The NBA lost a lot of money throughout the past year.
Over the last few months, the league’s finances have come under intense scrutiny. Because of how publicized basketball’s ratings woes have been, many have come to wonder what impact recent happenings have had on the NBA’s bottom line.
The NBA’s overall playoff ratings fell about 37 percent this year, but it was in the Finals where things got especially ugly. The Los Angeles Lakers’ title-clinching Game 6 against the Miami Heat did 5.6 million viewers. One year earlier, Game 6 between the Golden State Warriors and Toronto Raptors did 18.34 million viewers.
This week, Sports Business Daily took a deep dive into the NBA’s financial situation post-bubble. Based on the information available, it seems clear that the league sustained heavy losses.
First and foremost – approximately 40 percent of the league’s revenue reportedly comes from its gate. Because of COVID-19, that money vanished immediately. There were no fans permitted inside the bubble, and there was no way for the NBA to fully recoup its gate income.
What the league focused on instead was making a dent in the $1.5 billion projected revenue loss that would have occurred had no basketball taken place after its COVID-19 suspension of play.
According to Sports Business Daily, “the Disney restart allowed the NBA to stem the loss of about $1.5 billion in expected revenue, the bulk of the money tied to national and local television revenue followed by league sponsorships.”
One league executive noted that the NBA’s primary objective with the bubble was “health and safety and from a business standpoint,” and that “it was important that we would finish the 2019-2020 season, crown a champion and be able to include our business and media partners.”
By restarting the season in the NBA Bubble, the league was able to fulfill various sponsorship contractual obligations thanks to virtual and hard signs posted during games. This was particularly apparent during the NBA Finals, when the league put its presenting partner “Youtube TV” at center court. Never before had advertising been that blatant and in your face.
A bit of an odd situation. https://t.co/cSGzy8wrAw
— Game 7 (@game7__) October 17, 2020
This helped mitigate some of the damage, but the bleeding could only be stopped to a certain degree.
In addition to the lost gate, the NBA also was forced to deal with being kept off China’s CCTV for months as a result of the Daryl Morey debacle. With Morey now no longer a member of the Houston Rockets’ front office, all parties involved will attempt to move on – but it remains to be seen if there will be any lingering ramifications.
Beyond that, it is still unclear what sort of expenses individual franchises have been burdened with as a result of COVID-19. That information has not yet been collected and released, but early whispers indicate that things aren’t looking good.
Yikes Aaron Gordon. https://t.co/fmz8bvfSkC
— Game 7 (@game7__) October 16, 2020
All of those factors will play a role in negotiations between the NBA and its players going forward. Salary cap projections are based on estimated revenue, and at the moment, the league is having a difficult time pinning down just how much of a hit it has taken in recent months.
This will come into play when a star like Giannis Antetokounmpo is attempting to decide whether he wants his contract to be 35 percent of this year’s cap or next year’s cap. In order to make that choice, he has to have a clear idea of what those numbers represent. And at the moment — he doesn’t.
While it will likely take a few more months to truly understand how damaging the triple whammy of COVID-19, Morey’s China tweet, and declining ratings totals will be to the NBA’s and short and long-term finances, it’s safe to assume the numbers will be significant.
How will that impact player compensation going forward? An answer to that should become apparent in the coming weeks and months.