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View Full Version : Next years cap sitation looking better!



Will Galen
01-24-2010, 07:44 AM
http://www.realgm.com/src_wiretap/

With Implications For 2010 Cap, Ticket Sales Beating Forecasts (http://www.realgm.com/src_wiretap_archives/64234/20100124/with_implications_for_2010_cap_ticket_sales_beatin g_forecasts/)

Jan 24, 2010 2:46 AM EST

This season's NBA ticket revenues have not dropped as much as the league office projected over the summer. The league expected a 6% to 7% drop in ticket sales but there has been only a 1.7% drop to date.

Attendance is flat or ahead of last season's pace in the majority of NBA arenas. The Nets and Pistons account for most of the small overall decline.

"The fact that we're only down roughly 1.7% going into tonight's games, I'm pleased about," said NBA executive Chris Granger.

With this large piece of basketball-related income so far beating forecasts, the league's salary cap might drop significantly less than first feared. The NBA sent a memo to teams last July warning of a decline in the cap to a figure between $50.4 million and $53.6 million for the 2010-2011 season. But revenues could be on pace for the 2010 cap to be above $54 million and perhaps closer to this season's cap of $57.7 million.
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If the cap is close to next years, it's likely the lux tax line will be close to next years also. If this is true we might not have to make a trade to get under the lux tax. That means we can keep all our big contracts and just let them expire. Just think, we can keep Murph. :devil::devil::devil:

What it means is we are even more in the drivers seat. So if teams want one of our players they will have to pony up.

EDIT; Say next year's lux tax line is roughly the same as this years, $69,920,000. (It can change even if the cap doesn't.)

We already have 12 players signed for $65m in salaries for next year. That gives us roughly $5m to spend on 3 players for a full 15 player team, although we could get by with signing just one. (NBA teams are required to have 13 players.)

The fly in the ointment is we have 2 draft picks. (If Dallas gives us the 2nd rounder they owe us, we will have 3 draft picks. Dallas could wait until the year after to pay up.)

Our draft picks mean we can't just get by with signing a free agent to a minimum contract. We don't have to sign our 2nd round picks, but we are required to sign our first rounder.

First round draft picks have a salary scale. The first player in the draft gets $4.2m. The 5th pick gets $2.8m, and the 10th pick gets $1.8m, and so forth.

So we could wind up being under the tax, but our draft pick puts us over.

So even though things are looking better as far as the Pacers having to pay the lux tax, we are still not out of the woods yet.

Putnam
01-24-2010, 09:42 AM
This is good news. But!

The teams below the cap are paid a lump of cash from the teams that are over the cap, right? Does this also mean that the Pacers will get less cash than they might have otherwise?

Which turns out to be a better boon?

Will Galen
01-24-2010, 10:09 AM
This is good news. But!

The teams below the cap are paid a lump of cash from the teams that are over the cap, right? Does this also mean that the Pacers will get less cash than they might have otherwise?

Which turns out to be a better boon?

The teams below the lux tax are paid a lump of cash from the teams that are over the lux tax. So the Pacers have to be under the tax to share it that.

LG33
01-24-2010, 10:32 AM
I'm just glad we weren't singled out like the Nets and Pistons were. It's a good thing our attendence was so low last year!

Putnam
01-24-2010, 10:57 AM
The teams below the lux tax are paid a lump of cash from the teams that are over the lux tax. So the Pacers have to be under the tax to share in that.


Thanks. The luxury tax is the dividing line -- not the salary cap.

So this means the Pacers have a better chance of sharing in the payout from teams over the tax, but that the amount shared will probably be less than previously thought. Correct?

Will Galen
01-24-2010, 11:31 AM
Thanks. The luxury tax is the dividing line -- not the salary cap.

So this means the Pacers have a better chance of sharing in the payout from teams over the tax, but that the amount shared will probably be less than previously thought. Correct?

Correct!

