An interesting comment, and some proceeding ones, about winning and profitability sparked my interest. This has been something I always have thought about. Fortunately, Forbes listed their NBA team valuation list, which included profitability. Some really interesting things came up, reaffirming what many Raptor Fans have known/suspected for years:
WINNING DOES NOT EQUAL PROFITABILITY!
Well-well-well, what do we have here? The Raptors made more money then the Boston Celtics and San Antonio Spurs, both of which have won championships. In fact, MLSE’s profit margin is staggering compared to the two:
Raptors: 20.1%
Celtics: 13.5%
Spurs: 13.8%
Other interesting facts:
- 2 of the top 10 most profitable teams haven’t won a championship
- 6 of the top 10 haven’t had any post-season success in a decade
- The Bulls are more profitable then the Lakers and Spurs (who have accounted for 7 of the last 10 championships)
- 2 of the top 7 teams were built by Bryan Colangelo
So getting back to the Raptors, who controls this franchise? What do they do? Again, not treading any new ground here, but:
- Ontario Teachers Pension Fund – 58%
- CTVglobemedia – 15%
- TD Bank Financial Group – 14%
- Kilmer Sports Inc (Larry Tanenbaum) – 13%
The ownership face is Larry Tanenbaum, but 87% of the ownership lies with corporations and a pension fund, all of who’s sole purpose is to make money for their stakeholders. You think TD shareholders care if the Raptors wins a championship? Does the pension fund care about who plays with Bosh? Does Bell care about anything other then screwing consumers (TSN2, are you kidding me??)?
MLSE owns sports franchises (Toronto Maple Leafs, Toronto FC, Toronto Marlies), but they also are property developers & owners, TV station operators, merchandisers, marketers, capitalists (how much does it cost to get a slice of pizza at a game?)…elitists.
What was their first order of business when attendance was dropping during the post Vince Carter era? Get the guy who ran the 6th most profitable NBA franchise -> Bryan Colangelo.
So back to the question at hand, does winning mean you make more money? Lets examine the payrolls of the favourites to win this years championship vs the Raptors payroll:
- Boston Celtics – $80,781,018
- Los Angeles Lakers – $78,848,027
- Cleveland Cavaliers – $90,531,126
- San Antonio Spurs – $64,628,813
The Spurs may not be the favourites, but the road to the finals still runs through them in the west. So the average payroll of a championship contender is $78,697,246. Can we all agree this is the cost to win a championship (not including the cost for your GM, coach, assistant coaches, scouts, medical staff, etc)? The Raptors current payroll is $67,376,354. So to get to championship calibre, it will cost another $11,320,892, we subtract that from the Raptors profits, and you are left with $16,379,108. You think BCE/TD shareholders and Ontario Teachers are willing to accept $11mill less to win a championship? Seriously?
98 Raps
using your hypothetical scenario, the raptors’ owners won’t lose 11 million but 22 million profit because of the luxury tax.
Simon says:
How can anyone doubt that a team that wins would make more money than a team that doesn’t win?
(winning = money)
That’s just common sense.
ROFL!
lol, thanks dino. that’s even worse, God forbid they only put $5mill a year in their pockets.
Sorael says:
“Teams that win a lot make more money than teams that are merely mediocre.”
Riiight…
Well, this time the proof is in the numbers. Black and white. Nice work, Raps Fan.
But if a team is a loser team for a long time, people will stop going to their games. I mean, the Raps aren’t contenders and have never really been, but they make the playoffs and have had some interesting teams (Carter, Oakley, Bosh). Winning doesn’t necessarily mean money, but not-winning for a long period of time should drive away fans and lower ticket prices, I would expect.
Probably a lot of it has to do with location too (obviously). I mean, in the NHL, the TB Lightening were giving away Stanley Cup tickets, but in any Canadian city Stanley Cup tickets are impossible to get. All those cities in the Top 10, I think, are b-ball markets (although I know nothing about San Antonio or Houston).
The question is, what is anyone going to do about it? This is the ownership situation and it’s not going to change. Is anybody going to flee to another team? I’m not. So fuck it, hopefully BC or whoever can make a good team without spending big bucks. Looks like San Antonio did it, so why can’t the Raps?
jord, when people talk about a treadmill team, this is what they mean. a team good enough to win 45+ games, get to the playoffs, and maybe win a round or two. that is where the money seems to be.
the large markets aside (toronto included). look at the rest of the list (click on the picture) interesting things there.
Jord, San Antonio tanked on purpose to get Tim Duncan.. the rest is history.
And the Clippers are still around no? Christ, they have made the playoffs 7 times in 38 years.
No, no one is going to do anything about it, because of die hard, doesn’t matter what happens, loyal fans like you.
Thing is teams make more money doing what the Raps are doing (like I said a few weeks ago) – market to families, sell hope to “true” fans, get out in 1st round, rinse and repeat. Year in and year out.
Almost every team on your list has either won a lot recently or has had a storied history. Your list proves my point.
dude…lol..half the teams haven’t wont that much at all recently (bulls, knicks, raptors, wizards, rockets). all five of those teams have had absolutely minimal playoff success.
but talking about the leafs specifically, compare them to the celtics:
celtics had $10 million more in revenue, but had $8mill less in profits. what does that tell you?
look at the spurs. they have won 4 championships in 10 years, and make less money then the raptors. how would winning a championship makes mlse more money sorael? the numbers are all there above for you to see. i don’t see how you are making these statements.
