lunes, 5 de agosto de 2019

Business, Investopedia, How The NBA Makes Money

Television Rights, Merchandising, and Ticket Sales Are Primary Revenue Sources 

  • The National Basketball Association (NBA) has a reputation for being the most innovative of the major professional North American sports leagues, earning money from a combination of television rights, merchandising, ticket sales, and more. 
  • Because it is not a public company, the NBA does not release detailed financial reports to the public. However, according to Forbes, which regularly compiles valuations of the 30 teams of the NBA, total revenue across the organization reached $8 billion last season. Each one of the teams is worth at least $1 billion, and a team is worth on average $1.9 billion for last year—about three times the valuation from just five years ago.

The NBA's Business Model 

Alongside other major sports leagues, the NBA generates revenue from multiple streams, the most significant of which are television, merchandising, sponsorships, and tickets.

The NBA's Television Business

Like other major sports leagues, television comprises a key part of the NBA’s business strategy. Team owners figured out that a) they could reach scores of TV viewers for every ticket-buying fan, and b) that makes it more than worth it to sell to the middlemen (i.e., advertisers) instead of to the fans directly. Add the hassles of going to a game—the price of tickets, the time spent getting there and back, finding an expensive offsite place to park, possibly encountering an aggressive drunk or two at the stadium or arena—and within a few years it had become clear that watching games on TV would be the primary way that most fans would consume what sports leagues were selling.

The 2017-2018 season, NBA TV aired the most regular-season games with 106 followed by Disney's (DIS) ESPN (87), Warner Media's (TWX) TNT (67), and ABC (17). 

The NBA broadcasts 277 regular-season games nationally per year—plus 90 or so playoff games. In TV accounts for most of the NBA’s revenue. For the 2016-2017 season, TNT and ESPN re-upped their contracts to an estimated $24 billion in total. Even with a total of 400-odd active players making an average of close to $5 million annually, national TV contracts generate enough revenue to cover salaries and then some. However, those national contracts still leave 1078 regular-season games unaccounted for. Filling in that gap, local TV contracts can gross between $120 million and $150 million annually.

Future Plans 

As the NBA’s popularity increases, team values grow far out of proportion. NBA teams are not sold that frequently, but when they are, records break every time. Over the last decade, the average sale price of a team has tripled. Granted, that’s largely due to a single outlier: the 2014 sale of the Los Angeles Clippers, who went for an unprecedented $2 billion.

Key Challenges 

There are a number of key challenges facing the NBA, even as professional basketball continues to grow in popularity in the U.S. and elsewhere around the world—and as individual teams balloon in value. For one thing, not every team is valuable all the time. Last year, the Cleveland Cavaliers lost money on an operating basis and declined by about 4% in value to $1.28 billion, per Forbes.

Other challenges to the NBA's revenue may include the continuing trend away from television viewing as other technologies have grown increasingly popular in recent years. So far, live sports have tended to remain safe from these changes, but that may not last forever.


Investopedia, How The NBA Makes MoneyNathan Reiff,  Updated Jul 30, 2019. 

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