How would an implosion of cable revenue affect the NBA?

by on May 5, 2017 at 2:08 am in Economics, Sports, Television | Permalink

That is the topic of my latest Bloomberg column, here is one bit:

The decline of TV revenue is not the same as a decline of interest in the sport. NBA basketball is alive and well; it’s just that more people are cutting the cord on cable. They still might follow the NBA through its website, or watch highlights on YouTube, or share gifs on Twitter.

That shift is likely to favor the stars and the most athletic players, because they are more likely to be featured in very short clips. As for the incentives, player salary will matter less, and the desire to become famous on the internet — and thus win lucrative endorsement contracts — will discourage team play. Expect more attempts to produce spectacular sequences, even if that doesn’t always translate into wins. “Boring” but fundamentally sound teams — which are better to watch for a 2.5 hour game — will be disfavored by this trend. Sorry, San Antonio!

Here is another:

Another possibility is that the NBA will consolidate with fantasy basketball and video gaming to augment their revenue. The NBA already has plans to introduce an e-sports product. More speculatively, if more states legalize sports gambling, the league could enter into a revenue-sharing agreement with casinos or bookmakers. Imagine redesigning the playoffs to maximize the number of decisive games and thus boost betting interest — that could mean more but shorter playoff series. At least the fantasy component of such a basketball conglomerate might redistribute some of the attention back to players who are not superstars. Gamblers also tend to be well-informed about the teams they bet on, so this direction could encourage a smarter NBA, better designed for the nerds and fanboys.

Do read the whole thing.

1 prior_test2 May 5, 2017 at 2:31 am

Public spectacle is never going away, merely its forms change. And hard as this might be to grasp for a terminal stage boomer, TV has been dying for quite a while – after sports, there is pretty much nothing else left to milk money out of a mass advertising and/or mass subscription based system.

2 Mark Thorson May 5, 2017 at 9:50 am

Yes, and it’s not just cable. The end of over-the-air TV is in sight. The telecoms want that spectrum, and ultimately they will get it. I know OTA TV is on the way out when I see commercials for cheap crap (the sort of thing that would only air on UHF channels during the analog era) airing in primetime on major channels. Americans know what I’m talking about — the expanding hose, meatloaf pan, etc. I haven’t seen Flex-Seal or the Red Copper pan there yet, but that will be the signal the end is nigh. You can’t run a major network on that kind of advertising.

3 Floccina May 5, 2017 at 10:27 am

+1 I agree TV is dying. since it is now possible to watch things when you want and things with much narrower appeal. I love to read MarginalRevolution.com but to the average Joe it’s more boring that the San Antonio Spurs.

BTW I think Popovich’s success is built on focus on good shooters with soft touch and improving shooting and keeping the players together for a long time so they know each other well.

4 Amigo May 5, 2017 at 3:38 am

I’d be interested to hear Netflix’s estimate of viewers willingness to pay for an NBA subscription (or a team subscription), and what it would be worth if they included it as an option. With and without the advertising.

Sports run the risk of slowly dying for cord-cutters, and the leagues need to find a way to connect better with the customer who only streams.

5 Axa May 5, 2017 at 5:41 am

You can pay for NBA season package or single game access……..in China. https://www.si.com/tech-media/2016/10/14/nba-china-nba-league-pass-fans

6 Other derek May 5, 2017 at 11:15 am

I’d say sling’s $20/mo is about right. I signed up for the playoffs, though I will not keep for non NBA programming or even the limited selection of national games during the season, so their price is pretty close to my value of the product.

7 Amigo May 7, 2017 at 1:04 am

Sorry for late reply. But can you stream, or is live only broadcast (with commercials embedded)?

My limited with Netflix and Hulu says there’s a market for ad-less streaming content.

8 JCC May 5, 2017 at 4:12 am

What stops ESPN from having a Netflix like app/service? Smartphones, tablets, computers and smart tv usage to get typical tv content is growing and there is no indication that its popularity is going to fade anytime soon.

9 Axa May 5, 2017 at 5:57 am

Why pay a middle man if you can buy directly from the content generator? https://watch.nba.com/

10 Hoosier May 5, 2017 at 7:27 am

NBA league pass costs well over $100 I believe. Only your hard core fan are going to buy that. I agree with Tyler that the leagues will find it hard to recoup the broadcast and cable revenue. TV is going the same way as music with a more fragmented marketplace and less money for everyone.

