Latest News

Here’s where the NBA’s business stands as it enters a critical phase of its season on Christmas

0
A diamond-themed logo commemorating the NBA’s 75th anniversary is shown on the court during a game between the Oklahoma City Thunder and the Detroit Pistons during the 2021 NBA Summer League at the Thomas & Mack Center on August 8, 2021 in Las Vegas, Nevada.
Ethan Miller | Getty Images

A bizarre melodrama.

That’s the label sports business professor Patrick Rishe used when asked to label the National Basketball Association’s 75th Anniversary season.

During the NBA’s 2021-22 campaign, another Covid outbreak caused postponements as star players miss games. The Golden State Warriors are once again the talk of the league. Millions watched Stephen Curry break the three-point record in New York, and now anticipate fellow star Klay Thompson’s return.

And speaking of returns, the Brooklyn Nets did a reversal and welcomed back an unvaccinated Kyrie Irving. Russell Westbrook’s return home to Los Angeles hasn’t endured the best start. The Philadelphia 76ers still haven’t traded Ben Simmons. The Minnesota Timberwolves were fined $250,000 for holding workouts at Alex Rodriguez’s home. And the Phoenix Suns are winning despite the unclear status of its owner Robert Sarver who is accused of racism.

“A bizarre melodrama” said Rishe, the director of the sports business program at Washington University in St. Louis. “And I fear that if they don’t have a smoking gun via video or audiotape, that Sarver may not see a severe punishment.”

The NBA is approaching a critical stretch in its season with its annual Christmas Day games on Saturday. And those games are already in jeopardy due to the Covid outbreaks that have hit sports leagues.

With the NBA charging ahead, here’s a glimpse at their business as it closes 2021.

NBA wants to move forward

On Tuesday, NBA commissioner Adam Silver used his time on ESPN to tell fans the league wouldn’t be pausing its season like it did in March 2020.

With vaccines and booster shots available, and Covid experts calling for shorter isolations for those who test positive after vaccination, the NBA doesn’t see the “logic” in halting its business again.

Silver noted omicron took over as the dominant strain among 90% of the NBA’s recent positive tests, which includes a large group who received the Johnson and Johnson vaccine. He reiterated 97% of players are vaccinated and 65% received booster shots. Silver then called for that number to hit more than 90%, and then looked ahead.

“Maybe we can demonstrate that there’s a way that people can move forward, again recognizing that this virus unfortunately isn’t going anywhere,” he said. “It’s just going to become part of our lives for the foreseeable future.”

One day after Silver spoke, the NBA announced two postponements: the Toronto Raptors against the Chicago Bulls on Wednesday and the Nets contest against the Portland Trail Blazers on Thursday.

“They’re definitely taking their lumps right now, there’s no question about it,” said Scott Rosner, the sports business management director at Columbia University.

Marcus Morris Sr. # 8 of the Los Angeles Clippers hands a ball to a young fan during the first half against the Portland Trail Blazers at Moda Center on December 06, 2021 in Portland, Oregon.
Soobum Im | Getty Images

NBA attendance is down

Silver projected $10 billion in revenue this season, a notable bump from the last two seasons where fan attendance was limited or non-existent.

Revenue slipped from $8.8 billion for the 2018-19 season to $8.3 billion for the 2019-20 season. And revenue for the shortened 72-game season last season was down about 35%.

During the pandemic, NBA said attendance money makes up 40% of its revenue. So if $10 billion is the overall goal, $4 billion in attendance related money is one of the targets.

But there is a decline in attendance throughout sports including among the four big leagues.

Staying on the NBA, attendance is still essential as its tied to arena signage in sponsorship contracts. If clubs don’t meet in-person impressions via attendance, teams will lose money.

“It’s something everybody is keeping their eyes on,” said Rosner. “But Covid has made an analysis on it a little bit tricky because different districts have different regulations in place.”

