How does the NBA make Money?

Obviously, basketball and in particular the NBA is extremely popular in the USA and around the globe. The NBA has a number of franchises and sponsorship deals across and is regarded as one of the leading financially functioning sports leagues in the world. But it may make you wonder How does the NBA make money?

How does the NBA make monye? The NBA has grown into a universally acclaimed reputation for diversifying income streams through a combination of television rights, merchandising and ticket sales.

Due to not being a public entity, the NBA chooses to not release detailed financial reports to the general public. According to Forbes however, who annually value all 30 NBA franchises, the total revenue generated across the entire league is in the vicinity of $8.76 billion per year. It’s widely recognized each organization is estimated to be worth at least $1 billion, with some franchises double that in value, establishing a baseline average of about $2.12 billion per team.

Background of how the NBA makes Money?

The NBA’s inception in 1946 was relatively late in comparison to other sports leagues, meaning they had to make up ground quickly in order to keep up financially. With the National Football League (NFL) and Major League Baseball (MLB) out in front, the NBA first orchestrated money drawing events such as a three-day All-Star weekend, ascending into a staple for merchandising.

The league has intelligently pioneered the marketing their superstars also, by appealing to a global market and accelerating the popularity of the league on an international scale. As such, the NBA is broadcasted to every nation, and whilst the league was predominately American born players in the 70s and 80s, at the start of last season 108 out of 450 players were international born talent from 38 countries altogether.

In recent years, the NBA has overtaken MLB as the second most popular sport in the United States. Be that as it may, with ratings down in recent years, there is still plenty of room for growth moving forward.

How the NBA makes money through Television Revenue?

Similar to the majority of premier sports leagues, television revenue makes up a key part of the NBA income. TV is an easily accessible avenue for fans to watch games, often free of charge on national television. Watching games from the comfort of their own home is preferred by most fans, saving the costs of tickets to a live event, parking and food.

Due to this, the NBA’s advertising revenue and television contracts have steadily increased as the years went on. TV revenue compiles the majority of money generated for the NBA, especially after TNT and ESPN re-structured their deals to an estimated $24 billion. The nine-year contracts are worth an approximate $2.6 billion each year, and even with individual players making an average of around $6.7 million league wide on average, TV revenue covers those salaries with ease.

How the NBA makes money through Merchandise Deals?

Another huge money contributor for the NBA is merchandising.

Unlike TV revenue, merchandise is something tangible for fans and collectors to purchase that keeps the money circulating around the league. Accounting for well over a billion dollars annually, that figure has stayed true especially since teams started to wear advertisements on their jerseys in the 2017-2018 campaign.

Jersey patch revenue alone nets approximately $9.3 million annually, a program that was launched in 2016. The early success led to the NBA extending the program in 2019, following an excess of $150 million generated funds.

Some of the big players are General Electirc, Walt Disney Company and Rakuten – a Japanese e-commerce company. These patches benefit the franchises also, with the Golden State Warriors making $20 million per year from their partnership with Rakuten as one example.

Another branch of merchandising is sponsorship.

Back in 2015, the league office ended their long-time partnership with Adidas, and inked an eight-year $1 billion agreement with Nike. This saw an increase of 245% in comparison to the previous deal.

Another sponsorship example would be the Milwaukee Bucks opening up a $524 million arena in 2018. Following this, the opportunity for countless sponsorship and premium seating possibilities arose.

How the NBA makes money through NBA Ticketing?

The importance of NBA ticketing was highlighted last season, as the league struggled financially due to an absence of fans at games.

Ticketing is actually a primary source of income for the NBA, and although it doesn’t stack up to the afore mentioned revenue streams, ticketing still plays a vital role in the grand scheme of things.

According to ESPN, on average, between 15,000 and 20,000 people attended each home game in the 2019 season. Considering the average price per ticket is $74 dollars, the numbers add up quickly.

How the NBA makes money through International Revenue?

An aspect that must be discussed is the money coming in from international markets. The NBA has consistently been expanding its reach to all corners over the globe since the 80s, and it has transformed into a central revenue source – especially from China.

It has been reported that over $500 million is generated annually from China alone, and part of that income stream includes the Chinese technology giant Tencent, who’s $1.5 billion deal was agreed upon to make them the NBA’s exclusive digital partner.

The growing international appeal opens up opportunities for an increase in international investors as well. Just last season, well-known shipping company Alibaba’s founder Joe Tsai purchased a 49% stake in the Brooklyn Nets for an alleged $1.5 billion.

The international influence and success has forced the NBA to loosen its marketing rules on putting logos on jerseys. Now, international companies can advertise directly on jerseys through the patch program as well.

Simply put, the NBA’s expansion into China and other large markets worldwide will continue to see an increase in globally generated revenue as the years go on.