NBA Financial Doom: Two Related Stories and What They Mean to Fans

The economic conditions that are affecting most Americans will (if they haven't already) affect the NBA and its teams.

There are several teams that have elected to accept the Association's offer of financial support in order to survive, and many others are sensing the pending economic troubles and are cutting costs at a frantic pace.

Logical trades that would help teams on the court now and in the future have not happened because of the financial burden. One need only to look at the botched Tyson Chandler trade as an example of two teams (the Oklahoma City Thunder and New Orleans Hornets) looking at their budget as opposed to putting the best teams possible on the floor.

For years, the league has had a robust bottom line, with grown predicated on corporate sponsorships resulting in advertising and luxury box sales. In most cases, teams have responded by constructing "state of the art" arenas and accommodating big budget companies and marketing opportunities, often at the expense of fans, who were pushed further from the action. Premium seating and front-row seats were sold first to "VIPs" or were priced too high for most fans.

Put simply, much of the expansion of the NBA in the past years was at the expense of the fan. But now that the the growth has become shrinkage, how are teams and the NBA going to respond?

The difference between expected income and the harsh new reality has to be made up somewhere, or situations like the Pacers' will become more common:

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"The Pacers and the Capital Improvement Board struck their current deal 10 years ago, and Early said they are in the early stages of renegotiating. He said the board can’t pay the operating cost because it already faces a $43 million shortfall, and he’s unsure who would.

"'That’s the big question,' he said. 'Really, we do not have the funding sources to allow us to be able to do this. We’ve contacted the state, the Legislature...we’re trying to figure out, are there solutions?'"

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The Pacers' response is typical of companies in crisis; looking for loans and/or government bailouts in order to stem the tide while attempting to operate with a "business as usual" attitude seems to be the norm.

But the reality of the situation is that "business as usual" will not do. The times are changing, and the NBA will have to make adjustments immediately in order to survive.

According to the Marketing Vox article linked to above, some startling information about corporate involvement with sports is being discovered:

"- Nearly one-third (32 percent) of American consumers are paying "less attention" to corporate sponsorships than they were a year ago.

- The vast majority of those polled would like to see less spending on sports sponsorships by companies experiencing difficulties (62 percent), according to a Performance Research study (via MarketingCharts).

- Consumers think that companies accepting federal bailout money (68 percent), in particular, should spend less on sponsorships, the research found.

- Results indicate that this expectation is in keeping with consumers' own behaviors, with the majority of respondents saying they are less likely to purchase a ticket for a favorite sporting event (67 percent), purchase a ticket to a favorite performing arts or cultural event (64 percent), or donate money to a favorite cause (55 percent) than they were a year ago.

- Only 13 percent say that increased sponsorship of their favorite sporting event would raise their opinion of corporate America, while 26 percent reported decreased sponsorship would raise their opinion (61 percent say that an increase or decrease would make no difference).

- Twenty percent say that sponsorship of their favorite cultural event should increase to raise their opinion of corporate America, while another 20 say it should decrease.
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The decreased spending on sporting events runs slightly antithetical to typical recession-spending models. While guns (up 15 percent, according to the NRA), alcohol (up 10 percent), and pornography have all seen their usual increases (these being popular diversions in economic crisis), people have not been using games as an escape.

Many teams ignored their fan base in exchange for corporate dollars, decreasing access to players except in the most media-staged events. Now the relationship is changing, as teams are starved for the fans' dollars, and the above numbers suggest that they may not show up to watch games

Further, with the rise of the internet, digital cable, satellite TV, and the access to instant information, it is realistic that fans can watch any game at any time.

So why would they go to the games and pay the price when you can watch games from the comfort of your home for 100 times less money?

The problem with the current NBA marketing is that they have standardized it for all teams, and that has made it boring. The NBA commercials are fun once but quickly become repetitive and droll. Individual team messages are "cookie-cutter" and typically lack imagination.

Here is what I think the NBA fan is going to see more of if the NBA and its teams want to save themselves:

- There will be a greater personal relationship between the players and fans, and this will inevitably lead to a greater emotional connection between fans and the NBA. It is the only way to keep fans coming to the games.

- We are going to see more web-based interaction, such as players on Twitter (ala @the_real_shaq), personal websites, blogs, and perhaps more webcasts. This is a low-cost way to meet fans in a virtual environment, essentially going to where the fans are rather than attempting to bring them to where the teams are.

And that's a central tenet of marketing: find a need and fill it. Fans want to know their players and they're online, so why shouldn't they meet there?

After all, it was the rise of players as individuals and the subjugation of team identity exemplified by free agency that saved the NBA in the 1980's, so why wouldn't the same thing happen today? Personal interaction plus new media is the solution.

- I think we are going to see more "outside-the-box" marketing efforts aimed at increasing the interaction between the teams and the fans, with a specific attention to the player-"true fan" relationship. Perhaps not Bill Veick-style, but something that breaks the NBA template. With one club's success, other teams will follow suit and break the current marketing vortex.

- Possible deregulation could occur so that teams can have stock offerings. Deregulation could lead to individuals as holders (ala the Green Bay Packers of the NFL), which would give the fans a direct voice.

Sure, the Packer comparison is slightly skewed, seeing as how Packer stock owners don't have a vote; but they do have a voice and regular meetings at which they can hear the state of the organization and interact with management.

Now that teams have to listen to their fan bases, it will be interesting to see what types of interaction arise. It is about time that we, the fans, have a voice, especially after being priced out and seeing management and organizations seemingly purposely angering us (I'm looking at you, L.A. Clippers!).

The relationship has changed and those teams that want to survive will have to turn to the fan or succumb.

In support for my editorial, I used two recent articles dealing with the state of sports business:

"Pacers could move if financial losses continue"

"Consumer to Troubled Companies: Stop Sponsoring Sports"