The NBA told CNBC attendance is down 5% when compared to 2018-19, its last normal season. That figure is in the range of the 5.7% decline research company Morning Consult reported in its sports attendance report on Tuesday.

“Given the environment, we think that’s a good place to be,” said NBA executive Amy Brooks.

The NBA is averaging 16,741 people per game this season with 189 sellouts, and roughly 7.6 million people attended games, according to the league. This season, the NBA is projecting 21 million fans, though one sports executive projected that number could be more in the 19 million to 20 million range with Covid still around.

The projections are a decline from the record-high 22.1 million fans who attended during 2017-18. That season, the NBA averaged 17,987 fans and had 741 sellouts. For the 2018-19 season, the NBA attendance total was 22 million, including a record-high 760 sellouts.

The NBA provides tickets sold for attendance stats among media outlets. But team executives use scanned tickets to get a better account of how many people are actually coming to games.

The NBA said it doesn’t publicly release those metrics.

But when discussing the matter, Warriors chief operating officer Brandon Schneider pointed to Covid as the direct culprit.

Schneider painted a picture using internal numbers. He said 7% of Warriors fans couldn’t come to their games at Chase Center as they aren’t vaccinated. And 12% of fans polled are still not comfortable attending a sold-out game.

“If you tell any company you’ve lost 19% of your customers, that’s not good,” Schneider told CNBC. “Once we get through Covid, I think you’ll see – certainly in the NBA – attendance get to be at or above where it was.”

But with a new variant circulating, the NBA faces another attendance metrics test.

Canada cut the Toronto Raptors’ capacity due to Covid. And more cities including Chicago, Boston and Philadelphia will require vaccination cards to enter public places. That could impact those unvaccinated and put a dent in actual NBA attendance.

The Morning Consult noted the secondary ticket market for NBA games is down 6.2% for teams who require a vaccination card or a negative test to enter games.

“If the virus continues to wreak havoc and people begin to think twice about attending, you’ve got to figure out other ways to balance these losses,” said Charles Grantham, a sports business professor at Seton Hall and one of the architects of the NBA’s salary cap system.

The league could still reach its $4 billion goal, though, as ticket prices are up due to inflation.

Brad Griffith, CEO of secondary ticketing agency Gametime, told CNBC its metrics show average order value of NBA tickets on its platform increased to $240 this season. That’s up from $203 during the uninterrupted portion of the 2019-20 NBA season.

Stephen Curry #30 of the Golden State Warriors shoots the ball during the game against the Sacramento Kings on December 20, 2021 at Chase Center in San Francisco, California.
Noah Graham | National Basketball Association | Getty Images

New partnerships help balance losses

Also, Rosner noted bigger NBA sponsorship deals would balance attendance revenue losses.

Newer categories like cryptocurrency flooded the NBA in 2021 and on pace to help it surpass $1.46 billion in partnership money.

Companies like Coinbase landed an NBA deal. The terms of the pact weren’t publicly disclosed, but people familiar with the deal told CNBC it’s valued at roughly $192 million over four years.

If their game isn’t postponed, the Los Angeles Lakers officially debut Crypto.com arena on Christmas after its $700 million deal. And FTX landed the Warriors’ international rights with a $10 million agreement.

The Warriors deal also includes digital floor ads – another asset the NBA introduced to add local revenue streams for clubs.

“As the NBA’s national revenues grow through sponsorships and the next media contract, the less important ticket sales are,” said Rosner.

The shift is already showing in the NBA.

Even with restricted attendance, the Warriors still made a record-high $474 million for 2021, according to Forbes. The franchise also increased its valued to $5.6 billion during the pandemic. That’s more than any other National Football League team except the Dallas Cowboys.

