The NBA has tired of the 76ers tanking

Since some of you aren’t NBA fans, let me give a bit of background. If you’re familiar with the NBA, please bear with me.

The National Basketball Association is the highest level basketball league in the world. It’s comprised of 30 teams, 29 of which are American. It generates a bit under $5B in revenue a year. That revenue is not generated equally among the 30 franchises, and the league tries to mitigate that via revenue sharing, as agreed to in the 2011 collective bargaining agreement:

https://drive.google.com/file/d/0B8wUCcoSh2vUdmxBdy1mdmQyUzA/edit

It’s not worth reading the PDF, I just put it in for reference in case someone was interested. A more interesting read is this:

http://www.sportsbusinessdaily.com/Journal/Issues/2014/10/06/Leagues-and-Governing-Bodies/NBA-revenue-share.aspx

One key piece to note is that Philadelphia 76ers owner Josh Harris is the chair of the revenue sharing committee.

In addition to revenue sharing the NBA has a salary cap and a salary floor. From the 2013-2014 season onward to the 2020-2021 season that floor is 90% of the cap. In the 2015-2016 the cap is $70M and the floor is $63M. If you stay under the floor, that difference is distributed to the players from that team, so there is no financial benefit to attempting to cheat the floor.

This FAQ is very thorough and can answer any questions you have about the current CBA: http://www.cbafaq.com/salarycap.htm

Now, there is one other thing I need to explain. The NBA uses a draft lottery to determine the top three picks in its player draft. The worse a team does in the prior season, the higher the likelihood that team has of drafting an elite talent. This leads to a perverse incentive, known as tanking. Tanking is when a team sets itself to lose in the short term for some long term benefit:

http://www.forbes.com/sites/roberttuchman/2015/04/15/the-truth-behind-tanking-in-the-nba/

An aside, I love the fact that tanking has become so blatantly obvious that the draft tracker has been renamed:

http://nbatanking.com/

You might note that the 76ers have the worst record in the NBA, and the Lakers have the second-to-worst record. The Lakers owe the 76ers a first round draft pick, but it is is “Top 3 protected”, which means that if the Lakers win the lottery and get one of the first three picks, the owed pick is deferred to 2017. The same thing can happen in 2017, but not 2018 when the pick is no longer protected. At that point the Lakers have absolutely no incentive to lose, and if it gets that far, they have a pair of lottery picks to try and win with. Fun stuff.

So, let’s come back the Philadelphia 76ers. They hired Sam Hinkie to be their GM in May, 2013. He came in with a plan. Since his hiring the 76ers have gone a cumulative 38-148. They’ve accumulated multiple top picks, including Nerlens Noel, Jahlil Okafor and Joel Embiid. Noel may turn out to be an excellent player, but Embiid has been a disaster. He’s been injured, grown fat, and has no interest in doing the work required to get in NBA physical condition. If you wanted to attack Hinkie’s basketball acumen, the roll of the dice on Embiid would be exhibit one. For the record, Had Embiid been healthy at the time of the draft, he would have gone first overall (he went third). As for Okafor, it’s too soon to tell.

http://www.si.com/thecauldron/2015/10/16/philadelphia-76ers-sam-hinkie-joel-embiid-brett-brown-process

However, for the most part Hinkie’s acumen remains highly respected, and much of the 76ers fanbase understands and approves of the plan. That doesn’t mean they want to pay to go to the games to see the current roster though. Attendance has plummeted:

http://www.insidehoops.com/attendance.shtml

They have seen their revenue drop to $125M, but their net operating income is still solid at $24M

http://www.forbes.com/pictures/mli45emhdf/27-philadelphia-76ers/

So, while the 76ers ownership has been on board with the plan (Embiid aside), the league has become increasingly agitated by the 76ers. There was a move to change the NBA Draft Rules, but it was shot down by small market owners who view the draft as their best shot of landing a superstar:

http://www.nba.com/2014/news/10/22/lottery-reform-vote.ap/

So, the NBA decided to take a different tact:

http://espn.go.com/nba/story/_/id/14317233/nba-owners-lobbied-league-office-philadelphia-76ers-changes

This has led to speculation about Sam Hinkie:

http://deadspin.com/reports-the-nba-wants-sam-hinkie-out-of-the-paint-1746848561?utm_campaign=socialflow_deadspin_twitter&utm_source=deadspin_twitter&utm_medium=socialflow

BTW, look at owner Josh Harris’s face at the Colangelo press conference:

Josh Harris is in the background. That’s the look of a man who had his balls put in a vise by the commissioner. David Stern taught Adam Silver well. It’s one thing to put your fanbase through an extended losing streak, but it is quite another to act as a long term drag on league revenues. The idea that Hinkie doesn’t know how to win in the NBA is laughable (his trades have all been beneficial to 76ers in the long run), although he has hurt the franchise in terms of their relationships with many player agents.

Here’s the deal though. If Colangelo is coming in, it’s because he’s going to sit in the big chair. He has no need or desire to come in as an advisor:

http://deadspin.com/76ers-hire-jerry-colangelo-whats-it-mean-for-the-proce-1746737379

So, the jig is up. The 76ers responded to their incentives in too naked a fashion, and something had to be done. Bill Simmons was right when he wrote about this a few years ago:

http://grantland.com/the-triangle/nba-bag-volume-2-10-steps-to-tanking-perfection/

The final paragraph:

“I don’t think Adam Silver wants to stick his head in the sand. I really don’t. But conquering the self-sabotage corner is a good place for him to start. This isn’t tanking. Nobody is throwing games. They’re just shitting on them. And they’re doing it because it’s the smartest thing to do. Don’t pretend this is fine. It’s not.”

The thing is, the incentives haven’t changed. If you want a star, losing (a lot) is still the best plan. It’s just that with revenue sharing, the market cannot punish you for losing. By the way, this isn’t an NBA-specific problem:

http://www.cbssports.com/mlb/writer/jon-heyman/25371230/inside-baseball-rival-executives-upset-by-marlins-tiny-revenue

So, the beat goes on. In American sports, losing is rewarded via high draft picks and revenue sharing. In Europe, you get relegated you wankers. I think I prefer the latter.

 

 

 

 

 

 

 

http://www.ipmall.info/hosted_resources/SportsEntLaw_Institute/NBA_CBA(2011)_(newversion_reflectsJeremyLinRuling)May30_2013.pdf

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