11 Slocum May 5, 2017 at 10:16 am

Live sports is really the only thing we watch on cable now, yet we’re paying Comcast almost $100/month just for TV. A few hundred $$ a year for live sports streaming would be far cheaper and we’d be able to watch the teams we actually care about (which mostly aren’t the local ones). So we’ll be cutting the cord as soon as I can convince my procrastinating wife to make the call (the account is in her name).

12 JCC May 9, 2017 at 10:58 am

That looks like the future.

13 Axa May 5, 2017 at 7:45 am

Prices depend on your location around the world. It appears to me as $80 the whole season, and $10 for each game.

Assume you go to a bar with some friends to watch a game, those $10 are recovered in the 1st round.

14 Hoosier May 5, 2017 at 9:16 am

That’s still a small segment of the market. People are way underestimating the number of casual fans. The super bowl is pretty much the only “must see tv” that’s left.

15 chuck martel May 5, 2017 at 6:35 am

How about a service that broadcasts only the free throws of every game?

16 clamence May 5, 2017 at 10:29 pm

That already exists, it’s called the Houston Rockets

17 FE May 5, 2017 at 6:51 am

Yet it used to be common for economists to tell us that cable bundling was welfare-enhancing and that unbundling probably wouldn’t save consumers money. How to explain cord-cutting then?http://marginalrevolution.com/marginalrevolution/2013/05/bundling.html

18 Hoosier May 5, 2017 at 7:33 am

I think he’s saying it won’t. Hence the competition getting fearcer for eyeballs and only the big names/teams being able to thrive. The casual fan doesn’t watch games on the internet or care much about highlights. They’re going to have to cater to those with deeper interest and knowledge of the game- same thing that’s happened to music and food.

ESPN might have screwed up big time in pricing out more and more casual fans who are cutting the cord.

19 walt May 5, 2017 at 7:47 am

/>/ ” Yet it used to be common for economists to tell us…”

It is very important in year 2017 for economists to tell us (speculate) about professional sports distribution channels and revenues — because economists have so successfully resolved all the big issues in economics and national economies. We marvel at the broad consensus now achieved by the economics profession on all major economic principles and issues; they can now focus on minutiae to tidy up everything.

20 rayward May 5, 2017 at 7:28 am

Forget the NBA, it’s college football that could be fundamentally changed by the collapse of revenues at ESPN. For those who don’t follow college football, most of the televised games (and there are a lot of them) are on ESPN. Indeed, the ESPN broadcast on Saturdays in the Fall begins shortly after sunrise in the East (with its Gameday show) and doesn’t end until after midnight in the West. That has made it possible for less than nationally recognized programs (i.e., at schools other than Notre Dame, Alabama, Southern Cal, Michigan, etc.) to have their games aired on television, vastly increasing the revenues from football at those programs and making it possible for them to afford football. If college football returns to its former model, with only the nationally recognized programs having their games aired on television, one can expect an enormous contraction in the number of schools able to afford a competitive football program. I could imagine a future for college football much like the Premiere League in soccer in England, with only a few teams competing and playing each other repeatedly. Putting a competitive football team on the field is enormously expensive, while putting a competitive basketball team on the court is not.

21 Thiago Ribeiro May 5, 2017 at 7:31 am

Let’s be blunt: America is waking up to the fact that basketball is not even a little entertaining, so there is little reason to not cut the cord. A e-game product may perform well because Americans like videogames. Videogames have become the sigh of the oppressed creature, the heart of a heartless world, and the soul of soulless conditions. It is the opium of the American people.

22 Sam the Sham May 5, 2017 at 8:13 am

You shut your whore mouth! Basketball is a thrill compared to soccer – but then, so is watching paint dry.

23 Thiago Ribeiro May 5, 2017 at 8:56 am

You probably never saw a well-played football (i.e. the sport played with the foot) game. The strategy, the charges and retreats, the cunning and the pursuit, the nerve-wrecking waiting at the trenches and the predator’s sudden pounce. Football is called the kings’ game and it is the perfect ersatz for war and hunt.

24 Tenhofaca May 5, 2017 at 9:18 am

Basketball- where it easy to score and when it becomes exciting someone calls timeout and stops the game.

25 Thiago Ribeiro May 5, 2017 at 9:37 am

I never understood those timeouts. Sport is war by other means, there are not timeouts at war.

26 A Definite Beta Guy May 5, 2017 at 9:15 am

I’d rather watch Frozen with my nieces for the 400th time than watch another game of soccer.

Now hockey, that’s the good stuff.

