Brooklyn Nets dysfunction affects business prospects

Loaded with superstars, super-expensive, super-hyped, the Brooklyn Nets were supposed to be a super team. Instead, the lucrative NBA franchise is suffering from another early playoff exit and is looking for answers ahead of a costly offseason.

Since the team gave more than $300 million to former NBA champions Kevin Durant and Kyrie Irving in 2019, the team hasn’t made it past the second round of the playoffs. Earlier this week, the Boston Celtics eliminated them from the playoffs. Their other highest paid player, Ben Simmons, has not played since the Nets traded superstar and former league MVP James Harden for him. (Harden and the Philadelphia 76ers are still alive in the playoffs.)

The team is also looking for its third CEO in three years under Joseph Tsai. Rival NBA executives describe the $3 billion organization as “dysfunctional.”

“The failure of the Nets,” veteran columnist Michael Wilbon said on ESPN this week. “It’s the biggest story in sports.”

The Nets have a few other positives in the business. An NBA executive said the team remains optimistic about adding business partners as Durant and Irving are top attractions, for example.

This year, the Nets also need to bounce back from a $25 million decline in revenue due to the pandemic. The team was making a league-record $30 million a year from advertising jersey patches. In February, Tsai noted that the team had “set franchise records for attendance, ticket revenue, and sponsorships.” The team also received revenue from two playoff games. This is considered additional profit after regular season revenues cover costs. Ticket prices are also on the rise.

But Brooklyn, the NBA’s seventh-greatest franchise, can’t afford not to live up to sky-high expectations. Sponsors don’t like being associated with franchises that don’t live up to the hype, the longtime sports marketing executive said. Tony Ponturo.

“It’s bad for the team’s image, and therefore bad for the sponsor,” said Ponturo, former vice president of global sports and entertainment marketing at Anheuser-Busch. “You want everything to be positive and win, and you certainly don’t want a team with high potential to fail in the playoffs.”

For the past two seasons, Brooklyn has had the makings of a championship juggernaut, at least on paper. Last year, The New York Times wondered if the Nets, which at the time featured an experienced superstar trio of Harden, Durant and Irving, could make it to the Finals. greatest team of all time.

“We were all fascinated by it,” one NBA executive said of the Nets. “And we were wrong to see these guys as a real threat to the title. This is a perfect example where marketing has really supplanted content.”

Instead, the now-retired Harden was injured and the team lost in the second round of the 2021 playoffs. This year, the Nets traded Harden, who only played 80 games in two seasons, for Simmons. Simmons did not play, and the Nets finished seventh in the Eastern Conference, beating the Cleveland Cavaliers in a game to lose to the rising Celtics.

Injuries were a factor, as was Irving’s refusal of the Covid vaccine. The Nets initially banned Irving from playing but welcomed his return after New York dropped the vaccination requirement. He only played in 29 of the 82 regular season games.

One executive described the Nets as “beset by noise – distractions, arguments, misunderstandings” during Irving’s absence. Ultimately, this led to their death.

NBA executives who diagnosed the Nets as incapacitated have reached out to CNBC on condition of anonymity because they are barred from publicly discussing the team’s affairs.

One executive said the decision to trade Harden in January 2021 was a real turning point because it hurt the team. The Nets lost center Jarrett Allen, who went on to become an All-Star in Cleveland. Defender Carys LeVert and forward Taurean Prince were also traded.

“They bought penny stocks,” one executive said of Harden’s deal. “They didn’t do the basics, they rocked big and it exploded.”

Now the Nets are stuck with the talented but troubled Simmons, who owes about $112 million over the next three years, including $35 million next season. It’s unclear when the former All-Star will make his Nets debut. Simmons suffered a back injury and still struggling with mental health issues after a poor performance in the playoffs last year.

The Simmons situation “only creates more noise and distraction for the franchise,” the executive said.

The team’s estimated tax bill exceeded $90 million in the 2021-22 season, second only to the Golden State Warriors’ bill, according to the report. Spotrak, a website that tracks sports offers. This is slightly higher than the previous season’s score.

Next season, the NBA’s so-called soft salary cap will rise to $122 million, with a luxury tax threshold set at $149 million. The Nets’ total salary is $187 million for eight contract players. Spotrak. Expect this number to grow.

Executives wondered how long Tsai, the billionaire co-founder of Chinese e-commerce giant Alibaba, would pay to chase what could be an earlier playoff exit.

“At some point, the owner looks at the payroll and says, ‘This is unattainable.’ And that money doesn’t go to charity. This money is distributed among your opponents. [the roster], even at a loss? And if you don’t get the result – the championship – will it cost Shaun at some point?” one executive said, referring to Nets general manager Sean Marks.

Marks did not return a CNBC call to discuss the matter.

In terms of business, the Nets are looking for another CEO after John Abbamondi announces his resignation valid in July this year. The move came as a surprise as Abbamondi took over the role in July 2020 following the current Rod Sport CEO David Levy stepped down as Nets CEO in January 2020 after just five months of work.

The departures have created a sense of confusion over who runs the club and has led to other tense issues. A franchise, for example, will be scrutinized to see if it will hire a black CEO.

The predominantly black NBA has only three black CEOs, compared to the league’s top seven in 2007. NBA commissioner Adam Silver acknowledged the diversity issue, saying the NBA “can do a better job” of hiring among “business-side CEOs.” teams.”

Two league sources told CNBC that the Nets had already identified a candidate to replace Abbamondi. The Nets did not respond to a request for comment if the search for the CEO included a black candidate.