NBA: Pro Basketball League for Men Since 1946 - Essay Sample

Introduction

The National Basketball League is a North American professional basketball league for men. It is among the 4 major leagues for sports in North America. It was founded on 6th June 1946 by owners of arenas for Ice Hockey in the Midwest and North East of Canada and the United States. As of 2019, it is headquartered in New York City, New York. Today it is composed of about 30 teams. The most renowned teams include; Golden State Warriors, Los Angeles Lakers, New York Knickers, Cleveland Cavaliers and Toronto Raptors.

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The league is considered among the most prestigious sports leagues in the world. It's no surprise that for years, it has produced some of the finest talents in the Sports world. From early talents like; Wilt Chamberlain, who scored 100 points in a single match in 1962 and Kareem Abdul-Jabbar, who scored over 38,000 points in his career. Arguably the best player of all time. As of today, stars include; Michael Jordan, Le Bron James, Kevin Durant, and Steph Curry. The latter even has a song titled dedicated to him by rappers, Futuristic and Devon Terrell.

The main purpose of writing this report is to take an analysis of monetary issues concerning the NBA. This will include; revenue, costs, and salaries. I will also give highlights on the ranking of top 3 teams and players according to value, net worth, and overall performance. A prestigious sports league like this must raise questions on how much they make and the costs associated with running the league. Let us dive right in.

The net value of an average NBA team is about $1.9 billion as of 2019. This an improvement from the time of founding when basketball was often overshadowed by mainstream sports like; football, which started as early as the times of Ancient Rome and China. The largest team in terms of net worth is The New York Knicks, followed by Los Angeles Lakers and Golden State Warriors as the 2nd runners up.

The net worth figures stand at $4 billion, $ 3.7 billion and $3.5 billion respectively. Operating costs are; $155 million, $147 million, and $103 million in that same order. This generates revenue of $443 million, $395 million, and $401 million for the teams, respectively. This has increased their value by 13, 12, and 11% over the financial year. As you can observe, the bigger the team, the bigger the amounts of money on the line. It is sending a message of 'If you want the high altitude returns, you must go where the eagles dare.'

Investors in these teams in a non-directional description include; known business people and former players like; David Robinson. The venture is giving them a combined profit of over $800 million. This is from just the top three teams. Assuming the rest were making such a return for a trio, in an ideal situation. The result would be a whopping $8 billion+ in profits for the investors. It is no surprise that to most aspiring basketball players, it would be a dream-come-true to play for the league.

The major source of this impressive income is mostly from the attendance by diehard fans of the sport. The average price for a ticket to an NBA game is about $55. Average attendance stands at just over 17, 500 people, translating to over 21 million fans in attendance per season. Thus, the average season rakes in $1.155 billion. Which means an exceptionally performing season would attract a much larger figure. Other sources of income include; sale of jerseys and other gears with team logos, advertisements, etc.

Out of the 3 teams mentioned as examples, two of them are, unsurprisingly, home to some of the highest-paid sports athletes in the world. Stephen Curry, who plays for the Golden State Warriors as a point guard, makes over $40 million in salaries per year. As of today, the highest-paid basketball player is Le Bron James, who plays for the Los Angeles Lakers as a Point guard. He makes just over $80 million (basic salary + corporate endorsements). The highest-paid player in the New York Knicks is Enes Kanter, who makes $18 million per year.

Money is clearly not an issue for these teams. To strike a balance, I will take a look at the bottom three teams in monetary terms and the least paid players. The least successful teams in net worth are; Charlotte Hornets, New Orleans Pelicans and Memphis Grizzlies garnering, $1.25, $1.22, and $1.2 billion in value. The difference in net worth(s) ranges from an all-time high of $4 billion to $1 billion. The margin is $3 billion. It might seem small on paper, but covering just a fraction of that margin is a major resource investment venture.

The cruel truth is that where there are winners, there will be losers. In reference to this, the least paid players in the NBA by name are; Michael Beasley ($777, 778), Mike Muscala ($816,482) and Phil Pressey ($ 816,482). The latter two and 7 others(Chris Babb, Jorge Gutierrez, Carrick Felix, Matthew Dellavedova, Gal Mekel, Ricky Ledo, Tony Mitchell) have the same figure in salaries( 816,482). This makes Michael Beasley the lowest-paid NBA player.

