Gladwell on the Nets and NBA Economics

Posted on: September 26th, 2011 by Devin Kharpertian Comments

Today, Malcolm Gladwell published a must-read piece for Grantland on the Nets and NBA economics.

A few bullet points Gladwell highlights:

  • Bruce Ratner never cared about basketball. We all knew that already, but it's a good reminder that Ratner's only goal was to take over Atlantic Yards, and he needed a stadium to do that. Enter moving a franchise to Brooklyn. Enter the Nets. Today's press conference bolstered this, when Ratner explicitly stated his priority is to bring "events" to the Barclays Center -- not basketball.
  • Ratner lost a ton of money trying to make this happen, only in the beginning. That's true -- hate him or not -- but it's simplistic to point only in that direction. The recession didn't help, and Mickey P saved the franchise financially.

    But that doesn't mean anyone should feel bad for Ratner; the Barclays Center has already paid huge dividends, and there's more coming. Between eminent domain, $400 million in naming rights, and that Ratner stands to make roughly $35 million per year on the Barclays Center (about 10% ROI), the rich will assuredly get richer.

  • Gladwell calls out David Stern for championing the Nets as a model for economic failure, when the returns they stand to make on the Barclays Center alone are potentially "explosive," in Prokhorov's own words. He then ends the article with this quote:

    In the end, this is the lesson of the NBA lockout. A man buys a basketball team as insurance on a real estate project, flips the franchise to a Russian billionaire when he wins the deal, and then — as both parties happily count their winnings — what lesson are we asked to draw? The players are greedy."

I'm an outside party with no economic background. I have no idea who's right or wrong in the NBA lockout. Some -- like Gladwell -- say that the owners are greedy, and to argue that their teams are 100% business with no psychic benefit is nothing short of fantastical. He's right, of course, to some extent. That doesn't mean that owners aren't losing money, but I don't know how to accurately evaluate that difference from an economic standpoint. That's why I try to avoid offering solutions to this enormous problem; not only do I have no expertise, I frankly don't care much who gets what. I'm an observer. I have no financial stake. I'd just like to watch Deron Williams play, preferably on this side of the world.

That said, you don't need financial expertise to detect BS from billionaires, and Ratner laid it on thick today about youth -- citing the prospect of a child seeing their first circus at the Barclays Center as his driving inspiration. Come on, Bruce. If this didn't give you the opportunity to make boatloads of money, you wouldn't do it. I'm sure that Barclays will do a lot for kids, but it's not about them.

The sad truth, though, is that Ratner can always pretend otherwise. We can paint him as a greedy, dirty billionaire as much as we want (fair or not), and he'll remain a billionaire. That's the game. I'd just rather watch a different one.