Almost five weeks after the NBA suspended the game to limit the spread of the coronavirus, league leaders still have far more questions than answers. Although many teams hope to be able to start the playoffs by early July, officials are preparing for the possibility of not having a playoffs and, if this crisis continues as long as some health experts predict, perhaps even a delay in starting next season.
It would be a blow to a Warriors franchise eager to get back into the running and recover the money it is currently losing. In the past few weeks, Lacob, General Manager Bob Myers and Chief Operating Officer Rick Welts have met on numerous conference calls to describe the financial impact of the game stoppage. know:
Chase Center Revenues
The Warriors were not thrilled to open Chase Center simply because it was San Francisco’s first multi-purpose, state-of-the-art arena. Thanks to private funding from the Chase Center, Golden State gets its income from concerts and other events – not just games.
According to Forbes, just under a quarter of the Warriors’ recent $ 4.3 billion valuation has been attributed to their arena. Now, with Chase Center closed to the public indefinitely, Golden State has already postponed or canceled 10 concerts.
It is not known how much it will cost the Warriors, but a league source told The Chronicle that the Golden State front office does not focus on losing revenue from non-sporting events. The Warriors are just hoping that, assuming they don’t play another game this season, they can start next season as scheduled in October.
All the adversity that Golden State has endured in the past six months indicates a big 2020-2021. Guardians of Warriors Stephen Curry and Klay Thompson should be in good health, the empty retail spaces surrounding the Chase Center should be filled, and finally, the Warriors should have a product suited to their world class arena.
But in the short term, Golden State faces losses of tens of millions of dollars. If the Warriors do not play their last seven games at home, they will miss at least $ 25 million at the door alone. This is in addition to the earnings that Golden State is used to earning, but not from a potential playoff run.
The Warriors reportedly grossed between $ 4 million and $ 5 million per home game in the first rounds of the post-season at Oracle Arena, a figure that would have been considerably higher at Chase Center. The good news for Golden State is that, in addition to the money already made in the sale of suites and subscriptions, it has won $ 2 billion in sponsorship deals.
This should be enough for the Warriors’ business operations to overcome an economic deficit in the months to come. Lacob recently told the Athletic website that Golden State has no plans to fire or lay off employees – cost-cutting measures that other franchises have taken.
Wage cap problem
Suspension of NBA play could force Warriors to make tough decision: are they trying to cut their huge tax bills, or are they slipping exorbitant bills in the hopes of putting together a title contender ?
To determine the salary cap each year, the NBA and the National Basketball Players Association agree on an amount based on expected revenues for the next season. Before the coronavirus forced the league to end the game last month, the salary cap had dropped from $ 116 million to $ 115 million due to the expected loss of revenue from the conflict in China that resulted from the tweet from the Rockets general manager Daryl Morey in support of protesters. in Hong Kong.
It is not known to what extent the coronavirus could affect the salary ceiling, but early forecasts lower the ceiling between 4 and 15 million dollars depending on the revenue lost by the NBA. What East We know that the league and its players will do what they can to limit the decrease in the salary cap.
By revising the cap based on a one-time drop in revenue, the NBA would risk forcing more teams to pay luxury penalties. The Warriors, one of the franchises expected to incur luxury tax next season, could face hefty bills if the league lowered the salary cap.
As part of the $ 115 million ceiling projection, Golden State is on track to have a $ 47.7 million luxury tax bill. Another $ 10 million drop in the salary cap, a possibility given the amount of revenue that could be lost, would impose on the Warriors a $ 195 million luxury tax bill.
In other words, Golden State would spend $ 15 million more on taxes than on its entire $ 180 million list. This could be difficult to justify for a team that is not guaranteed to run after another Larry O’Brien trophy. The Warriors may want to choose from the top five choices for future selection, acquire a player who earns less than the total amount of their $ 17.2 million trade exception, or choose not to use the exception. full-level self-service taxpayers.
One of the silver medals for Golden State is that its gymnastics with a salary cap on the February deadline put it under the threshold of the luxury tax this season, which saved it about 40 million dollars. If next season’s salary cap is lowered, each team will face the repercussions, which could allow the Warriors to land a better player with the business exception than they could have otherwise.
Lacob has shown his willingness to spend big in the name of winning big, but that aggressive mindset may soon be put to the test. The Warriors are considering the possibility of losing tens of millions of dollars in revenue while struggling with a huge luxury tax bill.
But if an NBA team can overcome this financial headache, it’s probably Golden State. Chase Center offers the Warriors the ultimate financial cushion, that is, while it is open. Golden State could really benefit from an opening day in the fall.
Connor Letourneau is a writer for the San Francisco Chronicle. Email: [email protected] Twitter: @Con_Chron