Saturday, December 4, 2010

NBA Lock Out, Expansion or Contraction?

The NBA Is Not Likely to Have a Lock Out or Contraction, but Expansion Should Happen within the Next Ten Years.

The lock out most likely will not happen because David Stern has overstated (i.e. lied) about the fact that the NBA has lost money (do not let the title fool you, read the whole article for details), the NBA's main domestic rival, the NFL, may go into a lock out itself, and the league will be worried about losing second-tier  players to European teams who have an advantage because their salaries are tax-free.

Add to that the fact that David Stern has not lost an NBA team to contraction in his 26 years as the commissioner, a fact on which he prides himself, as well as the fact he has increased the NBA from 23 teams to 30 teams in that time.

Expansion of the NBA into Europe within the next decade is much more likely, as the international game has increased in popularity, the European teams offer the forementioned advantage in offering competitive salaries and those "lower" salaries which would be significantly higher than an equal contract in the U.S. would greatly diminish the costs of owning a team, thereby increasing those teams' chances at profitibility.

The NBA is a Business

The players, the owners and the league will do whatever it takes to maximize the profits/salary that they are taking.

NBA Commissioner David Stern has made two seemingly contradictory statements over the future of the NBA in the past months, at the same time offering up contraction for next year in order to solve the league's (perceived-at least by him) money woes and European expansion within the next ten years to increase revenue flows.

It is also a business with a bright future, as basketball in the international eyes has become an ever-increasing commody. While the NBA has a bright future ahead of it, the short-term is more fraught with difficulty, as the end of the Collective Bargaining agreement this year may lead to a cock out lock out next season.

The NBA is Unlikely to go into a Lock Out Because of its Profitibality

The main reason the NBA will not go into a lock out and/or contraction is because the league still remains profitable despite the economic hard-times. Because the NBA has revenue sharing, and most teams in the red are more concerned about building a winning basketball team than any loss of profit (with the major exception of the Hornets, who fight to stay profitable every year and often make roster moves (you need ESPN insider to access this article) based on financial concerns, although they are attempting to keep Chris Paul happy as well.

The owners of other teams, such as the Maverick's Mark Cuban, the Portland Trail Blazer's ownership and the Bobcat's ownership (including Michael Jordan) seem much more concerned about building a winning team than any increase in profits (poor Trail Blazers, who make the right moves, have a great coach, are only concerned with winning, lose more money than any team in the league and somehow managed to create a team that has won 50+ games the last two seasons, probably only missing out on the Conference Finals because of a myriad of injuries.)

While these teams do hurt the profitable teams because of revenue sharing, this is not a valid reason for the NBA to seriously consider contraction because the NBA overall is making money and any contraction will hurt the NBA's brand.

The NBA Players' Association will fight any contraction tooth and nail, and the resulting lock out would likely cost more in the short-term than a contraction will offset in the long- term. This becomes particularly acute when considering that the NBA is still making money during a rough economy, and that one of the league's major losers, the Nets, (one of only five teams to lose $10 million+ in the fiscal year ending in 2009, and one of only 8 teams to lose 3 million+) will likely see a surge in profit after their move to Brooklyn, which should be a benefit to the league in general.

(To be fair, teams across the league have lost value when it comes to a sale, but any sale of a team, even the least profitable, would likely be a huge net gain for an owner, and if enough owners were not making enough money in the short term and the long term to offset the desire to sell, more teams would have changed hands recently.)

The fact that the league is making money is an amazing feat, as businesses across-the-board worldwide have lost money.

The stance taken by the NBA owners and the commissioner may be to gain leverage against the players, because they look to position themselves as the sympathetic side in the public eye (poor us, we only made $232.8 million in 2009.)

The NBA Will Not Cock Out Lock If the NFL Does Next Season

The NFL seems to be moving closer and closer to a lock out, with talks between the NFL owners and the NFLPA pushing the sides further apart rather than closer together. While the owners want to increase the NFL season to 18 games, the NFLPA has made a counter proposal which focuses on the growing concern of the long-term effects of concussions and other injuries.

With basketball's growing popularity, an NFL lock out would amount to an unprecedented chance for the NBA to gain ground on what is by far the most popular sport in the U.S. (Still, you should not expect the NBA to catch the NFL because the NFL are head and shoulders above the rest of the competition.) The NBA would be idiotic to pass up such an opportunity.

Worldwide, basketball is making huge gains on soccer because of increasing urbanization that makes playing soccer a more difficult prospect, while increasing the chances of basketball being played.

