A league that can earn on everything.
We have already got used to be indignant with huge salaries in NBA. Why Otto Porter earns more Yannis? Who thought of giving Mozgov 64 million for 4 years? How much will Wall receive in two seasons? Why John Luer gets $ 10 million a year? Who is John Loire? Is this some kind of tea?
But the players earn so much, because the league earns so much. In American sports there is a system of closed leagues, in which there are no lower divisions, but there is a draft and a salary ceiling. This makes it possible to conduct a “single bookkeeping” – to conclude a collective agreement between the league and the players’ trade union and to share with the athletes income in certain proportions. This means that the largest item of expenditure (personnel costs, ie athletes) will be tied to tournament earnings, and the league as a whole will never be unprofitable.
It is expected that the revenue of the NBA in the current season will be $ 7.5 billion, including 5.4 billion of the so-called “Income from basketball activity”, on the basis of which the salary ceiling is calculated. Players will receive 50% of these 5.4 billion. Financial flows in the NBA do not run out, and possession of the club is no longer just an amusing toy, it can be a good investment.
First of all, because the clubs are becoming more expensive. Forbes estimates each in an amount of at least 1 billion, and the average cost of the NBA franchise is 3 times higher than five years ago.
But many league clubs also earn well, and not only grow in value as an asset: the average operating profit of the NBA club last year exceeded $ 50 million. And the income distribution scheme introduced in 2011 practically guarantees each club a profit if it does not inflate its payroll list and does not go deep into the luxury tax (greetings to Cleveland, the most unprofitable champion in the history of the NBA).
However, the growth of the cost of clubs, the mood of potential buyers affects more than the financial state of the league. The answer to the question of why NBA clubs are becoming more expensive is simple: because it is a very limited laxirie market, in which it is basically impossible to correctly name the price of an asset-resale is very rare, and only on their basis other clubs are trying to evaluate. I bought Ballmer “Clippers” for 2 billion – and the estimate jerked up. Goods for sale are single, and buyers, taking into account the interest of foreigners, do not become less even at price jumps.
It’s like the market is not even just ancient artifacts, specifically African figurines of the III century BC. e.
Talking about the NBA’s finances, it is better to ask: what new sources of income will the league have? Indeed, the NBA recently signed new telecompany agreements with ESPN and TNT until 2025, which will earn 24 billion, that is, in the near future safely closed the possibility of growth (but also the risk of falling) by its largest source of income. And the entire financial stability of the league is based on the fact that revenues will start up slowly, but grow.
While there is no need to work on a new TV contract, the NBA is developing other potential “gold veins”.
War of Friendship with the NCAA
The student association is still considered a non-profit organization and does not pay taxes to the federal budget. In fact, this is certainly not the case – the revenues of the NCAA in 2017 exceeded one billion dollars, and the net profit was more than 100 million. And 75% of its revenues the association, which has fifty sports, receives from basketball. “March madness” feeds student fencing, curling, cheerleading, athletics and even hockey.
In the student league there is so much money – and athletes do not get anything, but coaches get more than in professional leagues. And this leads to a lot of conflicts. Bribes, stakes, concealment of crimes, prostitutes for players, violations of rules for recruiting schoolchildren, illegal payments to athletes and their families – all this is and was at the NCAA almost the whole of its history. In this season, the FBI was involved in investigating the problems of student basketball. And recently a report of a special commission headed by former US Secretary of State Condoleezza Rice was published. In it, as usual, all responsibility is shifted to others – mainly shoe brands and the NBA. The root of all troubles the commission for some reason considers the rule that the NBA prohibits drafting players straight from school, and calls on it to cancel.
And the NBA already does not mind.
By the time the previous NBA commissioner, David Stern, closed the draft for schoolchildren in 2005 and sent everyone to the NCAA for at least a year, the league is already tired of the unprepared youth – as psychologically unprepared (Kwame Brown, Darius Miles, Sebastian Telfair, Ndudi Eby, Robert Swift ), and physically (Sean Livingstone, Dorell Wright, Jonathan Bender and again Robert Swift). A year in prestigious student programs with well-known coaches and an easy schedule was to become an express course on serious basketball.
