Page 2 of 10 FirstFirst 1234 ... LastLast
Results 21 to 40 of 191
  1. #21
    Join Date
    Nov 2007
    Location
    Vermont
    Quote Originally Posted by NYC Duke Fan View Post
    According to Michael Wilburn , writing on ESPN, there is a good chance that there will not be an NBA season this coming year. Barkley thinks that there is a 75% chance that there also won't be a season.

    I wonder if Irving made a mistake. Obviously, his draft position couldn't have been higher and there was a risk of injury, ( could have insured against it), but there is a good chance that he will earn no money this year, play no basketball and could have come back to a fun year at college, playing for a team that arguably could have had one of the best back courts in college basketball history.

    It looks like Barnes, Henson and Sullinger made the right choices.
    Frankly, I don't much care which side wins. If they cancel the season I couldn't care less...however, I was disappointed to see Wilbon swallow the owner's nonsense about so many of them losing money. This is simply untrue.
    For years, professional teams have gotten away with depreciating players or rosters.
    This is an enormous phantom deduction (allowed by the IRS, of course), and for almost all of the teams that are "losing" money, it takes a strongly profitable income statement into the red. It turns wine into water, if you will. And it involves no cash whatsoever.
    It explains why (besides ego) so many people line up to buy pro franchises. Donald Dell explained this to us in a business school seminar decades ago. It's been true for a long, long time. Teams are losing money on paper, but are strongly cash flow positive.
    If you Google "nba player depreciation" you can find a good Deadspin article which shows how this works, using the example of the NY Nets and their money "losing" season of 2004 or 2005. I can't vouch for the accuracy of everything they show, but I do know their basic premise is correct.
    So the issue is simply that right now the wealthy players are eating something like 57% of the very large NBA pie, and the wealthy owners would like to get a much bigger share of the pie. Don't be deceived by their assertion that they have to do this in order to stay in business.

  2. #22
    Join Date
    Apr 2008
    Location
    California
    Quote Originally Posted by Duvall View Post
    This assumes that the owners are taking real losses, and that they will continue to do so in the future.
    Very true. It's hard to fathom the economy getting worse than it was for the last couple years...although we could conceivably get a double-whammy from the situation in Greece and a series of cross-defaults from a failure to raise our debt ceiling, so I guess it's possible that the league may have some macroeconomic concerns going forward. But the league is becoming increasingly global, and revenue streams from the rest of world (especially Asia) will only continue to grow.

    And even if nearly every team were losing money, it's possible that the league as a whole is still profitable. With the luxury tax, many "losses" are a result of a financial shell game in which money is transferred from a team to the league and reported as a loss. Luxury tax expenditures may be substantial, but they are a product of poor management and entirely avoidable. Looking at some of the decisions teams have made on player salaries, it's almost as if owners wanted to drive down their revenues as much as possibe the last couple years in order to lock in a long-term discounted rate on the revenue sharing. After all, these owners generally didn't become billionaires by making stupid business decisions, and it may be shown to be a shrewd strategy when (not if) it eventually pays off.

  3. #23
    Join Date
    Apr 2008
    Location
    California
    Quote Originally Posted by NYC Duke Fan View Post
    I wonder if Irving made a mistake. Obviously, his draft position couldn't have been higher and there was a risk of injury, ( could have insured against it), but there is a good chance that he will earn no money this year, play no basketball and could have come back to a fun year at college, playing for a team that arguably could have had one of the best back courts in college basketball history.
    Nike may have a solution to that problem.

    And Supadave also mentioned the fact that his agent can and will ensure that Kyrie is covered. But even if he were somehow to earn no money, it will be the same amount he would have earned by returning to school for another year. Yeah, it's not as much as he would earn without a lockout, but he'll be fine.

  4. #24
    Join Date
    Apr 2008
    Location
    California
    Quote Originally Posted by SupaDave View Post
    Kyrie will be fine. His agent will handle any lacunae. That's why you make sure you choose an agent wisely. It's also why you don't get an agent if there's little chance of you getting drafted - bc THEN you can go back to school...
    I'm pretty sure the NCAA changed that policy last year. Now, if you stay in the draft beyond the withdrawal deadline, your eligibility is forfeited regardless of whether you sign with an agent.

