Saturday, August 4, 2012

NBA Puts Ads on Jerseys & Questions on the Mind‏

The NBA's indication that owners will move forward with 2.5 x 2.5 inch advertising patches above the heart on jerseys in 2014 season leads to some interesting questions for the fans, players, teams and collective bargaining that need to be answered before the final vote is taken in September.

Questions For the Fans
Most fans hate the idea of ads on NBA jerseys, but it's really not as bad as they think. Will fans carry out their threats to stop watching the NBA games and buying NBA jerseys if the owners put ads on the uniforms? If the fans' reaction to the NBA lockout is any indication, then they're bluffing and their money isn't going anywhere.

Questions For the Players
How will players protect their own endorsement deals if they conflict with the advertisements on their jerseys?  LeBron James and other players already wear their headbands inside out. Will star players put tape over patches advertising the competitors of companies they endorse? Freakonomics discussed this issue regarding NFL players with ads on their practice jerseys. Will it play out the same way in the NBA?

Will teams work with star players to negotiate mutually beneficial advertising on the jerseys? The HEAT signed endorsement deals with Chinese companies like PEAK Sports after signing Shane Battier aka Shaved Monkey Nuts (a PEAK endorser) because he was popular over there after riding Yao Ming's coattails for so many years with the Houston Rockets. Will the HEAT use the jersey ads to build on the existing relationships players like LeBron, Dwyane Wade and Shaved Monkey Nuts have with China?

If teams decide to seek out mutually beneficial advertising for their jerseys, then will endorsement deals play a role in free agency and vice versa? Will advertising deals for jerseys be timed to expire for big free agent classes so teams don't have to worry about any potential conflicts? Will conflicts between players' endorsements and jersey ads make sign-and-trade deals more complicated? Will this give agents more power because they'll have to package star players with jersey deals ready to go?

Questions For the Teams
Bloomberg BusinessWeek asked an important series of questions regarding, "How will the NBA protect its own endorsement deals?" For example, will Adidas prevent the NBA from allowing the HEAT to put Jordan brand on the jersey? Will American Airlines prevent the HEAT from putting another airline on their jersey if they get a substantial offer?

The final question Bloomberg BusinessWeek asked the teams was, "How will they protect themselves from each other?" Front Row Marketing Services estimated the income gap for jersey advertising could be anywhere from 4 to 14 million dollars between small markets and large markets. Will revenue sharing close that gap, or will successful teams hoard their jersey ad revenue and increase the wedge between the NBA haves and have-nots?

Questions For Collective Bargaining
The owners will likely share the revenue from jersey advertising with each other, but will they share it with the players? NBA owners have a history of withholding new revenue streams from the National Basketball Players Association.
In 1991, the NBPA discovered the NBA withheld $92.7 million of revenues guaranteed to players from luxury suite rentals, playoff ticket sales and arena signage.

The owners have a lot of wiggle room to play with the NBPA in terms of reporting the revenue from jersey advertising. Last year, analysts estimated ads on NBA uniforms was worth $31.2 million per year. NBA Deputy Commissioner Adam Silver said the jersey ads could be worth an estimated $100 million per season when he made the announcement at the Board of Governors Press Conference but Front Row Marketing Services estimates the value is closer to $125 million.

Since the NBA and NBPA couldn't agree on how much revenue was available to split during last summer's collective bargaining sessions, it's easy to see there will be plenty of room for disagreement when either side can opt-out of the CBA in 2017. A dispute over $100 million discrepancy in revenue from jersey ads will just be a cherry on top of the fight over a split of the new TV contracts up for renewal in 2016.

Produced by @BlackInformant

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