Addressing The NBA's $4 Billion Revenue Shortfall
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Addressing The NBA's $4 Billion Revenue Shortfall
With billions of dollars in potential revenue losses, how does the NBA plan to ease restrictions and increase creativity?
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Friends,
With the MLB season wrapping up last month, the NFL in full swing, and the Masters teeing off this week, the NBA has quietly made a lot of progress on the final structure and financial foundation of their 2020-21 season.
As a lot of the information has come out in piecemeal, today we’ll run through the most important parts—from start date to media contracts and everything in between—in an effort to paint the full picture.
Let’s get right into it.
(📸 / NBA)
Season Timeline
For the last month, NBA Commissioner Adam Silver has gone back and forth with representatives from the NBA Players Association in an effort to iron out the details for next season.
The first major issue?
Start time.
Despite the NBA Players Association pushing for a mid-January start time, in an effort to guarantee players adequate time off, the two sides eventually agreed to a December 22nd start date.
With the NBA offseason going from ~130 days down to 73, a 44% decrease in time off, the two sides agreed to eliminate 10 games from its regular 82-game schedule to ensure they would be back on track for the 2021-22 season.
After fighting for increased player safety guidelines for so many years, similar to the NFL, why did the NBA Players Association eventually agree to a shorter offseason?
Money talks.
It’s rumored that the NBA pitched their December 22nd start date based on the belief that TV partners—like ESPN and Turner Sports—may want to renegotiate their $2.6 billion TV deals should the season not start before Christmas Day, which is worth ~$500 million alone.
In the end, Adam Silver projects “a 72-game regular season schedule that finishes before the Summer Olympics in mid-July is worth between $500 million and $1 billion in short- and long-term revenue to the league and players.”
As I said before, money talks.
Draft & Free Agency
(📸 / Bleacher Report)
With the NBA offseason completely off schedule, and the 2020 season set to start in 6 weeks, things are about to start happening fast.
First up — the NBA draft, which was originally scheduled to happen in June at the Barclays Center in Brooklyn.
Instead, the 2020 NBA draft will be held in 9 days, on November 18th, via videoconferencing from ESPN facilities in Bristol, Connecticut.
Speaking of, here are ESPN’s top 10 available players:
After the NBA Draft takes place on November 18th, everything else gets set into motion.
Here’s a breakdown of the schedule:
November 18th - NBA Draft takes place.
November 19th - NBA Free Agency kicks off following completion of the draft.
December 1st - NBA Training camps open in anticipation for season restart.
December 22nd - Opening night of the 2020-21 NBA season.
Again, with the regular season only 6 weeks away, things are going to happen fast.
But what are the financial implications of a shortened 72-game season without fans?
Financial Implications
(📸 / Boston Celtics)
Before we get into the financials for next season, lets run through a few facts:
The NBA’s revenue dropped 10% to $8.3 billion for the 2019-20 season..
$800 million was lost in gate receipts.
$400 million was lost in sponsorships and merchandise.
$200 million was lost as a “net negative impact” from the aftermath of Daryl Morey’s tweet promoting Hong Kong freedom in 2019.
All in, this had to be considered a massive win for Commissioner Adam Silver and the NBA — especially when you consider that $8.3 billion in revenue is the second highest revenue total in league history.
Got it, but what about next season?
With most NBA cities still under guidelines which prohibit large gatherings of 500 or more, around 40% of the leagues revenue or $4 billion, which comes from gate receipts, concessions, and merchandise, could be lost next season.
Sure, the NBA is exploring the possibility of socially distanced fans and increasing the price on luxury arena suites—which should set a floor on overall revenue loss—but it’s hard to imagine they’ll make anywhere near their projections.
Think of it this way — the majority of the regular season was already over when the pandemic hit last year. They needed to complete the playoffs, due to contractual media obligations, but the financial impact of no in-person attendance was mitigated.
What’s the plan to fix it?
Creativity.
In an effort to “offset steep losses from last season and limit the financial hit” this season, the NBA plans to open “lucrative new revenue streams” for teams across the league.
The NBA has already given teams the green-light to sell new sponsorship inventory including baseline aprons around the basket, live digital content for website & application use, and increasing the limit on global partnerships from two to three.
That’s not all though…
Adam Silver is reportedly working on a plan to ease restrictions on hard alcohol, casino and sports betting team sponsorships, which should allow NBA teams to leverage greater visibility on in-arena signage for increased marketing & sponsorship fees.
In the end, it’s going to be more than 9 months before we get concrete details around the NBA’s financial losses, but it’s worth keeping an eye on how things progress throughout the season.
With Commissioner Adam Silver leading the way, I’m confident they’ll figure it out.
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