The Business of the NBA Finals – Part 2

The Business of the NBA Finals – Part 2

June 6, 2008 — Last summer, the NBA made headlines when former referee Tim Donaghy admitted betting on games he officiated and the league saw its lowest-rated Finals ever. Forced to deal with difficult issues and a tainted reputation, NBA officials exercised damage control through the media, as much was on the line for the brand that reportedly generates more than $3 billion in annual revenue.

Despite the setbacks, the show must go on. This year’s Finals will serve as a platform to rebound an otherwise growing brand. Since fan perception is key, the Finals will allow the NBA to stage its biggest performance of the year, marketing its players through personality segments and entertaining audiences with performances from Grammy-winning artists. The sentiment and flash helps the league build affinity while expanding into international markets, capitalizing on digital media, and generating additional revenue.

Global Growth
In reports, Commissioner David Stern has noted that the league is “rather mature domestically” and therefore is focused on the global aspect of the game. It’s anticipated that basketball fans in more than 200 countries will watch, listen, and participate in the Finals, while 280 international media members from 35 countries and territories will cover the Finals. About sixty percent of the 55 million expected to visit during the Finals will be individuals living outside the U.S.

It’s a Digital World
Thanks to social networking outlets such as Facebook and MySpace, the tech-savvy youth market will have access to Finals content. It is expected that more than 8 million NBA video highlights will be watched on popular sites including YouTube and Yahoo! Sports and 5 million widgets will be viewed.

Internet discussion and cooler talk is a self-generating marketing machine that easily benefits the league. Heavy Internet traffic often translates into heavier sales of player jerseys and Finals branded merchandise that includes T-shirts, flags, and hats.

Keeping the Lights On
Finals ticket sales are another source of profit for the NBA. It has been reported that 45% of postseason ticket revenue goes to the league, a sharp increase over the 6% it takes in during regular season games. A large portion of the money is used to offset travel expenses that are normally covered by the team.

According to Tad Carper, senior vice president of communications for the Cleveland Cavaliers, 2007 Finals tickets at the Quicken Loans Arena averaged $70 each and ranged anywhere from $18 to $1500 depending on the location of the seat. The venue holds more than 20,000 people and was sold out during both games played in the city.

“[Roughly] 60% of the tickets were allocated to Cavalier season ticket holders who get first crack at purchasing, while the remaining tickets are divided among the league, the opposing team, corporate partners, and a lottery for other fans,” Carper says.

In the secondary market, distributors such as allow ticket holders to sell seats at inflated prices, ultimately making a profit.

A Win-Win
While the league would not release figures on the cost of putting on the championship game, the Finals appear to be  good business for the NBA.

Next in the series: The Network