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Michael Heisley: Plenty of Teams Losing Plenty of Money

Some NBA teams -- the Lakers, the Bulls, the Knicks, and the like -- are a hot ticket pretty much no matter how good the team is. They earn a lot in TV revenues, merchandise sales, and the like. Those big-market teams are, by many reports, cash cows, and they almost never change hands.

Other NBA teams, however, play by different rules. One arrangement is "the Howard Schultz plan." The former Sonics owner majority owner lost money year after year, but then reportedly recouped it and then some when he sold the team.

Presumably there could be a third model, whereby you lose money while owning the team, and then don't recoup it from a sale. Let's call that "the sad plan."

The blog 3 Shades of Blue has just published the second installment of their interview with Grizzlies majority owner Michael Heisley, who says he has lost a lot of money, and bets most of the league is losing money, too. What's unclear is how many are on "the Howard Schultz plan," and how many, if any, are on "the sad plan".

Here's Heisley telling 3 Shades of Blue about the disparity between rich and poor:

Just look at Chicago. Chicago's record over the last 10 years has been worse than ours. I've been to the playoffs more times than they have. They've been the worst team in the league like 3 or 4 times. I've been the worst team once.

Their record, even though they play in the East which by any stretch is a hell of a lot easier than the West these last 7-10 years, but Chicago sells out every game. They have local TV revenue of $30-40 million dollars which is about my total revenue so how am I going to compete with Chicago?

Of course, Chicago makes a lot of money for their owners and we lose a lot of money for ours. That's a real problem with the league that they will have to face up to. It took baseball a long time to face up to it, They did it and they saved the game.

You know Major League Baseball had fallen behind basketball in popularity after the strike when Selig put it in. I have a friend in baseball who said not one team lost money last year in Major League Baseball because of revenue sharing.

I can tell you that probably better than 50% of NBA teams lose money.

I don't know what I think about the kind of revenue sharing the removes any need to perform. Every team makes money, essentially no matter what they do? Market forces are a good incentive to innovate and work harder. Don't want to take that away entirely.

Also, presumably the financial realities in Chicago and Memphis were reflected in the purchase prices of those teams. And if owners in small markets don't like the terms of their ownership, why did they buy in? Certainly they didn't buy in with the promise of revenue sharing.

That said, it's the NBA's job to have vibrant franchises, and if a little revenue sharing -- more than the current luxury tax -- would give all teams a better chance of success, well then I'd be interested to know more about it.