Nba nerd

Tyler Cowen on the NBA and Cable TV

Tyler Cowen posted an article on Bloomberg View about how the decline of Cable TV subscribership might affect the NBA.

That shift is likely to favor the stars and the most athletic players, because they are more likely to be featured in very short clips. As for the incentives, player salary will matter less, and the desire to become famous on the internet -- and thus win lucrative endorsement contracts -- will discourage team play. Expect more attempts to produce spectacular sequences, even if that doesn’t always translate into wins. “Boring” but fundamentally sound teams -- which are better to watch for a 2.5 hour game -- will be disfavored by this trend. Sorry, San Antonio!

I think there are a lot of unknowns about how all this will shakedown, and Mr. Cowen makes good points, but I disagree with this point in particular. The myth that revenue is driven by the "flashy" stars, not the 'boring" wins has a long history in the NBA, and indeed, many NBA executives subscribe to it (how else do we explain the $50+ million that Kobe got for his final two seasons, when he was but a shell of his former self?).

Yet, a large number of studies indicates that *winning*, not *personalities*, drives both ticket revenue and TV ratings. It's also fairly well known that elasticity is low, which means that fan behavior "lags" a bit and takes time to adjust to trends -- this is why the Chicago Bulls sold out every game for quite a while after Micheal Jordan, Scottie Pippen, and Dennis Rodman left the franchise.

And, of course, it's all proportional to population -- the fact that national ratings are lower for San Antonio than for New York isn't because San Antonio is "boring" and New York has Carmelo Anthony. It's because New York has 8.5 million people, and San Antonio 1.5. And that ignores surrounding areas, which are much more densely populated in New York than Texas. Nationally, many more people are likely to identify with the Knicks, because they live there, used to live there, know someone who lives there, etc.

So the relevant question is: would even more New Yorkers watch the NBA if they didn't have Melo, but won 55 games? Would more people pay to watch the Knicks play if they were "boring", like San Antonio? And I don't think the data supports Mr. Cowen's likely answer to this question.

For what it's worth, the NBA's most obvious endgame here is pay-per-view or on-demand subscriptions, either through its own service or through a partner. Right now, NBA League Pass is a terrible joke of a product, both because of its technical limitations (the app crashes frequently, has a poor UI, has very ugly ads with prominent placement, etc) and because of all the blackouts. Even aside from the ESPN/TNT/NBA TV blackouts, which account for nearly half the games, many games have "local" blackouts that extend for several hundred miles from the local market -- Portland games are blacked out in northern Washington, Wolves games are blocked out in Bemidji, etc, even though no local cable channels are actually broadcasting in those areas.

I can't help but wonder how much money could be made by a company like Amazon or Netflix if they had rights to EVERY game, with no blackout nonsense. And would the NBA be better off selling to a company like that, versus keeping it themselves and turning League Pass into a service worth paying for? How many more subscribers would be willing to shell out $199 a year for NBA League pass if it didn't have its current limitations?