Tuesday, November 29, 2011

NBA Lockout: Winners and Losers

Now that the NBA lockout is in the books, here are some of my winners and losers.

NBA Lockout Winners

David Stern- The longest-serving Commissioner in professional sports, Stern’s legacy depended on getting a deal done.  In Stern’s tenure at the NBA helm, he’s overseen 28 new arenas, the addition of 7 teams and revenues top $4 billion.  His most lasting accomplishment may be saving this NBA season.

NBA Owners- Arguably the biggest point of contention in negotiations was the division of basketball related income (BRI).  Players received 57% of BRI in the last labor deal, which resulted in hundreds of millions of dollars lost annually for owners.  In the new CBA, the players cut of BRI won’t top 51%.  For owners, that amounts to nearly $3 billion in savings over the length of the deal.

Small Market Cities- Portland, Memphis, Oklahoma City and others rely on their NBA teams as the only major league professional game in town.  Sacramento is looking for a new arena, or else the Kings might move to Anaheim. And in Orlando, where the NBA All-Star Game is scheduled for late February, $100 million of local economic impact hung in the balance.

(Most) Players Overseas- Deron Williams went to Turkey, Tony Parker to France and Rudy Fernandez to Spain.  They made some extra money, stayed in game shape and head home without major injury.  There is, however, one exception to this “winner” (see Losers).

Player Movement- Sign-and-trades, a mid-level exception and a soft salary cap all are preserved in this new CBA.  More opportunities for movement mean more money for players.  Earlier CBA proposals didn’t include some of these provisions.

NBA Lockout Losers

Billy Hunter- The NBPA eventually got a deal, but a) it wasn’t the one Billy Hunter wanted, and b) it wasn’t without lots of division amongst the players association ranks.  His decision to hold off decertification is the biggest reason a deal wasn’t reached sooner.  If the last couple of CBAs favored the players, this one likely will favor the owners.

Small Market Teams w/ Superstars- Dwight Howard and Chris Paul both are free agents next season.  Neither seems likely to stay with their current team beyond this year.  Early CBA talks included a NFL-like franchise tag that would allow teams to keep their superstar players.  Without one, Howard and Paul could be gone next season.

Players in China- When NBA players began signing overseas, guys going to China went with the understanding that they would have to play in China until the regular season ends in March.  That’s tough luck for guys like Kenyon Martin, Wilson Chandler and JR Smith.

NBA TV- During the football lockout, NFL Network did wonders for its credibility and viewership by tackling the issues head on.  The same can’t be said for NBA TV.  Instead of talking about the lockout, NBA TV showed dozens of reruns of Teen Wolf and other old basketball movies.  At one point in October, the network had the second lowest viewership on cable.

Agents- If NBA players are “giving back” $3 billion over the next 10 years, that’s more than $100 million in agent commissions lost.  No wonder they tried so hard to oust Billy Hunter before he agreed to a less-than-desirable deal.

Tuesday, November 15, 2011

NBA Lockout: (No) Pay Day

Since NBA players are paid in 24 equal installments throughout the year, today is the first day that guys are missing paychecks for the 2011-22 season.  Unfortunately, that money isn’t being reimbursed whenever the lockout does eventually end.  Given that 60% of NBA players go bankrupt five years after they retire, every lost paycheck exacerbates their need for a new labor deal.  Here’s an idea of what some notable players lost today (and will continue to lose every two weeks until a new CBA is reached).  The totals are gross amounts that don’t take into account taxes or escrow payments.

2011 All-NBA First Team
Kobe Bryant- $1,051,833
Dwight Howard- $745,225
LeBron James- $667,604
Kevin Durant- $566,833
Derrick Rose- $291,404

2011 All-NBA Second Team
Dirk Nowitzki- $795,536
Pau Gasol- $779,756
Amar'e Stoudemire- $759,071
Dwyane Wade- $646,333
Russell Westbrook- $211,767

2011 All-NBA Third Team
Chris Paul- $681,658
Manu Ginobili- $540,876
Al Horford- $500,000
LaMarcus Aldridge- $491,666
Zach Randolph- FREE AGENT

Rookie of the Year
: Blake Griffin- $238,795
Sixth Man
: Lamar Odom- $370,833
Most Improved Player: Kevin Love- $192,071

Thursday, November 10, 2011

What Lockout? NFL Business Thriving

Four months ago, the NFL season was in jeopardy.  Nearly 3,000 jobs and $160 million in local economic impact were at risk in each NFL city.

Today, the league is enjoying one of its most successful campaigns in recent memory.  All it took was the prospect of missing games because of the lockout.

