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The Cost of Running a NBA Basketball Team Research Paper


Definition of a NBA team

A NBA team is an outstanding men’s professional basketball team playing in a league that is overseen by National Governing Body for basketball in the United States, as well as from Canada.

Number and names of NBA teams

The NBA is made up of thirty teams; twenty nine coming from the United States while an additional teams streaming from Canada (Phelps, Bourret, and Walters 14).

These teams include; New Jersey Nets, Boston Celtics, Philadelphia 76ers, New York Knicks, Toronto Raptors, Chicago Bulls, Cleveland Cavaliers, Detroit Pistons, Indiana Pacers, Milwaukee Bucks, Atlanta Hawks, Charlotte Bobcats, Miami Heat, Orlando Magic, Washington Wizards, Denver Nuggets, Minnesota Timberwolves, Oklahoma City Thunder, Portland Trail Blazers, Utah Jazz, Golden State Warriors, Los Angeles Clippers, Los Angeles Lakers, Phoenix Suns, Sacramento Kings, Dallas Mavericks, Houston Rockets, Memphis Grizzlies, New Orleans Hornets, and San Antonio Spurs (Rosner 67).

Purchase of a NBA team

Cost of a successful team

Among the most leading-successful and valuable teams in the NBA includes; New York Knicks (Forbes.com). The net worth for those aspiring to purchase the club could cost them an estimated value of $655 million, as of the season ending 2009/2010. This estimated value as quoted by Forbes, is derived from a breakdown of various aspects such as;

  • Sport which contribute 19% of the total worth ($117 million)
  • Stadium which contribute 28% of the total worth ($185 million)
  • Market which contribute 43% of the total worth ($282 million)
  • Brand management, which contribute 10% of the total worth ($71 million)

Cost of an unsuccessful team

Milwaukee Bucks NBA team appeared to be least valued, which was relatively related to its success profile. The estimates postulated by Forbes as of the season ending 2009/2010 puts an estimated worth of $258 million on the team. The estimated value is derived from a breakdown of various aspects such as;

  • Sport which contribute 52% of the total worth ($134 million)
  • Stadium which contribute 16% of the total worth ($40 million)
  • Market which contribute 24% of the total worth ($63 million)
  • Brand management, which contribute 8% of the total worth ($21 million)

Operation expenses

Some of the operating costs for most NBA teams as calculated in the Forbes report 2010 have shown a significant uniformity in the improvement, as almost all teams have similar plunges. For example, if one reflects on the New York Knicks team, their proceeds shot up and their operating cost drifted downwards.

Consequently, they had the benefit of an enormous jig in 2010 to the tune of $64 million in operating income ($43 million in excess of in 2009) (Sherman 8). That boost creates instinctive good judgment. In relation, to some of the expenses incurred by New York Knicks, such as in uniforms, transportation, licensing, among other expenses are summed in Table 1.

Table 1. Showing annual operation cost on selected activities by New York Knicks for the season ending 2010/11 (Million dollars).

Type of Expense Value in U.S dollars
Uniform $ 4.7 million
Licenses $0.2 million
transportation of players $2.4 million
food and nutrition $3.1 million
athletic trainers expenses $4.4 million
medical team costs $2.4 million

Cost of contracts, salaries of players, and salaries of personnel

Most of money is restructured among all of the teams who do not exceed the tax contour (Brown 147). In past years, the New York Knicks would optimistically bluster $100 million in salary, pay that extra $30 mil to the players, throw in another $30 million to the tax fund, and stride away with a positive turnover, in addition, to the flamboyant players they acquired.

Some teams such as Los Angeles are still practicing such actions. They are approximately $91 million in remuneration budgets this year. That is $40 million or so in excess of the cap, $20 million or so greater than the tax contour, and a total superfluous burden of $60 million.

In the least, ‘All-Star’ players involuntarily obtains a $12 million cap amount, but the team that he comes from could pay him up to 25% above the cap amount (max: $60 million for four years). Consequently, a new team can simply pay the player that cap amount (max: $48 million for four years). A star in this respect is a player who has played for four successive years in one team and finished in the two All-Star teams or an All-NBA team at some point in that seasonal period (Brown 67).

On the other hand, nearly all ‘Franchise Players’ by design gets a $17 million cap amount, although he can only be compensated $500,000 per years of service away from that figure exclusive of counting on the cap figure. The ‘Franchise Player’ can be termed as somebody who has participated in at least four successive years with one team and completed three All-Star teams or two first or second All-NBA teams all over that duration(Brown 68).

When an All-Star happens to traded, he usually retains his salary/cap salary discrepancy for his new team that he is joining (Phelps, et.al. 121). On the other hand, franchise players only manage to veto the trade, and when they acknowledge the transaction, they ultimately drop their accrued $500k bumps and slip back to the $17 million cap figure (Sherman 14).

Players contract limits stipulate that there shall exist contracts that exceed three years (Rosner 134). In essence, both parties involved in the contract can only opt to procure out of the contract for 60% of the outstanding price. In addition, performances enticements are featured in basic salaries are accustomed, and new enticements are supplemented for the subsequent year. Consequently, performance enticements earned in one season can only turn out to be part of basic salary for the subsequent year.

Conclusion

Excessively countless pecuniary report from many sources reviewing and investigation process the NBA’s will likely not be able to give the real and actual financial of under-performing teams.

As a result, any prospect investor willing to put his savings on such clubs, will necessities extreme scrutiny of the many factors that contribute to the financial strength of the entire team, such as the ability to market its brand, remuneration currently paid to the players, fun base among numerous critical aspects.

Bearing this in mind, a prospective investor will need to employ a team of experts to look at these varying elements, since they fall under different business disciplines, so as to make an all inclusive and precise judgment on which is the best team to invest.

Works Cited

Brown, Donald H. A Basketball Handbook. Indiana: Author House, 2009.

Forbes. “The NBA’s Most Valuable Teams.” The Business of Basketball. 26 January 2011. Web.

Phelps, Richard, Bourret Tim, Walters John. Basketball For Dummies. New York: John Wiley and Sons, 2011.

Rosner, Scott. The Business of Sports. New York: Jones & Bartlett Publishers, 2010.

Sherman.J.A. “Who We Root For, Why We Hunt, and What Happened in 2010.” 2011 NBA Lockout. 6 July 2011. Web.

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IvyPanda. 2019. "The Cost of Running a NBA Basketball Team." May 21, 2019. https://ivypanda.com/essays/the-cost-of-running-a-nba-basketball-team/.

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