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Net gain: The end of Brooklyn's Russian adventure

The Brooklyn Nets may have performed poorly on-court, but Mikhail Prokhorov still looks set to make a tidy profit on his investment. (A.Savin / Wikimedia Commons)
Roar Guru
22nd January, 2015
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It has been announced that the Brooklyn Nets are up for sale, after much speculation during 2014 that Mikhail Prokhorov did not want the team anymore.

I’m taking a brief foray into oil prices, international politics and economics but please stick with me – this is a piece about the Nets.

Everyone in Australia is rejoicing that the price of petrol has come down by about 30 per cent in the last few months, but those in Russia are not so happy.

Russia is accusing OPEC and the US of trying to sabotage their economy by using mechanisms to keep the price of crude oil low and ruining the value of the Rouble. Given the country’s heavy reliance on oil (70 per cent of Russia’s exports are oil-related) it is no surprise that Russia, along with a number of other countries, would like to see a high price for crude oil.

Russia loses $2 billion in oil revenue for every dollar the price of crude oil drops, and it’s dropped $60 since June 2014. If you do NBA maths, that’s two NBAs full of Los Angeles Clippers in just seven months.

Couple that with the rising international tension between Russia and the rest of world over the Ukraine situation and the outlook for Russia is not positive. Big economic sanctions, a likely recession and troubling times lay ahead for the former world superpower.

So what does this have to do with the NBA and the Brooklyn Nets? Well their current owner, big-spending action-man Mikhail Prokhorov, hails from Russia, and with the economy looking like falling into recession he is going to be hit hard.

According to the International Business Times there is also a trend growing with Russian business pulling out of US-based investments. Whether that is a political move or forced by economic factors is up for speculation but Prokhorov has previously run for president in Russia and will have significant relationships with the country’s most powerful people.

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Prokhorov purchased his majority stake in the Nets in 2010 for $223 million and holds a 45 per cent stake in the Barlcays Centre and surrounding residential/commercial land (which is not part of the sale).

Since the purchase he promised big and spent even bigger to achieve this. The result is no trips to the Eastern Conference finals, a very large salary/tax bill and a short-term future that is about as optimistic as Russia’s right now.

Let’s examine what moves were done and how they affected the current mess the Nets find themselves in.

The trades
It all started soon after Prokhorov arrived at the trade deadline in February 2011 when the Nets shocked the NBA by trading for Deron Williams. In the trade they sent Derrick Favours, Devin Harris and two future first-round picks to the Jazz. The two picks ended up being Enes Kanter (#3 in 2011) and Trey Burke (#9 in 2013 but Utah traded up by giving Minnesota their own #14 pick and the #21 pick acquired from Brooklyn).

At the time Williams was still in the best point guard argument with Chris Paul, and was seen as a franchise player who could be used to lure potential free agents. The trade made a lot of sense.

In 2012 they made their first bad move after trading for an ageing Gerald Wallace with the Trailblazers for a 2012 first-round pick that was crucially unprotected. Who did that turn in to? Damien Lillard.

In the summer of 2012 the Nets proceeded to give an already declining 30-year-old Wallace a four-year, $40 million contract to partner the max contracts they handed out to Deron Williams and Brook Lopez. The max deal to Williams and Lopez were no-brainers at the time, otherwise they would have walked in free agency, but the Wallace deal was too much for too long and will feature further down in this article.

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They also traded Jordan Farmar, Anthony Morrow, DeShawn Stevenson, Jordan Williams, Johan Petro, Houston’s 2013 first round pick (Shane Larkin #17) they held and their own 2017 second round pick for Joe Johnson and his massive contract.

I’m not going to say this was a good trade because they still needed a decent shooting guard and Iso-Joe was probably still about top five at this stage in his career, it was just that he came with a salary of $23 million per season.

After all those trades they thought they had their title-contending team with Williams, Johnson, Wallace and Lopez but it didn’t quite work the way they planned, with a first-round playoffs loss to a severely undermanned Chicago Bulls outfit.

Instead of backing in their current players and looking around for some smart (i.e. cheap) complementary pieces, they did the opposite and loaded up on more salary while giving away unprotected draft picks. This was bad move number two and basically traded away their future on a move that didn’t exactly move the needle that much.

They approached Danny Ainge and the Celtics with a proposition to trade for Paul Pierce and Kevin Garnett. Ainge must have thought they were crazy when they parted with three unprotected first round picks in 2014, 2016 and 2018 in exchange for Pierce, Garnett, Jason Terry and the chance to dump the Wallace contract, which was already looking horrendous.

The result was a hard-fought Game 7 win over the Raptors in Round 1 before losing 4-1 in the conference semi-finals to eventual champions Miami Heat.

Going into this season they had the Jason Kidd fiasco and also lost one of their better players in Paul Pierce to the Wizards. One bright spot has been the development of their younger players, especially Mason Plumlee and Bojan Bogdanovic.

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They are currently 18-24 and sitting in the eighth seed but only a half game ahead of the surging Hornets. Given next season is the only time they will have a shot at decent first-round draft pick until 2019 (Atlanta have the rights to swap first round picks in 2017), I wouldn’t blame them for slipping down the standings, especially with Detroit and Charlotte charging up.

The end result for this expensive super team will most likely be two trips to the playoffs and a peak effort of making the second round.

Disappointing? Of course, but this team wasn’t without injuries so the whole mess can’t be put on Prokhorov and Billy King.

The future
Their main goal right now would be to get a decent draft pick in 2015, try and unload Williams, Lopez and Johnson, and focus on the upcoming free-agent class in 2015 and 2016. Even if they can’t move some of their bigger contracts this season or in 2016 they will only have about $40 million committed in salary for the 2016-17 season, which is great for the monster 2016 free-agency class.

Given the likelihood of a significant cap increase after the new collective bargaining agreement comes into effect they aren’t in a bad position provided they strike gold with free agents. All of this will depend on a number of factors but with a new ownership group coming soon you would have to expect the energy in the franchise to change and eventually for the Brooklyn name to shake off its ‘Russian billionaire play-set’ tag to form its true identity.

The total cost for Prokhorov’s enthusiastic entry into NBA ownership may not actually be as high as you would think. On purely monetary terms Prokhorov could come out in the black, as Forbes recently valued the Nets at $1.5 billion. Considering he only paid $223 million for a majority share that is a great return on investment no matter how large the yearly luxury tax bill was.

They may have had a roster full of ageing stars on massive contracts (both in dollars and length), given away a lot of first-round draft picks (six to be exact) and paid the most luxury tax in NBA history, but the Nets were a great investment for Prokhorov. His pride might be a little dented but when you can escape the mess he created with a profit in the hundreds of millions, plus still hold a large stake in the new stadium they use and the surrounding real estate, then you have done alright for yourself.

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The new owners may not be thrilled with the state of things but they can clearly see what they are spending their billions on. Whoever ends up buying this team will have a short-term headache but in a market this big and a decent general manager at the helm, this franchise still has hope of becoming what Prokhorov could have turned them in to.

It was fun while it lasted and provided an easy target for a cheap joke, but it really is Prokhorov having the last laugh (along with all the players on the massive contracts he gave them).

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