  5. #25
    Join Date
    Feb 2007
    Location
    Hot'Lanta... home of the Falcons!
    Quote Originally Posted by cato View Post
    Really? Are you sure? Even assuming he could "insure against it", what does the insurance cost, what does it cover, and what does it pay out?

    Even assuming that he could get an insurance policy and that it provided some sort of reasonable coverage at a reasonable cost, I assume that no insurance policy would insure against the risk that he reinjures his toe, is seen as an injury risk, drops to the end of the first round or even into the second, and never gets a contract like the one he will get as the number one pick.
    Actually, it is reasonably common for kids who come back to school instead of going in the draft to get an insurance policy against injury. Some of the "exotic" insurance firms like Lloyds of London offer these kind of policies. It is my understanding that the premium on the policy is paid after the player has been drafted the following year.

    I have not read one, but I believe that the insurance contracts are worded so that a player is guaranteed a certain amount if they suffer an injury that causes their draft stock to drop them out of the first round. The specifics and wording of it varies somewhat from case to case.

    Here is a web page that talks a bit about the insurance policies offered by the NCAA. These differ from what Lloyds of London would offer, but should give you an idea of how it works.

    Of note, and I already said this earlier but it is worth repeating, the premiums are paid AFTER the player signs a pro contract, not while he is still in school.

    -Jason "I am sure Harrison Barnes and Sully and others who came back to school have insurance policies like this-- heck, Mason probably does too" Evans
    Why are you wasting time here when you could be wasting it by listening to the latest episode of the DBR Podcast?

  6. #26
    Quote Originally Posted by budwom View Post
    Frankly, I don't much care which side wins. If they cancel the season I couldn't care less...however, I was disappointed to see Wilbon swallow the owner's nonsense about so many of them losing money. This is simply untrue.
    For years, professional teams have gotten away with depreciating players or rosters.
    This is an enormous phantom deduction (allowed by the IRS, of course), and for almost all of the teams that are "losing" money, it takes a strongly profitable income statement into the red. It turns wine into water, if you will. And it involves no cash whatsoever.
    It explains why (besides ego) so many people line up to buy pro franchises. Donald Dell explained this to us in a business school seminar decades ago. It's been true for a long, long time. Teams are losing money on paper, but are strongly cash flow positive.
    If you Google "nba player depreciation" you can find a good Deadspin article which shows how this works, using the example of the NY Nets and their money "losing" season of 2004 or 2005. I can't vouch for the accuracy of everything they show, but I do know their basic premise is correct.
    So the issue is simply that right now the wealthy players are eating something like 57% of the very large NBA pie, and the wealthy owners would like to get a much bigger share of the pie. Don't be deceived by their assertion that they have to do this in order to stay in business.
    Wow, I had no clue about RDA's and that owners allowed to stick the purchase of a team into the yearly balance books. That is pretty crazy.

    Here is a link:
    http://deadspin.com/5816870/exclusiv...8-million-loss

  7. #27
    Join Date
    Feb 2007
    Location
    Steamboat Springs, CO

    Talking Depreciation Based on Acquisition of a Team

    Quote Originally Posted by budwom View Post
    Frankly, I don't much care which side wins. If they cancel the season I couldn't care less...however, I was disappointed to see Wilbon swallow the owner's nonsense about so many of them losing money. This is simply untrue.
    For years, professional teams have gotten away with depreciating players or rosters.
    This is an enormous phantom deduction (allowed by the IRS, of course), and for almost all of the teams that are "losing" money, it takes a strongly profitable income statement into the red. It turns wine into water, if you will. And it involves no cash whatsoever.
    It explains why (besides ego) so many people line up to buy pro franchises. Donald Dell explained this to us in a business school seminar decades ago. It's been true for a long, long time. Teams are losing money on paper, but are strongly cash flow positive.
    If you Google "nba player depreciation" you can find a good Deadspin article which shows how this works, using the example of the NY Nets and their money "losing" season of 2004 or 2005. I can't vouch for the accuracy of everything they show, but I do know their basic premise is correct.
    So the issue is simply that right now the wealthy players are eating something like 57% of the very large NBA pie, and the wealthy owners would like to get a much bigger share of the pie. Don't be deceived by their assertion that they have to do this in order to stay in business.
    Bud Wom -- Even though you are a good guy and apparently named after one of my former Duke roommates, I don't buy what you are saying (although it would probably help if I read the Deadspin article). The depreciability of contracts is triggered by the purchase of a team. What is the new owner paying for? Well, much of it is the contracts of the players. Whatever amount was determined was then depreciated over 3-4 years. The owners would then use those losses to offset income in other business interests. This was the plague of baseball in the '50s and '60s, when the top individual tax rate was 70% (even higher at times) -- franchises HAD to change hands every three or four years.

