The Business of the NBA Finals – Part 1

City Revenue (Per Game) — Cleveland, OH*(2006-2007)
NBA Finals	$4.6 million
Eastern Conference Finals	$3.6 million
Eastern Conference Semifinals	$3.4 million
The Playoffs -1st Round	$3.2 million
*Source: Positively Cleveland

The ultimate destination for any NBA team is the Finals. The journey is long, but after 82 regular season games, it’s the host cities of the last two teams standing that win. To land the most coveted best-of-seven series of the year pushes a city’s revenue stream to take flight when tourists descend into the market and residents make game-related purchases.

Despite being swept 4-0 by the San Antonio Spurs in 2007, the Cleveland Cavaliers’ first Final’s appearance in franchise history brought Cleveland $4.6 million in revenue. An additional perk was the media exposure which would have cost $60 million to $100 million in paid advertising, according to industry analysts.

“The exposure was invaluable,”

says Tamera Brown, vice president of marketing for Positively Cleveland, the city’s tourism organization. “Having the Cleveland skyline and other trademark pictures broadcast on national television brings a lot of attention. As a result, she says, the city saw increases in its leisure tourism and business travel numbers during the latter part of the year.

“The organization is funded by a bed tax [which is a fee added to the room rates of all 4,200 hotels in the city],” Brown added. “This assisted our bottom line, and when we generate more money, we can continue to market the city more.”

The economic windfall of the NBA Finals can also benefit the state by reducing its

annual inducement payment to a club. The New Orleans Hornets, for example, have provisions in its lease that require Louisiana to compensate the team if its annual ticket revenue falls short of $38.7 million, a figure that represents roughly 80% of all tickets sold at the arena on a given night.

Because the Hornets got off to a slow start with ticket sales in the beginning of the season, state officials projected their obligation to be $6.3 million before the playoffs. The extra revenue from a Finals appearance would have helped reduce that financial burden.

Blacks in the City
Unlike the Super Bowl or the Olympics, which outsource contracts for numerous services and goods needed during the event, the Finals are self-contained.

The Cavaliers did not seek bids for the Finals, says Tad Carper, senior vice president of communications for the team, but it instead worked with local suppliers on a year-long basis. As a part of that process, the Cavaliers collaborate with the Northern Ohio Minority Business Council to identify new businesses that may be a match for its professional needs, he says, adding that 41% of the full-time Cavaliers and arena staff from the community are non-white. The Cavaliers recently awarded a contract to EPS Plumbing, an African American firm.

Fuel for the Future
The games also help build excitement for the following year, Carper says.

After their 2007 run, the Cavaliers started this season with a 22-game sellout streak and 8% of gross ticket sales, in the form of an admissions tax, went back to city, he says.

He added that this type of contribution to the community is great. “We are business people and like to talk dollars and cents, but people tend to underestimate the impact [a championship game] has on the fiber of life. There is the element of psychology–it generates a [warm] feeling and positive momentum in the city and people tend to feel good about themselves when hosting an event of such magnitude.” That, in itself, can have long-lasting effects.

Next in the five-part series: The League