Yeah, I may be a little die-hard, but I live in Vancouver and in no way (except through TV) support the Raps financially so people like me are not, “no matter what happens”, keeping this team in business. No one is going to do anything about it cause there is nothing you can do. The current owners are the current owners. Deal with it, or go jump on another team. Plus, teams sell the “hope to true fans” and then lose in the first round cause it’s hard to win the championship. Only half the league makes the playoffs, and the best teams are in the playoffs. In a general sense, every team is trying to create a winner, which means, yeah, not every team is going to win. Plus, there are only a handful of super good players who can get their teams to the playoffs and the finals. Look at MJ and the Bulls, Duncan and the Spurs, and now the Celtics. The Raps would need an amazing team to beat the Celtics, the Cavs, or any western conference team in a 7 game series. Just the way it is. So unless the Raps can get some superior players, which doesn’t happen often, we’re probably doomed to lose to those teams.
I might think this way cause I’m an Edmonton Oiler fan. Small market, sticks to the salary cap, and is generally quite mediocre. Still, once a while you get the right players and you make a move to be a contender. I still think the Raps have it in them within the next couple years, albeit with a lot of changes.
Sorael, are you riding the Pineapple Express? How in the world does it prove your point? What are you looking at? You need to elaborate dude.
Raps Fan beat me to it. I give up, this cat either failed math or is related to Marbury.
Jord, you are supporting it by watching on TV. I really don’t wanna comment on the rest, cuz it reads like a bunch of excuses to me. MLSE doesn’t want to do what needs to be done or has the wrong people in charge, whichever way you want it. You can’t just say.. oh well, the rest of the teams are better, there is nothing that can be done.
btw I flattered that my silly comment elicited a whole post in response. My point is simply that the Raptors can make even more money if they become an elite team than if they remain a “treadmill” team. The extra playoff revenue alone would be huge, but the have the opportunity to capture a largely untapped market.
Right now most Canadians are far more interested in Hockey than Basketball. The way to change this is to put a team on the floor that can’t be ignored. If the Raptors were a consistently elite team more people would watch them. Especially younger people, who are more open to new things. This would allow MLSE to make more money from better TV deals and from increased merchandise sales.
*sigh*
Also if you look at revenue you can see that successful teams generally have higher revenue than unsuccessful teams. If teams like NY and Dallas a dumb enough to kill their profits with bloated payrolls that just bad management. The teams market also factors into the equation, but winning is clearly more important.
Yeah Flux, I’m not an idiot, I wrote “except through TV”.
I’m not trying to say that there is nothing to be done, however, I am more easy going, I guess. In the end, b-ball is about entertainment. It’s fun to play and it’s fun to watch. I would love if the Raps would win and I scream in frustration when they don’t. But yeah, it would take a fair bit of losing for me to change to another team. I lasted through Wince, so this ain’t so bad, right?
Plus, you haven’t said what you’re going to do about it.
I’ve decided to complain on blogs :) and create Raptor superpowers through xbox. And still watch the Raps play. What else is there to do?
Sorael, wow..simply wow. Have you seen the attendance numbers? 97% How many more people do you think are going to watch? IMO, the profit margins would not be substantially greater then what they are now, hence MLSE has no reason to spend more money and increase risk of losses.
My apologies, Jord. Misread that.
Hey, I am here sharing the frustration, sadly I don’t think anything is ever going to change. Canadians in general are too loyal, regardless of performance (leafs show us that)and the MLSE cultural policy is family night out, guys night out and ladies wine tasting night. Not championships. You are entertained, it what the E stands for in MLSE and it’s what this team is – a cash cow.
What we need to factor in though, is that if you win more games, you have more revenue, both during season (though in the Raptors’ case, they do well even at mediocre levels of play) and during the playoffs (more rounds of playoffs = more games = more money).
With all that factored in, they end up recouping some of that $11MM investment (of course, excluding luxury tax).
Even then, think of if the Raptors win a championship (I know it’s extremely difficult to do, but please try). Do you realize how much memorabilia will be sold? The Raptors could end up turning a profit based (luxury tax included) on the merchandise sold if they won a championship. They have a whole COUNTRY to sell merchandise to.
Mash… you are not factoring in risk. There is no guarantee, at all, that they will ever get out of any round, regardless of the players. Think Dallas or PHX. So, does it make sense (to them) to take on that risk when it can result in a loss? (spend money on players, no rounds, no chips = no revenues) No! It doesn’t. They make lots of money this way, no reason for them to risk anything. The risk is bigger then reward, hence present situation.
I want some good news for a change.
Winning is NOT money, but losing IS lost revenue. If the Raptors go back to being a below average team with no hope of being in the playoffs, there will be less fans and the value of the franchise will drop. MLSE is trying to make the Raptors a playoff team rather than a championship team (like the Leafs).
Paps, I thought Sam getting fired was causing mass celebrations in TO?
Mike, when this team sucked there was very, very minimal losses in revenue and attendance, so sorry that is just not the case, at all, with the Raptors. Moms are always buying jerseys, and people will always want to get check out NBA action in town, no matter how bad the Raps suck. Plus, like I said earlier, the fans loyalty has no bounds.
I don’t know Sorael, you can see where the Raps had gate receipts of $44 million last year but player salaries were much higher.
Now, take the 67 mil payroll of this year and add $11 mil to get to arsenalist’s suggested 78 mil level.
That’s an extra 11 mil, times two for luxury tax, and the team loses it’s share of the luxury tax revenue coming to the team now from those paying the tax. so we’re looking at an extra 25 mill about.
Now, each homestand in the playoffs gets about $1 mil income is the figure usually thrown out there. so, they go far into the playoffs and pick up an extra 10+ home games. You’re still losing out a ton of cash. You have to hope the marketing picks that up and the city gets Raps fever (merchandise) and you renegotiate TV deals.
Raptors are the only team in the whole country, half of the people are not going to the games to see raptors but to see the other team.
On the other hand, I dont think that the ownership or GM is keeping the team from winning, in their eyes O’Neal who’s a legit superstar if not injured was a good pick-up even tho when you think about it you could get 3 pretty good players for his money
What Raptors need is a canadian on the team :)
Does anybody know if there is a serious study on this issue?
