National Basketball Association Free Essay Example

The national basketball association is the professional basketball league in North America consisting of teams 30 teams across the United States, apart from one team located in Toronto, Canada. In the 2017-18 season, the 30 teams generated revenue of $7.4 billion USD which was an increase of 25% from the 2017 season (Forbes, 2018).

Revenue streams and Business Model

The NBA generates a significant portion of their revenue through basketball-related income. This would include broadcasting rights, advertising, merchandising, and concessions. The broadcasting rights were recently extended in 2014 with ESPN and Turner Sports and the deal would pay the NBA .

6 billion USD annually. Ticket sales and concessions are crucial for NBA teams to make money at their stadiums. Other licensing agreements and sponsorships with brands create other income streams for teams. These partnerships can be league-wide, like Nike is the official apparel of the league, but also teams individually sign sponsors through advertisements around the stadium and through other opportunities such as naming rights for the arenas. Finally, within the franchise system, the NBA operates in a revenue-sharing system.

The revenue from this income is not part of the basketball-related income. The revenue sharing helps address small and big market teams. The revenue that is shared is divided equally from the high-grossing to low-grossing teams, based on the salary cap that year.

Major League Baseball (MLB)

Major league baseball is the professional baseball league in North America consisting of teams 30 teams across the United States, except for one team located in Toronto, Canada. The league and teams are not publicly traded companies and as a result, they are not required to make public their revenues.

Forbes found that the average baseball team was worth 1.645 billion USD in 2018, which was a 7% increase from the 2016 season.

Revenue streams and Business Model

One of the biggest revenue drivers for the baseball teams in the league is national television contracts. The league agreed to an eight-year contract with ESPN in 2012 and has a TV deal with Fox that began in 2014 and will run through the 2021 seasons. Not only are national TV deals important, but local television deals are strong revenue drivers for teams. According to Kantar, the 2018 MLB All-Star game generated $45 million USD in ad revenue which was the highest for any major league exhibition games in the past year. Other revenue sources include selling season and individual game tickets and concessions. The amount generated by each team was directly linked to the location of the game as well as the opposing team. Another important revenue driver is licensing and sponsorship. Companies such as Nike and New Era provide official apparel for the league and individual teams make money from sponsorships at their stadiums, including naming rights for their stadiums. Revenue sharing takes place in Major League Baseball like other large franchise leagues, but how they do it is a bit different. In this arrangement, it redistributes income from more profitable teams to less profitable teams in the league to improve the overall competitive balance. Under their 2017-2021 collective bargaining agreement, each team contributes a percentage of its net local revenue into a pool that is divided between all the teams in the league. The higher-earning clubs would pay more into the pool than they receive, and lower-earning teams would pay less than what they receive.

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