27 Thiago Ribeiro May 5, 2017 at 9:36 am

If you have already watch it 399 times, why not? I would rather wath 400 football games.

28 Rob May 5, 2017 at 11:47 am

Aside from Tennis, I would argue basketball is the most aesthetically pleasing of the sports. Your indifference stems from a lack of immersion. I’m sure the first taste of whiskey wasn’t pleasant.

29 Thiago Ribeiro May 5, 2017 at 11:58 am

I do not drink, but I wonder… so many friends of mine told me they hated the first ten or so cans of beer – and Brazilian beer is considered the best in the world. I do not know how people can complain of New Coke after drinking can after can of disgusting beer. Maybe it is a conspiracy https://xkcd.com/1534/

Basket will never be like footbal: the dribbling, the strategy, the dramatic tension, the scissor kick, the corner kick, the penalties.

30 rob May 5, 2017 at 12:31 pm

All qualities I could assign to basketball play (they have dribbling, inbounds, no scissor kick but dunking and alley oops are comparable) They even both have a problem with flopping!

31 Thiago Ribeiro May 5, 2017 at 12:47 pm

One can not compare dunking with the moment a football player propels himself and challenges Newton to head a ball or compare alley oops with a good corner kick. Those things are worlds apart. We were forced to play basketball one quarter of the year at P.E. classes. It was awful, there is no class, no magic.

32 middyfeek May 7, 2017 at 11:45 am

NBA players, whether you like basketball or not, are the greatest athletes in the world. If you try to say it’s soccer players, it is to laugh.

33 TMC May 5, 2017 at 2:27 pm

Rob’s right. Whiskey make basketball more pleasant.

34 Thiago Ribeiro May 6, 2017 at 5:11 am

I guess being drunk helps to appreciate the game.

35 JCC May 9, 2017 at 11:05 am

I love soccer but I get way more entertained watching or playing basketball, the dynamics and momentum changing aspect of the game makes it more interesting.

36 Colin May 5, 2017 at 12:24 pm

Just because you don’t like basketball doesn’t mean that millions of others can and do. https://www.youtube.com/watch?v=0la5DBtOVNI

37 Thiago Ribeiro May 5, 2017 at 12:42 pm

They are just deluding themselves and hundreds of thousands are waking up every day.

38 Thiago Ribeiro May 5, 2017 at 12:43 pm

Also, it is not about “liking”, it is about the objective quality of an activity.

39 rob May 5, 2017 at 1:04 pm

You know when I was a child I hated brussel Sprouts, hated them vehemently. I loved Artichokes, they were far better. Then I grew up and now value each for their uniqueness.

Both basketball and soccer are growing as a percent of watched sports globally, ergo the wisdom of the crowds sees these both as increasing valuable activities, football is in decline which would suggest its overrated, especially considering other country’s reluctance in adopting it.

.

40 Thiago Ribeiro May 5, 2017 at 1:23 pm

Millions of people use recreative drugs, it does not mean it is a good idea. Quite the opposite, they are the shortest way to the gutter.

Ths point is, real football, played with feet, is different from basketball, there is no going around that. And it is obvious football is a objectively better game.

41 msgkings May 5, 2017 at 3:25 pm

It’s as obvious as the superiority of Argentina to Brazil.

42 Thiago Ribeiro May 5, 2017 at 4:20 pm

It is not superior. Brazil cruahed Argentina in the War against dictator Rosas.

43 msgkings May 5, 2017 at 4:30 pm

Every schoolchild knows Argentina is far superior to Brazil in every metric. This is known the world over.

44 Thiago Ribeiro May 5, 2017 at 6:19 pm

It is a lie, Brazil’s economy is bigger, our culture is superior and we won five World Cups, they barely won two!!

45 msgkings May 6, 2017 at 1:01 am

No that is a lie. Brazil has won only 1 World Cup, and is smaller than Peru. Why do you tell these lies?

46 Thiago Ribeiro May 6, 2017 at 5:13 am

It is the country with more World Cup winings and it is bigger than the Roman Empire ever was.

47 msgkings May 6, 2017 at 12:43 pm
48 Ron May 5, 2017 at 10:49 pm

I can’t tolerate regular season NBA games. They play so many games in a season they just can’t go all out each game and it shows.

Every college game counts and it shows in their effort.

49 Bill May 5, 2017 at 8:23 am

Disintermediation will make each team its own channel, and each league its own network. Gone are the days where a Fox could get a major team contract from which to form a TV network with affiliates.