A link would be coo..
Thanks,
You seem to be calculating a net profit based on the annual income and cost of running a team. That’s misguided in my opinion.
Why don’t you look at that list as it actually is stated: value of the teams.
The worth of a team has to be taken into account — the value of a franchise obviously is a part of it’s net worth. If you own a 1 million dollar house, that equity is part of your wealth. Someone who owns that house straight up and makes 15 bucks an hour is richer than someone who doesn’t own a house and makes 17 bucks an hour.
Do you think San Antonio would be valued as much if they weren’t perennial contenders? No. The only reason small market teams have any sort of national presence is continued performance. The top ten of that list is all winners or major markets. How could a small market team make money without winning? By Forbes account, they can’t, and don’t.
To think that the Raptors wouldn’t make more money if they won a championship is just silly. Particularly because they are the only team in Canada. Winning a championship would make them nationally relevant, and in a championship starved city like Toronto that is full of bandwagon jumpers, they could afford to jack of ticket prices (already nearly the highest in the league).
So yea, it is common sense. Stop being so paranoid.
I think this is an over-simplified look at the numbers. There are so many factors that need to be considered, and since I’m not an economics expert by any means, I can’t give you a whole lot. But I don’t think you can say that winning DOESN’T equal more money.
Since I’m only seeing the numbers up at the top, I can’t say for sure, but I would assume the Celtics made more money last year than the year before, due to their long playoff run. You can’t compare the financial situations between different cities because there are so many different factors at play that aren’t affected by wins and losses. All cities do not start on a level economic playing field. The only way to do this is to take a look at each city individually and see how their own profits are affected by wins and losses, not through a cross-comparison of all the NBA cities.
You are completely ignoring the risk and rewards relationship and margin of profit. You have to spend the money 1st, to make it. MLSE in not willing to take that risk and not with a small margin of profitability. How do you not understand that? They want a sure thing and are not willing to do anything if they can get it. You are working under the assumption that spending money autocratically produces wins. Tell me what prices are you jacking up when you spend all that money and have no game tickets to sell in the playoffs?
No one is paranoid.. just realistic.
*they can’t get it.
Something in the order of what Baseball Prospectus has done regarding playoff berths/wins and the effects on revenue, except applied to basketball, would be cool to see. Haven’t found anything like that, but it would be nice.
I agree with Kreza23 in that there are some other factors to consider when looking at the chart, but who has time to gather data and build an econometric model to attempt to answer this question. So as a first approximation, this is great work/effort by Raps Fan.
Kudos, Dude.
Kreza, you would be wrong.. the Celtics barley broke even last year. You have to share you income with the rest of league when in the playoffs.
And obviously, the Raptors prove that in their case regardless of wins and losses they a have piled up cash. Their attendance has never suffered substantially.
Sure winning lead to more money, but how much are you gonna have to spend to get it? And again, you have to take the risk 1st and have no guarantees of even winning. Players get injured all the time, still gotta pay them.
Bosh’s agent and financial advisers have also explained the situation with the MLSE. So, if you were Bosh, would you want to play for the Raptors knowing that the franchise is only a cash cow for a teacher’s union and a bank who don’t give a shit about the team’s roster??!!!
Bosh will not stay with the Raptors even if they offer him an obscene amount of money, because he knows the situation is terminal in Toronto … and besides, BC is not going to give Bosh an obscene amount of money because he’s really not worth it.
The best management decision for BC is to trade Bosh for several athletic players immediately and let the Raptors tank with Triano coaching for a high first round draft pick.
Shaq was traded .. AI was traded .. Gasol was traded .. so Bosh can be traded too.
This was such a great and informative post, awesome stuff!
year total avg. record
2006-07 748,603 18,258 47-35
2005-06 699,242 17,054 27-55
2004-05 703,388 17,155 33-49
2003-04 750,608 18,308 33-49
2002-03 777,507 18,964 24-58
2001-02 810,160 19,760 42-40
2000-01 793,256 19,348 47-35
1999-00 756,496 18,451 45-37
1998-99 439,190 17,568 23-27
1997-98 675,255 16,470 16-66
1996-97 748,927 18,267 30-52
1995-96 950,330 23,179 21-61
playoffs 99,00,01,06,07
I think we can likely all agree that winning = revenue but Fluxland is right in that you have to factor in costs as well. Howevever, is it always the case that you have to increase costs to increase winning?. The whole theme of “Moneyball” was how an efficient GM (wins/payroll) was able to make the most out of his roster with a modest and in some cases declining (in real terms) payroll. To that end, can Colangelo do the same thing? Furthermore, is he motivated to do the same thing? Those are some key questions to me. Cause if he can, there is no reason to believe that the statis quo will be good enough for him, or MLSE.
I gotta be honest, I don’t see how you can ignore the one thing that MLSE will probably look at more than anything when deciding if a championship team is profitable, and that’s potential market. Southern Ontario alone is what, 10 million people? That’s about the same as the state of Ohio. It’s over double Louisiana. It’s not too far off Illinois.
My point is this: you will only ever sell so many seats – you’ve only got one stadium to fill. Your revenues come from television appearances, from merchandising and promotions and tie-ins and basically just selling as much crap with your logo on it as possible. What do the teams at the bottom of that list have in common? With the exceptions possible of Dallas, maybe Miami and the emerging Blazers, those teams have past success and a national following. In other words, they have a weaker brand than the Bulls (gee, I wonder why they’re still up at the top), Lakers, Pistons, Rockets, Knicks, Suns, Raptors, Celtics…
This is how you make money with a sports franchise: long term success that builds an inter-generational, international fan base. You put a big name in a big market, you get into the playoffs for a few years, hopefully you win a championship, you sell some hats. I’m guessing they’ll recognize that spending 10 million extra a year for a couple of years when you’re also raking in revenues from a deep playoff run will be worth the long term market development. But I can’t seem them spending an extra 5-10 million per unless that adds a player that can take this team into and maybe past the second round, and can you really say that about any player out there in free agency that’s available right now?
