By all accounts, the NBA is doing great financially as a whole. The league is now getting a nine-year, $24 billion TV deal that contributed to the skyrocketing salary cap in the last couple seasons. And the NBA is the American sports league with the most exposure worldwide.
But according to a report by ESPN’s Brian Windhorst and Zach Lowe, 14 teams lost money or had negative net income before revenue sharing payments, And nine teams still had negative net income after revenue sharing, including the Wizards.
There are several reasons that could contribute to the Wizards being in the red. They include:
- Lower ticket revenue and attendance - The Wizards had the fourth lowest attendance in the NBA based on capacity according to ESPN in the 2016-17 season at 83.8 percent. That’s actually a drop from 87.3 percent in the 2015-16 season. The teams with lower attendance based on capacity were the Nuggets, Timberwolves, and Pistons. None of those teams made the NBA Playoffs while the Wizards made the second round.
- The new local broadcasting revenue didn’t come into effect yet - According to John Ourand of the Sports Business Daily in 2015, the Wizards’ new television deal with Comcast SportsNet Mid-Atlantic (soon to be NBC Sports Washington) won’t go into effect until the 2017-18 season -- or this season. Last season, or in 2016-17, the Wizards received about $17 million in revenue from CSN Mid-Atlantic. But this season, that will bump up to about $35 million. These are nice bumps, but still way under the $148.1 million the Lakers received last year for their local television rights.
- The Capital One Arena was still the Verizon Center - 50 percent of proceeds from arena naming rights are considered to be basketball related income (BRI) from the current Collective Bargaining Agreement. The arena’s new name wasn’t in effect during the 2016-17 season yet, so revenue was just a bit lower than what it otherwise could have been.
- A fickle fanbase in a large market - Washington is a large market based on population and spending power. However, the area isn’t as passionate for the Wizards as other cities are for their NBA teams. Furthermore, the Wizards aren’t as popular with local Washingtonians as the Redskins, Nationals, and Capitals. When the fanbase isn’t energetic, there isn’t an incentive for broadcasters to pay more money. It ends up being a circular affair.
Thought the Wizards had negative net income based on these parameters, I don’t think it’s a sign that Monumental Sports & Entertainment is in poor financial shape.
There are some things that aren’t into consideration to the Wizards’ losses. They include any other Monumental Sports & Entertainment entity, like the Mystics, Capitals, Valor, Brigade, revenue from Capital One Arena concerts, and Monumental Sports Network. Though it’s unclear whether G-League team expenses factor into an NBA team’s operations, Monumental is also preparing for that team’s launch in 2018. In short, Monumental is making many investments for the future. It may be losing money today, but today’s investments could pay dividends in the future. The company isn’t just trying to make a “quick buck.”
Also, since the Wizards should have higher attendance rates this season and will have more money from arena naming rights and local media, I don’t think this is something that we should be terribly worried about for now.