The Business of Sports
There is a lot written about athletics and the changing of teams.
LaBron and Chris went to Miami. Carmelo went to New York. Kevin chose to stay in Oklahoma City.
This is not a piece on the athleticism of these men, the success of their new employers or their right to migrate to where they want to live. The discussion here is the business decisions of a collective association that decides to compete nationally.
The National Basketball Association, like every other sports league, is really a partnership that is competing with every other sports league — not just with each other. As it competes, it has adjusted its rules of the competition to deal with the issues of employee migration and structural balance (that’s code for free agency and a lottery system modification of a standard draft.) In the process, the league may have let loose a monster (opening Pandora’s box might be a better metaphor, but it just doesn’t seem to create the right image for these guys.)
Because of the draft lottery system, the best players no longer go to the worst teams. The best players have the greatest chance of going to the worst teams, but they might go to the best of the worst teams. Several years ago the league feared that certain teams would tank games toward the end of the season in order to gain a higher draft position to be able to pick a better future superstar. Also along the way the league, seeking more money from franchise payments, expanded the league away from the East and West Coasts to sites such as Utah, Oklahoma City, Sacramento, Memphis and Carolina. The effect of the increased expansion is the creation of the “small market teams”. The name is what it implies, a team in a market that is below average in its ability to draw advertising dollars to that team’s coffers. Now players are using their free-agency freedom to migrate to “bigger market” teams for the lifestyle and ability to play/work with friends.
Where the league let the monster loose is the publicity that now surrounds this phenomena. The League lives and dies by publicity. The dirty little secret to sports leagues is that they are slanted toward big markets. Sports writers from big markets act as though players forced to play for small market teams have been sent to Siberia and openly route for the greatest stars being together in the biggest market teams. Equally, they describe “small market” teams as those who need to be smart with their dollars and prepared to have the best and the brightest leave after an appropriate period because, after all, they are “small markets” and truly the best should be in the biggest. As Howard Cosell once said to a competing journalist, (I am paraphrasing slightly, but the intent is the same) “you can’t be anyone because you aren’t in New York with me.”
Such impact of this description is still playing itself out, but it can’t be good for business.
So what is the lesson?
The lesson is a business plan that is well thought out. New locations mean new challenges. New products may mean new opportunities, but they also might be cannibalizing existing products along the way.
I don’t think the NBA thought out the impact of creating the lottery within the draft. They layered free agency on top of that. Because of it they are now thinking through contraction. We all have to be careful of what we wish for.
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