The NBA is undoubtedly one of the most and acclaimed leagues in the world. With millions of viewers, none of the other basketball leagues come closer in terms of popularity. Such a huge exposure is directly connected to earning a lot of money.
How does the NBA make money? The NBA does make profits by several sources which are television rights, tickets, sponsorships and merchandising. Each of these details is strongly intertwined with each other. For example, at the end of the 2018-2019 season, the revenue hit $8.76 billion.
There are 30 teams in the NBA and each of them has a value of more than $1 billion. There are some interesting moments when it comes to the NBA revenue and we will have a closer look at these details.
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Understanding the profits in the NBA
We have mentioned that the NBA makes money primarily from 4 different sources that are sponsorship, merchandising, television and ticket sales. The NBA is indeed one of the most popular leagues not only in the United States but also in the whole world as well, but the NFL for example is more profitable. The NBA develops rapidly and there are always new opportunities for players and authorities to make more money.
The first one is television revenue. Around the world, there are millions of viewers that watch NBA games. Not every person has the ability to attend matches in arenas, therefore TV is a perfect solution to support your favourite team. Furthermore, when you want to see a match from the arena, there is an additional headache regarding parking, food and as a lot of people prefer to stay home, advertising and streaming grows rapidly. The NBA has rights sold to different televisions, and the contract is worth billions. Television rights help the NBA to earn over $140 million annually.
However, the revenue from television declined sharply amid the coronavirus pandemic. As there were no games to watch because the season was halted, the NBA experienced a massive setback, but the following season everything went to normal – at least partially.
Merchandise is another key factor in generating revenue. Approximately, it contributes to $1 billion of the money the NBA is making. The advertisements of different jerseys and selling them is certainly a lucrative option for teams and the league respectively. The Golden State Warriors for example have got $20 million yearly from Rakuten.
Striking sponsorship deals with different teams is also helpful. One such example is a partnership with Nike. In 2015, when the deal with Adidas ended, an 8-year contract was signed with its competitor and sponsorships generally bring a lot of revenue to the NBA. It creates further opportunities for new deals and collaborations.
Both the NBA and the teams make plenty of money by selling tickets. On average a standard arena can attend 15-20 thousand people. The price of a single ticket is normally $74. During the playoffs, arenas are for the most part, full, and in the playoffs, there are no questions regarding attendance. Of course, compared to the revenue streams mentioned above, ticket sales might not be the first option, but it definitely adds to the overall revenue of the NBA.
Like the television streams, the coronavirus pandemic also forced the games to be played behind closed doors. Temporarily people were not allowed to attend games of their favourite teams to curb the spread of the virus. As of the 2020-2021 playoffs, viewers are allowed to watch the games, but their amount is limited. This is better than playing games without supporters.
The NBA does not focus on the United States only. In other countries such as China, for example, the NBA is quite a popular sport and numerous people go in for basketball. China approximately generates $500 million in revenue. Tencent is one of the largest partners of the NBA. In Europe, the league is also followed by dozens and shows no signs of slowing down.
How the NBA affect the economy?
This is a pretty interesting subject, that interests a lot of people. The NBA and the popularity of franchises do help the economy, however, it has a more local approach. According to different articles, when the Golden State Warriors won the NBA it had a positive impact locally. More and more people were going to the bars, watching their favourite team and businesses started profiting as well. When the team is developing and has decent results it is always profitable for a particular state and the country as a whole.
In contrast, when the team performs badly it has a negative impact on the economy, but even if the Lakers and the Boston Celtics play badly, they will always have fans behind them who are ready to support all the time.
What are the major revenue challenges for the NBA?
As for now, the only problem regarding making more money for the NBA is associated with the coronavirus pandemic. The United States has one of the highest rates of vaccination, but the pandemic is far from being over. Arenas are only allowed to host a limited number of fans and this is unlikely to change this season (perhaps the following year as well). Covid-19 demonstrated that the revenues could be jeopardized and main streams like selling tickets and television rights could be affected. The inequality subjects, that have raised since 2020 is also noteworthy because this fact leads a lot of players to refrain from playing. There are a plethora of challenges for the NBA that it needs to take i