Fans this year are watching NFL broadcasts in record numbers.  Through the first nine weeks of the season, Fox is averaging a network-record 19.8 million viewers per game, while CBS is having its second-best season since reacquiring the NFL in 1998.  ESPN has committed $1.9 billion a year to extend Monday Night Football rights through 2021; and no TV partner has had more success this year than DirecTV, whose NFL Sunday Ticket product led to 327,000 new subscribers in the 3rd quarter, the company’s best quarter in seven years.

On the sponsorship front, PepsiCo signed a 10-year extension of its deal for a total of $2.3 billion, Marriott signed on as the league’s exclusive lodging partner, and the United Services Automobile Association became the NFL’s first official military appreciation sponsor.

With NFL sponsorship revenue expected to increase 15% this season, league-wide revenue could reach a record $9.5 billion.  That would make the NFL bigger than Fortune 500 companies eBay, Whole Foods and Visa.  Not bad for a business that nearly shut down for the year.

Tuesday, November 1, 2011

The NBA Lockout: By the Numbers

The NBA season should be underway right now.  At this very minute, the up-and-coming Chicago Bulls should be on the court against the defending champion Dallas Mavericks. Instead, you know the trending Twitter topic #ThingsLongerThanKimsMarriage?  Well, the NBA lockout is longer.  Literally, twice as long.  Kris Humpheries was out of work for 72 days before being married to Kim Kardashian for 72 days.

Regardless of when the NBA season starts, the lockout is doing some serious damage to the business of basketball.  Over the last couple weeks, I've compiled some stats indicating what’s being affected.  Let's take a look at The NBA Lockout: By the Numbers.

3- Three NBA teams have been sold during the lockout.  Though these new owners of the Hawks, Pistons and 76ers knew what they were getting into, they certainly wished their teams would be back on the court by now.

14- Last month, mayors in 14 of 29 NBA cities wrote an open letter to the league and its players asking – well, more like pleading – that they end the lockout.  An Indiana real estate consulting firm estimated $55 million in losses to the state if the Pacers don’t play this year.  Not surprisingly, Indianapolis Mayor Gregory Ballard signed the letter.

400- Although progress reportedly is being made on a new collective bargaining agreement, job losses attributed to the work stoppage have reached 400.  The losses are estimated at 200 at league headquarters and 200 amongst the 30 teams.

$500,000- Miami Heat owner Micky Arison was fined $500,000 for his candid tweets about the state of labor negotiations.  Arison’s tweets indicate a divide in the ownership group, but the tension supposedly is far worse on the union side.

$600,000- The National Basketball Players Association spent $600,000 in the year leading up to the lockout on legal, consulting and public relations fees.  With the lockout ongoing and players losing the PR battle, the money doesn’t appear to be well spent.

$1.5 million- Each NBA team could lose up to $1.5 million in ticket revenue for every regular season game lost to a lockout.  Adding to the potential losses, all NBA teams have promised refunds plus interest for cancelled games.  Consider this: your money is safer in NBA tickets than it is in the stock market.

$18 million- Memphis taxpayers could be on the hook for $18 million in FedEx Forum bond payments if the entire season is cancelled.  The city-owned arena relies on taxes from game revenue to cover the annual debt service.  If the lockout extends into December, Memphis could file a lawsuit against the NBA to recoup the money.

$100 million- The city of Orlando projects $100 million in economic impact from hosting the 2012 NBA All-Star Game.  Should the game no take place, losing the money would be devastating for the Orlando economy.

$400 million- To date, the NBA has canceled the first month of the regular season.  In losing nearly 200 games, the NBA is forgoing more than $400 million.  That money isn’t coming back.

$500 million- Financial analysts predict the shoe industry could lose $500 million this year if the league cancels the entire season.  That’s approximately a quarter of the annual basketball shoe market.  Some of the brands with the most at stake: Adidas, Nike, Champs and Foot Locker.

$700 million- TV networks and the NBA stand to lose nearly $700 million in ad sales if the entire season is lost to a lockout.  Recently released data indicated advertisers spent $627 million on national NBA broadcasts last year, and thanks to high ratings, the total was expected to increase by 10% this season.

$4 billion- The NBA is a $4 billion business.  To put that into perspective, the NBA is a bigger business than Hasbro Toys, JetBlue Airways or MetroPCS.  Try imaging one of those companies shutting down operations for a whole year.  However, if as many as 22 NBA teams are collectively losing $300 million annually, losing a season to revamp the business model isn’t just reasonable – it’s critical.  

Would you invest hundreds of millions of dollars in a sports team that essentially was guaranteed to lose you money?  Neither would I.