Tuesday, July 19, 2011

Billion Dollar Season Lost?


via Alex Raskin; Hoopsworld...


There seems to be a growing perception that the Owners are willing to throw away the entire season in an effort to break the union. Players can only afford to go so long without game checks and, theoretically, would be agreeable to almost any offer the Owners throw their way by next summer.

But that belief, right or not, omits one very critical component: The league suffers financially if there is no basketball in 2011-2012.

Ad Week's Anthony Crupi estimates that ESPN/ABC Sports and TNT will lose as much as $1.25 billion in ad sales revenue if next season is canceled. The NBA won't feel the hit all at once, but Crupi notes that the playoffs account for a fifth of all ad sales, so the Owners might be singing a different tune themselves next April. In fact, the 2010 playoffs netted $417.7 million in ad sales for ESPN/ABC and TNT, according to Kantar Media, and a 30-second advertisement during the Celtics-Lakers Finals cost over $400K.

Lost ad revenue would seem to be a bigger problem for the league's two national television media partners, but that would only be the beginning of the losses.

Writes Crupi:

If the networks stand to lose a fortune in ad dollars, the league itself risks billions in media rights, ticket sales and merchandising. ESPN/ABC pays $485 million per year for the rights to air NBA games while TNT forks over $445.

The league itself pulls in around $50 million from sponsors on its own network, according to Crupi, and then comes all of the regional cable money from the individual markets.

Then there are the league sponsors—such as State Farm and American Express—which Crupi writes will be forced to "scramble to make up for the diminished brand exposure.

These companies are currently locked into deals with the NBA, but businesses have the memory of an elephant and the long-term effect of the lockout is still anyone's guess. It makes sense that future sponsors, so as not to expose themselves to losses during another lockout, would seek contracts that end at the same time as the next collective bargaining agreement. At the very least, sponsors will invest more responsibly now that the NBA has locked out its players twice in 13 years.

Worst of all, when the league does return, it will have a few years before it regains its popularity—and it's not a certainty that will happen. Crupi notes that the league took three years to regain its ratings. Of course, the NBA was competing with a weaker NHL back then.

Now hockey's popularity is increasing and a number of Americans are starting to follow European soccer. Ironically it's globalization—a concept commissioner David Stern has utilized to build the NBA's fan base in Asia, Europe, South America and Africa—that could ultimately hurt the league as it tries to recover from a disastrous work stoppage. Americans can watch a Manchester United-Chelsea match on nearly every basic cable service and other networks, such as Fox Soccer, give fans 24-hour-a-day access.

The NBA has benefitted greatly from increased television exposure, social media and globalization. Now, however, those tools will work against the league because competitors can spend every day of the lockout winning the hearts and minds of the American public.

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