NBA Lockout: A terrible business decision
Nov 21st, 2011 by adrianlai
The NBA lockout has gone on for over 150 days. There has been many efforts to agree upon a new Collective Bargaining Agreement (CBA) for the past two years, but negotiations were officially broken down when the players union rejected the owner’s proposal and disbanded the union last week. This turn of event has moved the negotiations from the boardroom to courtroom, where both parties have filed lawsuits to sue for damages. Not only is this a great loss for the fans of the NBA, but this also has many negative economic implications for the league.
The NBA has gone through an unprecedented growth in both the domestic and international markets. The players, owners and the league have worked very hard for the past decade to gain international prominence and economic wellbeing. The lockout, however, will render all the hard work useless. The league will lose billions of dollars in ticket sales, TV rights, sponsorship fees and concession sales. The players would also lose millions in salary and bonuses. Once this lockout is resolved, it will take billions of dollars in marketing to gain back the lost fans of the NBA. All in all, the NBA lockout is a terrible business decision on the parts of the owners and players, and conditions will continue to deteriorate if this is not resolve.
Just saw this on PulsePress as I was about to do a blog about Lockout as well for the second part of my NBA series. Check out my part 1@ https://blogs.ubc.ca/joeliu/2011/10/30/accountants-magic-nba-style-pt-1/ about how financial reports of a team can be very misleading and wrong in order to avoid tax. (and potentially a token of negotiation on the percentage shares)
For the lockout issue, I am on the players’ side mostly, but again it is one of the case where millionaires are fighting billionaires, which isn’t healthy at all for the basketball industry, and it is affecting not only the players and the owners, but also fans, businesses that rely on the league, and the workers at the arenas. In addition, There are many sport entertainment alternatives other than the NBA, so if it continues to idle, it is likely that the NBA will lose a great chunk of fan-base as a result.
I agree with everything you’ve said. The timing of this lockout is really unfortunate because the NBA received record viewership for the playoffs and the Finals and is starting to regain the international prominence it had during the Jordan era in the 90s.
I think the owners and management should be blamed for this lockout. Even though players are earning a ridiculous amount of money, most of them earned every penny of it by really making the league popular again. However, there are many players who don’t live up to the enormous contracts they were given. While you could blame the player, it’s really the management’s fault for not properly evaluating the player before throwing millions of dollars at him. If all players are given contracts that justify their contribution, then teams wouldn’t have lost $300 million last year and the CBA would have been signed months ago.