Basketball, the Highest Paying Sport in the United States, Research Paper Example

Defense! Defense! The crowd goes as Stephan Curry dribbles the ball towards the Cavaliers’ side of the court to make a jump shot and claim three points. This is just a snippet of the highly charged 2015 NBA finals between the Golden State Warriors and the Cleveland Cavaliers. The Golden State Warriors would go to win the finals series 4-2, thrashing a much fancied and star studded Cleveland Cavaliers. As the third most popular sports in the United States, basketball generates considerable revenue, epitomized by the NBA league. It is for this reason that a majority of the highest paid athletes in the United States play professional basketball in the NBA.

Broadcasting Rights

Teams in the NBA has seen a considerable rise in the value of broadcasting rights. With ESPN/ABC and TNT currently having the broadcasting rights to NBA games, there is a considerable amount of money that is paid by these media houses to gain these rights. The last deal to broadcast NBA games expires with the 2015-2016 season. Time Warner and Disney pay 445 million and 485 million respectively to obtain the game rights for the TNT and ESPN/ABC (Badenhausen).

Broadcasting rights also generate foreign currency through global broadcasting rights. Foreign markets have become a thriving ground for NBA teams and the NBA itself as a result of the number of international players it has. In the last league, over 35 countries and regions were represented on draft day, setting a new record. One of the most prominent international basketball players was China’s Yao Ming. Since he was drafted to the Houston Rockets, all the team’s games have been broadcasted in China. These contribute to TV rights revenue earned by the league and the team.

Revenue Distribution

The NBA currently has a league-wide pool in which all the large market teams are expected to contribute. Teams such as the Knicks and the LA Lakers generate considerable revenue, far above what teams such as the Spurs and the Pacers realize. The league-wide revenue pool ensures that there’s an equitable distribution (sharing) of this revenue, ensuring a level playing field for all teams within the league. This ensures that smaller teams have the financial power to remain operational and competitive.

Salary Cap and Luxury Tax

The NBA employs a salary cap, limiting the amount of money that teams can pay to their players. This value changes from one season to the next as a result of varying levels of revenue realized. This ensures that there is a level playing field within the league, avoiding a situation of an uncompetitive league dominated by a few wealthy teams that can attract the best players with a high salary. This ensures that a considerable number of NBA pays are paid a considerable amount of money. Teams that exceed this cap have to pay a luxury tax. Some teams are capable of maintain a certain level of luxury tax relative to the revenue they generate.

In conclusion, The NBA depicts a large number of the highest paid sports personalities in the United States, as well as globally. The BA has effectively leveraged its bargaining position through broadcasting rights that rake in millions of dollars annually to service its costs. However, the most innovative and important aspect of the NBA, the revenue distribution system, ensures that all teams in the league realize revenue enough to keep them profitable.

Works Cited

Badenhausen, Kurt. “The World’s Highest-Paid Athletes.” 10 June 2015. Forbes.com. Internet Source. 28 July 2015. <http://www.forbes.com/athletes/>.

Humphreys, Brad R and Dennis R Howard. The business of sports. Westport: Praeger, 2008. Print.

Jozsa Jr, Frank P. National Basketball Association Strategies: Business Expansion, Relocations and Mergers. Cham: Springer, 2015. Print.

Plunkett, Jack W, et al. Plunkett’s Sports Industry Almanac 2009. Houston: Plunkett Research Ltd., 2008. Print.