Local TV Revenues Help Explain NBA's Out-Of-The-Blue Decisions
Imagine when that New Orleans-area car dealership initially heard of the trade that would send big NBA star Chris Paul from the New Orleans Hornets to the Los Angeles Lakers. This car dealer probably had a media schedule this season on the New Orleans Hornets cable channel, Cox Sports Television, radio outlet KMEZ, or both. "Oh, no. Might have to adjust those media buys now."
But wait. Maybe things aren't so bad after all. NBA commissioner David Stern stepped in to kill the deal.
Why? The theory is that this kind of trade hurts smaller NBA markets like New Orleans, while boosting bigger markets like Los Angeles. It could have been New York, Boston or Chicago. But it's not just small market teams that get hurt competitively -- it's those small market local advertisers who depend on strong local media platforms.
But this sends a signal that any independent businesses owning sports teams -- at least in the NBA -- aren't truly independent when it comes to making personnel decisions. (The NBA is in the unusual position of owning the New Orleans team -- so how a decision was made to trade Chris Paul to the Lakers to begin with is a mystery).
Sports leagues like balance -- and unpredictability. In theory, some of this balance gets addressed between seasons: The worst teams always have the better chance of getting amateur athletesthrough a draft.
This helps teams and their leagues to achieve some balance -- as well as giving regional cable networks, TV and radio stations and high-paying local marketers a chance to get gain big viewer and fan interest.
But you can go only so far.
Smaller market owners sided with Stern's decision. The issue was at the root of the league's postponement of the season due to that prolonged, sometimes nasty labor/owner disagreement.
Whether you are a team owner in Sacramento, Oklahoma City, Salt Lake City or New Orleans, you are trying to hold onto your growing stars -- many of whom, with plenty of money in their pockets, eventually seem to want to move to a big stage, where bigger TV marketing potential is in their interests.
No team owner -- or surrogate owner -- wants to see lower team values due to lower TV ratings, and thus lower advertising revenues. Increasingly, sports clubs -- especially in the NBA -- have been claiming poverty. Many say they are money-losing operations partly because of big-star talent migration.
Nothing in business is a guarantee -- unless of course a particular sports league claims it is a single autocratic operation that can decide when and where to move its employees to serve its business/marketing/advertising needs.
But that doesn't sound like a fair, or interesting, game.