The NBA suffers from a lack of competitive balance. It's for that reason that a lot of owners from small markets, including their de facto leader Bobcats owner Michael Jordan, wanted the players share of revenue to drop below 50%.
The past 4 NBA champions were large market teams with some of the league's biggest payrolls: Dallas Mavericks, Los Angeles Lakers (twice) and Boston Celtics.
By way of comparison, in the NFL four of the last five Super Bowl champs were from some of the league's smallest markets: Indianapolis, Pittsburgh, New Orleans and Green Bay.
How has the NFL enjoyed an unprecedented level of parity? A big part is revenue sharing.
As part of its robust centralized revenue model, the NFL shares about 80% all revenue from media deals, national sponsorships and merchandise sales.
Economic parity exists in the NFL because teams do not deviate widely in their revenues or costs. About 60% of league revenue is nationally generated and split evenly, with only a 40% window for teams to differentiate their top lines.
As far as gate receipts, 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.
What about the NBA you ask? NBA teams share money from national TV contracts and luxury tax funds. They don't share gate receipts. While NBA teams share equally in the league’s national TV rights fees, teams keep 100% of their local television revenues.
Here are some numbers for your NBA consideration:
Television Revenue
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.
Ticket Revenue
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.
Remember this ticket and television revenue is not shared. So with a luxury cap that was not sufficiently punitive in nature, teams weren't too concerned about spending the money they had. That in turn meant that the stability of the NBA and competitive balance were undermined.
So if fans from small markets are to feel hopeful at the start of the season, a revenue sharing model among teams that makes sense is key. That and of course a luxury tax system that will dramatically curb overspending.
Competitive Balance Versus Parity
One more thing - note I have used the term "competitive balance" and not "parity". There is a difference between the two.
Competitive balance is a structural framework that creates an equal playing field under which all teams can compete. So it still means good management is important.
On the flip side, parity refers to an outcome where there is little difference between the success of the best and worst teams. So the focus is results and not the framework designed to yield those results.
Too much parity is bad and can make things boring for fans. If all teams have pretty much the same record, then fans take naps. So it's important to promote competitive balance but not to the point where it results in absolute parity.
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