Money Comes, Money Goes

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NBA Money

Talking NBA Dollars and Cent$

How do the Los Angeles Lakers, the Boston Celtics, the New York Knicks get their money? Or how do the Toronto Raptors generate their revenue? As sports fans, we tend to overlook the business aspect of the NBA and look at its for its entertainment and competitive value when at the end of the day, the NBA and sports in general are first and foremost, a business – a multi-billion dollar industry.

Wow, billions! That’s a hefty amount of money, wouldn’t you say? But how exactly do these NBA franchises make their money? Only way to find out, is to dive right into it!

The league itself is one of the most innovative of all major sports, not only in North America, but worldwide. As a league that came into existence many years after the NFL, the MLB, and the NHL, you could say that the NBA as a whole had a lot of catching up to do. Therefore the need for innovation was primarily out of necessity.

The NBA and more specifically its teams, therefore create massive revenue through merchandize sales, broadcasting contracts and by marketing their superstar talent. As NBA rosters continues to expand in race and ethnicity, the league now broadcasts worldwide. From Canada, all the way out to China and Australia. Today, the NBA holds players from over 35 different countries outside the U.S. and with that comes broadcast and marketing interest from the native countries of the foreign basketball players.

Most of the NBA’s revenue of course comes from their huge TV deals. Although most games are not televised nationally, but only locally, there are still 152 regular-season games that are shown nationally each year by the NBA’s televising partners over at TNT and ESPN, with another 90 or so playoff games that follow. Both networks have contracts of an estimated $24-billion with the league between the two. As well their national television contracts do not even take into account the various $120-150 million local broadcast contracts the league owns. Each NBA team will thus get money through both National and local TV deal contracts that easily cover all 400-plus players in the league and then some.

NBA Money

NBA teams are in fairly good hands I’d say.

Next up – merchandise sales! I mean who doesn’t want a brand new Kevin Durant Golden State Warriors jersey anyways?

Jersey sales alone only account for nearly a billion dollars annually. Signed basketballs, shoes, warm-up gear, fresh apparel and so on and so forth. Add that all up and teams, and the NBA rake in a few billion dollars more per year.

Now, with the recently announced jersey ads arriving to the NBA, yup, you guessed it, even more money! NBA Teams get to choose all the prices for their own jersey ads, which will bring in another few millions of dollars per season to each franchise, and add to merchandise sales, as the jerseys in store will all have the advertisements front and centre. The Golden Warriors for instance are asking advertisers to pay up to $20-million dollars for jersey patches per season. That alone covers the final remaining year of Andre Iguodala’s contract and reigning MVP Steph Curry’s contract combined! Isn’t that a quick fix?

Speaking of advertisements and endorsements, each NBA team has tons and you see it wherever you go. In the arenas, on the television, on the radio, stores, and newspapers – the list never ends.

You have Miller Lite, the official beer of the Toronto Raptors. Hell, did you know that Werner is the official ladder of the NBA? I kid you not, when there is a problem with the shot clock and a ladder is required, Werner gets the job done in the NBA on live television.

The NBA and its teams are essentially machines. A lot of money comes in, a lot of money comes out. Whether it is ticket sales, endorsement deals, jersey sales, each team makes billions of dollars annually and in turn uses its revenue to cover its team, staff, management, arena and facility upgrades among many other necessities.

NBA Money

With the league averaging higher attendance records with each season, the T.V. deals bringing in loads of money as well as franchises exploding in value due to the 2011 NBA lockout, it is hard to envision that team owners can possibly lose money in this economic climate.

Unfortunately, NBA commissioner Adam Silver insists that a there are a “significant number” of teams losing money, therefore there are fears that the NBA is bracing for a possible lockout in 2017. Something hard to believe, as the league has generated $5-billion in revenue this past NBA season alone, an amount good enough to keep everyone comfortable and happy.

Silver did claim that he is willing to share the league’s financial statements with the players’ union, but the NBA is unwilling to give any numbers to the media and general public leaving us essentially in the dark.

The fundamental argument behind Silver’s claim is simple. If a team wants to make money, it must win and to win it must spend money, therefore if a small market team cannot afford big name players and cannot spend the money that the Lakers and Knicks of the world spend then they are ultimately doomed, spelling financial failure.

NBA Money

Based on Forbes’ 2016 list, teams are not losing money per say, but the bad and small market teams do generate far less revenue, which just means they spend less in the process.

Whether you believe the myth or not, professional sport leagues in North America, including the NBA have caps on worker compensation, revenue sharing and receive substantial stadium subsides from the government, ensuring that even the small market teams should see to their ownership generating profit.

With the possibility of gambling becoming a reality in the NBA and legalization of sports betting being discussed by the league, it just adds an extra dimension to an already mass consuming sports industry.

With the money streaming into the league at an all-time high from various outlets, can NBA teams really be losing money? Can even the most incompetent of owners be losing money? Even the worst of teams have their stars to hang their heads on to help generate extra cash flow. The Philadelphia 76ers have Ben Simmons and Joel Embiid to name just two young and bright upstart players. The mess of a team known as the Brooklyn Nets have Brook Lopez and now Jeremy Lin who has huge appeal to the Asian market.

Teams, no matter the market, are making their money and until the NBA and Adam Silver release their documents proving otherwise, it is hard to make an argument for Silver’s claim.

But hey, worse case scenario, you can always sell a team for a couple billion dollars! If the B-Team of Los Angeles can be sold for $2-billion, why can’t any other owner see gold if selling the franchise becomes a reality?

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