The Oklahoma City Thunder and Contraction: Is There a Danger?

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Nestled into the salvos fired between the NBA front office and the players came a comment that should have sent chills down the spine of any small-market team.

David Stern, with all the subtlety of a train hitting a semi truck full of model trains, dropped the longest four-letter word in league history.

Contraction. 

For those who are confused on what contraction means, were the league to contract, it would eliminate or relocate financially underperforming teams to reduce the league's operating costs.

A prime example of a contraction would be the Canadian Football League's 1992 expansion into the United States, where despite solid on-field performance (the Baltimore Stallions won the CFL's Grey Cup in 1995) and as many as five teams in the U.S., the league was forced to eliminate teams or relocate them to Canada due to low attendance and, in some cases, management problems, with the last CFL team in the U.S. folding by 1996.

Opinion seems to be divided on whether or not Stern was serious when he threw out the possibility of contraction, however given its' small market status, it would be easy to see Oklahoma City as being a prime candidate for the chopping block.

Not so fast.

In December 2009, Forbes Magazine published a valuation of all 30 NBA franchises, examining the financial situation of each team for the 2008-2009 season. It shows that twelve teams posted net losses on the previous season (The valuations for the 2009-2010 season have not been published yet.) 

The Thunder posted a profit of $12.7 million, with an estimated value of $310 million, a 3% increase over the prior season.

The fact that Oklahoma City, a small market team, can post net profits higher than big market names such as the Miami Heat ($8 million), Los Angeles Clippers ($10 million) and the Denver Nuggets ($4.6 million,) coupled with Stern's remarks in a Oct. 22 article on newsok.com that "[The NBA] is committed to small-market teams" and the growth of the Thunder as a brand, leads me to believe that the Thunder are going nowhere any time soon because of these ongoing league financial woes. 

However, if the threat of contraction is real, and the Thunder have nothing to worry about, then who should start worrying?

Surprisingly enough, the prime candidate based purely on the numbers appears to be a perennial test for the Thunder: The Portland Trailblazers.

The Trailblazers, despite consistantly solid performance on the court and the major potential boost to their market following the departure of the Sonics from Seattle, also posted the largest net loss at $20.3 million. 

According to Forbes, posting losses upwards of $20 million is no new thing for Portland. The Trailblazers's annual median loss is near $20 million for the last 11 years (with a total cumulative loss of $313 million for that period - the next highest cumulative loss over an 11 year period is the Dallas Mavericks at $172 million.)

Other franchises posting operating losses for the last valuation period were the New Orleans Hornets ($0.1 million), the Atlanta Hawks ($2 million), the Orlando Magic ($2.2 million), the Sacramento Kings ($2.8 million), the Minnesota Timberwolves ($2.8 million), the Memphis Grizzlies ($7.1 million), the Milwaukee Bucks ($7.4 million), the New Jersey Nets ($13.9 million), the Charlotte Bobcats ($15.1 million), the Mavericks ($17.4 million), and the Indiana Pacers ($15.7 million.)

The Kings are also a team buzzing about as a possible candidate for relocation, considering the team's inability to secure a deal for a new arena (the chances of a deal were declared "dead" in late September), which echos the situation that lead to the Sonics relocating from Seattle to become the Thunder.

We all know how that turned out. 

Not to say that the Kings would become the new Seattle Sonics (sonicscentral.com blogger "Sonicsman" believes that Seattle won't get a new team as long as Stern is in charge unless he was forced to), however would the Kings relocate as part of the contraction mess, Seattle certainly tops the short list of candidates. 

Ultimately, though, this all remains little more than conjecture. It's hard to imagine the league's financial situation is as dire as Stern makes it out to be. Forbes points out that despite Stern's claim of a $380 million deficit from the 2009-2010 season (and the projected $350 million deficit for this season,) the NBA posted a $280 million profit for the 2008-2009 season.

Forbes believes this radical a shift is very unlikely, and could only occur "if Forbes accounting practices are seriously flawed, NBA accountants are using legal yet creative procedures to produce operating losses, or the NBA's league offices are accumulating expenses not factored into team's balance statements that exceed the collective budgetary surplus created by team operations."

So, either Forbes (the premier financial publication in the world) is not good at math, the NBA is playing fast and loose with the numbers to boost Stern's position, or the NBA has numbers they're keeping close to their chest.

I'm inclined to believe option #2 personally. 

All in all, the day we lose the Thunder to contraction is the day I start watching professional lacrosse. 

(Note: I contacted Thunder Director of Corporate Communications Phil Bacharach by e-mail for this story, but did not receive a response. I will post an update should I receive any further information from the Thunder.)

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