I really didn’t want to write about the NBA lockout. But I had to look deeper into the issue for my own reasons. It’s sort of emotional for me honestly. I look forward to the fall because I know the NBA season will be my pastime for the season, even though I work about 60 hours a week. Despite my personal feelings about it, I am now wondering how the NBA lockout affects the US economy. Or is the NBA being affected by the recession? Let’s investigate….
1). The NBA reported $3.8 billion in revenue during the 2010-2011 season and 57% of this figure amount to player compensation ($2.1 billion). The average salary for an NBA player was roughly $5 million dollars.
2). The NBA lost $650 million over the last two seasons. But its overall operating income (revenue minus players’ salaries, etc.) was $183 million dollars according to Forbes.
3).The owners want a 50-50 split of revenue. The players do not.
4).During an 82- game season, approximately 1.4 million spectators attend NBA games.
1). The City of Memphis is projected to lose $10.8 million dollars if a season-long lockout occurs. This will cause the city to default on its loan payments for the FedEx Forum. The revenue from the franchise covers these payments. The Grizzlies generate $233 million annually.
2). Being that the season is now fragmented, the $4.2 billion revenue that was expected to be generated will not occur. On a per game basis, the league could have earned $1.7 million each game. Each spectator represents $2,987 in revenue for the NBA.
3). The Oklahoma City Thunder generates $100 million annually for the newly establish market. The Spurs generates $95 million and the NBA All-Star Weekend in Orlando, FL was expected to generate $100 million.
4). Players will feel the effects of the lockout in November 2011 when their paychecks are nonexistent.
5). Related business sectors will experience a sharp decrease in revenues: restaurants, transportation, retail stores, hotels, etc. This will ultimately result in layoffs, and people working in these sectors will join the 14 million people already unemployed.
6). NBA fans who purchased special cable packages like NBA Season Ticket will not get their money’s worth.
Needless to say, I didn’t want to get really deep in the issues of the NBA lockout. I just wanted to see the overall economic picture. And it appears to be rather fuzzy. During an era where banks are being bailed out, corporations are closing their doors for good, and foreclosures are skyrocketing, the NBA is still attracting consumer dollars. It is as though the US as not been in a recession for nearly 3 years. The NBA’s revenue has increased steadily and would have increased another 5% if the first tip-off was not cancelled.
I seriously doubt the players and owners are discussing the economic loyalty of the fans. I understand the players have a collective bargaining agreement, and that the owners want a higher rate of return. But I wonder if the negotiations would be necessary if season ticket holders demanded a written contract that guaranteed a minimum number of games to be played? If the NBA fans staged a boycott, would the players and the owners try to reach an agreement with us?
My solution is the owners should have taken the 46%. The player’s associated offered a revenue split of 54-46 instead of the current 57-43 split. The owners should have accepted it. The split could have been renegotiated in a couple of years or so. It is highly likely this issue will resurface again. I truly believe the owners want an even split to offset to their recent losses. In my opinion, the NBA owners were supposed to lose money during this time: it’s called a recession for a reason. The entire U.S. has been experiencing losses for a while now, every industry in U.S. is supposed to feel the effects in some fashion. For some reason, both sides are missing the point that some revenue is far better than no revenue.
And to think, I won’t get to watch basketball on Thanksgiving or Christmas because of someone’s bad business decisions.
How do you feel?
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"Putting My Money Where My Mouth Is" is a journal about real life experiences and concerns of Jéneen R. Perkins. The purpose of the blog is to exhibit the real life challenges and answer the tough questions posed by the concepts of business, entrepreneurship and money.