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NBA: “We have to tighten our belts”
Even employees in the NBA headquarters have felt the impact of the economic downturn. The NBA was the first U.S. sports league to lay off workers as David Stern cut 80 jobs. “The current financially situation is making us tighten our belts,” said the commissioner. Of course, many basketball fans did not even hear about this move. Who really cares within the sport if the administration has to slim down a bit? Job losses are a sign of the times. When things are uncertain you look to save. But, not on players. “Things are not bad enough that the crisis will impact the players’ salaries,” said Rick Welts of the Phoenix Suns management.
But the best years are likely past. Every summer, players were signing bigger and bigger contracts. For the 1984-85 season – Michael Jordan’s rookie campaign – the average NBA salary was 330,000 dollars per year. Currently, the top earner in the league, Kevin Garnett, is making 470,000 dollars – per week. Garnett’s average annual salary is 24.75 million dollars. And with the increases in the top salaries, the top stars’ helpers are also benefitting. The average yearly salary in the NBA is 5 million dollars. In no team sport in the U.S. do athletes earn so much. The 30 NBA franchises are paying their players more than 2 billion dollars in salary this season.
Some players don’t even know what to do with all their greenbacks. Former Sacramento Kings defensive specialist Doug Christie sent out a press release last September asking U.S. citizens to buy stocks of the endangered AIG to help save the insurance giants. “Don’t just sit around and watch,” said Christie, who himself bought 3,000 stocks. But the great act of courage was seen by many in the public as showmanship in light of Christie’s bank account. By the time his career ended in 2007, he had earned nearly 50 million dollars. New York Knicks forward Malick Rose now is suggesting his teammates buy the stocks. “They are cheap right now.”
So, will a new sense of modesty come soon? “The contracts will become shorter and the teams will be more careful about closing 100 million dollar deals,” believes Raymund Sauer. Of course, LeBron James’ contract in summer 2010 will blow everything else out of the water. But the question remains: Who has the money to not only attract James but also the means to offer the King a championship-caliber round table of knights? The Cavaliers will do everything they can to keep their superstar. In James’ five NBA seasons, Cleveland developed from the club with the lowest average attendance in 2002-03 to the fifth most valuable franchise in the league.
The smaller clubs are hit the hardest
Which factors decide if a team will have economic success or not – and therefore how safe is a franchise in tough times? The income for an NBA club is based on three pillars: the percentage of TV money, ticket sales and sponsoring. Every NBA team receives a portion of the league’s new 7.4 billion dollar deal with the U.S. television stations ABC, ESPN and TNT. “Television is the largest source of income,” said Adam Silver from NBA Management. And the TV money is basically safe and secure. “But the U.S. market is being hit hard in the other two areas,” said the league official. Tickets sales and sponsorship moneys basically decide how profitable a club will be. That means better times for big cities like Los Angeles and Chicago and headaches for Memphis and Minneapolis.
Ten of the 30 NBA clubs, including the Grizzlies and the Timberwolves, lost money last season, according to Forbes magazine. Eight of those are in smaller, less attractive markets. Sports in theory act just like any other business. Whoever can offer an attractive product, a number of potential customers and few local competitors would then have good chances for success. Those are some of the advantages of teams in Los Angeles, New York and Chicago. But even the Utah Jazz are very profitable, mainly because there is little sports competition offered in Salt Lake City. In Phoenix, the Suns are like an oasis in the sports desert. Another safe bet for stability is winning. After the Boston Celtics won their first NBA crown since 1986, there were sponsors logos just about everywhere, including on the nameplates of the players at their lockers.