Stephen Curry #30 of the Golden State Warriors poses with the jerseys of NBA Legends, Reggie Miller and Ray Allen after passing Ray Allen for most three pointers made in NBA history with 2,974 on December 14, 2021 at Madison Square Garden in New York City.
Nathaniel S. Butler | National Basketball Association | Getty Images

Warriors helping drive other NBA business

Attendance aside, Curry and the Warriors are one of the main drivers of other NBA business.

The Warriors are second to the Lakers in NBA merchandise sold across the Fanatics network, including the NBA Store, which it operates.

And Curry is keeping viewers engaged with his Michael Jordan-like popularity and performance.

For example, the NBA averaged 1.5 million viewers for national games this season. And temporarily suspending TNT games on Thursday focusing on Tuesday to avoid the NFL certainly helped.

But when Curry and the Warriors play, NBA viewership spikes.

Curry broke Ray Allen’s record for most 3-pointers made (2,973) when the Warriors played the Knicks on Dec. 14. The game attracted an average of 2.3 million viewers on TNT.

Last month, the Warriors also took out Kevin Durant’s Nets in what could be an NBA Finals preview. That contest averaged 2.2 million viewers on TNT.

In a potential western conference finals preview – the Warriors’ loss to the Phoenix Suns on Nov. 30 attracted an average of 2.4 million viewers. And the rematch on Dec. 3 averaged roughly 2 million viewers on ESPN.

And the season-opening win against the Lakers remains the NBA’s most-watched game with an average of 3.3 million viewers.

Stephen Curry #30 of the Golden State Warriors celebrates after making a three point basket to break Ray Allen’s record for the most all-time as Alec Burks #18 of the New York Knicks looks o during their game at Madison Square Garden on December 14, 2021 in New York City.
Al Bello | Getty Images

“It’s promising,” said sports media rights expert Lee Berke of the NBA’s viewership so far. “There are great storylines. The Warriors look terrific. The Suns look terrific.”

With the Warriors down in 2020, the NBA’s top Christmas game was the Lakers playing the Dallas Mavericks. The contest averaged 7 million viewers, lower than the 2019 Lakers-Clippers Christmas game, which attracted an average 8.8 million viewers.

The top Christmas game in 2018 featured the Lakers and Warriors, which averaged 10.2 million viewers.

This year’s Christmas games include the Warriors playing the Suns, while the Lakers are scheduled to host the Nets. But Covid is putting things in jeopardy.

Top stars including Durant, James Harden, and Giannis Antetokounmpo could miss Christmas games as they’ve entered the NBA’s health and safety Covid protocols. The rules call for players to sit out at least 10 days if they test positive.

If Saturday games are impacted, TV impressions may suffer and ESPN could owe make-goods.

To get a sense of the value around Christmas Day games, TV ad measurement company iSpot and search analytics firm EDO data estimate ad spend around 2020 games reached the $42 million to $51 million range. That’s up from 2019 games when companies spent between $23 million and $28 million around the NBA’s Christmas inventory.

The NBA is also competing against the NFL’s lineup again this year, when the Cleveland Browns play the Green Bay Packers.

The NFL invaded the NBA’s Christmas last year, and attracted 20.1 million viewers for the New Orleans Saints Minnesota Vikings contest. EDO said that game attracted $65 million in ad spend. And this year, Fox Sports lure sports viewers away from the NBA with its John Madden documentary before that game.

On Tuesday, ESPN reported its NBA Christmas lineup could be changed. But with NBA stars out, its 2021 Christmas games are looking a bit dull.

Still, Brooks was asked to sum up the NBA’s business entering the holiday and into 2022.

“Exciting,” she said. “We think business is very bright.”

The real NBA season starts this weekend, and the melodrama continues.

“They’re trying to get through to the next phase, which is the playoffs,” Grantham said.

Inflation will be a crucial part of the GOP economic playbook in two huge Senate races next year

Previous article

Cramer’s Investing Club: Recent drop in a portfolio drug stock only a minor setback

Next article

You may also like

Comments

Leave a reply

Your email address will not be published.

More in Latest News