I’m not sure how you can profess to be “light-years ahead of probably every other team in structure, in planning, in how we’re going to go about things” and complain about the rules governing the structure and planning that all NBA franchises are subject to, but Golden State Warriors owner Joe Lacob is sure trying.
Lacob will have you believe it’s “very unfair” that the Warriors have to pay escalating taxes in order to keep a championship team together, when his unique ability to rage against that system is the very thing that turned his ownership group’s $450 million investment into a $5.6 billion valuation in the span of 12 years.
The Warriors were coming off a championship and finishing a record-breaking 73-win regular season when Lacob delivered his infamous “light-years” diatribe, and three months later, a one-time 35% spike in the salary cap made it possible for the Warriors to sign Kevin Durant and form the greatest team in basketball history.
(The reason for that cap spike? A nine-year, $24 billion television deal that earned teams an average of $800 million to split between team owners and players. The next TV deal is expected to triple in 2025.)
In between, his team blew a 3-1 series lead to the Cleveland Cavaliers in the 2016 Finals, but that did not prevent the Warriors from drawing at least $359 million in revenue from a roster with a $100 million payroll the following season. That figure rose every year until March 2020, when Lacob informed us that Forbes’ $474 million estimate of Golden State’s revenue — a record-setting figure — was actually “understated.”
“We have much more revenue than the [New York] Knicks and [Los Angeles] Lakers,” Lacob boasted, referencing two teams that also print money every season because they exist in the league’s largest media markets.
That was the first season the Warriors opened their doors at Chase Center, an arena that secured a record $2 billion in “contractually obligated income” before construction was finished. Their own estimates pegged annual basketball-related revenue at $700 million. They did not hit that mark in the first year of the COVID-19 pandemic, when the Warriors laid off 1,720 part-time employees and 10% of their full-time staff, but that figure is estimated closer to $800 million for this past season — another record for the NBA industry.
Not to worry, the Warriors offset any pandemic losses by selling a 5% stake in the team for $275 million.
How much did the Warriors really lose?
Losses can also benefit billionaire owners who use them as tax write-offs against other earnings. There are even ways to disguise gains as losses. Los Angeles Clippers owner Steve Ballmer has reportedly claimed $700 million in losses, even though Forbes lists their profits at more than $200 million since he purchased the team for $2 billion in 2014. The Clippers are the only team paying more luxury taxes than the Warriors.
It is not unlike how Sony wrote off the $3.2 billion that Warriors co-owner Peter Guber allegedly cost them, and then the company invested $275 million into his next venture. (The story of how Guber made a fortune alongside disgraced former business partner Jon Peters is as wild as it gets in the entertainment industry. Neither Guber nor Lacob are free from the scandals that have followed their powerful peers in recent years.)
Sports franchises are not philanthropic ventures for billionaires, even if they can be charitable. They are cash cows. There are reasons why Lacob has “a standing offer” to purchased the Oakland A’s and why Guber has ownership stakes in the Los Angeles Dodgers and Los Angeles Football Club. Follow the money.
Forbes’ estimates are not a full picture of what the Warriors generate beyond basketball. Chase Center sits on an 11-acre plot of oceanfront commercial and residential real estate that the team also owns in the country’s second-highest rental market. That includes a $1 billion, 20-year lease on Uber’s headquarters.
As team president Brandon Schneider told CNBC, “Disney started as a theme park. The Warriors started as a basketball team. Look at what Disney has become, and look at what the Warriors are becoming.”
It turns out moving the Warriors from Oakland, where the Warriors tried sticking the city’s taxpayers with $45 million in decades-old debt on renovations done to the publicly owned Oracle Arena, to San Francisco was a wise investment, even if it cost Lacob’s ownership group $1.4 billion to build the new complex. The people of Oakland, who sustained the franchise when they were bad enough to draft Stephen Curry with the seventh overall draft pick in 2009, might think it unfair for the team to relocate solely for greater profit margins.
The Warriors paid $170 million in luxury taxes this past season because their payroll exceeded the NBA’s $137 million threshold by $38 million. The bulk of that is due to the $32 million salary for Andrew Wiggins, whose contributions to Golden State’s Finals victory were second only to Curry’s. The reason the Warriors were able to acquire Wiggins is because they traded Durant for D’Angelo Russell and Russell for Wiggins.
