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A Look At the NBA's Booming Business Ahead of the Finals

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The NBA Finals tip off Thursday night, pitting LeBron James and the Cleveland Cavaliers against Steph Curry and the Golden State Warriors for the fourth straight season. The speculation and predictions have already begun, but let’s leave the guessing to the NBA experts and look instead at the NBA’s rapidly growing business.

James, who is set to play for his eighth straight NBA title, Curry, and Kevin Durant are all global superstars. All three are some of the biggest names for some of the biggest sports apparel companies in the world, Nike (NKE - Free Report) for James and Durant, and Under Armour (UAA - Free Report) for Curry.

The three biggest names in the NBA Finals are also successful pitchmen as well as investors, making millions on and off the court. On top of the success of these superstars, the NBA has become one of the most successful sports leagues in the world and its business has never been bigger.

TV Ratings

The NBA saw its overall national TV ratings climb 8% from last season to hit 1.28 million, according to Nielsen. This uptick comes across the league’s four television-network partners: Disney’s (DIS - Free Report) ABC and ESPN, Turner’s TNT, and NBA TV. The 2017/18 season also marked the NBA’s best overall ratings average since the 2013/14 season and stands in stark contrast to the NFL’s ratings decline.

The league has also performed well on television throughout the playoffs. The struggling ESPN’s overall NBA playoff ratings were up 31% from 2017, with Game 7 of the Eastern Conference finals drawing 13.305 million viewers—which marked the second-largest total for an NBA game in ESPN history. Meanwhile, TNT’s coverage of the Western Conference finals climbed roughly 33%.

These ratings will be fun to pay attention to throughout the NBA Finals as the league’s performance on television might have major implications for sponsorship partners and help determine the NBA’s negotiating power going forward.  

Sponsors

The NBA introduced for the first time this season jersey sponsorship patches, which allowed teams to negotiate their own deals with companies for the rights to a 2.5 inch by 2.5 inch patch on players’ left sleeves. In total, 21 out of the league’s 30 teams played with a patch during the first season, with notable teams from big markets, including the Chicago Bulls and Houston Rockets, taking the court without patches.

With that said, the rest of the teams made some big money from deals. The average patch deal brought in roughly $6.5 million per year, and accounted for roughly $137 million of total sponsorship revenue, according to IEG/ESP.

The recent influx of new revenue helped the NBA pull in $1.12 billion in total sponsorship money this season, which marked a 31% surge from the $861 million last season. It is also worth noting that the NBA rested just behind the NFL’s $1.25 billion.

General Electric (GE - Free Report) , Disney, Harley-Davidson (HOG - Free Report) , Western Union (WU - Free Report) , eBay (EBAY - Free Report) -owned StubHub, and Fitbit (FIT - Free Report) were just some of the notable jersey sponsors in the inaugural season. The two teams that face off in the NBA finals stand to help provide even more exposure for their corporate sponsors: Japanese electronics firm Rakuten RKUNY for the defending champion Warriors, and Goodyear (GT - Free Report) for its hometown Cavaliers.

The 2018 NBA Finals mark another first for the NBA when it comes to boosting its top line, with Google’s (GOOGL - Free Report) YouTube TV acting as the first-ever presenting sponsor for the NBA Finals. The YouTube TV logo will appear all over the place, including the official NBA Finals logo. Meanwhile, select markets are also expected to be able to watch ABC’s NBA Finals coverage on YouTube TV.

Looking Ahead

From the NBA’s partnership with Take-Two Interactive and Amazon’s (AMZN - Free Report) Twitch on its new esports league to its active expansion in China and other growth markets, the NBA’s business looks poised to keep on booming.

Going forward, these deals should help the NBA become even more popular and relevant as it fights to stay on the cutting-edge of content distribution and outside the box business ventures.

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