SBD/Issue 152/Franchises

Cavs Have Chance To Turn Profit Despite $100M-Plus Player Payroll

Cavaliers Finished In The Red Last Season
Despite Advancing To Eastern Conference Finals

The Cavaliers have a "chance to make money this season if they advance to the Eastern Conference finals," despite payroll and luxury tax payments exceeding $100M, according to sources cited by Brian Windhorst of the Cleveland PLAIN DEALER. Sources said that the Cavaliers last season, paying out in excess of $100M in player salary, "finished just below the break-even line" while losing in the Eastern Conference finals. The sources noted that the team's operating revenue so far this season is "indeed in the red," and the Cavs are "part of the heavy losses in the NBA that will cause the salary cap to decrease" next season. Windhorst notes most league execs will "explain that the bottom of the balance sheet depends largely on how the accounting is performed." The Cavaliers, who also profit from non-basketball events at Quicken Loans Arena "plus parking revenue from Gateway garages, include arena operating earnings plus payments on the debt Dan Gilbert took on when he bought the franchise when calculating their bottom line." So while the Cavs are a "success story, the team is also an example of the problem within the league." They are "expected to set a team record for revenue" this season, with ticket and suite sales "up from last season." The team also owns "one of the top five highest-paying local television deals in the NBA," but the "problem is the Cavs need all of that revenue just to break even." Still, Gilbert is said to be "committed to continue spending -- even if that means losses and even if it takes 60 wins and a deep playoff run to squeeze out a profit" (Cleveland PLAIN DEALER, 4/21).

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