The Economics of the NBA

In an effort to ease tensions about the recent economic downturn in the United States, including the NBA’s decision to cut 9% of its workforce over the course of the year, the league is shoring up interest by introducing expanded instant replay rules, citing franchise ticket promotions and investing in crucial publicity abroad.  This comes at a time where worries abound as to the strength of professional sports franchises all over the U.S.

On Thursday afternoon, NBA commissioner David Stern fielded questions from reporters at the season tip-off conference call.  Due largely to the ailing economy, many of the questions Stern answered regarded the economic outlook of the league, and if any dire threats to its financial stability were poised to affect the upcoming season.

Stern assuaged any doubts that the league was struggling, citing fan base, television ratings and sponsor renewals as a reason to be optimistic of the NBA’s immediate future.  Stern said that approximately half of the NBA’s 30 teams were turning a profit, and that no teams were in any position to face financial instability.  The commissioner cited the Dallas franchise’s promotion to offer $2 tickets for selected games as a viable way to keep fans and the league enfranchised.

“Our owners seem quite determined to demonstrate they want to be contributing members of the community,” Stern said, “and focus on what 2 1/2 hours of fun can offer to families.”

The Dallas Mavericks are offering $2 tickets to most home games this season.  Special promotion nights will deliver cheaper tickets to fans and families across the board.  Tickets normally priced $9 will be $2, $19 will be $10, $35 will be $20 and $50 will be $32.

Although incentives are in place to keep fans coming back to see their favorite team, there has been some worry as to whether the struggling economy will affect players “jumping ship” to play in European leagues.  After the Atlanta Hawks‘ Josh Childress signed an unprecedented $20 million deal with the Greek squad Olympiacos Piraeus in July, there are concerns around the league about the possibility of other players bolting for Europe and abroad for a better piece of salary pie.

Stern said that Childress’ case is that of an isolated event, and that these decisions typically impact “mid-tier” players or below.  He argues smaller fan bases overseas and worsening economic conditions will not allow European leagues to compete for the elite NBA stars.

“Essentially, the NBA isn’t worried about losing LeBron James to Olympiacos,” Stern said.

Though most top-salaried NBA players will probably stick around to soak in the spotlight, there have been numerous player signings to overseas squads, including Juan Carlos Navarro, Bostjan Nachbar, Pops Mensah-Bonsu, Loren Woods and Carlos Delfino to name a few.   Even LeBron James said it was a possibility that he could leave the NBA to play in Europe, given that the offering club was willing to pay him an astounding $50 million a year.

This comes as Stern and the NBA say that efforts to bolster the expansion of the league in Europe is imminent, including new European franchises and more regular season NBA games to be hosted outside the U.S.

“What we’ve always said was that if there were the appropriate arena structure, if there were the appropriate fan affinity, and there was the pricing structure that would be necessary for a team to compete in the NBA, then it would seem to be an opportunity for us to grow,” Stern said.

The NBA also announced the expanded instant replay, which will debut this season.

The new replay rules will allow officials to pore over footage to determine two if a field goal was a 2- or 3-point attempt, or to decide if a shooting foul was committed behind the arc and whether it warrants two or three foul shots.  It will also allow officials to determine whether the game clock malfunctioned during overtime play, and allow them to determine how much time should have come off the clock or if the period should have ended.

The technology will provide more accuracy and oversight during league play, keeping teams competitive while resolving game-changing disputes.  This is just another way the NBA is hoping to innovate the court in an ever-fluctuating economy.

Regardless of what transpires in the NBA this season or the next, one thing is for certain: fans will show up on day one to see their favorite stars play for their favorite teams at their favorite arena, in support of their favorite pastime – basketball.