need of a financial restructuring to better align their costs with their profits.

Gold Rush Free Agency Mentality

Player salaries have been steadily rising due to poor mismanagement practices by ownership and a free agency process where the players hold all the cards. The Super Star players like Lebron James set the ball rolling for free agency with his Decision Circus which lifted all boats and had incompetent General Managers around the league seemingly caught in a Gold Rush Hysteria giving max contract deals for role players like Carlos Boozer. It isn`t really the Super Star players getting max contract deals which is hurting the league`s finances as much as the average to downright mediocre players receiving huge fully guaranteed contracts which are often so bad that the teams end up just writing off the contracts and cutting the players loose with several years left on the contracts.

Poor Incentives in Place for Winning

The poor mismanagement by ownership of these franchises is one factor, the other is the actual product on the court, and a broken business model. Unlike the NFL where in any given year many teams legitimately have a chance to win the Super bowl, in the NBA in a good year only 4 or 5 teams legitimately have a chance to win an NBA title. The rest of the teams are either purposely losing due to a poorly constructed ‘Drafting Incentive Plan’ purposely tanking to gain a better percentage chance in a lottery process, or putting a poor product on the court with no chance of winning an NBA title. This year it is even worse with basically only 3 teams having legitimate chances of winning an NBA title, and all the rest looking like poorly constructed versions of fantasy basketball teams with major shortcomings.