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Raising the NBA 'net'
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November 5, 1997: 1:14 p.m. ET
Basketball is bigger money than ever, but rising salaries penalize earnings
From Correspondent Casey Wian
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LOS ANGELES (CNNfn) - As the 51st season of the National Basketball Association gets underway, the courtside questions are the eternal ones: Will this be Michael Jordan's last year in the NBA? Can the Chicago Bulls repeat as champions?
Off the court, however, the talk is of finances. Although the NBA is still in better financial shape than any other professional sports league, staying on top this year will be tough.
By most accounts the NBA is a financial slam-dunk. It is expanding internationally, on the Internet, and among female fans. The average NBA franchise is worth $150 million and the league brings in $3 billion in merchandise sales alone.
The NBA also has three new corporate sponsors, and the next television deal is expected to double in value for the league. On top of all that, attendance last year was the highest in history.
Rick Welts, NBA chief marketing officer, explains that the league has "every reason to believe that at least over the next four years, revenue for the NBA is going to remain very, very strong, even better than it is today. Unfortunately, that's being balanced and in some ways overly balanced by the cost of doing business."
In other words, player salaries.
At least a third of the NBA teams lost money last year. The reason, says the league: contracts like the $126 million six-year deal recently signed by 21-year-old Kevin Garnett.
Several other salaries have topped the $100 million mark. However, the NBA Players Association says nearly 40 percent of all NBA players earn only the league minimum, about $250,000 a year.
"We had over 106 minimum-salary ball players a year ago," explains Billy Hunter, executive director of the Association. "And we anticipate that [percentage] is going to rise. . . . There's a schism developed between those players earning substantial incomes and those players who are at the bottom."
Hunter wants the league to do away with its salary cap and hopes that the NBA will renegotiate its collective bargaining agreement after this season. Although the league ownership is expected to follow through with this game plan, players are not expected to be so receptive. Consultants are already warning that a possible strike or lockout could result.
And a strike could be devastating. "Continuity with the sponsorships is critical," says David Carter, sports management consultant. "The brand equity that the league has put together with its corporate partners, the overall international growth of the sport -- they're hitting on all cylinders, and to have anything take attention away from their growth is going to be very detrimental to them."
Carter believes that the two sides will come to an agreement without having to stop play in mid-season. With $1.7 billion in non-merchandise revenue at stake, there's plenty of incentive on all sides for a deal.
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