Thursday, February 27, 2014

Economics Affect the NBA

Trevor Raasch
Mr. Reuter
Economics
24 February 2014

Economics affect the NBA

Although some may not recognize it, economics plays a huge role in all professional
sports, especially the NBA. The National Basketball Association is a lot different from most
American sports, the National Football League, Major League Baseball, and the National Hockey
League.

Competitiveness is what drives all sports; everyone wants to win. In professional sports the best
way to win is have to the best players, obviously. In order to acquire these all­stars, the owners
of the team must first look at the opportunity cost of each player and then, if willing, pay the price;
the best players typically go to the team that will pay them the most. The buying, selling, and
trading of players affects the NBA more than any other sport. Good team owners recognize the
economic boost that a certain player or players  can bring to a city. Take Lebron James for
example. He is one of the greatest to ever play, and he recently made the decision to sign with
the Miami Heat. The impact that one player had on an entire city’s economy is insurmountable.
Micky Arison, the owner of the Heat, made a very smart move to not only sign Lebron James but
another superstar, Chris Bosh. Miami Herald of Today’s reported that, “with the signing of
LeBron James, who is a "walking, talking, free­throw­shooting stimulus plan," the Heat will earn
more than $10 million or more in playoff revenue alone” (Herald). That is an unreal boost to an
economy, and that’s only the playoffs and only one player.

These economic times have been tough and they have deeply affected roster sizes. General
managers have had to cut or release players simply because they do not have the money. In the
NBA you are allowed 12 active players and three inactive or hurt players. In recent years nearly
every team has been able to fill up all 15 slots, however with the tough economic times, GM’s are
realizing that it might be more beneficial to leave a couple open slots. Mark Warkentien, the
Denver Nugget’s vice president of basketball operations, voiced his opinion about the decreased
roster size, “There’s an obvious economic benefit, I’m not going to deny it. The compelling
reason is the flexibility” (Warkentien). The economic benefit that Warkentien was talking about is
the fact that with open spots in the roster allows for more money to be spent. More money for a
team gives them a greater chance of signing a superstar to bring in all sorts of economic
benefits. The flexibility is also huge because 15 is the maximum amount of players allowed  on a
team; if spots are open, these high caliber players can find a place to fit in. All the greatest
general managers weigh the marginal benefit versus the marginal cost before signing a player.
Micky Arison knew that the benefit of signing Lebron James and Chris Bosh would easilyoutweigh the cost and look at Miami’s economy now.

Economics can affect all aspects of life, especially businesses. The NBA just like the NFL, the
MLB, and the NHL are all businesses and economics creates a great impact.

10 comments:

  1. When reading your post I never looked at the NBA in that view point, never seeing it as a business just as a sports team. I never understood who something as simple as a player leaving would affect the economy. Yet if the state new that losing a player would change a large amount of the economy wouldn't they have tried to pay more to keep that player to keep the economy growing with the fame and attraction that player brings?

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  2. I never really looked at the NBA like this. Each city makes so much money depending on who is on there team. If a city has a good team then everyone from that city will buy tickets to see a game. Ticket prices will raise and the team/city will make a lot of money. Having sports teams in your city are just ways to make more money and develop the city's economy. I cannot believe Lebron brought around 10 million dollars alone to Miami.

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  3. Very interesting topic, never really thought about the NBA rosters that way. It would make more sense to keep the 12 players and keep three extra slots open so that you would be able to sign all star players. But in the NBA most all star players only go to big city names like New York, Miami and Los Angles. Lebron James wouldnt come play for the Bucks so the smaller cities are at a disadvantage to begin with.

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  4. This is exactly what the people not supporting the Bucks to stay in Milwaukee need to see, how much a team can impact the cities economy. Now that the Bucks are poised to pick a star player in this upcoming draft, the same economic impact could happen for the small market of Milwaukee that it has had upon Miami.

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  5. When people think about major deals in sports history, the first thing that comes to mind is the salary which the player is earning. Many people forgot all the benefits the teams reaps from a economic standpoint when the new best player is signed. When rookies come into the NFL and become sensations, there jerseys goes up. Last year some of the more popular rises including Russel Wilson, Richard Sherman, and Colin Kapernick. A few years ago these names would have been indifferent in the veteran owned jersey market, but with the recent rise of the young guns the jersey sales has shifted. This brings up the question of what effects other sports have when certain deals occur. Also the effects of endorsements and how much money certain people get for that as well.

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  6. Wow, I never realized how much a player can affect how much money a team can have. When Lebron was in Cleveland; he not only brought his extreme athleticism, he brought a lot of revenue to the team and to the city. I never realized that Lebron brought so much money to Miami in terms of playoff revenue. With the signing of the big 3, Miami brought in so much star power, it was certain that they were a powerful team and with that powerful team, the franchise would get a ton of money in terms of ticket sales, and ultimately a rise in their revenue because of their investment. But all in all, I never realized how much impact 3 athletic players can have on a city and a franchise.

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  7. Personally I think that the NBA's view on economics is kind of screwy. Unlike the NFL they do not have a hard salary cap. Teams, like the Miami Heat, are just able to spend ridiculous amounts of money on really good players, and then have unfairly stacked teams. The NBA did impose a luxury tax, which fines the teams heavily, every time they go over the cap, but teams, such as the Nets who recently signed a ton of high quality players over the off season, do not care about this tax and just continue to blow their money.

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    Replies
    1. I agree, I think that NBA should also have a hard salary cap. This would prevent teams like the Miami Heat and the Brooklyn Nets from spending abnormal amounts of money on players. This would also give smaller teams like the Milwaukee Bucks, a chance to sign an all star player. This would also help the overall economy of the NBA because they would have an equilibrium.

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  8. I think it's crazy how a single player can effect a city economy. As one of the best players to ever play, LeBron James brings in so much money into Miami. That's why Milwaukee has a problem with not bringing any money because there isn't a "star" player that everyone wants to see and buy apparel. I think if the Bucks draft a key player this up coming draft which they should have no problem doing, they will see a increase in how many tickets are being sold along with the money coming into Milwaukee.

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  9. For as much money as the Miami Heat make, it is all because they have three star players who are better than any other 3 players on one other team. Not only that, but they have the face of the NBA in LeBron James. He alone could make a franchise tons of money, like he had when he played for Cleveland. With him being one of the most popular players in the league, he creates more money for a team. Along with that it affects the amount of money that he makes from salary. Even though the Heat are millions of dollars over the luxury tax, this does not affect that they can re-sign any one of their players to a max deal. They can be able to keep all 3 players on the team for the next 5 years and still be way over the luxury tax. This just means they won't be allowed to spend big money on another big name free agent, but they can sign a player to the league minimum, which is around $550k. This is the problem the Bucks have. The Bucks have a small market, and no star players. This means there is little to no chance that a star player would want to play for them, and the only way the Bucks can get a star player is through the NBA draft, in which there are no guarantees in how good the player will be.

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