It turned out that he does not become anything like that, the “students” do not study, but simply kick the bald for a whole year in anticipation of the draft, and the bastions in the NBA continue to appear. The average age of beginners has only grown, because now most students move to the NBA after one year in college, which does not give them anything. The goal of the NCAA is not to invest time and effort in training an athlete, as he will soon leave, but simply replenish each year with new talented “meat” from school.
In the NBA itself, there is now much more room for accommodating young players. The teams have two additional places for bilateral contracts, almost every club (27 out of 30) has its own team in the Development League, salaries in the G-League are growing, the level of scouting of school basketball has grown, and the NBA is ready to engage in the development of youth – look at the “Philadelphia” and how slowly, gradually, but correctly they prepared Embiyad and Simmons, even without releasing them to the floor.
The draft rules will be changed not earlier than 2020, and during this time the NBA will look at how the Development League and the Australian NBL will work, which wants to pick up top American schoolchildren, while the NBA is just preparing for reforms. The G-League has signed a contract with Twitch on the online broadcast of matches, and if in the league conditional Zion Williamson, Bol Bol and son Shaka play, this will add interest to the farm league – and where the interest is, there’s sponsors and money. Darius Baizli, one of the top drafts of the draft 2019, has already announced that he will not enter the University of Syracuse or any other college, but will sign a contract with the G-League for the 2018/19 season.
Once a loud scandal with contractors in the NCAA in 1951 saved the NBA, because many viewers switched to less popular professional basketball. The current troubles of student sports also turn away from him many fans, sponsors and even players (and it’s not just about the Boll family). All this gives the NBA additional opportunities to increase its financial strength, its status as the main basketball entertainment of the planet.
New telecontract in China
The policy of the ruling party of China regarding the support of sports is very volatile: they invest billions in football, planning to become a new Brazil, they throw all their efforts to develop traditional species like ping-pong.
And the NBA still remains the most popular league in China.
The NBA China project was launched 10 years ago, on the wave of Yao Ming’s success in America, and now this division of the league is estimated at $ 4 billion. It employs 175 people (which is approximately 175 times more than officially employed in the direction of NBA Russia).
According to the NBA estimates, 750 million Chinese last season watched the NBA games. In China, about 300 million people play basketball. The local league even manages to compete with America and Europe for one or another player (of course, not someone who could play in the start in the NBA). 144 million are watching the NBA in Chinese social networks – this is 5 times more than that of the Premier League, La Liga and Serie A combined. At the NBA in Weibo signed 6 times more people than the league page in a blocked in China Twitter.
Stephon Marbury generally turned here into a god.
In China, there is money, in China there is an interest in basketball – and the NBA is trying to monetize all this. The league has more than 30 marketing partners in China, and in 2015 it signed a five-year telecontract with Tencent for a total amount of 700-800 million dollars. There can be no doubt that on re-signing this amount will be even greater.
In China there is a shift in television – there are fewer opportunities for the state monopolist CCTV, more and more viewers have streaming platforms like Tencent. Over the past year, the number of NBA games has almost doubled. Short videos, which league post in Weibo, scored 3 billion views only during the playoffs!
NBA on time built relationships with Asian media partners, and now this acquaintance brings big profits – and can bring even more.
The development of the NBA in China is not limited to broadcasts – the league has already built 3 basketball academies here and plans to establish a major sports center next year. The first full-fledged Chinese investor appeared in the NBA – Joseph Tsai bought 49% of Nets from Mikhail Prokhorov, and Jiang Lizhang has a small share of Timberwolves.
In theory, the Chinese audience of the NBA may exceed the American audience. Although the NBA has been operating in this market for a very long time (the first exhibition games in China were held in 1979), it is still the most promising one.
Advertising on the form
Since this season, the NBA for the first time appeared “alien” logos on forms: first, the Nike logo, the new league outfitter (previously adidas could brand training sets and souvenir products, but not playing T-shirts), and secondly – advertising.
How many screams, curses and curses, when news of this only appeared. And now admit, when you last remembered that on the form of your favorite team there is a sponsor’s logo? How often do you notice it during broadcasts? Does this hinder the viewing of games? Has the spirit of the NBA vanished because of this?
20 out of 30 NBA teams now advertise on forms, the remaining 10 plan to sign sponsorship contracts in the near future.
The League evaluates the project “for C grade”, because it expected more financial effect. The NBA budget has dropped about 200 million, but since only 2/3 of the clubs placed ads on their form, the league did not earn nearly 50 million – and adjusted the forecast of the salary ceiling for the next season by about 1 million in the direction of decrease.