I agree with those that say that there are a lot of variables at play here, and as Flux pointed out, risk is certainly one of them. In my defense, Flux, I agree that spending $11 MM on players doesn’t automatically guarantee a playoff berth or win. However, spending $11 MM WISELY does increase that likelihood.
Nothing, save for death and taxes is ever 100% certain.
But definitely, if the Raptors spend more money, going past the cap if necessary, and spend that money more prudently, the chances of us being able to compete substantially are far greater. And if these chances are greater, the expected value of us making more money goes up. We have a higher chance to secure a championship, so the fans benefit. The suits at MLSE get a chance to earn some additional profits, so they benefit too.
Granted, it’s completely ideal, and admittedly simplistic.
But think of the winning programs. These are the programs that are able to secure strong veterans for smaller contracts, getting those hometown discounts from resigning contracts, having their late round draft picks perform at a high level because of strong guidance and strong practices.
Success breeds success. And I sincerely believe, in the Raptors case, success will breed money.
Raps Fan,
Who loves ya baby?
———————————-
re: What was their first order of business when attendance was dropping during the post Vince Carter era? Get the guy who ran the 6th most profitable NBA franchise -> Bryan Colangelo.
———————————-
The K-man! That’s who.
Keep On Truck’n : )
Does anybody have the details on Triano’s salary situation and Mitchell’s?
I heard that MLSE has to eat some of Mitchell’s salary which should indicate, at least to some degree, a wilingness to not just be status quo at MLSE, even at the cost of some salary. This should make all the posters on this board feel more hopeful.
My mind is melting…
You have to work within the constraints that you’re given, and our franchise is smart enough to know this is a business that operates to make money. If it didn’t, it would be asking for handouts every year like the car makers. It’s possible that if Vancouver had this mentality from the onset it too could have survived and possibly flourished.
The franchise that we should be looking to emulate is New Orleans. Continually battling for home court advantage in the playoffs, with young talent, and the same team salary as the Raptors.
Spudz
http://eclectic-indulgence.blogspot.com
1. Don’t put too much stock in the Forbes rankings as they are highly flawed. Somehow I doubt that the Celtics are only $47MM more valuable than the Raptors. Forbes doesnt provide a lot of details on the methodology or their sources of info, particularly given that these are private companies.
2. Assuming the math on the Luxury Tax is correct, I would also argue that the $22MM additional cost would easily be offset by additional revenue generated through a championship. You have to factor in additional seat sales during the playoffs which are much higher margin, additional concession sales, and additional TV revenue both through the playoff run but also in the future. I think it is easy to argue that a championship would give MLSE a strong hand in negotiating with TV networks on TV revenues for Raps games, and over multi year deals this is a lot of money.
3. I love to bash the owners as much as the next guy, maybe more. But the fact is that OTPP manages over $100Bn, TD makes over $2Bn annually (on a normalized basis), i dont think they want to lose money, but an additional $20MM in expenses to them, with a respectable risk /return profile is not going to make them blink. I think Colangelo is going to have to convince them why they should do it and what the likelihood of winning is. Take the Leafs as an example, they were always near the salary cap, they just spent the money on terrible players. This is a very profitable business but your crazy if you think that Teachers and TD in particular are worried about their pro rata share of $22MM.
As I’ve said beofre Colangelo is an employee who is given parameters to work within. Are the owners win at all cost owners? No. At the same time spending a tonne of money isn’t a guarantee (although it helps). We need management that can bring in the right players and spend the right money to win. You can draw your own conclusions on if you think Colangelo is the guy. Until I see the team take a pass on a guy(s) who you could justifiably argue would put them over the top, based solely on money, I will take Colangelo at his word that he would recommend going over the cap if it made sense.
The main thing that correlates with total revenue is, quite simply, the location of the team. HOWEVER, there are other factors. The two biggest ones are wins during the current season and wins during the previous season. After that, it’s historical success (as measured by past championships). Last you’ve got star power, as measured by total all-star votes the team gets.
The relative value of those measures is important to note, though. During the 2003-2004 season, the average team had roughly $200,000 of their total revenue explained by star power, or about 16 cents per all-star vote. By contrast, EACH additional win was worth an average of $238,000.
The biggest factor in a team’s financial performance is the market it’s in. No surprise there; how much a team can charge for its tickets is determined by supply and demand. BUT–and this is the massively important point that I think this article is missing–the main thing that a team can do to IMPROVE its revenue is, simply, win. Winning correlates to gate revenues more than anything else, and gate revenues are basically the only revenues that are significantly variable for a pro sports franchise. Consistent winning, especially past championships, helps a lot, but the biggest factor is still wins for the current season, or “how the team’s doing” right now.
So yeah, the article’s way off-base unless you’re suggesting the raptors should move to New York, or get a time machine and produce a history of championships.
Reference: “Stars at the Gate: The Impact of Star Players on NBA Gate Revenues”
Journal of Sports Economics, Vol. 5, No. 1, 33-50 (2004)
Fluxland – I’m totally with you that there are obvious risks to going over the luxury tax and spending more on players. Spending more doesn’t necessarily equal more wins, as the Knicks have demonstrated year in and year out. But the issue here is whether or not winning equals more money.
You stated that the Raptors have shown that regardless of wins and losses they have piled up a lot of cash. This is quite true, but this doesn’t disprove that winning more would have made them more money. Who is to say that if they went deeper into the playoffs last year(all things being equal – payroll being the same), that they wouldn’t have made even more money. I believe it’s a pretty safe assumption that they would have. I could be wrong(like I said, I’m no economics expert), but I’m not sure how and I am more than open to having somebody prove it to me.
