Cabrera: NBA Econ 101

“With the economy these days...” Continue the fragment however you wish. These five words have become a regular occurrence in every day life, whether it’s at the office, home, playground, campus, or restaurant. Granted, the market has been on the rise as of late (knock on wood), but in deed, with the economy these days, professional sports are struggling, particularly the NBA. Many players are finding themselves unemployed, ticket sales have declined, and teams are starting to carry fewer players on their rosters to cut costs. Combine this with the eagerness of saving (not spending) cap space for the summer of 2010 and you get a recession. Owners aren’t investing their money in players; rather, they are stuffing it under the mattress. Replace the word “players” with banks, coupled with a rise in unemployment, and you get the Great Depression. Bank (or Player) Holiday anyone? Fireside Chats Mr. Stern? OK, maybe I’m over exaggerating a little bit. But what does the NBA do in a time of economic instability? Turn to the WNBA, of course.

Get this straight: A league that basically is hooked up to a respirator powered by the NBA is teaching The League a lesson. This season, the Phoenix Mercury decided to place an advertisement for LifeLock on their jersey. The Mercury, the only WNBA team with an advertisement like this on its game jersey, has followed the footsteps of many professional sporting teams abroad. Virtually every club soccer team sports a large advertisement on the front, as well as international basketball teams. The NBA’s response to the Mercury: practice jerseys. This year, NBA teams will be allowed to have advertisements on their practice jerseys. If I’m a CEO, I wouldn’t hurry into this investment, as practice jerseys don’t get a hefty amount of publicity. However, I’d wait for the big fish: the game jersey. As of right now, it looks to be inevitable. It only seems logical, first practice jerseys and then game jerseys.

For the NBA and its teams, game jersey advertising has no feasible, economic loss. As a company, the NBA has no competition in the United States selling its product—basketball. Don’t dare tell me the NBDL or CBA. Furthermore, internationally, the NBA is still king. 25% of the NBA’s revenue on jerseys now comes from international purchases. Fans abroad who love basketball would much rather watch the Celtics vs. Lakers than Enisey Krasnoyarsk vs. CSKA Moscow (What!?). Fans don’t want to and won’t turn to anything else, even if the jersey becomes commercial. Fewer players will bolt to Europe as well. Everyone knows Josh Childress chose Olympiakos over the Hawks because he always wanted to play with a large Citibank advertisement on the front of his chest. But seriously, there is no economic loss for the NBA if it chooses to go this route. Fans will most likely be irritated at first, but once they realize the talent level is the same, they’ll get over it. Therefore, ticket sales wouldn’t decline. The loss of profit on jersey sales due to a change in style will be outweighed by the gain of revenue raked in from the advertisers.

Regardless if the recession turns to expansion soon or not, advertisements on game jerseys will soon blossom. Lets face it, the NBA is a business, and all businesses follow the basic rule of profit maximization. So pretty soon Kobe will have the words Microsoft planted on his chest, LeBron’s will say Crown Royal, KG’s Guiness, and New Jersey will surely have, well, a new jersey. It’s only a matter of time. So if you are a bigot or simply don’t understand basic economics, please don’t hate the player, hate the jersey.