After NBA finals, will Heat do a cooldown?
Jeff Horwich: Let’s talk about that game, huh? The Miami Heat, in five games, won the NBA championship last night by… a lot. If you caught the first quarter, you pretty much saw the whole thing. But this experiment — pulling this super team together in Miami — has obviously been huge for that city. And you have to presume it’s put plenty in the team’s pockets. But, from a strictly business point of view — what now?
I sure don’t have a clue about what’s going to happen, so we’ve got Henry Abbott, who writes the TrueHoop blog at ESPN.com. Henry, I know it’s been a long night — thanks for being here.
Henry Abbott: Thanks for having me.
Horwich: So LeBron James, Dwyane Wade, Chris Bosh, the supporting casts like Battier — let’s say we’re talking a big legacy here. As a business proposition, what does that mean potentially for a city like Miami?
Abbott: Well it’s a funny thing. The NBA is changing from a sport where the primary revenue driver is ticket sales to national TV deals. And what that means, though, is that for owner Mickey Erickson, who has a bad financial few years, most of his money is in the cruise industry, which hasn’t gone very well. They don’t get the huge windfall from ticket prices like they would.
All that said, the whole industry of owning an NBA team has gone much better with players making a much smaller percentage of league revenues with the new collective bargaining agreement, but it doesn’t actually mean that it’s going to be fat city like it used to be if your particular team is doing well; there’s more revenue sharing now. And ironically, I know that one of the things about winning the NBA championship in particular is that it costs millions I’m told to buy everybody championship rings, and that actually affects the bottom line.
Horwich: So let’s look at the other outcome here. Let’s say next year rolls around, the passion is kind of gone from these guys, something changes, the magic has disappeared. Is the economic fallout even greater for how high they climbed this year?
Abbott: In the big picture of the economics of these players and their championships, probably all three of those players — LeBron James, Dwyane Wade and Chris Bosh — are worth far more than the team is allowed to pay them. The cost of this team is not great compared to what they deliver to the owner. But the economics don’t change very much if they are runners up, or win, or not. I think basically the city of Miami has a viable entertainment option for the next couple years, no matter what happens, which does justify a lot of the cost of the arena and everything else that goes into having a team here.
Horwich: So that’s a very interesting point, I just want to make sure we’re clear on it — it doesn’t matter that much if they win the championship or if they stink, economically?
Abbott: Well, stinking isn’t good, but they’re not going to stink. If they’re a very competitive team, then I don’t think that the profits swing with the ring… wow, that rhymes. I think it’s more being very good gets you a big chunk of TV revenue from the playoffs.
Horwich: Henry Abbott with the True Hoop blog at ESPN.com. Thanks a lot.
Abbott: Thank you very much.
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