“90% of life is just showing up.”
The current NBA season has been noted more for off-court economic issues than on-court performance. While the league product has been great, with a number of exciting young players and teams, the recession has put a damper on the excitement around it. People are spending less of their disposable income on entertainment, according to a March Zogby poll. Subsequently, NBA teams have faced a noticeable decline in attendance.
Last season, NBA teams averaged 17,520 fans each game over the course of the year. This season, however, the NBA has already seen a significant drop in attendance. Through about 14% of the games this year, the attendance is down 3.5% from last year. This projects to about 750,000 fewer fans over the course of the season. At an average ticket price of about $50, according to the Fan Cost Index, this leads to a $37.5M revenue shortfall. Add another $23 per fan for food, souvenirs, and such, and the shortfall rises to $54.75M. While some teams can absorb these losses, a lot of them are experiencing cash flow problems due to the lower attendance. This precipitated the league to secure a $200M line of credit to allow teams to meet these shortfalls.
This decline in attendance, though, does not necessarily equate to a loss in fan interest. While in-game attendance is down, the television ratings are up. According to Sport Media Watch, the TNT broadcasts of NBA games are up 36% over the same time period last year. Realizing that the NBA likely cannot renegotiate the TV rights deal that they signed two years ago, it needs to find a way to take advantage of this increased viewership to replace the lost revenue of lower attendance. One way might be to increase advertising revenue, due to the increased exposure that sponsors can leverage. Or the NBA could undertake an aggressive campaign to increase NBA TV’s viewership, in order to increase subscription and advertising revenue. However the NBA decides to tackle this problem, the answer could lead to how well the NBA can take advantage of the exciting on-court product it has to offer to increase its fan base.
The league office, however, can only do so much. Individual teams will need to address the issue also. Next week, I will look at some team-specific marketing campaigns to try and overcome the early season attendance and revenue short fall.