Forest City Enterprises, the majority owner of the New Jersey/Brooklyn Nets is a public company, with its stock traded on the New York Stock Exchange (FCE.A). As a result, its recent 10-K/A filed with the SEC last week in connection with the sale of the Nets to Russian oligarch Mikhail Prokhorov, provides us with the most detailed look to date into the financial affairs of a NBA team.
In each of the last three fiscal years (ending on June 30) the Nets gross revenue has decreased from $97 million in 2007, to just under $94 million in 2008 to almost $78 million in 2009. The drop from 2007 to 2008 can be attributed to the loss of playoff revenue; the drop off from 2008 to 2009 likely reflects the impact of the Great Recession. In 2009, three of the four categories of revenue the Nets report (exclusive of playoff revenue) were down, with the exception being TV broadcast revenue, the one item not affected by the recession. Revenue from ticket sales was off over $11 million.
The relatively good news was that operating expenses, dropped from almost $162 million in 2008 to $ 147 million in 2009. However, operating loss was slightly higher in 2009 at $68.5 million, compared to $68 million in 2008. Net loss totaled $77.2 million in 2009, up from $76.4 million in 2008 and $77 million in 2007.
The Nets player and team staff payroll was $66.2 million in 2009. The franchise is currently contractually obligated for $118.2 million in employment contract payments for the years ending June 30, 2010 and thereafter.
The Nets current lease of the Izod Center, which is now on basically a year-to-year basis as the team waits on the construction of the Barclays Center, is $53,395 per game for the upcoming season, rising 3% per year.
The team's broadcasting revenue is derived from the NBA's league wide agreements with TNT and ESPN/ABC. All league broadcasting revenue is divided equally among member clubs, with the four former ABA clubs receiving approximately 85% of their allocable share with the balance being paid to the former owners of the Spirits of St. Louis in "the best deal in sports history." In 2009, the Nets share totaled, 22.8 million. It's local broadcast revenue does not have to be shared. The Nets games are carried by YES, for which the Nets received $9.6 million last year. Remember, when YES was first established, the Yankees and Nets were part of an ownership group known as YankeeNets and the ownership of both groups were the owners of YES, along with outside investors, including Goldman Sachs. Owners of the Nets still own interests in YES.
There are four NBA subsidiaries reflected in the financials: NBA Media Ventures, Planet Insurance, WNBA Holdings and NBDL Holdings. Two things related to these struck me. The club received distributions of $3.5 million, $5 million and $5.2 million in 2009, 2008 and 2007 respectively, and the Nets are not required to contribute any funding to the operations of any subsidiary. That tells me that either they are all making money or the league is using league-wide revenues to fund any deficit incurred by the WNBA or the NBDL.
All in all, should you have any interest in how the NBA works from a financial standpoint I highly recommend you take a look at this. You don't often get a look at this level of financial detail of a professional sports franchise in the US.
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