The NBA is facing uncertainty about the upcoming season due to a labor dispute between owners and players over a new collective bargaining agreement, potentially delaying games until mid-December. Financial analysis shows a steady increase in revenues over the years, although recent seasons have shown flat revenue and declining profitability, resulting in cut expenses. This differs from the NFL's situation, where the challenge was previously about dividing a growing revenue stream rather than a shrinking one.

1. 11/21/11

2. NBA Labor Dispute
• It’s unclear if there is
going to be an NBA
season. Already the
season will at best be
shortened with games
starting no earlier than
mid-December.

3. NBA Labor Dispute
• The reason is that the
owners and players
have yet to agree on the
terms of a new
collective bargaining
agreement.

4. NBA Labor Dispute
• To get a better
understanding of the
labor dispute, let’s
review financial
information (source:
Forbes). Let’s start with
Revenue.

5. NBA Revenue ($millions)
Year Tickets Sales Other Revenue Total
1989-90
1990-91
NBA Labor Dispute$518
$578
$516
$783
$1,034
$1,361
1991-92 $649 $923 $1,572
1992-93 $680 $919 $1,599
1993-94 $775 $1,096 $1,871
1994-95 $826 $1,201 $2,027
1995-96 $950 $1,389 $2,339
1996-97 $2,557
1997-98
1998-99 $1,611
1999-00 $937 $2,038 $2,975
2000-01 $3,091
2001-02 $3,260
2002-03 $1,168 $2,072 $3,240
2003-04 $1,192 $2,231 $3,423
2004-05 $1,220 $2,395 $3,615
2005-06 $1,211 $2,463 $3,674
2006-07 $1,258 $2,562 $3,820
2007-08 $1,246 $2,612 $3,858
2008-09 $1,224 $2,661 $3,885
2009-10 $1,146 $2,659 $3,805

6. NBA Labor Dispute
• Now let’s look at a
graph of the Revenue.

7. Previous strike-
shortened season
NBA Labor Dispute
Note the steady increase in revenues, except during the one previous season
where there was a strike-shortened season.

8. NBA Labor Dispute
• Notice how
revenues have
been flat for the
past few seasons.

9. NBA Labor Dispute
• Now let’s repeat the
process with Expenses.

10. NBA Expenses ($ millions)
Year Tickets Sales Other Revenue Total
1989-90
1990-91
NBA Labor Dispute $420
$534
$394
$574
$814
$1,108
1991-92 $686 $598 $1,284
1992-93 $775 $522 $1,297
1993-94 $775 $677 $1,452
1994-95 $934 $520 $1,454
1995-96 $1,097 $785 $1,882
1996-97 $2,297
1997-98
1998-99 $1,830
1999-00 $1,773 $993 $2,766
2000-01 $1,920 $990 $2,910
2001-02 $1,865 $1,093 $2,958
2002-03 $2,021 $1,008 $3,029
2003-04 $2,017 $1,082 $3,099
2004-05 $2,091 $1,258 $3,349
2005-06 $2,166 $1,282 $3,448
2006-07 $2,206 $1,302 $3,508
2007-08 $2,219 $1,314 $3,533
2008-09 $2,323 $1,323 $3,646
2009-10 $2,204 $1,418 $3,622

11. NBA Labor Dispute
Notice that expenses have been cut back in recent years due to the decline in
revenues.

12. NBA Labor Dispute
An important statistic is the Operating Income, which is the amount income earned
before taxes are paid. This is often a good indicator of the overall economic health
of an organization. Let’s look at a table of the Operating Income.

13. NBA Operating Income ($ millions)
Year Operating Income
1989-90
1990-91
NBA Labor Dispute $220
$253
1991-92 $288
1992-93 $302
1993-94 $419
1994-95 $573
1995-96 $457
1996-97 $260
1998-99 -$219
1999-00 $209
2000-01 $181
2001-02 $302
2002-03 $211
2003-04 $324
2004-05 $266
2005-06 $226
2006-07 $312
2007-08 $325
2008-09 $239
2009-10 $183

14. NBA Labor Dispute
• You can see why
strikes are such a
problem. They
lead to dramatic
losses in profits.
Previous strike-
shortened season

15. NBA Labor Dispute
Another important statistic is the Operating Margin, expressed as a percent. This
statistic provides important information on how a business is growing from year to
year.

16. NBA Operating Margin
Year Operating Margin
1989-90
1990-91
NBA Labor Dispute 21.28%
18.59%
1991-92 18.32%
1992-93 18.89%
1993-94 22.39%
1994-95 28.27%
1995-96 19.54%
1996-97 10.17%
1998-99 -13.59%
1999-00 7.03%
2000-01 5.86%
2001-02 9.26%
2002-03 6.51%
2003-04 9.47%
2004-05 7.36%
2005-06 6.15%
2006-07 8.17%
2007-08 8.42%
2008-09 6.15%
2009-10 4.81%

17. NBA Labor Dispute
• You can see that
since the last
strike-shortened
season, the NBA’s
profitability has
declined. This
puts added
pressure on both
sides to strike a
Previous strike- deal.
shortened season

18. NBA Labor Dispute
• The NBA is a in a
different position than
the NFL. With the NFL
the issue was how to
divide a growing pie
between owners and
players. With the NBA
the issue is how to
divide a shrinking pie.