There has been a lot of chatter regarding the NBA’s length of games and schedule recently. With the recent news that the league is going to try out a 44 minute game, the NBA world has filled up with new ideas to shorten, or as some think, improve the quality of basketball.
Let’s first look at the many, and I do mean many, proposals set forth by everyone involved in the sport.
The league’s announcement of the experimental 44 minute game has to lead this off. Previously, each team played 3,936 minutes per regular season (48 minutes x 82 games). By removing 4 minutes per game, the league will save the player’s wear and tear a total of 328 minutes, or 6.8 games (48 min/game) to 7.5 games (44 min/game). This option will keep the television contractors happy as they still receive 82 game seasons, the owners still get to sell tickets to 82 games and the players essentially play 7 less games a season. There is even some talk of making the games only 40 minutes. (http://grantland.com/features/the-case-40-minute-nba-game/) Zach Lowe of Grantland, as usual, does a great job looking at all angles of the shorten games so I won’t bore you with repetitive points.
Without a doubt the most logical solution to the NBA’s plan to save player’s miles, keep fans interested with a shorter game, and still cash in on all revenue opportunities. I understand the league’s premise to prevent injuries because having your stars in games will draw more fans to pay attention and watch.
The other measures to improve the quality of the product mostly include shortening the season.
Although finding ways to compensate for this loss of revenue have been few and far between, many believe the league needs to shorten the amount of games played in order to increase viewership. We have heard everything from 72, 70, 68, 65, 62, 60, 58, 55, and 50 for amount of games per a season. Amin Elhassan of ESPN had a great suggestion, that if you favor shortening the season, then you must agree with a minimum of at least 58 games. This method will allow each team to play a home/away series with every team in the league.
However, something that is missed during this whole discussion is making up for the loss revenue by playing less. Everyone has blanket statements such as, “The TV contract is most of the money” and “if it’s for the growth of the game, owners have to think long term”. All be it true, they still need to account for cash flow and daily business operations. No one buys a business that operates in the negative in order to sell it one day for a large profit, that’s not how investments work.
The Financial Implications
Let me do you the favor and dive into the finances of each team briefly, talking in terms of averages. Clearly everyone knows the Lakers are more profitable than the Utah Jazz. To catch you up to where I will be pulling my numbers, let’s take a look at this blurb below from the 2007/2008 season financial numbers (http://nbahoopsonline.com/Articles/2007-08/NBArevinuesharing.html):
“Income varies from team to team, but many sources claim that the average NBA team makes $100 million dollars annually, with the Lakers and Knicks bringing in close to $150 million annually. All the small markets, except for Utah who made the playoffs and eventually the conference finals, brought in less than 85 million dollars. Subtracting the two mega-franchises(Knicks and Lakers) the average NBA gate income was around $750,000 dollars a game or $32,250,000 a year. That $32 million may even be a little high since I also calculated the two preseason games each team plays at home. Of the $32 million a portion of that goes to the visiting team, but since everyone plays the same number of road games it tends to cancel out. The TV contracts with ABC, ESPN, and TNT bring each team 28 million for every one of the NBA teams. Merchandising also brings in close to 5 million a year and finally add in the 13 million for local TV contracts. If you’ve been following your math closely, you will see that the total here is not $100 million, its $78 Million. Here is where the differences between small and large markets begin to take effect. Large market teams get around $30-40 million dollars in corporate sponsors and advertisers. Medium markets average around $25 million, and the smaller markets $10-15 million.”
Now that we are up to speed on the numbers, we are talking about $750,000 per team per game in terms of gate revenue. This has nothing to do with the TV deal that will remain untouched. Therefore, we are talking about a loss of about $15 million per team per season by deducting 20 games per season or a total of $450,000,000 for the league in terms of gate revenue. Are the owners willing take a $15 million per year less income? Will that make the sport more “watchable” or increase television ratings and increase fans enough to recover such losses? These are the questions being asked behind closed doors that I have not seen discussed on twitter. ( I apologized if I missed this conversation.)
This being said, we understand the ownership’s view of the new proposals being thrown around. I want to take this a step further and dig into the emotional aspect of this in terms of the daily work force. I am not sure people really take the time to think how much goes into having a professional sporting event take place. You have to consider the parking incomes, bar/restaurant revenue around the stadium during a game, the people that work the venue (concessions, tickets, merch, etc.) and a few more roles I am probably forgetting. What will the economic impact of playing fewer games be?