    But, in addition to lower tax rates today, most of the owners have been around the NBA for more than 3-4 years and the depreciation triggered by the acquisition of the team has disappeared. Now there may be some other scam going on, but I can't imagine the IRS would fall for anything that said a $40 million contract over four years [sigh] led to deductions greater than $40 million.

    sagegrouse

  8. #28
    Quote Originally Posted by cato View Post
    Really? Are you sure? Even assuming he could "insure against it", what does the insurance cost, what does it cover, and what does it pay out?

    Even assuming that he could get an insurance policy and that it provided some sort of reasonable coverage at a reasonable cost, I assume that no insurance policy would insure against the risk that he reinjures his toe, is seen as an injury risk, drops to the end of the first round or even into the second, and never gets a contract like the one he will get as the number one pick.
    Lloyd's of London is the go-to place for unusual insurance needs. According to the repository, they've insured mustaches, eyes, and (most relevant to this situation) legs. I'd imagine that a toe wouldn't be overly difficult, although I'd also imagine the policies are quite expensive.

    Edit: Doh, didn't realize there was a second page to the thread.

  9. #29
    Quote Originally Posted by sagegrouse View Post
    Bud Wom -- Even though you are a good guy and apparently named after one of my former Duke roommates, I don't buy what you are saying (although it would probably help if I read the Deadspin article). The depreciability of contracts is triggered by the purchase of a team. What is the new owner paying for? Well, much of it is the contracts of the players. Whatever amount was determined was then depreciated over 3-4 years. The owners would then use those losses to offset income in other business interests. This was the plague of baseball in the '50s and '60s, when the top individual tax rate was 70% (even higher at times) -- franchises HAD to change hands every three or four years.

    But, in addition to lower tax rates today, most of the owners have been around the NBA for more than 3-4 years and the depreciation triggered by the acquisition of the team has disappeared. Now there may be some other scam going on, but I can't imagine the IRS would fall for anything that said a $40 million contract over four years [sigh] led to deductions greater than $40 million.

    sagegrouse
    Maybe you can explain this to me a bit, because I am sort of confused.

    How exactly do players depreciate after they sign a contract?

  10. #30
    Join Date
    Apr 2007
    If every NBA team opened its books, there would still not be agreement among the parties as to how many failed to make a profit. It's less about the numbers and more about the definition of "profit." The parties will never bridge that difference in opinion, IMO.
    Fine. Who cares? You just saw the end of an era last year anyway. A bunch of hall of famers: Shaq, KG, Kobe, Ray Allen, Paul Pierce, Duncan, Jason Kidd, Nowitzki, and Steve Nash are done or almost done, and the whole bunch of the rest are way overpaid. I'd like to see a lockout with player salaries cut at least in half, and even that wouldn't be enough. I won't cry if there's no season next year.

  11. #31
    Join Date
    Feb 2007
    Location
    Raleigh, NC
    Quote Originally Posted by El_Diablo View Post
    Nike may have a solution to that problem.

    And Supadave also mentioned the fact that his agent can and will ensure that Kyrie is covered. But even if he were somehow to earn no money, it will be the same amount he would have earned by returning to school for another year. Yeah, it's not as much as he would earn without a lockout, but he'll be fine.
    But at Duke he would have his room and board covered. Now, he's going to have to find a job at a Subway or something.

  12. #32
    Join Date
    Feb 2007
    Location
    Steamboat Springs, CO

    Depreciation and All That

    Quote Originally Posted by theAlaskanBear View Post
    Maybe you can explain this to me a bit, because I am sort of confused.

