The NBA has been striving to catch up with its much older American sports league competitors the NFL and MLB to become a global brand. Through innovation, forward-thinking and years of graft, the NBA has achieved this. The league’s revenue hit a staggering $8 billion last season and the sport is now positioned as the second most popular in the USA.
On the court, much favoured Golden State Warriors just lost out in the June 2019 Championship finals to the Toronto Raptors, who won their first ever title. Another fascinating season starts in October – who’s your money on for the 2020 title?
Steph Curry is Golden State’s star and he tops the salary pile with $40 million and just 23 out of the 507 2019/20 NBA players get paid less than $1 million per year.
Forbes regularly compiles valuation data following each team in the league. For four years in a row the New York Knicks have topped the list, but teams earning this much money wasn’t always the case.
When the latest list was released, senior editor of Forbes, Kurt Badenhausen, said:
“In the beginning of the decade, more than half of the NBA teams were losing money, and now the average operating profit is double the level it was two years ago…”
So what has the NBA done to achieve such successful commercial growth?
With a huge leg up from television rights, ticket sales, merchandising, and much more, the business success of the league has sky-rocketed.
Television
There’s no doubt that TV deals have elevated the NBA’s status as high-performing business. Television accounts for the majority of the NBA’s revenue as Kurt Badenhausen commented:
“Teams have benefitted from the NBA’s $24 billion TV contract with TNT and ESPN, which kicked off with the 2016-17 season, as well as the collective bargaining agreement reducing the share of revenue players receive.”
The league has come a long way in three years thanks to an incredible boost from TNT and ESPN.
Tickets
Ticket sales, while a vital aspect, aren’t actually as big for the business as television deals and merchandise sales. Having said that, without ticket sales the business model would struggle. Each team welcomes between 15,000 and 20,000 supporters to their home games and the average ticket costs $100. It doesn’t take a mathematician to work out that this is still a huge earner for the business.
Merchandise
We’ve all seen basketball fans wearing their club’s jersey, or a baseball cap sporting the teams colours, so it may not come as a surprise that merchandise generates a lot of revenue for the NBA.
Of the $8 billion of annual revenue, merchandise accounted for over $1 billion of that total. Many items of merchandise have fashionable status – helped by the top stars wearing the jerseys – so this is a fantastic earner for the business.
Spot-on marketing
The NBA’s marketing team has helped the league become positioned as a real force in business – but what is it they do so well?
From developing extensions to the brand such as the WNBA, branching out to China, creating incredible engaging content and ensuring their players experience elevated fame has helped the NBA reach a larger audience.
With the new season approaching in October, we’ll be keeping a close eye on how the NBA innovates further in for 2019/20.
