Friday, July 1, 2011

Now NBA players are locked out

The NBA and the NBA Players Association failed to reach agreement for a new contract last night and, as a consequence, the league has suspended operations.  In essence the owners have gone on strike. 

At the surface this seems very much like the NFL situation.  Both leagues are coming off highly successful seasons with all-time highs in revenue, attendance and TV ratings.  There is one critical difference.  The NFL is highly centralized and distributes all national TV money equally across the teams.  The NBA has national TV contracts but each team also has its own local TV contract.  There are way more eyeballs in LA, Chicago and Boston than in Oklahoma City or Memphis, thus resulting in sizable disparities in team revenue. 

Although I remain optimistic about an NFL settlement in the not-too-distant future (see previous blog post), there are most likely some NBA teams in smaller markets that will lose more money under a business-as-usual labor contract than they would if there were no season at all.  To use MBA 505 lingo, total revenue is less than total variable costs.  So maybe the Bobcats' season starts on time, maybe it doesn't. 

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