    How exactly do players depreciate after they sign a contract?
    If you pay, for example, $300 million for a team. You do not own the arena, and you rents offices and other things. One could argue that of the $300 mil., say, $100 million is the value of the "franchise" in the NBA and $200 million is the value of the players contracts, which is the "excess value" over what you will actually pay the player. (It would be normal for a player to be worth more to the team than the value of his contract).

    Then you create an asset on the balance sheet called "Player Contracts" wtih a value of $200 million. Then you work a depreciation schedule over the life of the contracts. Suppose they all expire exactly four years from the time you buy the franchise. Then you would have a "charge" (cost) of $50 million per year. This charge is in addition to the cash salaries paid to the player and the current costs of operating a team.

    At the end of four years, there is no more Player Contract asset value to depreciate, so the "profit" (whether negative or positive) for tax purposes bumps up by $50 million. Meanwhile the "losses" are probably distributed to the owners who use them to offset income at which they pay the max rate of about 35% plus state taxes. Of course, through depreciation, the "tax basis" of the franchise will have gone down (in our modern-day example) by $200 million. If the franchise sold for $300 million again, then the owner would pay only a capital gains tax (what? 15%?) on the $200 million gain, plus have the use of all that money ad interim.

    The point about baseball franchises back in the 1950s and 1960s is that owners were using these paper "losses" to reduce their taxes back in the day when the top federal rate was 70%. So the owners then flipped the team to some other "needy" businessman and went back to their trucking company (like the evil Bob Short, owner of the old Washington Senators, who took the team to Texas before selling it).

    You know, I don't know if I am less comfortable masqerading as an accountant than masquerading as a lawyer (which I am not).

    sagegrouse

  13. #33
    Quote Originally Posted by jimsumner View Post
    But at Duke he would have his room and board covered. Now, he's going to have to find a job at a Subway or something.
    Actually, that could be a great PR by Kyrie.

    Imagine that he contacts some local Cleveland businesses and says, hey, I want to work at your shop/restaurant to meet and serve the local population during the lockout. Spend a couple of hours a day -- store gets great pub, Kyrie gets to meet his fanbase.

  14. #34
    Quote Originally Posted by sagegrouse View Post
    If you pay, for example, $300 million for a team. You do not own the arena, and you rents offices and other things. One could argue that of the $300 mil., say, $100 million is the value of the "franchise" in the NBA and $200 million is the value of the players contracts, which is the "excess value" over what you will actually pay the player. (It would be normal for a player to be worth more to the team than the value of his contract).

    Then you create an asset on the balance sheet called "Player Contracts" wtih a value of $200 million. Then you work a depreciation schedule over the life of the contracts. Suppose they all expire exactly four years from the time you buy the franchise. Then you would have a "charge" (cost) of $50 million per year. This charge is in addition to the cash salaries paid to the player and the current costs of operating a team.

    At the end of four years, there is no more Player Contract asset value to depreciate, so the "profit" (whether negative or positive) for tax purposes bumps up by $50 million. Meanwhile the "losses" are probably distributed to the owners who use them to offset income at which they pay the max rate of about 35% plus state taxes. Of course, through depreciation, the "tax basis" of the franchise will have gone down (in our modern-day example) by $200 million. If the franchise sold for $300 million again, then the owner would pay only a capital gains tax (what? 15%?) on the $200 million gain, plus have the use of all that money ad interim.

    The point about baseball franchises back in the 1950s and 1960s is that owners were using these paper "losses" to reduce their taxes back in the day when the top federal rate was 70%. So the owners then flipped the team to some other "needy" businessman and went back to their trucking company (like the evil Bob Short, owner of the old Washington Senators, who took the team to Texas before selling it).

    You know, I don't know if I am less comfortable masqerading as an accountant than masquerading as a lawyer (which I am not).

    sagegrouse
    Ok, let me try this in laymans terms. Most of the value of the franchise is in the player contracts currently the franchise holds. Because they don't hold those contracts in perpetuity, without additional contracts the value of the franchise will decline whenever a player contract is up.

    In order to account for the costs of acquiring new contracts, they take a depreciation of the expiring contract. It makes sense when you think of players as assets, less so when you think of them as players.

    To me it is still weird though, because in effect you are counting a player's salary twice! It makes way more sense to think of it in terms of needing future contracts than existing depreciation.

