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What the NBA can learn from other lockout recoveries

Some good news for the NBA: Ticket sales are typically unaffected by labour stoppages in sports.

Whenever the New York Knicks suit up and play in the confines of Madison Square Garden, they generate at least US$1 million in ticket revenues, driven by a rabid fan base in arguably the sport’s best market. Like the Knicks, sports franchises across North America will typically pull in between hundreds of thousands and millions of dollars in gate receipts per game, with that total swelling in the playoffs. Generally speaking, franchises that sell plenty of tickets are financially healthy.

But when games are lost to a labour stoppage, those revenues drop to zero. And even after a labour dispute is settled and games resume, there’s always the possibility that annoyed consumers will punish the league and its teams at the box office. The Montreal Expos never recouped their pre-strike attendance levels—in part because fans were robbed of a banner year from the Expos—and after years of diminishing numbers, they were forced to relocate.

The NBA can ill afford a consumer backlash. The league and players’ union ratified yesterday a deal that officially ended the lockout, which ultimately axed 16 games from each team’s regular season schedule.

Luckily for the NBA, there is reason for optimism: most sports-related labour disputes don’t result in major drop-offs for ticket sales. Sports economist Dave Berri, speaking on the Freakonomics website, says that consumers don’t punish leagues over cancelled games. “In other words,” says Berri, “strikes and lockouts don’t really cause attendance to change in professional sports.”

In fact, there’s a very real possibility that the NBA could emerge from its lockout with stronger attendance numbers, much like when the NHL followed up its cancelled 2004-05 season by posting league-wide attendance records.

The 2005-06 NHL Season

By all accounts, the NHL’s first post-lockout season was a success. When you compare average home attendance from the 2005-06 season with the year preceding the lockout, 21 of 30 franchises either maintained or increased those numbers (22 if you factor in Detroit, which averaged two less tickets sold per game at Joe Louis Arena, a miniscule drop). The NHL reported a 2.4% upsurge in ticket sales, posting records for league-wide average and total attendance.

The biggest gains were made by the Pittsburgh Penguins, which increased their attendance by 33%—largely because of Sidney Crosby’s performance in his rookie season—and the Carolina Hurricanes, which increased its ticket sales by more than 26%. The only franchise to suffer cataclysmic box office losses—the St. Louis Blues, which posted a 23.4% drop—had a terrible on-ice product. If anything, you could argue that in-game consumer demand was stronger once the NHL had solved its lockout woes.

It’s important to note that Pittsburgh and Carolina had the two worst home attendance figures in the year preceding the lockout. To some degree, they could only get better. Many teams with the weakest positive growth—or flat growth, like Colorado and Vancouver, which maintained their sell-outs—were adding to their already impressive numbers. The NHL’s best markets—Canadian teams and established American markets like Detroit, Philadelphia and New York (Rangers)—posted the highest average attendance numbers, to the surprise of no one.

But what surprised many was how quickly people bought tickets again. When the NHL lockout was initially underway, Ipsos Reid conducted a survey of Canadians and found that 52% would blame players for a cancelled season, whereas 21% would blame the owners. Sixty per cent of people felt the owners were fair and reasonable—in spite of the fact that players were eventually forced to accept a one-quarter salary rollback—while only 20% felt the players were reasonable. Given that people pay to watch athletes, it’s never good when consumers find them unfair and greedy.

And yet the NHL, despite this PR crisis, increased its ticket sales.

There are many hazy theories as to how the NHL pulled this off. Some have argued that hockey fans are simply more diehard, supporting consumers than are fans of other leagues—an argument that rings hollow below the 49th parallel. It’s more likely that consumers responded to the new-look NHL. The league made various system and rule changes that promoted parity and facilitated high-speed, offensive hockey. “The game is so much better now,” said Ron Francis, a retired NHL star, when speaking with the National Post about the effect of those changes.

In the same Ipsos Reid survey, “most Canadians” believed the NHL would make a full recovery. Consumer spending and ticket revenues are inherently part of that recovery. And despite whatever resentment they had towards the league and its players, consumers were just as willing to spend money at the box office.

What can the NBA learn from the post-lockout NHL?

It’s safe to assume that people in the NBA’s best markets—Chicago, New York and Los Angeles—will continue purchasing tickets. In the NBA’s mid-range and small markets—New Jersey, New Orleans and Orlando, to name a few—ticket sales will be contingent on how those teams perform, much like in the case of the Pittsburgh Penguins.

The NHL’s biggest weakness, however, has been their long-term strategy for vulnerable markets, particularly those in the southern United States, such as Miami, Dallas, Phoenix and Nashville. In the year following the lockout, many weak hockey markets improved their ticket sales, though long-term growth has stalled. That development, coupled with mediocre TV deals, makes it tough for some American franchises to be profitable. Even the Atlanta Thrashers posted higher attendance in 2005-06; five years later they’ve relocated to Winnipeg.

If the NBA’s most vulnerable markets—Charlotte, Sacramento and New Orleans, among others—show signs of life this year, the NBA can’t be lulled into thinking their lockout resolution has solved the woes of small market teams. Ticket revenues are a key economic driver in sports leagues, but it’s only one element of a franchise’s fiscal health.

The NBA’s outlook

The NBA’s 1998-99 season was reduced by 32 games per team due to a lockout. In The Wages of Win, a book written by Berri, Martin Schmidt and Stacey Brook, it says that 1997-98 average total attendance was 701,799 fans per team. In the first full season after the lockout, that number dipped by an average of about 10,000 spectators per team. Berri says, however, that you can’t be sure the lockout caused this downturn, or whether it’s just part of a typical pattern in league attendance. Other seasons have seen decreases in ticket sales, and those seasons didn’t follow lockouts.

“When we employ intervention analysis to assess the impact of the NBA lockout on attendance we find that there wasn’t any statistical impact,” the book says. “NBA fans did not walk, in a statistical sense, when the players walked.”

If ticket sales were barely affected in the wake of a lockout and Michael Jordan’s retirement—a time when the league was suffering an identity crisis and weak TV ratings—then the NBA finds itself in an optimal post-lockout position.

The NBA is currently basking in its best on-court product since the ’90s, driven by a deep roster of highly visible and marketable players. And the NHL has proven that in-game entertainment is paramount to ticket sales and post-lockout recovery. Consumers will always pay for quality and the NBA has it.

*NHL attendance data courtesy of ESPN.