Kreza.. I agree there would be more money. All I am saying is that the risk does not outweigh the rewards. The margin of profit they would make would not enough for them to spend crazy money up front. Like I said, there is no guarantee there would be more wins (more money) so why would they spend more money up front (risk) to chase that dream. They make enough money as it is, there is no reason for them to push it.
tkfu..revenues and profits are not the same thing. You are not taking into account various costs and expenses. Article is not off at all. And it the case of the Raptors winning or losing.. it’s all the same, money is flowing in.
Flux – It’s possible that the extra playoff, merchandising and TV revenue wouldn’t be all that much. I really don’t have access to the figures that would prove this one way or the other. One thing that a successful team would allow them to do is raise the ticket prices without driving fans away.
Also Raptors fans are not as die-hard as Leafs fans. There’s no way the ACC would continue to be full if the Raps had a run like the Leafs have have over the last 30 odd years.
tkfu/dg: thanks for the references, very interesting. i don’t think the basis of this article is that far off, obviously i am not accounting for everything, but in any business, you have to factor in risk and roi (as stated above).
in doing so, you have budget the cost to build a contending team that is 50+ wins a year. give or take, assumption of $78 mill seems about right. the spurs and pistons are just damn well managed franchises and skew that average payroll down.
so back to the ownership of mlse:
you have a bank, a telco and a teachers pension fund. all conservative business entities. all of whom bought into this organization at valuations far less then current levels. i think otpf bought in at like $120mill. so they pocket about $11mil per year from that invest. a return of roughly 9%. roi of 9% per year out paces money invested in the equity/bond markerts on a year-over-year basis.
i imagine the other business have similar situations.
to spend another $10mill in the hopes of producing a team that goes deep into the playoffs is reckless for a pension fund/bank/telco. look at teams like dallas and denver, massive payrolls and not very much success over the last 6-7 years (dallas has had success, but nearly enough to justify a $92mill payroll).
so yea, winning obviously does make you more money, but whats the return? suppose you invest another $10mill to bring this team up to contention standards, and win a round of playoffs, what is that, 6-7 home games? figure $1mill per game in revenu, and $3mil in total tertiary revenue. you have about $10mill.
so yes, the additional investment is recouped, but when you consider luxury tax (figure another $10mill in luxury tax), you come out $10mill under current levels. just something to think about.
sorael, you are right, the raptors wouldn’t be able to survive like the leafs, going back to the premise of this article. colangelo is very good at running profitable teams that are good enough to keep fans interested, but not good enough to win, which is in line with the profits mlse is in the business of making.
mlse isn’t like mark cuban, who wants to win, and will spend whatever it takes. two different types of philosophies there.
The Raptors did not make more money than the Boston Celtics, Forbes magazine believes the team would sell for slightly more than the Boston Celtics would. Equity in the team is higher but for all we know, the Celtics make a better profit. As someone pointed out in another post, their revenue increased significantly after the moves they made (according to Forbes). Respectfully, I think that RapsFan had a premise and has chosen to interpret the numbers in support of that premise rather than find numbers that would confirm or disprove the premise. Like Flux and many other regulars on this site, he wants MLSE to be the villain. They might be a problem but I just don’t see them as the villain. That might not be an edgy position but I strongly suspect it is the truth.
But if MLSE is the villain and “justice prevails” to wrest the franchise from the hands of the evil-doers, it very likely means the death of NBA basketball in Toronto. There is no Basile waiting in the wings to buy this franchise from MLSE. There likely are (assuming the economy eventually recovers) a number of Americans who would love to own an NBA franchise and move it to an American market. The only reason to keep the franchise in Toronto would be profits which would mean exchanging one villain for another. As imperfect as it is, MLSE is the best available owner if you want an NBA franchise in Toronto. As I’ve said before, they may be money grubbing whores but they’re our money grubbing whores. Other franchises have waited longer than Toronto for respectability. The team may not be at that point yet but I’m content to wait. I might not buy as many tickets next year but I’m content to wait.
Sorael.. true, no team ever discusses their numbers. The Celtics did state that they barely broke even last year. Whatever that means to you.
I have posted the attendance numbers… there is little evidence supporting the statement that when the Raps suck people stop coming. Also the Raps do not rely on the diehards.. they rely on the families, kids, occasional outings (see the promos: ladies wine tasting nite out, guys night out..etc,), tourists and people in general who want to see the rest of the NBA talent, not the Raps. But that doesn’t dismiss the fact the die hards are loyal and would never turn on the team. Tell me how many people do you know that are FORMER fans of the team?
RapsFan, you may wanna add that any financial success in the playoffs also involves sharing it with the rest of the teams in the NBA.
If the correlation between “winnning more” and “making more money” is, in fact, tied in directly with “winning the championship” and “a willingness to ’spend more money’ in order to ‘make more money’ and therefore ‘win more’ and therefore ‘make more money’ and therefore ‘win more championships’ and therefore ‘make more money’, ad infinitum” … then, please, riddle me this …
What’s the reason any team in the NBA should EVER be afraid of going over the Salary Cap and the Luxury Tax Threshold?
… since spending more, equates with winning more, equates with making more money, equates with winning a championship, equates with making more money, etc., etc., etc., …
[i.e. The NEED for a NBA team to stay within the acknowledged Salary Cap and underneath the stated Luxury Tax Threshold is a complete and utter Red Herring ... propogated by insidious carpet-baggers. Discuss at your leisure. : ) It's a Game, that works best, when The Other doesn't even realize that s/he is Being Played.]
sam: the celtics had more revenue, but they had less profits. it’s all about profits aka what you put in your pocket at the end of the year. what exactly am i interpretting? i linked to the original source, and took revenue and profit numbers. sure, maybe the numbers aren’t a 100% accurate, but they are probably within an acceptable variance of 4-6%. even accounting for that, the raptors profitability is greater then the celtics.
also, there are canadians who have the money and would jump at owning the raptors, and keep them in toronto.
