1.Losses from COVID-19 expected to surpass $1 billion.
- Using the 21.1 per cent as a base figure, the league could lose $548.6 million from media rights deals.
3. Finances have taken a big hit during the 2019-20 season even before COVID-19
In the last ten years the first three instalments of the Golden State Warriors/Cleveland Cavaliers dynasty have attracted the biggest audiences across the NBA’s showpiece event, with the 2017 victory for Lebron James and the Cavaliers the most watched final on ABC. Last season’s final between the Raptors and Warriors however saw a sharp drop in viewers, hitting an average of 15.13 million across the six games, to become ABC’s lowest watched Finals in the last decade; with the inclusion of a Canadian side perhaps offering some explanation. Unsurprisingly the series tends to grow in viewership as the series goes on, as the games become more meaningful. Over the past decade, the four championship series that have gone down to a seventh game have each drawn the four biggest audiences for the ABC network, averaging at 28.51 million views.
The league itself, according to the Sportcal database has 33 different brand partners for the current 2019-20 season, which collectively generate an estimate $602.15 million. The most financially valuable deal for the NBA is with 2K Video Gaming which signed a new seven-year contract with the NBA at the start of the current season which has been valued at $1.1 billion over its lifetime, a deal which reportedly doubles the value of the same deal signed in 2011. The deal is a licencing agreement with Take-Two Interactive Software to develop the popular NBA 2K video game franchise. Its NBA 2K19 edition of the game last year was named the best-selling sports video game in the USA and third bests-selling game of any variety. The other eye-watering sponsorship deal the NBA currently holds is for its kit supplier rights with Nike which holds a reported worth of $125 million a season; a steep increase on its previous kit deal (at $36.4 million with adidas). The eight-year deal gives the brand shirt production rights until the end of the 2024-25 season, with the deal also extending to rights for the Women’s NBA competition. The centralisation of these deals allows for a more even distribution of income, with the fixed income from one sponsor perhaps reducing the potential income that bigger teams could achieve upon signing deals individually. The partnership has seen the two work on introducing the latest technology to the sport via the programme Nike Connect. The app allows fans to gain more from their shirt purchase, being able to unlock team and player content (including pre-game arrival and highlights footage) on their smartphone by scanning the NFC chip (under the NBA logo) on their shirt.
The NBA introduced a three-year trial ahead of the 2017/18 season to allow teams to sell patch sponsorship spaces on its playing shirts, an initiative which now appears to set to stay across the league. Additionally, in 2019 the NBA announced new rules allowing teams to grant its partners additional promotional rights internationally. The NBA teams have bought in and as such the deals are estimated to have generated revenue of $182.67 million a year across the 29 franchises to have an active deal, averaging out at $6.3 million per franchise. The values of the different deals between teams remains fairly consistent, with increased value given to teams due to recent success, league history and geographical position in the States – major markets like Los Angeles, New York and Chicago are always likely to attract larger contracts than in smaller markets like Minnesota and Milwaukee. The trial has been seen as a success and as the league enters into its final year of the agreement, it should be expected that the NBA will continue discussions over the course of the season in efforts to extend the trial into a permanent option for the teams in the next collective bargaining agreement (CBA). This most recent agreement started with the 2017–18 season and runs through 2023–24, with a mutual opt-out after 2022–23.
In total there are thirteen different sectors involved in this type of sponsorship, with brands in the financial services market most active with seven deals. The list of sectors even extends to the charity sector, through Utah Jazz’s deal to promote the 5 for the Fight movement, in partnership with Qualtrics.
For the 2019-20 season the league has the salary cap at $109.14 million. With only 15 players on a team roster, the NBA stands as one of the most financially lucrative leagues in global sport, with the average player annual salary this season coming in at $7.7 million. At the highest level the highest earning player at each franchise currently earns between $40.2 million and $16.2 million, averaging out at $30,168,167. However, the impact on COVID-19 is likely to have a profound impact on the NBA salary cap, which is discussed in detail further in this report, which is based solely on league revenue. With revenue likely to decline in the short term due to lack of ticket sales primarily, the new reality for many NBA stars will likely involve a reduction in salary.
Home Venues for the 2019-20 season
The average combined social media following of the NBA teams is 11,340,135. The most popular teams remain those that have the bigger history of success, such as the Lakers and Bulls, and those based in the largest markets, such as the Houston and Boston.
The Impact of COVID-19
Much like most sports operations worldwide, the NBA is expected to incur heavy losses as a result of COVID-19. Potential losses can be linked to areas which are usually their biggest source of income – in broadcasting and sponsorship, with no live content on offer meaning affiliated networks and brands are looking to cut its payments at this time. Whilst some form on return on investment could be saved if the season resumes, the total losses of the league are likely to be at its biggest in the event of all remaining games being scrapped. Whilst the potential losses from brands and networks could vary on an individual basis, these losses are expected to be hugely significant, with some 259 games of the regular season still to be played. Further to the end of the regular season, the most significant contributors to the league losses in this time could be the lack of Play-off action, which tends to be the most exciting and high profile period of the season, to which brands and networks attribute most of their budgets and marketing campaigns.
$118,585,047 (average $7,905,670 per franchise)