    Does this sound right?

  15. #35
    Join Date
    Apr 2010
    Location
    Arlington, VA
    Quote Originally Posted by sagegrouse View Post
    If you pay, for example, $300 million for a team. You do not own the arena, and you rents offices and other things. One could argue that of the $300 mil., say, $100 million is the value of the "franchise" in the NBA and $200 million is the value of the players contracts, which is the "excess value" over what you will actually pay the player. (It would be normal for a player to be worth more to the team than the value of his contract).

    Then you create an asset on the balance sheet called "Player Contracts" wtih a value of $200 million. Then you work a depreciation schedule over the life of the contracts. Suppose they all expire exactly four years from the time you buy the franchise. Then you would have a "charge" (cost) of $50 million per year. This charge is in addition to the cash salaries paid to the player and the current costs of operating a team.

    At the end of four years, there is no more Player Contract asset value to depreciate, so the "profit" (whether negative or positive) for tax purposes bumps up by $50 million. Meanwhile the "losses" are probably distributed to the owners who use them to offset income at which they pay the max rate of about 35% plus state taxes. Of course, through depreciation, the "tax basis" of the franchise will have gone down (in our modern-day example) by $200 million. If the franchise sold for $300 million again, then the owner would pay only a capital gains tax (what? 15%?) on the $200 million gain, plus have the use of all that money ad interim.

    The point about baseball franchises back in the 1950s and 1960s is that owners were using these paper "losses" to reduce their taxes back in the day when the top federal rate was 70%. So the owners then flipped the team to some other "needy" businessman and went back to their trucking company (like the evil Bob Short, owner of the old Washington Senators, who took the team to Texas before selling it).

    You know, I don't know if I am less comfortable masqerading as an accountant than masquerading as a lawyer (which I am not).

    sagegrouse
    Not a lawyer, or not masquerading?

  16. #36
    Join Date
    Feb 2007
    Location
    Steamboat Springs, CO

    2-4-6-8, Who Do We Depreciate?

    Quote Originally Posted by theAlaskanBear View Post
    Ok, let me try this in laymans terms. Most of the value of the franchise is in the player contracts currently the franchise holds. Because they don't hold those contracts in perpetuity, without additional contracts the value of the franchise will decline whenever a player contract is up.

    In order to account for the costs of acquiring new contracts, they take a depreciation of the expiring contract. It makes sense when you think of players as assets, less so when you think of them as players.

    To me it is still weird though, because in effect you are counting a player's salary twice! It makes way more sense to think of it in terms of needing future contracts than existing depreciation.

    Does this sound right?
    A simpler and maybe clearer example. A person buys an NBA franchise for $300 million and gets NO tangible assets (no arena, no office building, no corporate jet). What is the $300 million for? Well, (a) the franchise from the NBA that lets the team play other teams and charge admission and share revenues and (b) 12-15 player contracts. In the interest of minimizing taxes (which -- unhappily -- is the objective of much accounting), it is better to put a high value on a depreciable asset. So, maybe the new owner says the franchise is worth $100 mil. and the "excess value" of the player contracts is $200 mil. The latter is not unreasonable if you -- for instance -- had Dwyane, Lebron & Co. under contract.

    Depreciation, by itself, doesn't change the cash flow of the company -- it is a "book transaction;" no money changes hands. EXCEPT in one respect: Reported income is lower for tax purposes and, therefore, the team or the owner (there is often a pass-through) pays less federal and state income tax. So, in that respect, there is more money left at the end of the year.

    The logic I just went over is clear to me because I have been in business for a long time. OTOH if you were to explain the meaning of the first eight lines of "Paradise Lost" to me, I would be totally lost.

    sagegrouse

  17. #37
    Join Date
    Feb 2007
    Quote Originally Posted by El_Diablo View Post
    Nike may have a solution to that problem.

    And Supadave also mentioned the fact that his agent can and will ensure that Kyrie is covered. But even if he were somehow to earn no money, it will be the same amount he would have earned by returning to school for another year. Yeah, it's not as much as he would earn without a lockout, but he'll be fine.
    You are probably correct. It seems by reading now that everyone who was basketball savy knew that there was no way that a new CBA was going to happen and that there was going to be a lockout.