50 Roadrunner May 5, 2017 at 8:41 am

Disagree. In my experience, the most important thing for a team’s long term viability is consistency. A consistent winner will draw best, as it builds loyalty. This lends itself to moneyball type of management (PER, not overpaying aging superstars, shorter contracts).

To your point, superstars also draw. Maybe allocate national TV revenue based on q rating.

51 chuck martel May 6, 2017 at 11:01 am

” A consistent winner will draw best, as it builds loyalty.”

And there we have it. Spectators don’t flock to athletic contests to enjoy physical prowess and superior gamesmanship. They’re there to so see players that supposedly represent them crush their opponents. Since individual violence is both forbidden and out of the question for the modern wimp population, it must be obtained vicariously through mercenary professionals, even at the collegiate level. The biggest cheers at athletic events occur when an opposing player is smashed by a member of the home team.

52 Ted Craig May 5, 2017 at 9:13 am

I would argue again that data-driven strategy takes a toll on the mass appeal of sports. Fewer people like watching a game that is nothing, but three-point shots and layups.

53 Floccina May 5, 2017 at 10:52 am

BTW an interesting thing to me in the NBA recently, is because of the 3 point shot opening up the middle, a team today can be quite successful playing what we would call one-on-one with obstacles. You see it at Houston and Boston this year and Atlanta last year. Jeff Tegue IMO was not even that great a player but with the middle open he was tough to guard. The first I heard of that was back when Bob Cousey was coach he did not have a lot of talent so he tried to turn the game into one on one with Nate Archibald but he could only win so many games like that, but it seems today you can do much more. Also that makes a good shooting center like Al Horford valuable.

54 FG May 5, 2017 at 11:55 am

What is “one-on-one with obstacles”? That sounds to me like the iso-heavy ball of the early 2000s NBA (e.g. Allen Iverson). The name of the game today seems to me to be ball movement and switching.

55 Sam Kaplan May 5, 2017 at 11:47 am

With attention spans shorter and shorter and with the regular season increasingly meaningless, especially the last few seasons when we know barring injury Golden State and Cleveland will play in the finals, I expect the NBA to start adding mid-season tournaments of some sort that will provide more reasons to watch throughout the year rather than just in May and June during the playoffs.

56 Scoop May 5, 2017 at 12:11 pm

Question for cord cutters:

How do you save big money while maintaining decent Internet speeds?

Internet alone would cost me 80% of my current Internet plus cable (as would cable alone) so getting rid of a very good cable package would save me less than $30 a month, unless I’m also willing to cut my Internet speeds by 75%.

What am I missing?

57 mpowell May 5, 2017 at 1:16 pm

If you negotiate with the cable company you can keep your cable bill down. But if you’re not willing to deal with the hassle, cutting the cord will save more than $30/month (for same internet)

58 Axa May 5, 2017 at 1:17 pm

That’s my sad case with the local company. It seems they already know people is leaving cable, thus TV + internet = 60 per month, only internet = 50 per month.

It doesn’t feel good to subsidize shitty TV.

59 Amigo May 7, 2017 at 1:14 am

A few years ago I was paying over $110/mo for extended cable (not pay channels), and fairly basic speed internet. It was a monopoly market, so that might’ve had something to do with it.

But now we pay $40 for mid-speed internet, and we get Netflix and Hulu, I think around $10/mo each? As members of Amazon prime they also have some shows. I can stream Youtube content for free. My wife is a fan of alot of shows and this works for her and she picks up Sling off and on for the Walking Dead and few other shows. For me I would probably cancel Hulu and Amazon prime and just go with Netflix.

60 Smash May 5, 2017 at 2:31 pm

I’m not sure that franchise owners are more interested in maximizing their profits than winning. A lot of owners made their coin in other fields and have bought a team for the love of the game and/or the prestige and glamour of owning one. They want it to succeed. When the team sucks (Knicks, Kings, etc.) the owner gets excoriated by fans and media, not just locally but nationally. They don’t want to develop a reputation of being cheap or lousy people. For these new ownership groups there may be more interest in the business side of things. Minority owners just want to say that they own a (winning) franchise and show off a few players to their friends.

61 clamence May 5, 2017 at 10:53 pm

And it looks like the top predictor of team value is market size rather than winning record or superstar content.

https://www.forbes.com/nba-valuations/list/

I guess fans prefer to cheer for the home team rather than for the most interesting team.

62 middyfeek May 7, 2017 at 11:51 am

@Thiago Roberto you have no understanding of the utter disdain most Americans have for your five World Cups.

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