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re: As I’ve said before, they may be money grubbing whores but they’re our money grubbing whores. – by Sam
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No such entity exists, as money-grubbing whores belong to no one but themselves.
And here comes Sam proving my point about DIEHARDS.. “Hey at least we got a team” and will never turn on them.. just so there is NBA action in town. They will never fold.. it would have happened already. Look at the Clippers.
It’s not about MLSE being villains.. it’s just about how they operate their business and evaluating what it means in the future. Nothing more or less.
If you think there aren’t people who are willing to buy them out.. you are kidding yourself.
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re: also, there are canadians who have the money and would jump at owning the raptors, and keep them in toronto. – by Raps Fan
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Without a shadow of a doubt.
Truth-seekers hire the best person for the job, if the job is winning a NBA championship, not turning an annual profit.
Villains hire the best person for the job, if the job is ensuring an annual profit by being a competitive NBA team.
There’s a difference.
It’s absolutely mind blowing how painfully blind people are to obvious facts. It’s like being in an emotionally abusive relationship – “Oh, it’s not that bad, at least I have someone. It will get better.”
khan: villians hire the best person to ensure profitability while selling the move as one designed to make them champions. i think the distinction should be made. no shame in running a sports franchise like a business if you don’t put lipstick on the pig.
The “.200″ article about BC today is pure gold. Or not, for “BC lovers”.
Flux – No need for your condescending tone
“It’s absolutely mind blowing how painfully blind people are to obvious facts”
so that needs to stop. It seems you take intelligent attempts to counteract your arguments personally.
Raps Fan,
On the regular, the women in my life don’t happen to wear lipstick. : )
They is real and beautiful, simultaneously.
————–
Agree, 100%, re: villains, champions, profitability and pigs.
Trust me Rishi, if I wanted to be condescending, you would know it.
Just stating FACTS. People are completely (choosing) to ignore or not seeing what is clearly (to some) going on. I find that astounding.
If you are offended, what does that tell you?
You wanna call people out for being condescending, there are plenty of other on here you may wanna pick a bone with.
It tells me that you have offended me and probably others.
LOL mine do!
Flux,
Pure, unadulterated, GOLD.
You think Dave Feschuk has been reading a specific blog out there? : )
i do ;)
Rishi, I can’t help you. Don’t read what I write if you are going to cry after. : )
Khandor, funny… have never dated a woman who wears makeup, either.
Yeah, no doubt, lately a few journalists have been putting out work that is very much in line with KSB and work that has been posted on there for a long time.
I never even read the TO media stuff, but have been paying attention since the Sam firing.
Flux – done and done, no more reading your constant negatively, adios amigo.
This argument is going around in circles because everybody is going off on tangents that are completely unrelated. The topic at the top of this analysis is “Does winning = money?”, but goes on to question whether or not MLSE would ever be willing to spend more to go for a championship, which is a topic that, while not completely unrelated, isn’t a direct answer to the question.
As I’ve mentioned, winning a playoff round for the Raptors would’ve meant more money. Any team that went to the second round of the playoffs would have made more than if they were eliminated in the first round. The same goes for a team making it to the third round, as opposed to getting knocked out in the second, or first, or having missed the playoffs. So the answer is, yes, winning does = money.
Whether spending more in order to do so is a smart investment is another issue all-together. Nobody here has said that spending more guarantees more wins. Everybody has agreed that there is a certain risk involved in doing so. And whether the Celtics made more or less than the Raptors is also unrelated, because of the other factors at play in terms of market, etc. As I said before, the only way to look at this is by picking one city, and seeing how their profits are affected by their results on the court. Picking a team that has spent relatively the same amount in player salaries but has had a big discrepancy in results is the best way to do it. You can’t compare the situations between cities and franchises.
kreza: you make a valid point, and i will be re-examining this next year when revenue/profitability is posted again. for the basis of this article, comparing the raptors (one and out) to the celtics (nba champs) was my only way (since i’m not a finance/economist) for comparing money spent, and profits realized.
Raps Fan – Not dogging your work at all here, so I hope you didn’t take it that way! Considering how little information you had to work with, it was a very good piece. Was just seeing the bickering between posters and was thinking that we’re not even arguing about the same thing anymore. Haha.
Re: Raps Fan,
I was recently employed as an economist and I, most of the time, still don’t know what I’m talking about.
You get props for the article anyways.
i know kreza, no offense taken at all. comment threads always reduce to bickering at some point, lol :)
LOL @ RISHI
RapsFan – who’s the saviour(s) of basketball in TO? That’s a genuine question and the only serious part of this post.
Khan – you should keep commenting, etc. but man you suck the life out of the game. A whore belongs to no one but themselves? It’s a lame little metaphor not a point for argument. But anyway, as we all know by now the answer is Rodney Carney!
Y’all gotta read the FreeDarko book and develop a sense of humour (or a sense of humour that doesn’t demand a winner and loser). Humour, fun – these are a big part of what makes basketball worth following. I’m starting to care less about wins and losses and wouldn’t mind a team with a definable (and enjoyable) style. If that’s an abusive relationship, so be it, I like the bruises baby!
@FLUX: Really? Revenues and profits aren’t the same thing? Damn, am I ever glad you’re around to explain that…
Silly me for assuming that any idiot would realize that the only way to increase profits is to either increase revenues or decrease costs, and that decreasing costs is not correlated to winning and thus isn’t relevant to a discussion about the relationship of profitability to success.
@Raps Fan:
“in doing so, you have budget the cost to build a contending team that is 50+ wins a year. give or take, assumption of $78 mill seems about right. the spurs and pistons are just damn well managed franchises and skew that average payroll down.”
