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Economics: NBA

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kelsey kunkel

on 11 December 2013

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Transcript of Economics: NBA

En los 80's
En los 80's la mayoría de la rivalidad y espectáculo estaba dividido entre los L.A. Lakers y los Boston Celtics... hasta que la irrupción de Michael Jordan ayudó a que el interés internacional por la NBA no decayera tras las retiradas de Bird y Magic (jugadores de estos equipos).

Un dato curioso es que el equipo de Bird, los Celtics, estaban en su mayoría formado por blancos y en el de Magic, la mayoría eran jugadores negros, esto de algún modo daba más morbo a los partidos de aquella época en USA.
Individual sports teams fight for the profit they
can make from sport entertainment through:
The transactions of tickets,
Contracts with media broadcasting organizations

Players get drafted through a lottery system where
teams pick based on the numbered order. Players
that don't get chosen are available as “free agents”
on the market and their salaries are predetermined.

The NBA acts as a cartel. The franchises drafts players in contrast to just having a free agency.
protections from competition:
Territorial exclusivity,
Control over number of franchises in league,
Scarcity permits higher ticket prices,
Media relationships,
The value of NBA franchises (the individual teams)
increases with exclusive rights.

Profit: the brand
Each team has a franchise in the NBA and has a dollar value for what its worth.

This is because the public subsidization of NBA franchises happens because tax breaks for team owners who claim losses on the team every year to balance their gains in other industries.

In terms of efficiency, the NBA utilizes their resources of players by enticing fans to buy tickets, clothing, shoes, broadcasting networks, and much more. By using the players, the NBA actually promotes better efficiency in the market by maximizing the profits that they reap through the economic activity of the fans.

Industry structure
a profit
NBA is a cartel because the league appeals to fans by making a salary cap that teams can't exceed
This fans favor the salary cap because it levels the playing field for all teams.

salary cap sets a limit on the amount of money that a team can spend on their players and if a team exceeds the cap, they must pay a luxury tax to the association.

Lastly, but not least, there is product differentiation as well within the industry of basketball. There is the Women’s National Basketball Association (WNBA) and also the National Basketball Development League (NDL) as well.

The industry

Major firm in the microeconomic industry

Acts as a monopolistic firm

Competes with other sports leagues such as:
National Hockey League (NHL)
National Football League (NFL)
Major League Baseball (MLB)
and Major League Soccer (MLS)
not with other basketball leagues.

NBA acts as unions because of the unequal distribution of monopoly profits and as a result of the cartel between the franchise owners and NBA commissioner.

NBA can:
Drive wages up in order to drive ticket prices up and
Raise wages to increase profit

In either scenario, the consumer
is harmed because ticket prices
are continually climbing.
Within the industry, there is also price discrimination. Combining services such as
~transportation and tickets,
~ticket bundles,
~season tickets,
~single game tickets,
~major theme
nights for groups.

We discovered that the NBA’s structure is defined as a monopoly and that it relates to microeconomics in that there is only a small product differentiation with only several firms (30 teams) in the market.

The NBA affects the economy with the expenses the teams use for :
Even the gas expense for the audience who go to every game to cheer their teams on.

We explored the different income sources include:
Media broadcasting

The NBA today has expanded to a global scale, attracting an international audience that express their adoration through purchasing:
Shirts, jerseys, shoes, and much more.

In terms of government regulation, teams are separately owned, and compete for both employees (players) and customers (fans). But teams in pro leagues, they also work collaboratively to establish the game’s rules, schedules, collective bargaining agreements, and broadcast rights. For these collaborations, league have exceptions and exemptions from Congress from traditional antitrust laws.

This topic interests us because we are intrigued to see how the internal and external workings of the economic structure of basketball are within and beyond the American economic market.
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