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.

TV: The Driving Force Behind College Football

One of the main reasons college athletic conferences are pursuing expansion is money – in particular, TV money.  The Pac-12 Conference a couple months ago announced it will create a national TV network plus six regional affiliates.  The networks, which will generate millions of dollars for member schools, will carry about 850 conference events annually.

To see how a conference TV network can positively affect Pac-12 schools, look no further than Washington State.  The Cougars have the second-smallest operating revenue in the conference at just $39 million.  That’s well below the Pac-12 average of more than $60 million per school.  However, once the new TV revenue starts flowing in, Washington State could use part of the money to fund an $80 million renovation to its football stadium, which is the smallest in the conference.

Although realignment has gotten crazy, at least this Washington State move shows tangible results from the madness.

 

If realignment is maddening, this story is downright quirky.

In one of the more unusual sports business moves of the year, CBS, ESPN and NBC made a “three-network” TV rights trade.  The driving force behind for the deal was CBS, who wanted to show next week’s big Alabama-LSU showdown in primetime.  The problem was that CBS only has the right to one SEC primetime game per year, and the network already aired Alabama-Florida at night.  ESPN holds the conference’s remaining primetime rights.

Per the deal, ESPN is allowing CBS to show the game in primetime in exchange for “future considerations,” the TV equivalent of a player to be named later.  However, with the Alabama-LSU game moving from the 3pm time slot, CBS needed to find a new game.  So it dealt rights to the November 19 game between TCU and Colorado to NBC’s Versus channel for rights to tomorrow’s Army-Air Force game.

I like this move for several reasons.  First, kudos to CBS for thinking outside the box.  Getting Alabama-LSU moved to primetime should be huge for ratings.  ESPN, knowing that Arkansas-South Carolina will draw marginal interest at best, possibly has leverage to showcase a more high-profile SEC game next season.  Meanwhile, Versus gets a TCU game, which should draw more viewers than sub-.500 Air Force and Army.

Thought the deal may be complicated, the takeaway here is that rivals can always find a way to work together.

The World Series: A Tale of the (Financial) Tape

Game One of the World Series is tonight, and without knowing who will be crowned champion, here’s some of the things we can take away from the 2011 season.  Despite ongoing economic turbulence, league-wide attendance increased 0.8% over last season to 73.4 million, the most since 2008.  Thanks to sponsorship renewals from Bayer, Chevrolet and others, MLB gross revenues are at an all-time high of $7.5 billion+.

However, interest in this World Series could be slim compared to recent years.  This is just the third time since 1995 that neither World Series team has a top ten payroll.  Also hurting matters, the top seven most popular MLB teams, according to Harris Poll data, were eliminated before the League Championship Series or didn’t make the playoffs.  Additionally, TV ratings for both MLB League Championship Series were down double-digits compared to last year.  Hurt by rain delays, postponements and day games, Fox’ coverage of the ALCS was down 20% from the 2010 NLCS.  TBS’ NLCS telecasts fell 43% from the network’s ALCS coverage last year.

But what does the World Series mean to a team?

In the cases of the Rangers and Cardinals, winning (or even losing) the World Series could mean $30-50 million over the next five years in incremental ticket, merchandise and sponsorship sales.  Both teams have room for improvement on ticket sales.  The Rangers played to a stadium at 74% of capacity, while the Cardinals played to 89% capacity.

If the Cardinals play through the end of the World Series, St. Louis projects economic impact from the playoffs to exceed $56 million.  Each game in the division and league championship series was worth $5.2 million.  World Series games likely are worth $1-2 million more.

Here's a financial breakdown of the World Series:

St. Louis Cardinals

Wins: 90

Payroll: $105.4 million

Value: $518 million

Value % increase after last World Series appearance: 7% (2006 World Series champs)

     *Below MLB average growth of 14%, but Cardinals saw big increase the prior year when the opened new Busch Stadium

Operating income: $19.8 million

Texas Rangers

Wins: 96

Payroll: $92.3 million

Value: $561 million

Value % increase after last World Series appearance: 24% (2010 World Series runner-up)

     *Above league average of 7%, but inflated by bankruptcy auction that took place mid-season

Operating income: $22.6 million

Payroll/win

St. Louis Cardinals: $1.17 million

Texas Rangers: $961,000

Value/win

St. Louis Cardinals: $5.76 million

Texas Rangers: $5.84 million

Operating income/win

St. Louis Cardinals: $222,000

Texas Rangers: $235,000

**All values, operating incomes according to Forbes

Rome Wasn't Built in a Day

Tired with slow moving NBA collective bargaining negotiations?  Delonte West is.  Since the free agent can’t sign with a new team until the lockout’s over, he instead took a job at a furniture warehouse in Maryland. 

Worried about life after basketball?  That’s top of mind for Brandon Jennings.  The Milwaukee Bucks guard has been interning in Under Armour’s footwear department since the summer.  Jennings goes into the office regularly and sits in on meetings with top executives.

Things have gotten so out of hand with the NBA season on hold that even the King, LeBron James, is flirting with the idea of playing in the NFL.  Never mind the fact the last time he put on pads and a helmet was for a State Farm commercial.

Furniture stores?  Internships?  The NFL?

With the first two weeks of the NBA season cancelled, and much more of it in jeopardy, the absence of basketball is causing players to think and do crazy things.  The craziest of them all?  The notion that someway, somehow, the players might walk away from the negotiating table to form their own league.  There’s a better chance of LeBron catching the winning touchdown in February’s Super Bowl.

Despite what the players may think, starting a league from scratch is much more complicated than throwing together the occasional exhibition game.  They’d need to find places to play, and a majority of arenas are owned or operated by NBA teams.  They’d need to generate enough revenue to cover salaries – remember this dispute is about money – and players made a collective $2.176 billion last season.  They’d also need to hire a couple-thousand person support staff to do everything from producing TV broadcasts to selling concessions on game nights, as well as experts in traditional management functions such as corporate sales, international affairs, marketing and retail operations.

They say Rome wasn’t built in a day.  Well, neither was the NBA.  It’ll take several years and boatloads of money for players to create a successful, rival league.

Their best option?  Drop the pipedream and stay at the negotiating table.

Don't Call it a Comeback...

I been here for years!