It is noteworthy to say that the size or net worth does not necessarily translate to better or poor pay. For example, Michael Beasley, the lowest-paid player, plays for Miami Heats, a giant team that is among the top 10 richest teams in the NBA. On the other end, Lebron James, the highest-paid player, used to play for the Cleveland Cavaliers in the year 2014-2018. It takes the 25th position in the ranks of the wealthiest. As you can see, the salary does not depend on net worth alone. Other variables are at play.

The major determinants of the paycheck level of a player include; talent and skill-set, experience, investor policies, number of fans, etc. The first two are the most obvious. They are the reason(s) why the salary that Michael Beasley or Phil Pressey get is a far cry from that of LeBron James or Steph Curry. Players' overall value is placed on how much they can do to help the team win a game and a league title. After all, the main aim of any game is to beat your opponent.

LeBron James and Steph Curry have been named the most valuable players and have won multiple awards and championships for their teams. This translates to a fat paycheck. However, this does not come easy. With money comes power and fame. But also 'With great power, comes great responsibility.' The players have to practice to sharpen their skillset and keep winning regularly. Most of the hard work is backstage (rigorous training at the gym) to improve physical prowess (agility and speed). It's not a walk in the park to achieve greatness.

Funds are necessary to run any sport. The material needed includes special training equipment or gear, clothes (jerseys), overhead costs (water, electricity, transport), salaries for players, venue or court (arena) maintenance, etc. Just to give you an idea, it costs around $60.5 million to run an NBA team per year on average. That translates to a staggering $1.8 billion to run all the 30 teams on the list.

The bigger the team, the higher the costs associated. Earnings from tournaments are not the only source of income. Behind the scenes, is a group of rich but often soft-spoken investors both as individuals and corporate endorsers. For example, the Buss Family is the owner of the Los Angeles Lakers. They together with sponsors like; Adidas, Toyota, Lexus, and Beats By Dre provide additional funds in the form of investments.

Golden State Warriors get corporate sponsorships from; Meyers Construction, Jacob Davis Real Estate, KENDA(rubber manufacturer), and Chabot College. The team is owned by businessmen, Joe Lacob (majority shareholder), and Peter Guber. The combined financial aid helps to run the $3.5 billion team. New York Knickers, is run by the efforts of James Dolan, CEO of Madison Square Garden and owner of the team. Corporate sponsors for the $4 billion sports juggernaut include; Coca Cola, KIA Motors, JP Morgan Chase, and Boost Mobile.

The most profitable of the thirty teams are the New York Knickers, Los Angeles Lakers and Golden State Warriors, this is according to Forbes. Return on Investment (ROI) is looking good for the investors. The three teams each delivered a net profit of $288 million, $248 million, and $298 million, respectively. Note that, the Golden state warriors are the highest-grossing in profit yet not the highest on the ranks.

Revenue is not only from the two sources expounded on. Other sources not mentioned include; Real Estate e.g.5- star lodges that bring in rent payments. A good example is the New York Knickers, which makes up to $1 million per year in its luxurious situated smack in Manhattan. A large portion of their money also comes from television programming, e.g., Knicks Fans TV on YouTube and other networks.

Digital media and Local Media rights have added to the net profits for these teams. For example, through their highly sought after Coach Steve Kerr, the Golden State Warriors have sent their earnings sky-high. Los Angeles Lakers have made over $100 million from the local fan base and from the local media rights. Others like the Boston Celtics have signed lucrative deals to increase brand awareness for General Electric Ltd, which pays them over $7 million per year. This is by simply putting the Company's Logo on their jerseys.

The Philadelphia 76ers, through its owners, David Blitzer and Joshua Harris, has come up with a revenue optimization strategy known as 'the process,' which has seen the team improve their overall income. Not forgetting, the advertisement royalties imposed on various products like; shoes (Adidas, Puma, Nike), gym accessories (headbands, wrist wraps, elbow wraps (used by players), etc. This is also how the high profile players also make an extra buck, e.g., of the $80 million LeBron James makes per year, $55 million is from advertisements for various companies.

Ideal situations are rare. If any, they are short-lived. From all the impressive numerical figures, one might think it's all roses for the NBA. This could not be further from the truth. There have been major financial crises and issues in the NBA. This has taken place at an individual team and league level. I will focus on the team examples of; the Houston Rockets and the Toronto Raptors .