Can the Small Market NBA Teams Survive?

Can the Small Market NBA Teams Survive?

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One of the critical issues in the NBA lockout is revenue sharing. The collective bargaining agreement that has been active since 1999 was seen as quite favorable to the NBA’s owners and players. However the tremendous and ridiculous increase of player salaries has finally taken its full effect.

Small market teams such as New Orleans, Sacramento, Minnesota, Milwaukee and Charlotte are struggling to keep afloat. Meanwhile big market teams like the Lakers, Chicago Bulls and the New York Knicks are turning a profit each year. While you cannot fault these big market teams for doing so, it is hurting the league.

Of course, a silver-bullet fix according to owners is to implement a hard salary cap. This is something most basketball fans saw coming for quite some time based on the trend to pay even non-franchise players astronomical salaries. Yet, a higher revenue sharing initiative might act as the key to save small market teams, most of which are losing money.

The current recession and the downfall of our economy has not helped any NBA team, but the small market teams have been hit worse. The Lakers, Knicks and Bulls have that big market working in their favor to keep attendance high despite economic woes. The same cannot be said for smaller market teams.

For example, “the Milwaukee Bucks averaged 15,412 fans per game during the 2010-11 NBA season, which was good for 23rd in the league.  The city of Milwaukee has the 35th largest TV market in the country and ranks 25th in the NBA.* This was during the regular season. A playoff appearance can have the same effect for small market teams.

“The revenue generated by a single playoff game varies widely, depending on the playoff round and the city in which the game is played. One playoff game can take in as little as $500,000 or as much as $2.5 million, according to one league executive, who also noted that ‘Milwaukee couldn’t charge as much for a Finals game as the Lakers charge in the regular season’.”**

It is not only the declining ticket sales revenues and the large player salaries that are hurting small market teams. It is the revenues that come in from sponsors and television rights deals that take affect on the small market as well. “Large market teams get around $30-40 million dollars in corporate sponsors and advertisers. Medium markets average around $25 million, and the smaller markets $10-15 million.”***

Take the Lakers’ new television rights deal with Time Warner as an example. It has been reported that the deal is worth $3 billion dollars for a 20-year contract. Two new regional channels would be created for Lakers media by Time Warner. Now look at a small market example. In 2009 the Minnesota Timerwolves were considering not airing 20 of their games on television as a way to draw fans to buy tickets and personally attend the game.

With the expected prolonging of a gloom economy in the near future, small market teams continue to be a target of potential failure. With Americans struggling to financially stay afloat, the prospect of attending games is not a reality. This directly hits small market teams financially since ticket sales is the number one source of revenue for a sports organization, which the NBPA is aware of.

According to a Sports Illustrated report, “The NBPA does not believe the NBA is losing as much money as it says it is. The union also attributes teams’ economic woes primarily to a lack of sharing among big-market and small-market teams — if teams shared local television revenue, which varies considerably by team, fewer would be in financial trouble, the union claims.”**

So it seems that equal revenue sharing may turn around the failing teams in the small market. With a lasting dismal economy in the United States and with basketball fans, it may be their only chance of survival.

*Source: bleacherreport.com
**Source: insidehoops.com
***Source: nbahoopsonline.com