The entertainment industry has grown tremendously over the last decade or two. A lot of that growth has to do with sports, as many different professional leagues act as large businesses. Here we are talking specifically about the National Basketball Association. Despite knowing how successful the NBA is in it’s own industry, but few know how the league operates as a business.
How does the NBA work as a business? The answer is pretty simple. Viewership, merchandising, concessions and ticket purchases are all contributors to the NBA as a business. The league uses all of those factors and much more to generate popularity and cash in by allowing the fans of the game to watch or buy items for their product..
The full understanding of their business gets a little bit deeper than this however. This is why we are going to take another step into the world of NBA business to figure out exactly what it is that they do so successfully as a large corporation.
Massive Television Deal
Obviously, as a fan of the sport, it’s expensive and difficult to go see every game in person at the stadium. This is why the NBA was able to work out a massive television deal so that they could broadcast their games. The deal was made back in 2016 with both ESPN and Turner Sports. It was set for nine years and is going to pay the league approximately $24 billion dollars in total by the time that period is up. Given how it’s the end of 2021 already, this deal is closing in on the end, where it will be inevitably renewed.
The league has been able to work around the staggered viewership due to streaming services and yet continues to make more and more money off these deals. That’s a pretty large business side of the sport that many don’t realize. According to one report, their previous deal that was signed back in 2007 paid them $930 million a year, which is far less compared to what they are receiving nowadays.
Sponsorships and Licensing Agreements
The NBA also knows their own popularity, and because of that, can sponsor other businesses that would like to get their name out there. You’d see it all the time while either at the game or watching it on television, random commercials and advertisements from different companies that really just want to spread a message to as many people as possible. From what I’ve seen so far, they are bringing in about $861 million in revenue from corporate sponsors like State Farm for example. Those numbers were pulled back in 2016-17, which means there is a ridiculously high chance that those numbers could have doubled in the last few years.
The possibilities are endless for the NBA, they can sign and work alongside practically any other business that comes to them with an offer. Especially in the shoe industry. Many basketball players love to collect and wear different shoes in each game, which is why the NBA dove into partnerships with places like Adidas and Nike. Back in 2015, the league signed an eight-year, $1 billion dollar contract with Nike. The brand accounts for about 90 percent of all basketball shoe sales in the United States nowadays.
Another side of business that the NBA tackles beautifully is expansion. It’s hard to stay complacent for so long and yet still be this successful. The NBA has done a lot to venture off into other places outside of the United States in order to get other people as hyped up about the sport as we are. The league puts a lot of money into broadcasting and advertising their sport in other countries. Not only are merchandise sales going up because of it, but they are also influencing younger players to work on their game and have a dream of making it into the league.
Giannis Antetokounmpo came from Greece, and because of international expansion he is raking in billions of dollars for the league. His likable personality and dominance on the court have allowed them to use his name for other advertisements. It’s not just Giannis that got inspired at a young age though, the 2019 season saw over 100 international players with 11 of them nowadays being All-Stars at some point in their careers. The NBA also allows players to sign shoe deals with places like Anta, a company that is established in China. Sometimes we see star players visit China so that they can promote the league and still rock shoes from their sponsored company at the same time.
Players Signing Contracts
This is likely the most important part of the NBA being successful. For an entertainment sport like the NBA, you have to keep your players happy above all things. Fans are the real reason they are able to do what they love, but players still have to get on the court for a living and provide that entertainment. Each player has contracts in order to be on an active roster with the possibility of playing. The organization that drafts or signs them has to make sure they are happy with the amount of money and get them to sign it.
That contractual agreement makes sure that they can’t do anything way out of line that diminishes the league, while also getting a promise that they will be paid for going out and playing their hardest for the fans. If the NBA wasn’t so good on the business side of things, we could see superstar players bashing the league and refusing to play just because they aren’t receiving money or are unhappy with specific details in contracts. Thankfully, that isn’t the case with the NBA. It should also be mentioned that the league operates independently. This is pretty impressive for a business of this stature and yet they are able to handle all these different responsibilities and paychecks seemingly with ease.