Wednesday, July 13, 2011

Disparity in Ticket Revenue Another Reason for Revenue Sharing in NBA

Recently I wrote an article entitled, Revenue Sharing Will Be Part of Solution for What Ails the NBA. In it, I talked about the need for a robust revenue sharing model among teams to even out the competitive playing field. Unlike the NFL, the NBA does not engage in substantial revenue sharing.

Case in point - NBA teams don't share revenue for local television deals. The New Orleans Hornets make $8 million/year off their TV deal, while the Sacramento Kings make $11 million/year and the Portland Trail Blazers make $12 million/year. Portland's deal is worth $120 million over 10 years.

In stark contrast, the Lakers TV deal is worth $3 billion over 20 years - or $150 a year. That means that one year of the Lakers deal is worth $30 million more than Portland's entire 10 year deal.

The gap between big and small markets is so large that the NBPA believes it undermines the stability of the NBA and the competitiveness of many of the teams. This argument is not unreasonable.

Here's something else to consider. There is a significant disparity in NBA ticket revenue, which NBA teams also don't share. The Lakers generate about $1.9 million per game, while the Grizzlies ($322,105) TWolves ($350,118) and Bucks ($415,450) generate a lot less.

For the Lakers, that ends up being $82,000,000 in ticket revenue, which is well ahead of the other 3 teams (Grizzlies - $13,202,000; TWolves - $14,350,000; Bucks - $17,015,000).

In fact, the Lakers pull in more ticket revenue than all 3 teams combined.

The NFL has a 60/40 policy whereby the home team keeps 60% of gate receipts and gives 40% of receipts to a pool, which is then distributed evenly among the 32 teams. The NFL has the most comprehensive system of shared gate receipts.

With this types of disparity, it can be tough to generate any type of meaningful and long term competitive balance. Revenue sharing will be part of the NBA solution.

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