The entire reason for having a luxury tax is to encourage parity and discourage a championship team from adding one of the 15 greatest players in history. Or, at the very least, it rewards with a fat check the non-taxpaying teams that essentially subsidize a big-market owner’s ability to buck the system and still profit.
Why Joe Lacob’s luxury tax criticism has holes
Golden State’s ownership group has profited $448 million in the years since signing Durant, according to Forbes’ “understated” figures. That includes a $44 million loss during a season played mostly in an empty arena and excludes the hundreds of millions of dollars that Lacob and company brought home last season.
It would have cost the Warriors in excess of $400 million to retain everyone from their title team, and that number could rise north of $500 million in the near future if they reward Wiggins, Jordan Poole, Draymond Green and Klay Thompson with contract extensions that will run into the second half of this decade, when Curry will pull a $60 million salary at age 37. It is prohibitive to keep a dynasty together, which is the point.
“Those numbers are not even remotely possible,” Lacob told The Athletic’s Tim Kawakami, bizarrely scapegoating the league office instead of conceding the primary reason he would not match the $41 million paid to Gary Payton II and Otto Porter Jr. this summer — that they would have significantly eaten into his ownership group’s profit for a marginal roster upgrade. “They’re just not. I’m already in trouble with the rest of the league. We are in trouble for being where we are. In fact, in Vegas there’ll be a board of governors meeting. They’re not happy. It’s not just us. Other teams are going into the luxury tax now as well.
“You know, we kind of blew a hole in the system, and it’s not a good look from the league’s perspective. They don’t want to see it happen. And there are limits,” he added, intimating that the league would cap his spending, not his investors. “I’m not going to say what they are, but there are limits to what you can do.”
Those limits can be stretched when your team generates $800 million in revenue. It is possible for Golden State to pay $400 million to $500 million to the players who are responsible for that cash influx. It’s just not practical.
It is unwise to pay max salaries (or close to them) five years from now for Green and Thompson, both of whom experienced a decline amid athleticism and injury concerns at the age of 32 this past season. It is also easier to blame the luxury tax rather than tell a fan favorite and one of the pillars of your dynasty that he is no longer worth a max investment, especially when you are speaking to another of those aging pillars.
“The truth is, we’re only $40 million more than the luxury tax,” Lacob told Andre Iguodala on his “Point Forward” podcast. “Now, that’s not small, but it’s not a massive number. We’re $200 million over in total because most of that is this incredible penal luxury tax. And what I consider to be unfair and I’m going to say it on this podcast and I hope it gets back to whoever is listening … and obviously it’s self-serving for me to say this, but I think it’s a very unfair system because … all top eight players are all drafted by this team.”
That is not true, of course. Wiggins was not drafted by the Warriors, and he is the direct result of signing Durant in 2016. Golden State is not guaranteed three of its championships without them. The Warriors are only “light-years ahead” because they capitalized on an anomalistic cap spike, and now they’re paying for it. They built a dynasty and profited immensely from it, and we’re really supposed to feel sorry for them?
Weird how Lacob was singing a different tune a few years ago, when he told Kawakami, “We can do whatever we want [financially]. And you should expect that that’s not going to be a reason this team … doesn’t stay great going forward. We have the capital to pay our players what they deserve. And we will.”
You want to pay Green and Thompson for past performance because they made you an enormous amount of money? Go ahead. That’s your prerogative. It’s also going to cost you exponentially to add layers of expenditures on top of them, like re-signing Wiggins and Poole to combined salaries of $60 million annually.
Lacob has some decisions to make from the comfort of his $20 million mansion in Atherton, America’s wealthiest zip code. Or maybe he’s spending the summer at the $20 million second home he just bought in Malibu. He has come a long way from his hometown of New Bedford, a blue-collar port city in Massachusetts he called “crappy.” “I have no interest in going,” he once told Ethan Strauss, “and I don’t want to be near it.”
When billionaires are complaining about taxes, the system is working as designed. If anything is unfair, it’s that the Warriors can push that system to a ludicrous degree, rake in nine figures and still ask for a bailout.
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