    I am sure that Coach K with all his basketball connections also knew this.

    If there wasn't any threat of no pro basketball this coming year than Irving made the right decision. However, if he knew or should have known than coming back might have been a better decision. I am assuming that he liked school and was enjoying his time at Duke.If that were not the case than no matter what he should have left.

    Every excellent college player who decides to return to school takes the risk of injury. Life is a risk. Nolan and Kyle took the risk, Henson, Barnes and Sullinger are taking the risk.

    I am not saying that Irving made the wrong decision by not coming back because I am an ardent Duke fan, and the thought of him playing another year would have insured a championship run. Not the case. Even if he did come back, in my opinion, UNC, Kentucky and Ohio State are still probably better, at least on paper.

    I just think that knowing that he might not be playing pro basketball this year might have changed his mind. He could go to Europe and earn some money there but there is a risk of injury there also.

  18. #38
    Quote Originally Posted by NYC Duke Fan View Post
    ... I am not saying that Irving made the wrong decision by not coming back because I am an ardent Duke fan, and the thought of him playing another year would have insured a championship run. Not the case. Even if he did come back, in my opinion, UNC, Kentucky and Ohio State are still probably better, at least on paper. ...
    I think this is the best part. Especially looking at the 2010 NC Duke TEAM. No one ever knows, no matter how much "better" the chances are with certain players. As Coach K says... "look through the windshield, not the rear-view mirror"...

  19. #39
    Join Date
    Nov 2007
    Location
    Vermont

    ?

    Quote Originally Posted by sagegrouse View Post
    Bud Wom -- Even though you are a good guy and apparently named after one of my former Duke roommates, I don't buy what you are saying (although it would probably help if I read the Deadspin article). The depreciability of contracts is triggered by the purchase of a team. What is the new owner paying for? Well, much of it is the contracts of the players. Whatever amount was determined was then depreciated over 3-4 years. The owners would then use those losses to offset income in other business interests. This was the plague of baseball in the '50s and '60s, when the top individual tax rate was 70% (even higher at times) -- franchises HAD to change hands every three or four years.

    But, in addition to lower tax rates today, most of the owners have been around the NBA for more than 3-4 years and the depreciation triggered by the acquisition of the team has disappeared. Now there may be some other scam going on, but I can't imagine the IRS would fall for anything that said a $40 million contract over four years [sigh] led to deductions greater than $40 million.

    sagegrouse
    1) No, I'm not named after one of your roommates. Have no idea who he is, Sage.
    2) Yes, you would do well to read the Deadspin article. The teams already get to deduct player salaries. Getting to depreciate rosters is completely unnecessary. As some people have pointed out, while some players may be "depreciating" at a point in time, others are clearly "appreciating"....a good example would be Gerald Henderon in Charlotte.
    When a large corporation does its accounting, they get to deduct workers' salaries...but they don't also get to depreciate the workers. Yes, as you point out, all of this was concocted (by Bill Veeck?) in the 1950s to offset high marginal tax rates.
    Frankly, I don't much care what the owners do, except when they whine about losing money will remaining highly cash flow positive, I think it's worth calling them on their BS.

  20. #40
    Join Date
    Mar 2008
    Location
    raleigh
    Quote Originally Posted by jimsumner View Post
    But at Duke he would have his room and board covered. Now, he's going to have to find a job at a Subway or something.
    sorry...the unc peeps have those locked up...
    "One POSSIBLE future. From your point of view... I don't know tech stuff.".... Kyle Reese

Similar Threads

  1. Sports, scandals, scars and why I am doubting if I can be a fan anymore
    By KenTankerous in forum Elizabeth King Forum
    Replies: 40
    Last Post: 11-15-2011, 10:20 PM
  2. I can't take it anymore
    By Jumbo in forum Elizabeth King Forum
    Replies: 119
    Last Post: 05-10-2007, 11:10 PM
  3. i can't take it anymore ii
    By dukie8 in forum Elizabeth King Forum
    Replies: 32
    Last Post: 03-22-2007, 12:35 PM
  4. I just can't take it anymore!
    By Bostondevil in forum Elizabeth King Forum
    Replies: 33
    Last Post: 03-10-2007, 10:27 PM

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •