For every game where Kobe Bryant and LeBron James are playing to packed houses and national television audiences, there are six games between the Washington Wizards and Oklahoma City Thunder on a Wednesday night in a half-full arena. Or some equivalent.
Many NBA teams have been getting steamrolled by the economy — sponsorship deals are down, buildings are half empty and the line to buy that $8 small beer is a lot shorter these days. Teams that were barely getting by or losing a little money three years ago are bleeding red ink now.
So meet the NBA Bailout plan:
The NBA is set to borrow $175 million Feb. 26, marking one of the first league financings since the implosion of the credit markets last fall.
The money, which will be available to 15 teams, supplements an existing $1.7 billion league wide credit facility that uses the NBA’s media contracts as collateral to secure loans for the clubs. The NBA surveyed its teams, and 15 responded they would like to tap into the new borrowing….
“In this economic environment, it’s tremendous that the league can place such a facility,” said Alex Martins, chief operating officer of the Orlando Magic, which plans to borrow from the new debt. “It certainly helps us bridge the time period between now and when we move into our new events center in 2010. We’ve been operating at a $15 [million] to $20 million [annual] loss over the past half-dozen years, so it helps us.”
Much like the federal government bailouts of banks (and just about every other industry) the NBA is just trying to provide a bridge for teams through the tough times, hopefully before they start cutting costs in a way that compromises the product on the court (something that started at the trade deadline).
But like the federal government expects (although may have a hard time getting), the very core of how these businesses operate needs to change for the majority to turn a profit. The CBA between the players union and the league is up in 2011, and you can bet that NBA owners will want to make the kind of changes that banks are reluctant to — and they want to do it on the backs of the players. That could make 2011 more about money than LeBron’s new team.