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View Full Version : Here's something to help explain why Philadelphia is perfectly happy with Bynum



Sssmush
02-01-2013, 07:17 PM
Very interesting little article that I happened to bump into reading the print version of this magazine, which explained some things about NBA and sports finance that I was unaware of:

http://www.economist.com/news/finance-and-economics/21570723-calculations-behind-insurance-athletes-claim-game

beasted86
02-01-2013, 08:01 PM
I'd bet Bynum's contract is uninsured, and if not, his next contract will surely be uninsured just like Amare.

So this doesn't apply. Also as far as I remember, the insurance only cover 50% of the contract once the player misses at least 41 games, but I'm not 100% on that.

bholly
02-01-2013, 08:22 PM
I'm guessing his current contract is insured, but his next one almost certainly won't be.

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02-01-2013, 08:48 PM
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Sssmush
02-02-2013, 03:54 AM
I'd bet Bynum's contract is uninsured, and if not, his next contract will surely be uninsured just like Amare.

So this doesn't apply. Also as far as I remember, the insurance only cover 50% of the contract once the player misses at least 41 games, but I'm not 100% on that.

What the article seemed to imply is that the teams pool together and insure more or less of all the contracts collectively, at a cost of about 4% of annual salary total. So for a small market or marginally profitable team, having an injured player sit out (especially if that player isn't super good) creates an alternate revenue stream.

So you could actually make back some percentage of the minimum team salary number from the insurance on the player, and since you're not paying any luxury tax that money basically goes right into the revenue column.

So, say the minimum team salary is $50M. Made up numbers let's say Philly's yearly operating cost is $70M, and they bring in $80M in revenue (again, made up numbers).

Bynum makes $17M a year, and misses 2/3 of the year. The insurance policy pays you $10M.

Your team just doubled its annual profit.

beasted86
02-02-2013, 03:07 PM
You lost me on that... but whatever it is you are trying to say...

Let's say you lose 15 more games than you would have (made up number) because you don't have Bynum, thus you miss the playoffs. Let's say the attendance over the 2012-13 season dropped by 15% of what it could have been if they were winning (again made up number). With his health issues and the fact you are a lottery team, and his next contract will not be insurable, the team is wavering whether they will re-sign him long term and fans know this. As a result you lose 2000 season ticket subscriptions for 2013-14 as a result, and even if Philly re-signs Bynum when the NBA comes out with the new TV schedule they plan to not put many televised games for Philly because they might be a losing team again or Bynum might be injured again.

How much money did Philly gain by having Bynum sit on the bench injured with these variables added in now?

Sssmush
02-04-2013, 06:12 PM
You lost me on that... but whatever it is you are trying to say...

Let's say you lose 15 more games than you would have (made up number) because you don't have Bynum, thus you miss the playoffs. Let's say the attendance over the 2012-13 season dropped by 15% of what it could have been if they were winning (again made up number). With his health issues and the fact you are a lottery team, and his next contract will not be insurable, the team is wavering whether they will re-sign him long term and fans know this. As a result you lose 2000 season ticket subscriptions for 2013-14 as a result, and even if Philly re-signs Bynum when the NBA comes out with the new TV schedule they plan to not put many televised games for Philly because they might be a losing team again or Bynum might be injured again.

How much money did Philly gain by having Bynum sit on the bench injured with these variables added in now?

I'm guessing the insurance policy factors in those costs.

But you're right, it's likely a wash, unless it is a bad team with low revenue with a big contract player.