LeBron James’ move could signify new NBA business model

(AP Photo/Lori Shepler, File)
(AP Photo/Lori Shepler, File)

Franchises shedding payroll to free up money under the salary cap to sign free agents, players changing teams, short-term contracts, draft picks collected as assets, year-round coverage — this sounds a lot like the NFL. Except it isn’t. It’s the NBA. The past few weeks of craziness could be the new normal, at least until the next Collective Bargaining Agreement.

With LeBron James returning home to Cleveland, the Eastern Conference has been flipped on its proverbial head. The Cavaliers are now a contender and the Heat may be a five or six seed in the east with an aging Dwyane Wade and max contract Chris Bosh.

Since the 1980s, the NBA has been driven by stars. Magic, Bird, Isiah, Jordan, Kobe, and . . . LeBron. As a result, the league has been focused on marketing the individual to bring in ratings and casual fans.

The superstar structure helped eliminate parity. The teams with the stars win titles, and those without don’t . . . only 10 teams have multiple titles in NBA history. Since 1980, only nine teams have won an NBA title. To put that in perspective, six different MLB franchises have won the World Series in the past 10 years. Parity and the NBA shouldn’t be in the same sentence.


Commissioner Adam Silver has stated that one of his goals is to bring increased parity to the league, and if this offseason is a sign of things to come, that won’t be a problem. Big markets will always be able to afford to keep their stars, but with shortened contracts and a higher salary cap, player movement could increase. Stars could force a trade or just wait out their shortened contract to jump to a better situation. The Nets can afford stars, but does anyone want to join that aging roster? New York has big-market allure, but we just saw the NBA’s premier player go to rust-belt Cleveland.

The championship contenders next year could be from the following markets: San Antonio, Oklahoma City and Cleveland. Not exactly a murderers’ row of media markets. Revenue sharing and the upcoming TV deal will make the NBA business model look more and more like the NFL, which could be beneficial to the league. Of note, one thing the NBA does lack when compared to the NFL is a hard salary cap. There is some flexibility in the NBA for franchises that are willing to spend over the soft salary cap, although the luxury and repeater tax could be curtail this type of spending.

The NFL has built its brand on teams. Sure, the big-brand NFL teams have star players, but the Cowboys, Redskins, Giants, Packers, Bears and Steelers are big draws even when they are bad. The NBA has similar strong brands in the Lakers, Celtics, Knicks and Bulls. When those teams are competitive — and sometimes when they aren’t — they are still in demand, even outside of their home markets.

(AP Photo/Amy Sancetta, File)
(AP Photo/Amy Sancetta, File)

The business benefits of this new paradigm could be immense. With a new exciting offseason, the NBA could increase its Twitter followers, website traffic and media coverage. The league could also take advantage of the renewed interest from casual fans. Those who follow stars may remain fans of their local teams even if a player leaves. By pushing for parity, the NBA is taking a two-pronged approach of marketing its game around stars while also increasing fan/team loyalty.

Players can also help the NBA through interaction with fans on social media. There is a burgeoning market for interaction that feels more natural and organic between players and fans. Athletes on social media resonate with their fanbase. They have extremely high engagement metrics. This is exactly what brands are searching for during the age of the second screen and DVR. It’s not only another touchpoint to connect with a customer, but the social media demographic skews heavier toward younger fans. It’s notoriously difficult to reach 13 to 24 year-olds. Social media will allow the NBA and its players to market the game, create engagement, and help its business partners engage with fans in new and exciting ways.

The new CBA was beneficial to most owners. It has created a hot-stove offseason that rivals any other league and keeps the NBA at the forefront of the sports discussion. It also pushes more teams toward profitability through revenue sharing. LeBron’s move signifies that the market might not matter (think Peyton Manning in Indianapolis). Fans across the country will now follow the smaller market Cavs. Star power with parity was the goal. It looks like the NBA is taking a page straight out of the NFL’s playbook.

Michael Colangelo is Assistant Director at the USC Sports Business Institute and Managing Editor of The Fields of Green.

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