I believe there’s a big ol’ flaw in your logic here–or rather, the assumption behind your argument. You’re assuming that payroll is correlated to wins. Before you make that assumption, go look at the data. Overall, it doesn’t support that, and even the specific data you cite doesn’t support that.
You even make the telling statement yourself: “the spurs and pistons are just damn well managed franchises”. Spending money is not the answer, spending money well is. The last 20 years of NBA history is littered with teams who have spent tons of money without being successful*, and also with teams who have been championship-caliber without spending a ton**. There does seem to be a minimum threshold of spending to become a contender–you can’t be the Clippers, or the old Charlotte Hornets (teams that would refuse to sign large contracts for players that were worth it)–but those were teams that would rather let their stars walk away as free agents and sign journeyman replacements than try to win. That’s not what we have with the raps.
Fact is, it’s really damn hard to contend in the NBA. By the Noll-Scully measure of competitive balance(and every other other measure yet devised), the NBA is by far the most stratified pro league in North America.
*Knicks for the last 5 years, Jail Blazers (Scottie Pippen signing anyone?), Philly this year, Wizards with Mitch Richmond and Juwan Howard, Nuggets with AI and Carmelo, Nets with Kidd, Jefferson, and Carter, Suns with Hardaway and Marbury, Magic with Hill and T-Mac
**The aforementioned Pistons, the Spurs for the last 15 years, the current Blazers, the Jazz for the last 25 years, the Bad Boys in Detroit, the early-90s Blazers
Just realized I didn’t outright say the main point that I wanted to get across, and that seems to be a recipe for being misunderstood around here:
There is very, very little correlation (about 10%) between payroll size and team success in the NBA. In fact, there is little to no correlation between those two variables in ANY pro league in the world that has a salary cap. In the NFL it’s around 5%, and in the NHL it’s around 11%. Even in baseball it’s only about 18%.
The upshot if that low correlation is that an extra 3.5 million in salary is worth about 1 extra win, so that 11 million dollar add is worth about 3 wins. Whoop-de-doo. Like I said above, quality management (and talent evaluation) is what creates a good team, not payroll.
References:
“Wage Inequality and Firm Performance: Examining a Natural Expiriment from Professional Basketball.” Atlantic Economic Journal, 32, no. 2, 130-139 (2004)
“The Economic Design of Sporting Contests.” Journal of Economic Literature, 41, no. 4, 1137-1187 (2003)
p.s. in case y’all can’t tell, this is an area of great interest for me.
tkfu: thanks again for the references. and i do agree with you to a point. this whole piece started when someone said that if the raptors won more, they would make more money. how do teams make money:
- gate and concessions
- tv revenues
- merchandiszing
- sponsorships
you look at the raptors case, and they are one of the top teams in the league in attendance. this all with a pretty mediocre team over the last 8 years. so would winning increase gate & concessions? maybe a little bit, but significant.
tv revenues are a tough one. the only people interested in watching raptors games are torontonians, and some other people across canada. for the most part, americans don’t care and only watch them when the raps play their team. will we ever get to hockey viewership? no way. half? maybe. i’m sure this will could improve with a winning organization, but outside of southern ontario, how much real growth can be expected? i don’t have the answer to that.
the raptors have two of the top ten jersey sales in europe. with accounts for a 25% of the leagues merchandising. without a bonafide superstar, i don’t expect for them to be able to squeeze much more out of this. (bosh is an elite player, but not a superstar player, there is a difference)
sponsorships: they have tons already. you can only have so many sponsors at once. companies expect a certain amount of airtime along with the raptors. can’t dillute that.
when i was correlating payroll and team success, i was just speaking to the levels we are at now as a franchise. $67mill payroll and about a .500 team. some good players, and some crap ones. to improve the roster, more money will have to be spent. can we agree on that?
jamario moon – $750k
joey graham – $2.7mill
will solomon/roko ukic – $2mill
hassan adams – $750k
that is only $6.3mill tied up in 5 players who all require to be upgraded. how much do you think it will cost to getting a quality starting small forward int his league?
as far as talking about the pistons and spurs ability to produce winners and manage payroll, there are only a handful of those sorts of executive teams in any league, not just this one. could the raptors be one of them? i’m sure, if mlse had the option to bring in buford or dumars, they would have in a heart beat. but the fact of the matter is that franchises don’t let those types of people go easily. can colangelo be this type of executive? i would have to think he can.
i don’t think he is a bad pres/gm, but he isn’t a great one. he has an eye for talent, you can’t dispute it, but his track record isn’t all roses. i haven’t given up to him, contrary to my tone, i think he can bring in some players to make this competitive, not sold on him to bring a championship though. hope i’m wrong on that one.
“but those were teams that would rather let their stars walk away as free agents and sign journeyman replacements than try to win. That’s not what we have with the raps.”
Hmmmmmmmmmmm
tkfu,
Seems as though your areas of interest might be similar to mine.
Given what you just said there ^^^^^, in comment #78, about a certain correlation which exists.
It would help promote further understanding if you first provided your working definition for the term “team success”.
Thanks, in advance.
Sam,
————————
re: Khan – you should keep commenting, etc. but man you suck the life out of the game. A whore belongs to no one but themselves? It’s a lame little metaphor not a point for argument. But anyway, as we all know by now the answer is Rodney Carney! – by Sam
————————
1. I wasn’t arguing a thing.
2. The Answer is … Allen Iverson.
3. Rodney Carney is … the Exclamation Point! : )
Some of us are just naturally more funny than others, I guess [which happens rarely].
raps fan: Yeah, I see your point on a number of those things. Certainly with TV revenue. The only TV revenue that goes directly to a team is the regional tv deals(which for us includes our deal with TSN, the Score, and CBC), and we just signed a long-term deal. Great success and high interest in the team might enable us to get a better deal several years down the road, but for now that’s not going to change much. Revenue from the big deals the NBA has with ESPN, ABC, etc. get divided evenly among the teams, no matter how many times each team actually shows up in those national broadcasts.