Nevertheless, it is 200 million, which was not before. The largest contract is for champions from Golden State, which Japanese online retail giant Rakuten pays 20 million a year.
In addition to the net financial benefits of advertising, this project also opens opportunities for new corporate partner programs – for example, GE not only places the logo on the form of “Boston” (and repainting it in club colors, which many do not, see the photo above), but also will put the hi-tech equipment on the new training base “Celtics”, which will open in the summer. This is not just advertising, but full-fledged cooperation.
Media analysts from GumGumSports estimated the benefits of companies from advertising in 350 million in social networks alone (and there is also a coverage of potenic buyers, at the expense of television, souvenir products, and advertising at the stadium), and most of all from advertising on the form of winning Goodyear (Cleveland), Rakuten, General Electric, Wish (“Lakers”) and Squarespace (“Knicks”).
The League launched advertising on the form in a test mode – all contracts are concluded for three years, and in 2020, the NBA will decide whether they have the necessary effect and how to continue this project.
(at this point you have to climb in the comments and leave a mandatory comment “This is only the beginning, then they will form the whole form with stripes, did you see the logo of Shyvrolet on the uniform of MU? !!! 1! 11!”)
Mikeys are not the only potential source of revenue growth due to advertising. The League has long been branding the All-Star Match and contests (the dunk contest is officially called Verizon Slamdank, and the three-point competition is sponsored by JBL), even the farm league was renamed from the D-League to the G-League – Gatorade became the title sponsor.
Advertising surface can be even parquet: in February, in the arena of “Warriors” showed a teaser to the new part of the video game God Of War:
Such advertising in the breaks, unlike the usual, is clearly visible to the fans in the stands and is shown to the spectators in the broadcasts of the League Pass, at the same time not falling under geo-restrictions. The ingenuity in delivering advertising to the user goes to a new level, and a patch on the form is just a small part of it.
Someone will call it a commercial sport, someone – a necessity for the financial stability of the NBA.
The NBA earns a lot, but continues to seek all new sources of income.
The league enters the e-sports market, establishing the NBA2K league with its club counterparts. And the NBA cyber sportsmen will already receive more than one basketball player in the G-league (not to mention the basketball players in the WNBA – this is the project that the league can not monetize in any way).
The League wants to participate in the legalization of the bookmaker business (now there are huge restrictions except for Nevada) and it requires 1% of all bets on their games – and this is a huge amount of money, even if some of them go to monitor the betting market in order to identify suspicious rates and trading in insider information. A similar system of bookmakers’ deductions to the budget of sports leagues operates in Australia and France.
The League expands its representation in social networks – and it has the youngest audience in America. Realizing the psychology of the millenials, the NBA is not satisfied with the crusade for illegal highlights in Twitter or Facebook, like the NFL or Major League Baseball, because even pirated content attracts an additional audience that can be monetized in the future.
The League is developing more and more mobile applications. The League Pass will soon be able to “micropayments” – buying the broadcast of the last quarter of a tense match for 99 cents – a convenient option for a casual fan. Half of the tickets for the games are sold through a mobile phone, the new stadiums are becoming “smart arenas”, the broadcasts from mobile devices evolve from HD to UHD to VR to a format that we still can not imagine (choose the game form itself in a full-fledged reality? in real time? nano-camera on the eyebrows of each player? built-in smells?).
The league continues the globalization of basketball: somewhere it builds academies, somewhere it opens official representations, somewhere holds preseason games, and somewhere – and games of the regular championship. And in Mexico, potentially there can be even a new NBA team (but, most likely, will start with the Development League).
Clubs become international corporations. Players turn into media brands. TV ratings are growing, fans are becoming more and more, the NBA is developing promising markets in China and Latin America, going to India and Africa. According to the commissioner of the NBA, Adam Silver, 1.4 billion people in one way or another interact with the NBA – watch the broadcast matches or highlights, play video games, watch the broadcasts of how others play video games, read social networks about Tristan Kardashian, buy T-shirts, caps , sneakers…
And the league earns excellent on its popularity.
A photo: Gettyimages.en / Mike Stobe, Scott Gries, Sean M. Haffey, Ezra Shaw, Josh Lefkowitz, Emma McIntyre