While Major League Baseball (MLB) is declining in popularity and the National Football League (NFL) is plagued by safety issues, the National Basketball Association (NBA) continues to shine, with the NBA focusing on expanding basketball audiences abroad, particularly in Europe and China, which are helping to drive growth.
On the world stage, basketball is second only to soccer in popularity. With the expansion in viewership, the NBA's revenue has increased significantly. The average NBA team is estimated to be worth $3.85 billion. Forbes' is estimated for late October 2023. That's about a 35% increase in one year. The Golden State Warriors alone made $7.7 billion during the 2022-2023 season.
Basketball-related revenues include broadcasting rights, advertising, merchandise sales, concessions, etc. The NBA has contracts with ESPN and Turner Sports for US broadcasting rights, and is expected to earn an average of $2.66 billion per season through the 2024-2025 season.
Key Takeaways
- Broadcast rights are the main source of revenue, currently bringing in an average of $2.66 billion per season.
- The licensing agreements also include a $1 billion deal with Nike for branded basketball shoes and apparel.
- International interest in basketball is on the rise.
Basketball-related income
Most of the revenue generated by the NBA and its subsidiaries is classified as basketball-related revenue (BRI), which includes ticket purchases and concessions, broadcasting contracts and merchandising rights from the sale of jerseys and apparel.
The BRI does not include revenues paid to expansion teams, fines assessed during the season or revenue sharing.
Because the BRI contributes to salary cap calculations, revenue sharing should be excluded from the BRI because it provides an economic advantage to large market teams. If the highest revenue generating teams, such as the Los Angeles Lakers and New York Knicks, were to push up the salary cap, forcing smaller market teams to spend exorbitant amounts to retain players, this would lead to an unsustainable system and economic disparity between franchises. For this reason, revenue sharing is not designated as basketball related revenue.
TV Contract
Television ratings across the board have been steadily declining over the past 15 years due to competition from streaming services, but live sports has been largely unaffected by this trend, with networks paying huge fees to hold the rights to broadcast these matches.
The NBA is currently nearing the end of a nine-year, $24 billion media rights deal with ESPN and Turner Sports announced in 2016 that will pay the NBA a total of $2.66 billion per season. A previous deal signed in 2007 paid the networks $930 million annually.
The deal expands ESPN's television, digital, highlight, audio, data and international NBA rights. Games will air on ESPN and TNT through the 2024-25 season.
Ticket sales and concessions
While ticket sales are not the team's primary source of revenue, they remain a significant source of income for the team. The Chicago Bulls, who consistently have the highest attendance in the league, averaged 20,624 fans at home games in the 2023-24 season.
The New York Knicks once had the most expensive tickets in the league, but now the Golden State Warriors have the highest ticket prices, followed by the Los Angeles Lakers. The Knicks still sell the most expensive tickets in the league, and maintain their position as the third most expensive ticket holder.
You can also look at the Fan Cost Index (FCI), which is how much it costs for a family of four to attend an NBA game. This metric includes the cost of tickets, concessions, and parking. According to Chicago sports business firm Team Sports Marketing, the FCI for a 2023 NBA game was $444.12.
Licensing and sponsorship
The NBA and Nike signed an eight-year, $1 billion deal for branded basketball shoes and apparel that begins with the 2017-2018 season. This marks a 245% annual increase from the company's previous deal with Adidas.
The Nike brand accounts for an estimated 90% of basketball shoe sales in the U.S. Many of the NBA's biggest stars, including LeBron James, Kevin Durant and Giannis Antetokounmpo, have lucrative endorsement deals with the world's largest shoe and apparel companies.
When you attend an NBA game, you'll see sponsor and brand signage all over the arena. For the 2023-2024 season, the NBA generated a record $1.5 billion in revenue from these corporate sponsors.
Banks and financial services companies are the biggest spenders, but technology companies are also increasingly partnering with the NBA.
Revenue sharing
Like the MLB and NFL, the NBA operates a revenue sharing system. As previously mentioned, revenues from this system are not included in basketball-related revenues.
The NBA's revenue sharing addresses the unfair situation between small and large markets by having all teams pool their annual revenue and redistribute it from the higher-revenue teams to the lower-revenue teams. This way, each team receives an amount of revenue equal to the salary cap for that year.
To reap the full benefits of revenue sharing, the revenue structure would require small-market teams to generate revenue equal to at least 70% of the league average.
The salary cap for the 2023-24 season will be $136.02 million per team.
International growth
As more international players appear on NBA rosters, the sport's global popularity is growing.
On opening night of the 2023-2024 season, 125 international players from 40 countries were on team rosters, including two-time NBA MVP Giannis Antetokounmpo of Greece.
As these numbers continue to grow, the NBA will likely turn to international markets to boost its media coverage and merchandise sales, and we may even see a European-based NBA team in the near future.
What is America's favorite sport?
Sorry, NBA. According to Gallup, American football has been America's most-watched sport since it first surpassed baseball in 1972. Basketball and baseball are currently roughly equal in popularity.
Are NBA games broadcast overseas?
NBA games are currently available in 100 countries through the NBA's agreements with broadcasters such as Sky Deutschland and DirecTV.
When was the NBA founded?
The NBA has its origins in the founding of the Basketball Association of America in 1946. In 1949, the organization merged with the National Basketball League and was renamed the National Basketball Association.
Conclusion
The NBA has garnered attention both domestically and internationally, and has seen its popularity and revenue streams grow rapidly over the past few years. With television contracts worth $24 billion, a Nike contract worth $1 billion, increasing corporate sponsorships, rapid international growth, and an average NBA team value approaching $4 billion, the NBA has firmly established itself as one of the largest and most valuable leagues in global sports.
