Cavaliers

How the NBA could reduce games and not lose money

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Nike

When discussing the NBA, its schedule and rest, I think it is too easy for debate to devolve into emotional opinions. Scott did a nice job of covering what happened this week with LeBron James and the emo bleating that Jeff Van Gundy and crew did on the air, but I want to take it to a different place today. I want to talk about why the NBA should shorten the schedule and also why they should be willing to talk themselves into it even though it looks like it might cost revenue in the short run.

First of all, this is all hypothetical, and I don’t expect it to happen. Brian Windhorst was doing a spot on ESPN Cleveland recently, and he said in no uncertain terms that he didn’t believe a schedule reduction would never happen due to the local cable TV deals that call for a certain amount of air time and game inventory for club partners. I think he’s right, but that doesn’t mean I shouldn’t make the case, right? So let’s talk inventory.

There are 30 teams in the NBA, and each of them plays 82 games. If you multiply that out, that gives you a game inventory of 2,460 contests. Now, I know that’s not completely accurate. When a game is on ABC or some other national broadcast, it might or might not be on the local regional sports network. I could spend time doing exact accounting, but it isn’t important to my point, so let’s assume it’s 2,460 and that the math is this simple for calculating inventory. What’s the real number, though?

A game inventory of 2,460 assumes you’re making widgets and that all widgets are the same size and quality with the same demand. As we all know from watching NBA games, that’s simply not the case. When a team is on the second night of a back-to-back — even if they’re not resting major players — they’re likely not going to be as good as they would be with more rest. We also know that rebuilding teams with no stars playing other rebuilding teams with no stars aren’t marquee matchups. We should do something to account for quality in this equation.

NBA games are pretty good right now. Not all of them, of course, but as a Cavs fan, I’m jaded to think the NBA product is pretty good so let’s give the current NBA regular season product a score of 75 percent quality on average. By taking 2,460 and multiplying it by a quality percentage, your new adjusted game inventory drops to 1,845.

Now, what happens to the quality score of an average NBA regular season game if you drop the number of games each team plays? This is all subjective of course, but shouldn’t the quality go up the more you drop the numbers of games, at least within reason? My point is that there’s an optimal number of regular season games, and that number wouldn’t be one that includes back-to-backs if your primary goal is to boost quality while not abusing your TV partners.

Let’s assume if the NBA dropped 10 games from the schedule they could boost the average game quality to 85 percent. Now you’ve got 30 teams playing 72 games for an inventory of 2,160. You multiply that by 85 percent, and your new adjusted inventory number is 1,836 compared to 1,845. Your effective quality game inventory would only drop 0.5 percent as opposed to the 12.2 percebt you might think you’re taking by reducing games from 2,460 to 2,160.

Yes, I’m making up numbers, and the quality metric is pure speculation and subjective. If you take it to the next level, however, and presume the NBA could boost their quality score to 90 percent, their effective inventory drops to 1,944 compared to 1,845, which is an increase in quality inventory by 5.4 percent. Obviously, it would be a leap of faith to think you could boost NBA regular season game quality by 15 percent simply by reducing the number of games from 82 to 72, but you see where I’m going with this. A reduction that boosts quality doesn’t cost you nearly as much as you might think.

NBA Game Reduction Chart

Let’s talk about financial realities in the NBA. According to Forbes’ reporting, in 2013 NBA teams generated 54 percent of their revenue from national television partners and 33 percent from local deals. The “hit” that NBA teams might take from reducing their overall game inventory will disproportionately impact the lower margin part of their business. The nationally televised games will only get better, and they represent a higher margin part of the NBA’s overall media rights business.

It’s like if you were running a restaurant and you decide to make only a a small percentage on Coke products in your restaurant so you can make a much bigger markup on cheeseburgers. To take the example further — and probably too far — people are here for the cheap pop, and they’re also questioning the quality of the cheeseburgers. That’s not good, and Adam Silver’s right to sound the alarm. I wouldn’t respond by forcing guys to play more, however.

The NBA is full of people who are much smarter and more successful than I am. They also have an owner in Mark Cuban who warned of excesses as it relates to the NFL and getting hoggy, playing games on Thursdays and oftentimes twice on Mondays and the quality disruption that has subsequently followed. They should be able to figure out the right balance between changing the schedule and their revenues. They should be able to do that up to and possibly including a shrinkage factor. If they time it right and actually do boost the quality of the game, they will not lose revenue, and while boosting their chances for even higher highs in the future as the shift continues toward national games with a primetime appeal. Oh, and when they do have those matchups, the teams are healthier and not resting.

Well, except maybe the Spurs. You can never discount Pop.