Memphis Grizzlies lose money after revenue sharing

The Memphis Grizzlies finished the 2016-17 season in the red, despite receiving substantial subsidization via revenue sharing. Their financial struggles are a reflection of the current state of the NBA.

According to a report from ESPN‘s Brian Windhorst and Zach Lowe, the 2016-17 Memphis Grizzlies were one of 14 NBA teams to lose money, and one of nine to remain in the red after accounting for revenue sharing and luxury tax payments.

Per the report:

"“After boosting their payroll, the Grizzlies lost nearly $40 million, earning a league-low $9.4 million in local media rights. Their losses were offset by $32 million in revenue sharing, the most in the league. The Grizzlies start a new local TV deal this season that should boost revenue, but as the smallest market in the league by Nielsen rankings, they may continue to have challenges relative to their larger peers.”"

The Grizzlies’ losses point to a structural issue within the NBA. Teams are asked to simultaneously function as businesses and competitors for championships — actors in the league’s broader narrative of competition and meritocracy.

Those ideas are at odds for any teams that aren’t in large enough markets to sustain major profits. The “free market” solution would be to let such teams lose money until they’re no longer sustainable, a scenario that likely ends in relocation to a bigger market.

"“Teams in small markets are told we need to run our businesses better so we can make money,” one ownership source told ESPN.com. “But teams in the largest markets can run their businesses poorly and still make money.”"

That’s fairly unpalatable, and really a cutthroat basketball league as purely business philosophy is an ignorant one. You can’t just “run a better business” when your expenses include a mandatory salary threshold. To suggest that small market teams need to be more business savvy is unfair, and if that’s your argument, then really everything should be tossed out the window — salary cap, draft, minimum and maximum contracts — every constraint that could keep a team from being as profitable as possible.

Memphis Grizzlies

That’s not a world I want to live in. I prefer an NBA that values competition and the storylines it creates. That’s partially why all those different mechanisms were put in place to begin with. Their failure in this moment is a reflection of the fact that owning a successful, beloved basketball team (i.e. a team that wins consistently at a high level), and owning a profitable basketball team are two different things.

The Grizzlies are proof of that. They’ve been to the playoffs in seven straight seasons, have a rabid fanbase, and didn’t manage to finish in the black, even with substantial subsidization from teams in larger markets.

It’s disingenuous for the NBA to prop up winning a championship as the ultimate sign of success and feign concern about competitive balance without creating a financial structure that allows for those things to be tied to profits. That isn’t happening, and the question becomes how the league can re-orient its financial system such that it is.

Coming to any sort of resolution will be exceedingly difficult. Owners of teams in the NBA’s biggest markets are making money hand-over-fist, even with substantial revenue sharing payments. They’ve got very little incentive to agree to a plan that would require them to give up another dime, and its unlikely that arguments based on “helping out the little guy,” or maintaining an entertaining level of competition are going to convince them to see otherwise.

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How much of an issue that is likely comes down to personal perspective. I’m not big into the idea of free-market capitalism being the solution to any problem, including making the NBA an engaging and compelling product. As such, I’m for a more egalitarian approach to the distribution of revenue. I’m sure the Grizzlies are too.