Friday, October 9, 2009

NBA Clubs Not Required to Contribute to WNBA

From Sportsbiz - The Business of Sports Illuminated:

Forest City Enterprises, the majority owner of the New Jersey/Brooklyn Nets is a public company, with its stock traded on the New York Stock Exchange (FCE.A). As a result, its recent 10-K/A filed with the SEC last week in connection with the sale of the Nets to Russian oligarch Mikhail Prokhorov, provides us with the most detailed look to date into the financial affairs of a NBA team.

The post gives some ideas of operating an NBA team like the New Jersey Nets. This paragraph is particularly interesting:

There are four NBA subsidiaries reflected in the financials: NBA Media Ventures, Planet Insurance, WNBA Holdings and NBDL Holdings. Two things related to these struck me. The club received distributions of $3.5 million, $5 million and $5.2 million in 2009, 2008 and 2007 respectively, and the Nets are not required to contribute any funding to the operations of any subsidiary. That tells me that either they are all making money or the league is using league-wide revenues to fund any deficit incurred by the WNBA or the NBDL.

Some greater detail: In the financial documents submitted, there is a section called "Investments in NBA-Related Entities". These entities include:

* NBA Media Ventures (LLC)
* Planet Insurance Ltd.
* National Basketball Association
* WNBA Holdings (LLC)
* NBDL Holdings (LLC)

The Nets own 3.4 percent of all of these entities. (Each of the 30 clubs in the NBA appears to own an equal piece.) The Nets contributed to only two of these entities: NBA Media Ventures ($6.5 million in 2008, $7.8 million in 2009) and in Planet Insurance ($240K in 2008, $190 K in 2009). The Nets contributed nothing to either the WNBA or NBDL.

Basically, these limited liability companies don't have to pay certain taxes and can distribute profits (if any) any way they want to. The WNBA Holdings LLC might be a temporary company. But in any case, the Nets aren't contributing anything to it.

Which means that clubs can decide whether they want to support the WNBA or not. This implies that the money from the NBA - if there is any - is coming from somewhere else in the budget, and not from NBA ticket holders or the clubs. (The same is true for the NBDL). So for those who want to claim that their ticket costs for NBA games are going to the WNBA, they can be set straight.

1 comment:

Ethan said...

Hear hear. Good one!