Ken Berger’s View Doesn’t Reflect the Progress Being Made In New Orleans

A thought and emotionally provoking article got my attention just the other day. It was Ken Berger’s article on CBSSportsline about which teams are going to be contracted. First, I don’t know Mr. Berger personally, but I do know his clear agenda. His ultimate point in much of his writing is to rid the NBA of small-market teams. Rather than enhance it’s brand, he wants to diminish it.

In this article Berger gives a criteria of assessment to see who’s up for the chop. These include Local Revenues, Annual Losses, Market Size and Arena Lease term. Here’s his reasoning as to why New Orleans is on the out of the NBA:

"The Hornets’ $9 million in local broadcast revenues in the fiscal year 2009 was a full $3 million less than the Trail Blazers commanded in the nation’s 22nd-largest TV market — and 1/16th of the Lakers’ newly inked $150 million-a-year deal with Time Warner Cable in the No. 2 market. Add the crushing debt obligations the team was saddled with, a $16.6 million operational loss in 2008, and an arena lease agreement with a mere $10 million penalty — which, according to the amended lease, would be reduced by millions in unpaid relocation fees if exercised in 2012 or ’13 — and the Hornets meet enough criteria to warrant a close look.Plus, the fact that the NBA owns the team removes potential complications that would arise from compensating an outgoing owner. NBA spokesman Mike Bass declined to divulge any procedures for contraction that exist in the NBA Constitution, nor would he address what would happen to the lease penalty or unpaid relocation fee if the Hornets were contracted."

He makes some excellent points about how the Hornets seem to be lacking behind a lot of teams when it comes to TV deals, debt problems, operational losses and a lease agreement which isn’t exactly restrictive and he reaches a conclusion that the team more than warrants contraction.

However there are some flaws with his argument. First and foremost the operational loss in 2008 was in large part because of the huge amount of debt that George Shinn accrued over the duration of his ownership. In fact, the Hornets had an Operating Income of 3.2 million dollars (EBIT and “Depreciation”). This number is good for 20th in the league.

Putting aside Accounting figures for the moment, a lot of the negativity in the argument is drawn out by secondary information. The fantastic work being done in New Orleans isn’t being fully appreciated. Currently the Hornets have the second highest rate of new Season-Ticket holder signings in the entire league. They have currently sold 8550 in the midst of a lock-out. The fans are showing their support and so too is the organisation for the community.

As for a new lease agreement and TV deal, those will get worked out relatively soon. I am sure that high on the agenda of Jac Sperling’s check-list is a renegotiation of the state lease and Governor Jindal has let it be known his commitment to the organisation.

Louisiana actually appears to be on the up-and-up. They were named State-of-the-Year in the South by Southern Business & Development magazine outranking states like Kansas, Tennessee and North Carolina. This is quite cumbersome to the notion that the Louisiana region is a dead and small market. When in fact it appears that it is growing. Why then would the NBA like to leave?

With all this hard-work being done, why is it that national writers continue to hamper on the contraction issue. Contraction itself would not resolve the greater problems at hand, it would put more players out of work, it would diminish the NBA’s brand and make it less relevant to the United States and most importantly it would restrict any further progress to be made by the league.

Sure there are markets like Seattle and Kansas City raring to get teams, but that doesn’t mean that markets like New Orleans, Sacramento, Minnesota have to suffer. They are all quite viable, the system set up by revenues and competitive structure for players has made them less than attractive.

I think not enough credit goes to smaller market teams. Yes a lot are losing money and a lot are having difficulties securing long term lease deals (not New Orleans they are making a lot of progress). I just think that with the proper management in place that small market teams can be very viable in the NBA, if they’re given the correct structure and care.