At a point in time, it seemed as if the NBA would be one of the few leagues to be unmoved by the recent COVID -19 outbreak. In fact, some teams were so confident in their immunity, they ignored health departments advice, advising against non-essential mass gatherings. It soon became clear that games would have to be played without crowds, however, this didn’t seem to threaten the league financially, as much as what was about to occur.
On the 11th of March, Utah Jazz Center, and back-to-back ‘Defensive Player of the Year’, Rudy Gobert, became the first NBA player to be tested positive to COVID-19. A day later, his teammate, Donovan Mitchell also tested positive to the disease. The league went into shutdown mode, immediately declaring all play and basketball operations to be suspended indefinitely, sending the NBA into a hiatus.
With no basketball being played, the question stands: ‘How much of an financial hit will this be to the NBA, and the others who are closely affiliated with them?’
The League
It’s difficult to put an exact number on how much money the NBA will lose as a result of the Coronavirus outbreak, as there are so many different ways in which the league earns revenue. From parking spots to ticket sales, hot dog sales to media boxes, it would be difficult to estimate exactly how much the league loses in revenue, as all of this stops during the hiatus. Expert analysts predicted before the hiatus that the league would lose almost $500 Million due to the banning of crowds. With the average NBA game earning $1.6 Million in gate revenue, and with 342 games left in the season (regular and post), this estimate seems quite accurate. In addition to this the league will also take a hit in terms of revenue earned from the media, as it earns approximately $4.5 Billion in media fees each season.
For the owners of the franchises, they seem to be the least threatened from the outbreak, as many clauses that are stated in the Collective Bargaining Agreement (CBA), that was agreed upon between the Players Union and the league in 2016, work in their favour. In addition to having the leverage to not pay their players, owners can essentially rip up a contract if they have given the players union sixty days notice.
The Players
With the season indefinitely suspended, players are unable to play basketball, ergo, they will not be paid. The CBA states that the salary of an NBA player can be reduced by up to 1.8% per cancelled game. For now, the NBA hasn’t announced whether the remaining games of the season are postponed or cancelled, however, whilst the latter is not the most probable possibility, it shouldn’t be ruled out.
As most economic structures are, the wealthier will be less affected by this clause than the poorer. For example, Lebron James, superstar Los Angeles Lakers small forward, will lose approximately $400,000 for every game of his cancelled. This at first may seem like a gargantuan amount, however, when put alongside the context that Lebron’s contract spans 4 years, pocketing him $154 Million and his long list of endorsements, it is clear he won’t be affected too much financially.
On the other hand, freshly drafted rookies and two-way players receive the rough end of the stick, as they do not have a large contract or previous earnings to fall back on, if the league does begin to cancel matches.
TV Networks/Betting companies
The NBA has many television networks it has deals with to broadcast games. Such as ABC, ESPN and TNT. Unsurprisingly, with no basketball being played, these networks are scrambling to fill in the gaps left by prime time basketball, whether it be reruns of previous games or increased showtime for NBA analyst and talk show hosts. The only problem being: “What do they talk about?”.
The losses for revenue during suspension is estimated to be around $75 Million to $100 Million, across all broadcasting networks. However, the playoffs, that were set to occur in April, preceding the Finals in June, have the ability to make for the losses during the suspension, as viewers and ratings are sky high during this period. This is providing the NBA can start up again on time.
Worldwide betting on the NBA has completely come to a standstill, unsurprisingly. Most betting companies have refunded all bets that were put in place for games that were unexpectedly cancelled or postponed. The NBA’s little brother, NCAA cancelled its most renowned event, its College Basketball tournament of ‘March Madness’, rocking the gambling industry completely, as it is set to lose tens of millions of dollars due to the cancellation.
In an era where gambling has become so accessible, available on the internet, mobile phones, in the form of fantasy games, the gambling industry is in unknown territory, having never really experienced such a lack of sports before. In order to gain some revenue from the NBA’s hiatus, some betting companies have cheekily offered prop bets to its gamblers, allowing them to place a bet on when they think the NBA will return to suspension.
Franchise and Arena workers
Many spectators would have failed to realise that the league’s hiatus affected all the workers who worked either in arenas or as a part of a basketball franchise, in a major way. With no basketball being played for at least a month, almost all workers would have been out of a job, severely impacting their well-being and livelihood.
However, almost immediately after the hiatus was announced, Mark Cuban, the Owner of the Dallas Mavericks, announced that we would continue to pay hourly workers of his franchise, even during the hiatus, as many of them would have struggled without the cash flow.
As a response, Kevin Love, Cleveland Cavaliers Center, pledged $100,000 to arena workers at Rocket Mortgage Fieldhouse, as a means of support during the hiatus.
Since these two individuals, many players and franchises have caught on, the likes of which include Zion Williamson, Giannis Antetokounmpo, Blake Griffin, the Atlanta Hawks, Golden State Warriors, Scaramento Kings and Portland Trail Blazers.
In short, the NBA seems to be bracing for financial impact. The league is in uncharted waters. Whilst having a few seasons postponed and shortened due to lockouts, never before has the NBA been under the siege of a worldwide pandemic. Whilst the health and safety of players is the top priority, almost all officials, administrators, players and most importantly fans are keen to see the NBA season
Year 11 MHS Economics 2020 
imagine going for the celtics
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How long can the clubs keep paying players before they run out of money?
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Really interesting blog, I especially liked how you looked at different aspects of the NBA that would be affected, such as players coaches and team owners.
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