Lakers continue to be an economic juggernaut
The Lakers aren’t just a roster of All-Stars trying to win a 17th NBA championship.
They’re an economic machine, with more money than ever pumping into, and out of, their franchise.
Their $100-million payroll is the NBA’s largest, they currently owe $30 million more in luxury taxes, and they’re projected to pay $49 million next February for revenue-sharing dues from last season, according to NBA documents.
Don’t cry too much for the Lakers, though.
The team makes up to $90 million in annual ticket sales and is starting the first year of a TV deal with Time Warner Cable that pays them $120 million more this season.
Their bean counters will be, um, busy.
“The numbers are staggering,” said George E. Belch, chairman of marketing at San Diego State. “The Lakers are clearly a marquee franchise of the NBA. Because of the size of their market, they can command large revenue, particularly on the TV side, a big part of paying some of these bills.”
The Lakers received about $60 million total in local broadcasting rights from KCAL and FS West last season, a number that doubled in the first year of the Time Warner deal. Annual raises bring the deal to about $3.6 billion through 20 years, and the Lakers hold an option to extend to 25 years, potentially pushing the total over $5 billion.
The shark swimming through the water, though, is the prospect of stalled negotiations between Time Warner and a host of TV providers to carry Lakers games. The first Time Warner game to be televised is Oct. 31 in Portland, one day after the Lakers begin the regular season with a TNT exclusive broadcast against Dallas at Staples Center.
The beast that’s already attacked the Lakers is the revenue-sharing concept installed after the NBA lockout ended last December. NBA Commissioner David Stern, acting on behalf of several small-market owners, deemed the luxury-tax payroll penalty too insignificant to stop large-market teams from distorting parity by spending freely.
Teams that prosper financially in a given season don’t owe revenue-sharing dues until the following February.
“It damages the Lakers a lot because they’re projected to pay $49 million, which sucks up a lot of the money they’re getting from the Time Warner contract,” said NBA salary-cap expert Larry Coon. “Luckily, they got that contract in order to pay for the revenue sharing.”
The Lakers aren’t quite alone. Chicago, Boston, New York and Miami also owe steep revenue-sharing payments, though the Lakers are projected to owe twice the amount of any other team, according to NBA documents. Small-market teams with limited payrolls and annual financial losses will gain from the redistributed wealth.
“They needed to bring player expenses down but also level the playing field. They figured revenue-sharing would do that,” Coon said. “Combine that with progressive luxury taxes coming next year and it’s getting to the point where few teams will be able to spend.”
Indeed, larger luxury taxes loom next season. The $30 million the Lakers could pay in luxury taxes this season would be pocket change to the $85 million owed next season if they had another $100-million payroll.
Will they keep spending? They certainly received a heavy boost from Time Warner for years to come.
“Sports broadcast rights, there’s a premium on them,” Belch said. “You wonder where it’s going to stop. The draw of the Lakers is they win. They may not get the championship every year, but you know that they’re in there, you know they’re going to contend for the title.”
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