Maybe the NBA is Just Really, Really Bad at Business

Last week, Trysta Krick and I had a conversation about the idea that the WNBA is losing money (which you can now see on Youtube).

Unlike certain New York reporters, Trysta finds the idea to be preposterous.  In fact, Trysta has noted that it is not a coincidence that the New York Post reports that the WNBA is losing money just days before the WNBA players opt out of a collective bargaining agreement because they want to be paid more money.

Of course – if you have read Slaying the Trolls – I obviously agree.   And I as I detailed a few days ago, the NBA has a long history of claiming it is losing money.  Just to review…

• the NBA made this claim in the early 1970s when it wanted a merger with the ABA

• the NBA made this claim in 1983 when they wanted a salary cap

• the NBA made this claim in 2011 when they wanted the players to take a pay cut

Trysta and I suspect that the NBA has made these claims because they want a better deal with their players.  If the NBA can convince people they are poor, the players are more likely to accept less money.  And across the NBA’s history, this strategy has definitely worked!

Consequently, when the NBA tells the New York Post that the WNBA is losing $40 million per year, there is reason to think (as Trysta and I have said!) this claim was made because the NBA knew WNBA players were about to opt out of their collective bargaining agreement and demand more money. 

But if that is true, then the NBA – for all these years – has been lying! 

In general, when you tell people you think they are lying they get a bit upset.  So, maybe we should avoid making this accusation and go with the other story that fits these claims. Maybe what we should say…

The NBA is just really, really bad at running a sports league!!!

Here is how that argument would work.

In the early 1970s the NBA was about as old as the WNBA is now.  And at that time the NBA claimed they were losing money.  In the early 1980s the NBA was in its late 30s.  And again, the NBA claimed it was losing money.  In 2011, the NBA was 65 years old.  Even in this very mature professional league, the NBA claimed it was losing money.

It really does seem quite difficult to lose money in a mature sports league like the NBA.  As I note in my textbook, the NBA has received billions of dollars in taxpayer subsidies to build their facilities.  They have numerous caps on player pay to control costs. 

And then there is the nature of consumer demand in sports.  The customers in sports are called fans.  “Fans” is short for “Fanatics”.  To put it simply, sports customers are basically addicted to the product.  If the team wins, fans are immensely happy.  If the team loses, the fans are obviously sad.  But here is the important difference between sports and every other product.  When a sports team makes its customers unhappy, most of the customers don’t abandon the product.  To illustrate, the Detroit Piston last won a playoff series in 2008.  After 16 years of losing basketball, attendance for the Pistons is still 82% of what it was when the team was good!

But even if the Pistons suffered more losses at the gate, the team would still likely be doing very well financially. All the teams in the NBA share a very lucrative national media contract.  This means even if your team is persistently bad, the team can still survive financially.

With huge subsidies, significant controls on worker wages, addicted customers and shared revenues; it is hard to believe anyone could be losing money.

Yet, the NBA claims persist.

Now they say the same thing about the WNBA.  The WNBA has seen revenue grow from $100 million to $200 million from 2019 to 2023.  This year the revenues have grown even more.  Despite a massive increase in revenue, the NBA actually claims the WNBA’s losses have grown from $10 million to $40 million. As Trysta says, that doesn’t really make sense. 

But maybe it does. Maybe the NBA is telling the truth. And that means, maybe the NBA is just awful at running a business.  Maybe the men running the NBA were given a business with exploding revenues and they still figured out how to lose money.

After all, James Dolan – current owner of the Knicks – once owned the New York Liberty.  As the owner of the Liberty, the team – very much like the Knicks under Dolan – never won a title.  In 2019, the Liberty were playing in a tiny arena in Westchester, New York and averaging only 2,239 fans per game.  

Dolan then sold the Liberty to Joe and Clare Wu Tsai.  Just five years later, the Liberty are averaging 12,729 fans per game and were recently handed a title by the referees (okay, I am a Lynx fan!).  

Dolan could have done the same thing that was done by the Tsais.   But he didn’t.  He probably could also build a title team with the Knicks in the NBA.  But  he hasn’t.  How do we interpret these failures?

It does seem obvious that Dolan just isn’t good at his job.

And maybe he isn’t alone. Maybe the NBA really did lose money in the early 1970s.  And then in early 1980s. And then again just 15 years ago. 

Just maybe, the NBA is populated by immensely honest people who just can’t figure out how to make money in a business that seems set up to make money.  

So, just maybe, we shouldn’t say they aren’t telling the truth.

Maybe we should say every time the NBA claims the NBA and the WNBA isn’t profitable:

We believe you! So, why are you so horrible at business?