NBA: $1.5 Billion Lost in Revenue

(Photo by Mike Ehrmann/Getty Images)

On the 11th of October, 2020, the NBA season came to a close as the LA Lakers beat the Miami Heat in 6 games (4-2). Reports from NBA Commissioner Adam Silver and other representatives claim that the NBA has lost a staggering $1.5 Billion in revenue from the projects they had for the 2019-20 season. What makes this more shocking is that this massive loss includes the NBA restarting back in the summer, meaning that if they hadn’t, the losses would have been even more immense. But what specific factors caused this revenue loss? It boils down to three: “cut-short” season, “bubble,” and low ratings.

The biggest reason why the NBA lost such an enormous amount of money is that the season was cut short. On the 11th of March, just before the game between the Oklahoma City Thunder and the Utah Jazz, officials were informed that the game was canceled, and the season as a whole was postponed. This was an immediate action from the NBA after reports came that Jazz player Rudy Gobert had tested positive for COVID-19 and had come into recent contact with teammates, rivals, as well as fans in previous games. The season was, therefore, cut a month short from its usual ending point. This may not seem like much, but because there are 30 teams in the NBA, revenue loss, such as in ticket sales and food, will grow exponentially for every match day canceled.

The second reason that added to the significant loss was that the NBA season resumed in a “bubble.” This was done at Disney in Orlando, Florida, where the resort was divided into two parts: players and non-player activities (e.g., cooking). Though the bubble may have made it possible for the NBA to resume, it came at a cost, as the NBA had to pay a little over $200 million for the 100 days of the season. This amounted to around $1.8 million per day. The bubble’s expenses aren’t limited just to the site’s occupation, but what is left out in return. Because all the NBA teams are playing under the same roof without any fans in attendance, all the ticket and food revenue is completely lost from July to October.

Finally, one of the stand-out reasons for the $1.5 billion loss in revenue was due to historically low TV ratings, especially in the NBA Finals. For game 6 of the NBA Finals between the Lakers and the Heat, only 5.6 million people tuned in to ABC. For comparison, last year’s game 6 in the NBA Finals had 18.34 million viewers. The downturn in viewership can be pointed to two things: competition and controversy. When it comes to the competition, the Finals this year had been described by many as an “epic mismatch,” which would discourage fans as many started predicting “Lakers in 4” or “Lakers in 5”. Even with Miami upsetting the Lakers twice and forcing a game 6, many just saw it as luck and that eventually, the better overall team would take over. The other part was the controversy surrounding social justice movements such as Black Lives Matter. With the NBA fully embracing the movement, this caused many fans—those who disagreed with the movement or just didn’t want to see any social justice in their favorite sport—to boycott the NBA. This decrease in viewership was particularly devastating in these circumstances because the revenue the league would receive was now mostly dependent on TV. This, therefore, became a huge factor in the revenue loss.

Overall the massive loss in revenue won’t prove as detrimental as others make it out to be, as long things go anywhere near close to normal by the start of the next season. And given the fact that the NBA will be even more competitive with additional title contenders such as Brooklynn Nets, there should be a spike in viewership or at least in interest, which would prevent another financial downturn like this from happening again.

Categories: Athletics

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