Thankfully, we have a little information due to the 2011 NBA lockout. Below is some stats relating to the Sacramento Kings loss of revenue (http://theweek.com/article/index/220362/the-cost-of-the-nba-lockout-by-the-numbers) in ticket sales, parking revenue and vendor sales. This is not including outside NBA vendors such as local bars and restaurants and the other commerce that comes with professional sports.
About $1 million
Amount in revenue the Sacramento Kings lose per canceled game, says CBS News, an amount typical of most small-market NBA teams
Amount lost in ticket sales per canceled game
Amount loss in parking revenue per canceled game
Amount lost in vendor sales per canceled game
Now that we have broken down the ideas (less minutes per game, fewer games per season), hit buttons on the calculators ($450 million loss revenue in 20 less games), it is now time to jump into the good ole ratings dilemma. First, I will show you the television ratings for national televised games for the regular season as well as the finals to show you the stagnant numbers the NBA has held in these two categories for over a decade.
Now looking at the statistics, no one can argue that the era from Magic/Bird through the Jordan era saw (1982-1998) ,an average of 14.7 per year of viewership on the Nielsen rating for the NBA Finals, was the height of the NBA. The next 16 years (1999-2014) saw a much lower on average rating in the Nielsen score, a 9.6 average over that span.
To think that the ratings drop is something recent, it is not. The league has been hovering around that 10 rating per year over the past 16 years, with a high number of 12.1 (2001) and a low of 6.2 (2007) for the NBA Finals.
To further give the audience a perspective, the NFL had 108 million viewers for the super bowl, the 2012 Olympics closing ceremonies had 31 million viewers, the BCS championship game (Alabama vs Notre Dame) saw 26 million viewers, Kentucky beating Kansas in NCAA championship had 21 million views, the NBA Finals game 5 (Heat vs Thunder) saw 18 million viewers. The sports after the NBA Finals were World Series (16 million), Horse Racing – Kentucky Derby (15 million), Daytona 500 (14 million), The Masters (13 million) and Stanley Cup (3 million). (http://www.breitbart.com/Breitbart-Sports/2013/02/05/Americans-care-more-about-Superbowl-more-than-government)
Clearly the NBA isn’t beating out the single game championships such as the BCS, Super Bowl or even the NCAA Championship. They aren’t even going to compete with the Olympics, where every house hold turns on the closing ceremonies (because countries pay billions of dollars on these ceremonies). So my question to those trying to improve the sports championship viewership, what is your goal? Are you trying to overtake the Super Bowl as the most watched sporting event?
How about we take a look at the regular season ratings next? National television did not start getting NBA games regularly until 1996. This year they started with a 5.0 TV rating for the season. Last year, that number was 2.3. In 2000, we saw a huge drop from 4.3 to 3.3 (the season Jordan left). The trend with the league continues, as I like to call it, the Jordan effect. (I am not breaking any knowledge here, we all know this)
I bring these two periods up because everyone agrees the league was in it’s heyday during the Magic/Bird/Jordan eras. However, since Jordan left, the league struggled to appeal to the American audience especially with the growth of the NFL and many other new sports (lacrosse, soccer, etc) picking up more interest (not that much but some) along the way.
TV ratings as a whole have dropped over time. Take a look at this chart (http://en.wikipedia.org/wiki/Nielsen_ratings). In 1950, the number one program (Texaco Star Theater, um okay?) had a 61.6 rating. Since that year, the top program’s numbers had drop. Meaning, the number one show per ratings went from 61.6 rating to 12.8 rating (Sunday Night Football). What this tells us is that there are more options than ever. How many channels do you have on your television? With the decrease in attention spans and the exponentially greater options in television viewing, it’s impossible for a programs numbers not to decrease.
Lastly, with more and more households are cutting their cable cords (not literally). I am one of those Americans. I use NBA League pass, Hulu and Netflix. This averages out to about 45 dollars a month for my television viewing. The monthly bills of $200 plus are not economically feasible in a down economy (This is a down economy, I don’t care what stats you pull up from some biased source, look at how far your dollar goes today). These absolutely factors into the decreased television ratings.
Ask yourself, what is the goal of shortening the NBA season or the NBA game? Is it to increase television viewership? Is it to increase the value of the sport? Is it to market more internationally (the only feasible goal in my opinion here)? I do not have the statistics for the NBA league pass membership numbers but I can only believe with the changes they have made, that these numbers are going up. The game is growing globally. As much as it pains me to say this, I do not think the game has that much more room to grow in America. Cutting the season or games will not help create a new Michael Jordan for the country to fall for like they did in the 90’s.
What do you think? Think the league should change the number of games or game play? Or do you think the league is fine where it is?