While it would be unreasonable for the NBA to catch up to football in U.S. popularity during the next two or three decades, basketball and the NBA are poised to overtake soccer as the number one sport during that time period. Here is an excerpt from that link:

"While it retains enormous popularity in much of Europe and South America, the World Cup--and soccer in general--is no longer the only game in town. Soccer hotbeds like Brazil, Argentina and Germany are discovering American basketball by leaps and bounds, a trend that dates back to the 1992 "Dream Team" of professional stars that the U.S. sent to the Barcelona Olympics.

Euroleague basketball attendance is up 79% from its inaugural 2001 season, though it's leveled off recently. Television beams the league across both Europe and Africa, as well as some games into the U.S. and Canada via NBA-TV.

A 2000 survey in Germany showed kids in most age groups found basketball as popular as soccer, a spokesman for the Federation of International Basketball says. What's more, a December 2004 study by German sports researcher IFM found that European basketball fans are younger and more affluent, on average, than the general population.

In Brazil and Argentina, meanwhile, 14% of households say they "regularly" watch NBA basketball, according to a Latin American survey group. Young Argentineans now snap up as many replica jerseys of basketball icon Manu Ginobili--who led their country to the 2004 Olympic gold medal and won a 2005 NBA championship with the San Antonio Spurs--as any soccer jersey.

In Brazil, a country that has sent several players to the NBA in recent years, basketball is now the most-watched Olympic sport. PriceWaterhouseCoopers forecasts that NBA licensing and sponsorship revenues in Latin America will rise to $1.1 billion in 2009 from $752 million in 2004.

Basketball has yet to overtake soccer as the world's top sport, but it’s a strong number two."

The NBA Will Expand into Europe

David Stern has openly stated his desire for a European Division within the next ten years (he has numerous times stated that, including on "The Colbert Report," but I could not find any of these videos on youtube. In this video, the question is "where do you see the NBA in 20 to 30 years?" It starts at 4:29, watch the rest of the interview as it is very funny. Stern quotes a player you would not expect him to quote.)

While concerns about travel time are sure to surface among fans and commentators, Stern seems to have the support of the players and the owners when it comes to playing overseas.The likelihood of a division in Europe in the near future combined with any concern European owners would have over the possibility of contraction and the inevitable hit such a contraction would take to the NBA's brand abroad, make it unlikely the NBA will actually contract.

Another reason the NBA will not contract or have a lock out is David Stern's track record. He has been league commissioner of the NBA for 26 years, and has not contracted once while increasing the league from 23 to 30 teams. The NBA during its history has never contracted and that trend should continue, and certainly David Stern would not like to be remembered as the first commissioner to do so.

A NBA Lock Out Now Would Be Mistimed

While Stern and the league have gotten away with a lock out before without it hurting its overall brand, the timing of a lock-out now would be horrendous.

The 1998-1999 lock-out occured the season after Michael Jordan retired, when the NBA obviously would be in flux after the retirement one of the five most popular athletes of all-time.
Because no clear front-runners had emerged, the NBA's three biggest brands (the Knicks, the Celtics and the Lakers) were not projected to have big seasons (although the Knicks did make it to the finals) and the NBA's major storyline for the past decade (Michael Jordan) was gone, with nothing to replace it, the lock out was not going to hurt the NBA that badly.

Now, however, we have:

1. the NBA's first super villians since the Bad Boy Pistons of the late 80's/early 1990's in Miami's recent acquisition of Lebron James and Chris Bosh, to pair alongside Dwayne Wade

2.the biggest, most popular of the big three franchises going for a 3peat

3. the second most popular with some excitement over the signing of a franchise player (Amar'e Stoudemire), along with the possibility of signing former scoring champion Carmelo Anthony when he becomes a free agent and also their possibility of getting Chris Paul in a trade next season

4. the third most popular franchise going for the 3rd finals visit in 4 years, and one year (the year they are proposing to lock-out) before the window closes on any championship runs

5. and the possibility of a Lakers-Heat finals dream match-up for the NBA, throwing the NBA's two most-popular and at the same time two most-hated players (Lebron James and Kobe Bryant) against each other in a Finals matchup that would feature another top 5 NBA most-popular player (Dwayne Wade), as well as one of the NBA's most popular international players (Pau Gasol) in what you could expect to blow the highest-rated basketball event of all-time (Jordan's final game as a Bull) out-of-the-water.

Conclusion: The NBA Will Expand to Europe Within the Next 10 to 20 years and Avoid a Lock Out and Contraction.

Nothing short of someone taking David Stern and the NBA owners hostage will take them into a lock out, and all the posturing of the owners to get more money out of its players will only result in a lowering of the salary cap and a small concession by the players to make the league's teams more profitable.

The NBA, its owners and its players, would not benefit from a lock out no matter what details on the bargaining table they believe would hurt their financial status.

(UPDATE, LOOK AT for an update on the possibility of a lock out next season.)

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