Without a doubt, the NBA is probably one of the most influential and prominent leagues in the world – both by revenue and number of viewers. Total revenue in the NBA exceeds billions and the amount of money only grows year after year.
It was basically 2020 when the coronavirus pandemic disrupted plans and the overall situation, resulting in the decreased profits for teams and the NBA in general. The lack of attendance, premature ending of the regular season impacted the financial situation, and a lot of teams were forced to deal with losses. The salary cap was lowered for players and the 2020/2021 season was cut short to 72 games, played behind closed doors. However this is an exclusive situation, that might happen once in a blue moon.
How do NBA teams make money? Teams are earning money through merchandising, television, tickets, and sponsorships. TV contracts are considered a main source of revenue and in this article, we will have a look at these factors.
We look at the different ways that NBA teams can make money and how the different revenue streams help increase team value.
How do NBA teams make money through tickets?
Tickets are directly connected to arena income. The majority of NBA teams have their own playing arenas. Fans purchase tickets to watch matches of their favorite players. On average a regular ticket for a particular match costs $95. If we pick Madison Square Garden, which is home to the New York Knicks, it has a capacity of almost 21,000 people. And for the most part, the tickets are sold out entirely. Keep in mind that there are premium seats also and the price of tickets grows during the playoffs. If a team manages to reach the Finals, of course, different rates apply
There is an exception, though. For example, both the Lakers and Clippers share the same arena (Staples Center), but it is known that the Lakers earn more money (almost $20 million more), meaning that the Clippers could eventually think of building a new one exclusively for themselves.
Arenas also host non-basketball events that contribute to the revenue of teams. It could be a boxing match or a show – depending on the agenda. If a team is successful there will be even more fans, eager to attend matches. Frequently, arenas get sponsorship deals that help to generate revenue and top players have a key role in attracting famous brands.
How do NBA teams make money through merchandise?
NBA teams also sell a large number of jerseys that count as revenue. Millions of jerseys are sold every year and if a prominent player joins a team, then it only affects positively on the selling process. It is also directly connected to market and brand income. The exposure of a particular brand can bring a lot of benefits to the team.
Not only do teams sell jerseys through the Internet, but also they have other types of equipment available for selling. It could include sneakers, shoes, socks, footwear, armband, headband, etc. – everything that is directly related to the process of playing.
How do NBA teams make money through television?
Not every person can attend the matches of their favorite teams, therefore they can watch the games on TV. NBA fans are paying for the service that cable providers offer. At the same time, these matches are shown in over 200 countries, meaning that these countries should pay some money to have streaming rights. They sign a contract with the NBA, which can reach millions, to provide matches to their audience. It is another way for generating revenue. China is actually a leading country. We can remember that in the 2012/2012 season when Linsanity happened and Jeremy Lin was playing fantastic basketball for the New York Knicks the number of people watching his matches grew significantly.
How do NBA teams make money through sponsorship?
This one looks pretty straightforward and simple to understand. Famous NBA teams strike deals with major companies. It could be a corporation, vendor of different apparel, online casino. Each team has its policy and partnering with decent sponsors is really helpful in getting additional money. We can remember that even though the NBA stopped the partnership with Adidas in 2015, it signed a $1 billion deal with Nike that is expected to run until 2023.
Sponsorship can also be related to advertising. Most teams have logos and advertisements on their jerseys of various brands.
How do NBA teams make money through parking?
This may seem a little surprising but yes – viewers who attend matches of their favorite teams should pay money for parking. There are specific places allocated for cars, where fans should pay money and while it may seem moderate revenue compared to the other ones, still it brings profits.
There is no official information about the cost of parking but it does have some importance for the teams.
As time passes the valuation of a team grows. Eventually, the owner might decide to sell his or her team and earn even more money, before it was valued initially. Success, championships, brand recognition are really helpful. The new owner could invest even more money which later could result in triple revenue!
It should be noted that not every team generates the same amount of money as the other ones. Additional taxes also apply and the NBA tries its maximum to share the total income as equally as possible for lowest-performing teams so that there is no unfair advantage and competition is fair. Some of them may have more lucrative deals, while the remaining ones could struggle with attendance. Numerous factors should be taken into account, and different methods can be applied for generating more revenue. 2020 was a really difficult year in this regard and NBA teams were somewhat forced to come up with original ideas to ease the financial tension on themselves.