COVID’S economic impact on the NBA

FEEL THE GAME - Bobby Motus (The Freeman) - April 6, 2020 - 12:00am

I am trying to avoid newsfeeds on my phone and news updates on TV because of the gloomy state of things.  The current situation had most of us confined to our homes and we sometimes have the tendency to forget what day it is.  Never in recent memory did we have so much idle time and so much sleep that nahurot na akong mga damgo sa kinatug.  Being on a different time zone adds to confusion. 

Like the rest of the sports groups around the globe, the NBA is one of the richest associations that got badly hit with the disease.  As per latest reports, the league would very much want to crown a new 2019-2020 champion and they are having meetings on how to salvage the rest of the season, with the best-case scenario resuming play on the later part of June.  Hopefully it would already be safe for fans, players and the media to gather in arenas.

Bringing back the season of course brings back revenues to the league and especially to the broadcast partners.  30% of NBA earnings come from lucrative television deals which translate to about $2.7 billion annually.   Most of the TV advertising money are made on the playoffs and the potential Laker-Clipper post-season showdown really smells delicious profit.

There are 259 regular season games left and that means an estimated $300 million in ticket sales.  The playoffs have approximately 83 games with an additional $166 million in ticket revenues.  Merchandise and concession sales can account to up to $700 million. At least a billion dollars will mean losses to the league if they do away with the final regular season games, which could be a big possibility.

A clause on the players’ collective bargaining agreement give team owners the option of withholding salaries of players for games cancelled after April 15.  The force majeure provision (which include scenarios like pandemics/epidemics, natural disasters, terrorism, sabotage, government orders and war), allows teams to withhold a fraction of a player’s salary per cancelled game based on the current health crisis.  Teams can pay their players later if, and when play resumes.

This provision was inserted into players’ contracts after the 9/11 attacks.  A player will then forfeit about 1% of his annual salary.  In the case of LeBron James who gets a $37.4 million salary from the LA Lakers, he will miss $404,000 per game.  Kalooy intawon ni LeBron.

The salary cap, the maximum total amount teams can pay their players, is dependent on league revenues and with the present shape of things, caps will be lower next season translating to lower player salaries.  The current cap of $109 million per team could decrease by at least $10 million next season.

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