How corona-virus is affecting the NBA’s economy! – Hayden Nguyen (ECO 1)

As the corona-virus pandemic continues to exponentially grow with more cases appearing daily, the NBA as well as other major sporting leagues will soon be forced to act in order to maintain the safety of fans as well as the players and coaches. On Friday 6^th, NBA sent memos to teams, notifying them of the possibility of playing games with no fans in attendance, which has caused an uproar of debate with players and fans on both sides of the argument. Arguably, one of the greatest athletes to ever play basketball, Lebron James, has responded to the situation with “I ain’t playing if I ain’t got the fans in the crowd. That’s who I play for”. With such a large model athlete like Lebron, a missed game has a large impact on the NBA’s economy. Making $434,757 per game before endorsements are added, the debatable G.O.A.T is a force in the NBA in which fans from all over the world come to watch.

When signing with TV networks, owners expect for superstars to play all games in order to maximise television revenue, which accounts for a huge percentage of the NBA’s yearly revenue, alongside ticket sales.

Approximately ¼ of the NBA’s $8 billion yearly revenue comes from ticket sales. Per game, tickets have an overall sale price of $100 and approximately 20,000 fans in attendance per game. As the pandemic continues to rise, the NBA will be forced to take action, which will not only affect their overall income from ticket sales, but merchandise, another factor that plays a huge role in their overall income, as well as TV revenue, with superstars beginning with Lebron James, stating that they would not play if fans were not in attendance, which as seen in figure 1, has a toll on NBA viewership. Herd Behaviour, “a phenomenon in which individuals act collectively as part of a group”, plays a role in the current situation the NBA is held in. With a role model such as Lebron James mentioning that he wouldn’t be playing games without fans, many of the young NBA superstars who looked up to Lebron in the 17 years he has played basketball, are likely to follow their role model and his decision to not play during the period, which would take a huge toll on the NBA’s overall income.

The media also plays a large role in promoting NBA players and their endorsed merchandise. After reporters and journalists were banned from player locker rooms as a result of the virus, there have been little to no interactions between players and the media, which affects the media outlets, who are left empty handed, unable to discuss the controversial questions they ask players. Before most NBA games, Lebron James advertises his personal Nike sneakers that are for sale in most Nike stores, with his lifetime endorsement deal estimated to pay him out approximately $1 billion by the time he is 64 years old. Another blow to both NBA and Nike’s economy with Lebron unable to advertise the sneakers both on and off the court to his 60,000,000 Instagram fans.

Lebron James Instagram where he advertises his Nike endorsed sneakers to his 60 million fans (via Instagram)

Soon after two NBA stars, Rudy Gobert and Donovan Mitchell from the Utah Jazz both tested positive to the virus, many NBA teams were held in quarantine, to prevent the further spreading of the disease, which ultimately forced the NBA commissioner to suspend the rest of the NBA season until further notice. This decision, although does prevent the further spread of the virus both through fans and players, makes a great impact on the soon to decline NBA economy. With no ticket sales, no games to stream on the t.v or merchandise to be purchased at arenas, the 2020 NBA revenue is sure to be lower than that of 2019. The amount of jobs lost due to the suspension of the season has left hundreds of employees jobless all of a sudden, leaving them possibly unable to pay their bills, with Mark Cuban stating that he would be paying out all the employees throughout the suspension in order to keep employees paid throughout this time. This has sparked a chain, with many NBA stars and teams joining this cause.

References

https://fivethirtyeight.com/features/how-the-lebron-effect-affects-attendance/ https://www.statista.com/statistics/193467/total-league-revenue-of-the-nba-since-2005/ https://www.investopedia.com/articles/personal-finance/071415/how-nba-makes-money.asp https://en.wikipedia.org/wiki/National_Basketball_Association_on_television https://sloanreview.mit.edu/audio/the-economic-impact-of-sitting-nba-superstars/ https://medium.com/the-smart-play/the-economics-of-the-nba-b9665363b7b8 https://www.youthvoices.live/2017/12/20/how-media-affects-sports2/ https://www.latimes.com/sports/story/2020-03-09/coronavirus-latest-news-sports-world http://www.sloansportsconference.com/wp-content/uploads/2019/02/Economic-Impact-of-NBA-Superstars.pdf