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Wednesday, July 15, 2009

NBA's Economic Forecast - Gloomy

In an article by the associated press, NBA Commissioner David Stern acknowledged that the NBA league is in serious financial trouble, with at least half the teams posting net losses last season. Let's not rush to judgement and blame this all on Stern. I dare not give his policy's that much credit. Obviously, many businesses are losing money in the dire economic landscape we are in. But half the teams? Ouch!

The expected reduction in salary cap will help. It reduces expenditures and player salaries, both were escalating at an obscene rate. Now they can be dialed back down to a more market-defined level. The league also expects many teams to offer lower ticket prices to lure more sales. Will it work? That remains to be seen.

As previously reported here, the league has a $175 million dollar 'slush fund' that teams can draw from in times of need. Well, welcome to the times of need. Pressure will be intense on coaches to produce winning teams and to get them to the playoffs. Additional post-season revenues may be the only way teams have a chance to compete fiscally. TV revenues are down and the days of mega-TV contracts appear to be a memory as networks scramble to find new ad revenue sources. Less revenue for networks means less money on the table when tv contracts are up. Trickle down theory, in full effect. Driving the prices down further is the proliferation of so (too?) many distribution methods including tv, cable, internet, radio and satellite. Is saturation becoming a problem? Supply and demand, anyone?

With so many teams suffering, folding teams could eaasily emerge as a possibility. Just as businesses like Starbucks are forced to close weak-performing franchises, will pro teams follow suit? Is this the time when the league finds it's true financial niche, via addition by subtraction?

Only time will tell. Stern's policy's will certainly be scrutinized closely, as he tries to right the ship while simultaneously considering his inevitable retirement.

One idea that could bode well for the league financially would be a proven market like Seattle to have another team, something the NBA should begin pushing for. The City of Seattle needs to get on board and pay the idea some serious attention. Let's put the Stern/Bennett ill-will aside and look at it as bringing a business to town, a business that contributes to other local businesses, the local economy, and creates jobs.

It won't save the league, but it's a place to start.

1 comment:

Anonymous said...

interesting stuff. you know what's really gloomy? the BLUNDER OUTLOOK! lololol. okc sucks