Merch I don’t know anything about, but my gut says you’re probably right on that too. Besides, most of the profit from merch gets shared around the league as well, anyway, so a big increase in our merch sales wouldn’t translate into a big increase in our revenue.
As for gate revenues, though, there’s room for growth. Sure, ticket prices are already high, and we already have good attendance, but if we were genuine championship contenders, the prices could be even higher and we’d still sell out every game. Winning increases the demand for tickets, a commodity with a finite supply, so the price of that commodity goes up. Econ 101. Now, I’m sure you raps fans in Toronto wouldn’t be all that happy if prices were to go up again, but hey: there’s a reason they call economics the dismal science.
(btw, I live in Montréal, so as far as I’m concerned all you torontonians are basically investment bankers with overstyled hair who I could care less about :P. Also, Leafs suck and will continue to suck with Burke.)
@khandor: Team success is defined (in the papers I cite) as number of wins.
tkfu,
It’s important that others understand you are not talking about ever necessarily “winning a championship” [or two, etc.] when using the term “team success”.
tkfu,
Secondly.
Now, let me ask you this:
What’s the correlation which exists between “payroll size” and “team success”, defined as “winning the NBA championship that season”?
In terms of:
I. Highest-to-lowest payrolls; and,
II. Stratified segments with that range [e.g. High End; Middle; Low End].
sorry … Thanks, in advance, if you can provide this info. : )
lol @tkfu
i’m from toronto, and feel the same way about all our bankers…lots of them walking the streets begging people to manage their portfolios…sad really. and i agree about the leafs. wish i was a habs fan, at least 50% of my sports life wouldn’t be so dissapointing…
khandor: That’s not a good question to ask. Team success, as measured by wins, is closely correlated to efficiency differential, which is an excellent predictor of a given team’s likelihood of winning a given game. Now, the team with the best efficiency differential doesn’t always win the championship, but it happens a hell of a lot more than any other method we have of predicting the winner in a given season (yes, even better than games won. see 2004 Detroit Pistons).
What actually happens when a team with a lower differential beats a team with a higher differential depends on your perspective. It might be things like “crunch-time execution”, “toughness”, and “chemistry”, or it might have to do with coaching strategy, substitution patterns, and rock-paper-scissors style strengths and weaknesses, or it might have to do with injuries, or it might have to do with random chance–after all, upsets do sometimes just happen; that? why we play the games.
Any way you slice it, that’s a matter to be settled over beers, as a matter of opinion, or over mountains of game tape, as a professional study. It’s not really a question suited to analysis of broad data, and certainly not salary data.
tkfu,
Perhaps I asked the question poorly before.
In this instance, all I’m really interested in is the data associated with the answer to this question [A & B]:
For each of the last 40 years [let's say], where has the “NBA champion” actually ranked among the 30 teams in the League [or whatever number was in the League that season], in terms of “payroll size”?
For example:
[hypothetically ... because I don't know the actual answers]
A] Based on Individual Ranking
Season – Team – Payroll Size Ranking
2007-2008 – Boston Celtics – #1
2006-2007 – San Antonio Spurs – #12
2005-2006 – Miami Heat – ?
etc.
B] Based on Stratified Ranking
Season – Team – Payroll Size Strata
2007-2008 – Boston Celtics – High End [#1-10, #1]
2006-2007 – San Antonio Spurs – Middle [#11-20, #12]
2005-2006 – Miami Heat – ?
etc.
in order to better understand the correlation that exists between “winning the championship that season” and “payroll size”.
Technically, I’m not really interested in:
i) If it qualifies as a good question [or not]; and/or,
ii) If the correlation is statistically significant [or not].
[not trying to be impertinent; just trying to state the facts]
The “predictive” [i.e. before-the-fact] value of the correlation is actually immaterial to me.
The reason I say it’s a bad question is that the answer is neither predictive nor explanatory. You might as well be asking how much college age females liked the team colours of the championship team in each year. You might find a pattern, but you wouldn’t find anything useful.
So yeah, you could find that info and collect it. Hell, some people collect Cabbage Patch Dolls. But then what if someone someone used that information in an argument later? Then I’d just have to come back in here and explain again why that data’s useless (and that by extension, any argument or conclusion based on it is useless as well).
tkfu,
—————————-
You might find a pattern, but you wouldn’t find anything useful. – by tkfu
—————————-
What makes a found pattern “useful”, or not?
Whether the pattern is a coincidence or not. Our brains are wired to look for patterns, so we see them in all sorts of places where they don’t actually exist.
tkfu,
Taken any sports economics courses? If so then where?
tkfu,
What determines if a/the found “pattern” is a “coincidence” or not?
khandor: Repeated experiment, controlling for each possible confounding variable and checking to see if the pattern remains. Sadly, we can’t do that for sports. So if we want to look at data and find out if there’s a pattern, we have to eliminate the possible variables through regression analysis. How much data we need for regression analysis depends on how “noisy” the dataset is and how large it is. In university, I studied mathematics and computer science, with several stats courses thrown in there, and to me it is abundantly clear that the dataset you’re proposing to look at has far too much noise for its size to produce any useful data. You can either take my word for it or not, but I’m not prepared to try to give a course in statistics via message board to prove it, so I’m gonna have to stop debating the point here.
Such a stupid argument – Hmm. The owners don’t care if they win because they’re already making so much money – it’s populist BS, that we hear too much – usually from Leaf fans… bottom line: winning = playoffs…. playoffs = home playoff games… home playoff games = even more money for the owners… so any notion the owners don’t care if they win is beyond ridiculous.
tkfu,
No debate, from my end. Simply seeking clarification. It’s a suject of tremendous personal and professional interest to me.
Are you familiar with String Theory, as well?