Revenue sharing is no magic bullet

Adam Fusfeld of Business Insider has been thinking about revenue sharing, and has dug into some numbers, and he has found that revenue sharing is unlikely to do much to help small market NBA teams perform better.

Here's why:

  • Money spent on salaries correlates very little with wins.

  • Market size doesn't lead to wins or necessarily to riches, as some small market NBA teams made a lot, and some big market teams lost plenty.

Fusfeld writes:

Small market owners gripe that its impossible for them to stay afloat without sustained on-court success, while large-market teams rake in profits no matter what. But how does that explain the Dallas Mavericks? Mark Cuban's $75 million loss dwarf those of Pacers' owner Herb Simon.

Sure, Mark Cuban and Knicks' boss James Dolan can afford to incur those losses, but they are losses nonetheless. In essence, the Pacers, Bucks, and other small market teams are griping over rival owners' riches.

And that's the true inequity in NBA financials.

Some owners are willing to bankroll losses to assemble the best roster they can, while others aren't. ...

Until someone who is willing to lose money buys the team, small market franchises must behave efficiently to be viable. The other team to dominate the last decade wasn't New York: it was San Antonio. One spends a lot, the other spends wisely.

Between the leaguewide salary cap and the standards of excellence set by the Spurs and Jazz, it's clear that efficiency is attainable in any market. And with the exception of once-a-decade free agents like Shaquille O'Neal or LeBron James, a fat checkbook isn't the key to success. Teams must draft well, scout meticulously, and unearth diamonds in the rough.

And that's where many small-market teams have failed over the years. In 1998, the Bucks sent rookie Dirk Nowitzki to Dallas for Robert Traylor. That wasn't big, bad Dallas wielding its power over the little guys in Milwaukee, forcing them to trade a future Hall-of-Famer. Nowitzki was signed on the cheap. The Bucks simply weren't shrewd. Neither was Charlotte when it traded rookie Kobe Bryant to Los Angeles in 1999, and Indiana certainly wasn't shrewd spending nearly $70 million to win less than half of its games.

This is an ongoing conversation, with many moving parts. I'd be interested to hear the league and Players Association on why they are generally in favor of increased revenue sharing -- is there a reason to expect it to improve the game, or is it really more just about alleviating financial hardships for some cash-strapped owners?

Also, it's worth noting that succeeding as an NBA team almost always depends on getting a superstar, and there will never be enough of those to go around.