Teams that pay the tax are not likely to have as big a tax bill as first thought. Hence the teams that share in the money will have less to share.

Brad8888
01-24-2010, 11:54 AM
This article is decidedly mixed in the wording chosen about actual total revenue generated by selling tickets vs. ticket sales. I really am not so sure it actually means revenue from ticket sales is down only 1.7% as much as it means the number of tickets sold being down 1.7%, and I am sure that there are deep discount programs going on in other markets around the NBA besides here and NJ that are reducing the $/ticket. If so, that would yield a much worse than 1.7% decline in total revenue from ticket sales.

Maybe Count can use some of his connections over there to let us know what the author intended, because I would love it to mean that revenues are better than the initial forecast just like everybody else. I just am not sure what to believe.

wintermute
01-24-2010, 03:01 PM
it is indeed attendance which is down 1.7%, not revenue. the realgm article links to a ny times article (link (http://www.nytimes.com/2010/01/24/sports/basketball/24knicks.html?ref=basketball)), which says:



It has all allowed the Knicks to defy a historic recession, which is being felt acutely in some other markets. Leaguewide attendance has declined by about 1.7 percent, to 16,982 per game. That decline, however, is primarily because of anemic sales by two teams, the Detroit Pistons and the Nets.


in fact, the entire last paragraph in the realgm article (which is the most relevant for us) is not present in the original ny times article. the original article only talks about attendance all throughout, specifically the knicks' attendance, with no luxury tax discussion at all. sloppy journalism on the part of the realgm writer, i think, mixing source material with a paragraph of their own analysis, resulting in an article which has an entirely different focus from the original.

Will Galen
01-24-2010, 03:06 PM
it is indeed attendance which is down 1.7%, not revenue. the realgm article links to a ny times article (link (http://www.nytimes.com/2010/01/24/sports/basketball/24knicks.html?ref=basketball)), which says:



in fact, the entire last paragraph in the realgm article (which is the most relevant for us) is not present in the original ny times article. the original article only talks about attendance all throughout, specifically the knicks' attendance, with no luxury tax discussion at all. sloppy journalism on the part of the realgm writer, i think, mixing source material with a paragraph of their own analysis, resulting in an article which has an entirely different focus from the original.

Good catch! Thank you!

Brad8888
01-24-2010, 03:27 PM
it is indeed attendance which is down 1.7%, not revenue. the realgm article links to a ny times article (link (http://www.nytimes.com/2010/01/24/sports/basketball/24knicks.html?ref=basketball)), which says:



in fact, the entire last paragraph in the realgm article (which is the most relevant for us) is not present in the original ny times article. the original article only talks about attendance all throughout, specifically the knicks' attendance, with no luxury tax discussion at all. sloppy journalism on the part of the realgm writer, i think, mixing source material with a paragraph of their own analysis, resulting in an article which has an entirely different focus from the original.

Thanks for answering my question wintermute. I was afraid of that.

I found most intriguing the commentary in the NYT about how fans there are committing to season tickets even now to be in line for Lebron's possible arrival. I wonder if the entire hype surrounding potential destinations for the superstars of the league during the summer of the mass expirings is not at least partially a ploy to generate advance season ticket commitments in as many markets as possible? Likely so, but I hadn't thought of it that way before now.

Thanks for providing the link, and the answer to my question!

CableKC
01-24-2010, 07:25 PM
Okay....so does this mean the SalaryCap and Luxury Tax threshold should likely :pray: be higher then previously expected?

tadscout
01-24-2010, 07:33 PM
Okay....so does this mean the SalaryCap and Luxury Tax threshold should likely :pray: be higher then previously expected?

Yes


The NBA sent a memo to teams last July warning of a decline in the cap to a figure between $50.4 million and $53.6 million for the 2010-2011 season. But revenues could be on pace for the 2010 cap to be above $54 million and perhaps closer to this season's cap of $57.7 million.

CableKC
01-24-2010, 11:22 PM
Yes
Yeah...but the part that you quoted doesn't exactly line up with what wintermute was saying:


in fact, the entire last paragraph in the realgm article (which is the most relevant for us) is not present in the original ny times article. the original article only talks about attendance all throughout, specifically the knicks' attendance, with no luxury tax discussion at all. sloppy journalism on the part of the realgm writer, i think, mixing source material with a paragraph of their own analysis, resulting in an article which has an entirely different focus from the original.
I'm just trying to determine if this is mere speculation, "sloopy journalism ( yeah, I know...from RealGM ) or if there is a strong likelihood that the LT threshold will definitely be higher then expected.

CableKC
01-26-2010, 03:14 PM
:bump:

Based off of what wintermute noted ( because of the word-smithing that was going on from RealGM that came to a different conclusion about what the original article )....are we likely looking at the LT not being as low as we originally thought?

count55
01-26-2010, 03:31 PM
Personally, I put little or no confidence in the comments added by RealGM.

Attendance is down only slightly, but a lot of teams (Pacers included, as well as the Celtics and Lakers, IIRC) cut their ticket prices, so it remains to be seen what the actual revenue does.

A month or so ago, I would have told you to expect the $50mm cap (and corresponding $61mm tax threshold). Today, I think that's probably pessimistic, and it may be closer to the $53/$65 number.

Assuming no trades, and basically only adding their draft picks next year, the Pacers 2010-2011 salary would probably land around $67 or $68 million. I am almost 100% sure that figure will be above the tax threshold next year. Or, put another way, I would consider any projection of the tax threshold being higher than $65mm to be imprudently optimistic.

The higher cap/tax thresholds do give the Pacers more flexibility, but it's still not great news. In their place, my (very strong) preference would be to get the best deal I could get by this deadline to clear payroll for next season. It is true that they have until next year to reduce the payroll, but if they wait until after the deadline, then they will be limited to dealing only with teams under the cap (and not with teams that have expiring contracts). In that scenario, it is likely that they'd have to do a deal similar to the Harpring/Maynor deal, where they'd be required to give up a draft pick or a young prospect in order to get the team to take TJ or Junior or Jeff or Troy's contract.

Given the paucity of assets we have, and the fact that TPTB steadfastly refused to sweeten any deals for Tinsley, I'd have to believe this would not be a path they'd follow. It's better to get less than you hope this year, than to give up more than you want next.

tadscout
01-26-2010, 04:06 PM
Personally, I put little or no confidence in the comments added by RealGM.


The story originated from the NY Times (http://www.realgm.com/src_wiretap_archives/64234/20100124/with_implications_for_2010_cap_ticket_sales_beatin g_forecasts/#) Will just found it on Real GM (see that's how Real GM works most the time;), they get their stories from real publications and rebroadcast them... it's just the stories they make up themselves that are sketchy.).

count55
01-26-2010, 04:39 PM
The story originated from the NY Times (http://www.realgm.com/src_wiretap_archives/64234/20100124/with_implications_for_2010_cap_ticket_sales_beatin g_forecasts/#) Will just found it on Real GM (see that's how Real GM works most the time;), they get their stories from real publications and rebroadcast them... it's just the stories they make up themselves that are sketchy.).

This is the article that RealGM cited:

http://www.nytimes.com/2010/01/24/sports/basketball/24knicks.html?ref=basketball

and this is its full text (by Howard Beck)


Knicks Succeed by Selling an Intangible: Hope
By HOWARD BECK
Published: January 23, 2010

As short-term investments go, a Knicks season-ticket plan might seem rather ill fated. Fans last summer were asked to send thousands of dollars to a 32-win team that had added no significant talent and was trudging toward the second year of a wait-now, rebuild-later plan.
Skip to next paragraph
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Jason Szenes/European Pressphoto Agency

Despite years of bad basketball, the Knicks are averaging 19,604 fans a game this season, a 3 percent increase over last season.

Yet Anthony D’Inverno happily spent $2,500 for a seat in Section 329 at Madison Square Garden. It was a small leap of faith in the present, and a huge leap of hope for the near future.

In July, the Knicks will be flush with salary-cap space and chasing LeBron James. D’Inverno, a 29-year-old investment banker, saw an opportunity, and an urgency.

“It’s the right year to do it,” said D’Inverno, a first-time season-ticket buyer. “It’s, ‘We might not be able to if we don’t grab them now, if they get LeBron.’ ”

D’Inverno said he was also encouraged by the Knicks’ direction under Coach Mike D’Antoni. They are not profoundly talented but they play hard most nights — “It’s been enjoyable to watch,” he said.

Optimism, apparently, is contagious. The Knicks have signed up more than 3,000 new full-season subscribers since last spring, a 10-year high for the franchise and the third-highest total in the league.

Despite a devastating recession and the malaise of eight straight losing seasons, the Knicks are averaging 19,604 people per game, a 3 percent increase over last season and the fifth-best mark in the league. They sold out 15 of their first 22 home games and should easily surpass the 23 sellouts they had last season. The Garden has been filled to 99 percent of capacity, on average.

“We are excited about the numbers,” said Scott O’Neil, the president of Madison Square Garden Sports. “There’s certainly a sense that the buzz is back.”

The Knicks are one of eight teams with 10,000 full-season subscribers. They are the only team in that group with a losing record (17-25), which suggests that fans are looking ahead a bit — to July, to $20 million of cap space, to James.

“You want to be one of the first people in line to be able to buy season tickets the subsequent year,” D’Inverno said.

To be sure, there is also genuine excitement about some of the Knicks’ young players. David Lee could make the All-Star team as a reserve. Danilo Gallinari, the team’s 2008 lottery pick, leads the league in 3-pointers. Wilson Chandler has made huge strides.

“There’s some level of hope now,” D’Inverno said, “where there was none a few years ago. That makes a huge difference to people. It’s palatable.”

In the Garden halls, team executives and staff members can only whisper James’s name, for fear of a tampering charge. But the Knicks’ agenda is the worst-kept secret in the N.B.A.

When O’Neil referred vaguely to “excitement about the future” as a driving force in ticket sales, he surely was not talking about Jordan Hill.

In better times, Knicks tickets were a precious commodity. They sold out 433 consecutive games from 1993 to 2003.

O’Neil again seemed to be speaking in subliminal messages when he said, “A lot of those fans see some of the writing on the wall and say, ‘I don’t want to be shut out for the next decade.’ ”

Last season, the Knicks padded their sales with heavy discounts on group packages and single-game tickets. They continue to offer in-season bargains, though not as extensively. They are also benefiting from what O’Neil calls a “robust international tourist market.”

It has all allowed the Knicks to defy a historic recession, which is being felt acutely in some other markets. Leaguewide attendance has declined by about 1.7 percent, to 16,982 per game. That decline, however, is primarily because of anemic sales by two teams, the Detroit Pistons and the Nets.

The N.B.A. anticipated a difficult year because of the recession. But attendance in most markets is either flat or ahead of last season. Leaguewide, N.B.A. arenas are filled to 89 percent of capacity.

Chris Granger, the N.B.A.’s senior vice president for team marketing and business operations, said the league had anticipated an attendance decline of about 6 to 7 percent.

“The fact that we’re only down roughly 1.7 percent going into tonight’s games, I’m pleased about,” Granger said Friday. “Our teams have been very resilient thus far.”

Although the Knicks have the advantage of playing in a city of roughly eight million people, it is hard to overstate the challenge of filling the Garden.

The 2000s were a lost decade, littered with bloated payrolls, internal feuds, sexual-harassment lawsuits and coaching changes. The Knicks have not won a playoff series since 2000 or had an All-Star since 2001. Without controversy, they would have been wholly uninteresting.

The seven other franchises that sold at least 10,000 season-ticket plans this season are all contenders, playoff teams or likely playoff teams: the Boston Celtics, the Cleveland Cavaliers, the Los Angeles Lakers, the Orlando Magic, the Portland Trail Blazers, the Utah Jazz and the Oklahoma City Thunder.

The Knicks are selling only hope — and the promise of a few thrills along the way.

“I don’t know if it’s been a good investment,” D’Inverno said, “but it’s been an enjoyable one.”

The bolded part is the NY Times-sourced material. The following section, which is pivotal to this discussion:


With this large piece of basketball-related income so far beating forecasts, the league's salary cap might drop significantly less than first feared. The NBA sent a memo to teams last July warning of a decline in the cap to a figure between $50.4 million and $53.6 million for the 2010-2011 season. But revenues could be on pace for the 2010 cap to be above $54 million and perhaps closer to this season's cap of $57.7 million.

is basically outright speculation being made by RealGM. This is what I give little or no confidence. It is based on one piece of data, and the person speculating has no bona fides (or even a name) to lend credibility.

Naptown_Seth
01-26-2010, 05:36 PM
Just wanted to say good analysis everyone. I totally agree with you, they've taken one piece of data and extrapolated out another that has little definite connection, and anecdotal evidence suggests it's outright wrong.

What we need is another article citing known price drops for at least a few of these markets so we can apply that PCT to the ticket sales and estimate the actual revenue drop.

CableKC
01-26-2010, 05:53 PM
A month or so ago, I would have told you to expect the $50mm cap (and corresponding $61mm tax threshold). Today, I think that's probably pessimistic, and it may be closer to the $53/$65 number.

Assuming no trades, and basically only adding their draft picks next year, the Pacers 2010-2011 salary would probably land around $67 or $68 million. I am almost 100% sure that figure will be above the tax threshold next year. Or, put another way, I would consider any projection of the tax threshold being higher than $65mm to be imprudently optimistic.

The higher cap/tax thresholds do give the Pacers more flexibility, but it's still not great news. In their place, my (very strong) preference would be to get the best deal I could get by this deadline to clear payroll for next season. It is true that they have until next year to reduce the payroll, but if they wait until after the deadline, then they will be limited to dealing only with teams under the cap (and not with teams that have expiring contracts). In that scenario, it is likely that they'd have to do a deal similar to the Harpring/Maynor deal, where they'd be required to give up a draft pick or a young prospect in order to get the team to take TJ or Junior or Jeff or Troy's contract.

Given the paucity of assets we have, and the fact that TPTB steadfastly refused to sweeten any deals for Tinsley, I'd have to believe this would not be a path they'd follow. It's better to get less than you hope this year, than to give up more than you want next.
Okay....when it comes to "All things SalaryCap/LuxuryTax" related....I will go with count55's assessment.

Another thing to consider is that if we deal with a Team that is over the SalaryCap....we'd likely be taking back a Player with a Contract that extends beyond the 2010-2011 season. Unless we get back a kick@ss Player that is worth his contract.....we'd be trading our Expiring Contracts for one that slightly smaller but is longer.

If it looks like the LT will be a little higher then expected....and falls somewhere close to $65-68 mil.....I think that it would give us some breathing room. But due to the likely cost of waiting....it wouldn't change my preference to move one of the Big 4 for an Expiring contract this year. Moving one of the Big 4 for an Expiring Contract is the prudent Financial move to make. I'd settle for getting back nothing for one of the Big 4 now as opposed to waiting for next year and either getting back a longer contract ( that is slightly smaller ) or being forced to give up an asset to move them for a Trade Exception.

Brad8888
01-27-2010, 12:11 PM
Just wanted to say good analysis everyone. I totally agree with you, they've taken one piece of data and extrapolated out another that has little definite connection, and anecdotal evidence suggests it's outright wrong.

What we need is another article citing known price drops for at least a few of these markets so we can apply that PCT to the ticket sales and estimate the actual revenue drop.

Just like politicians or CEO's of major corporations everywhere would do, if there were actually good news on the actual revenue front that would show a better salary cap / luxury tax picture, wouldn't they be happily trumpeting that from the highest mountains so that everyone could both marvel at the incredible success of the NBA as one of the premiere sporting leagues on the planet and also have hope that most of their favorite teams are going to have a better chance to do well in the free agent / trade markets in the next couple of years?

Instead, so far at least, all we seem to have is "well, at least our attendance has only dropped 1.7%" without drawing additional attention to the fact that overall ticket prices have likely dropped far more than many would realize.

BillS
01-27-2010, 01:13 PM
Instead, so far at least, all we seem to have is "well, at least our attendance has only dropped 1.7%" without drawing additional attention to the fact that overall ticket prices have likely dropped far more than many would realize.

But don't forget cap/tax is based on all basketball related income. Assuming that includes sales of licensed player product (which I think but am not sure about), when the ticket price goes down you draw people who are likely to buy a shirt or something. In that case you still have a much higher income than you would by keeping prices up but letting more seats go empty.

Naptown_Seth
01-27-2010, 01:53 PM
when the ticket price goes down you draw people who are likely to buy a shirt or something. I disagree Bill.

Spending threshold = $80
4 tickets = $100, you don't go
4 tickets with drink/food package (dog and coke) = $40, you go
Then you buy 2 shirts or hats = $30
You spent $5 parking someplace not arena related.

Income on $100 seats still only equals $70 and will never go above $80 due to customer limits.

So yes, compared to empty seats the cheaper seats are better, but they still aren't better than selling the full priced seats, and you are assuming the full priced seats aren't selling shirts/beer/etc.

This means that no matter how you slice it, EQUAL attendence with LOWER ticket prices is not going to match in BRI. Attendence is only DOWN 1.7%. So that's still 1.7% less purchases of all other goods/services.

And then on top of all this is that teams are ALSO DISCOUNTING those shirts, hats, etc as well as using food and drink as free enticements which my example indicated.

Should I really get into the socio-economic aspect here. I know some big spenders in nice seats and I know some people that only go on the cheap. The big spenders are also spending MORE on food/drink, not equal and certainly not less.

The people that only come to games on a discount are less likely to spend more than the people that view it as "price doesn't matter". They want a nice seat so they buy a ticket, any price. They want a beer, they buy a beer, any price.

The guy that only came because the ticket was half off will have the same view toward other purchases. He either doesn't have the money or doesn't like to spend the money.

NO ONE thinks "$40 for a ticket, no way, but hey that $8 beer sounds like a deal".

BillS
01-27-2010, 04:45 PM
Take out the concessions, those aren't BRI.

What I'm saying is that if a customer threshold for this team as it is playing now is, as you say, $80, then leaving the seat at $100 gets you nothing. Discounting it to $50 may still get you $80 because of related spending at the gift shop. Yes, even that may still be discounted, but because the ticket is 50% off doesn't reduce your income by 50%.

There's a lot more complex marketing analysis - how many of those $50 tickets are new customers, who are more likely to buy gift shop items? Do we know that all ticket consumers include the cost of clothing and other logo goods in the game budget (many only consider food and drink and ticket, while wearables are part of a clothing budget)? How many more people with money to buy related items show up when good seats are priced low vs. having to spend all their money on the seat itself?

You aren't discounting the tickets just to sell to people who can't afford to go. After all, the cheapest seats are already $10. You are discounting BETTER tickets to get people who are CHOOSING not to go for value reasons to see the ticket as a value.

I am not trying to say that 50% discounted tickets yields more profit or even something approaching even. What I'm saying is that the discount does not cause BRI to go down on a dollar-for-dollar basis.