While Major League Baseball (MLB) attendance is down, the National Football League (NFL) is struggling with safety concerns, and the Women's National Basketball Association (WNBA) is still in its infancy, the NBA is thriving. The NBA has successfully grown its audience by attracting new fans in Europe and China.
Basketball is second only to soccer in terms of global participation. The NBA's income has increased dramatically as the league's popularity among fans has grown. Indeed, the 30 NBA clubs earned $8.3 billion in 2019-20. 1 Broadcast rights, advertising, merchandise sales, and concessions are ways money may be made off basketball. As part of its intricate economic model, the NBA's $24 billion TV agreement for the 2016-17 season will undoubtedly raise basketball-related revenue and have repercussions for things like team operations and player wage caps.
Revenue Generated from Basketball
Almost all of the money the NBA and its affiliates may be categorized as "Basketball Related Income" (BRI). Ticket revenues, food and beverage sales, television broadcasts of the game, and merchandising rights from the sale of game-worn jerseys and other merchandise all contribute to this total.
BRI does not account for fines incurred throughout the season, revenue splits, or funds allocated to expansion clubs. Including revenue sharing in BRI will provide large market teams with an unfair economic edge.
Hence it is removed from BRI. Some have speculated that clubs like the Los Angeles Lakers and New York Knicks, which bring in a lot of money, may raise the salary limit, forcing smaller markets to pay astronomical sums to keep their star players.
The Television Contract
Viewership of traditional television has dropped over the past 15 years due to technological developments such as streaming services and digital video recorders. While this tendency has affected other media, live sports have mostly escaped its effects. Therefore, broadcasters must pay astronomical fees to air these matches.
The NBA and ESPN/Turner Sports agreed to a nine-year, $24 billion media rights dealt in February 2016. Starting with the 2016–17 NBA season, ESPN and Turner Sports agreed to pay the NBA a total of $2.6 billion each year.
Provisions and Ticket Sales
Ticket sales are essential to a team steams bottom line even though they aren't the organization's main source of income. The Philadelphia 76ers averaged 20,628 fans per home game this season, enough for one of the league's top attendance numbers.
An additional metric to consider is the Fan Cost Index (FCI), which measures how much it would cost to take a family of four to an NBA game. Tickets, food, and parking are all factored into this measure. The NBA game FCI for the 2019-2020 season was $430.25, as reported by Team Sports Marketing, a Chicago-based sports marketing company.
Sponsorship and License Arrangements
After working with Adidas for many years, the NBA canceled their collaboration in June 2015 and instead entered into an eight-year, $1 billion arrangement with Nike. The increase from the prior agreement was equivalent to 245% each year.
Before this merger, Nike was already a major player in the basketball shoe and clothing market. Ninety percent of all basketball shoe sales in the United States are believed to be controlled by Nike. When you attend an NBA game, you will see many sponsors and companies positioned throughout the arena. The NBA earned $861 million from corporate sponsors in the 2016–17 season.
Proportional Distribution of Earnings
The NBA uses a revenue-sharing model similar to Major League Baseball and the National Football League. As was previously said, the money made through this method has nothing to do with the NBA. The NBA'sNBA's revenue sharing system attempts to equalize the playing field between smaller and larger areas.
Therefore, all teams combine their annual earnings and share them equally among the highest and lowest earners. Each club will get a sum equivalent to the salary cap for the upcoming season.
Global Expansion
As more and more foreign players fill out NBA teams, the sport's global profile has risen to new heights. As the 2019-20 season got off on October 3, 108 foreign players representing 38 nations and territories were on the rosters of the 30 teams in the league.
Eleven international players are current or previous NBA All-Stars, and the two-time NBA MVP, Giannis Gianni, originates from Greece. As this number continues to climb, the NBA will seek overseas markets to enhance media coverage and retail sales. We may see a handful of European-based NBA franchises in the near future.
Summary
The NBA'sNBA's popularity and income have skyrocketed in recent years, thanks to its ability to attract viewers and fans worldwide. The NBA has firmly established itself as one of the biggest and most lucrative leagues in the world, with a TV agreement valued at $24 billion, a $1 billion Nike deal, rising numbers of corporate sponsors, rapid foreign development, and an average NBA club valuation of over $1 billion.
