How An NBA Lockout Could Whip These Businesses

Taking a lead from the NFL, the NBA yesterday moved dangerously closer to the beginning of an official lockout of the coming 2011-2012 basketball season. According to the New York Times (NYSE:NYT), the players union and the owners have six days to reach an agreement before their current labor deal expires and a lockout becomes almost certain. The two sides met for negotiations in New York yesterday, but apparently to no avail.

Reportedly the players union, led by the Lakers‘ Derek Fisher, was willing to compromise, offering a deal that would see salary cuts of $500 million over the next five years. The owners were unhappy with the players’ proposal, seeking to cut far more in salaries and costs to help franchises, many of which have struggled to turn a profit in recent years, make ends meet. The owners will meet next Tuesday, at which time they are expected to decide whether to give negotiations another go-round or cancel the coming season outright.

An NBA lockout could exact a costly toll on a variety of businesses. Local small businesses, such as bars, restaurants, and popular hangouts near and in sports stadiums will be hard-hit by a canceled season, and making the NBA lockout potentially more threatening to small businesses than the NFL’s is the length of the season, and the frequency of games. Furthermore, according to sports consulting firm Sportscorp Ltd., the city of Chicago, for example, generates $173,000 of revenue per game from taxes and ticket sales, and almost double that amount when you add concessions and parking costs. With 41 home games for each team annually, we’re talking millions of dollars of lost revenue just in parking and tickets, a major blow to any local economy.

While small businesses relying on traffic and interest in basketball to draw customers will take a hit, radio broadcasters and television networks, who can attract lucrative advertising deals with companies wanting to purchase commercial slots during NBA broadcasts, are also likely to lose revenue unless they can find a replacement with similar viewership. Companies like Disney (NYSE:DIS), which owns ESPN channels, TV One (owner of TBS), Comcast (NASDAQ:CMCSA), CBS Corp. (NYSE:CBS), and Fox‘s News Corp. (NASDAQ:NWSA), all of which regularly broadcast NBA games, could all get slugged.

Finally, companies that market products heavily through contracts with the NBA, such as Nike (NYSE:NKE), Coca-Cola (NYSE:KO), Hewlett-Packard (NYSE:HPQ), T-Mobile (NYSE:DTE), Warner Bros. (NYSE:TWX), Toyota (NYSE:TM), Ford (NYSE:F), Molson Coors (NYSE:TAP), Anheuser-Busch (NYSE:BUD), and many others will lose a valuable and popular avenue of targeted advertising.

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