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How the NBA is planning to save its season after the coronavirus forced a suspension – CNBC

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The National Basketball Association is already thinking about how it could rescue its season, and a revised tournament in Las Vegas leading to the finals could be its answer, assuming it’s safe to start playing again.

After being the first U.S. league to suspend games due to the coronavirus outbreak, the NBA is hoping to salvage revenue, which The Washington Post reported could total $1 billion in losses.

In his interview with ESPN last week, NBA commissioner Adam Silver said he wants to “believe we’re going to be able to salvage at least some portion of the season.”

According to NBA executives and agents who discussed the matter with CNBC on condition of anonymity, the league remains focused on a return after suspending operations following Utah Jazz center Rudy Gobert testing positive for COVID-19 earlier this month. Las Vegas has emerged as the best location to resume the season, according to league executives. 

If the season can’t resume, the NBA will need to consider the revenue consequences of a canceled season and how it will affect players’ salaries, which are tied to games being played.

“The players are going to experience a fair amount of salary pain,” said Richard Sheehan, a professor of finance at theUniversity of Notre Dame’s Mendoza College of Business.

Longtime sports media and marketing guru Tony Ponturo, the CEO of Ponturo Management Group, said he expects Silver to patiently examine all options before deciding the NBA’s next step.

“Adam will not rush it,” said Ponturo, who spent 17 years as Anheuser-Busch’s vice president of global media sports and entertainment marketing. “I think he’s one person that will keep doing the right thing even if that means a financial hit for a year.”

Las Vegas to the rescue?

But if the NBA does return, team executives told CNBC they favored Las Vegas as a possible location to conclude the season. And media experts agreed, adding the decision could help the NBA retain some of its revenue domestically and perhaps in China.

An NBA spokesperson told CNBC the league has considered many “scenarios” but is not close to rolling out a plan. When asked if the NBA would pick up where it left off or jump into the postseason, Silver said he didn’t have “a good enough sense of how long a period this is going to be” to give a definite answer. 

The NBA could decide to cancel the remainder of its regular season and create a play-in tournament for lower-seeded teams to enter the postseason. The league could then set up a best-of-five series for the first round, before moving to a one-and-done tournament to determine the two teams that will play in the NBA Finals, which would also be a best-of-five, people familiar with the planning said.

The tournament and NBA Finals would be held in Las Vegas at the Thomas & Mack Center and Cox Pavilion, where the league hosts its annual Summer League events.

“It certainly would be the first place to think about,” said Marty Conway, an adjunct professor at Georgetown University’s McDonough School of Business. “The NBA also has a solid history of not only playing Summer League, but also the commercial opportunities that they’ve built around the Summer League and everything that goes with it.”

The NBA could also test elements of its planned in-season tournament, which Silver said he “strongly” believes will be incorporated in the coming years. NBA sources told CNBC the league has already floated the idea of using Las Vegas as the final location for a possible in-season tournament.

Conway said that picking up at least part of the season would be “essential” to the NBA’s revenue, which was already expected to decline after Houston Rockets GM Daryl Morey supported Hong Kong protesters and offended the Chinese government in one tweet. 

At last month’s NBA All-Star Weekend in Chicago, Silver told reporters the NBA could lose up to $400 million due to its rift with China. 

Sheehan said any tournament that’s part of a modified restart of the season could assist in repairing relations with China, as government officials may return games to CCTV now that the country is currently recovering from the coronavirus outbreak.

Portland Trail Blazers star C.J. McCollum told CNBC he’s intrigued by the idea of a modified tournament later this year.

“It depends on how the tournament is structured,” he said. “I can’t say I would be happy with it or that I think it’s the right thing. I’d have to see how it’s structured. I think logistically, the NBA is in a position to experiment with many potential solutions.”

Dallas Mavericks owner Mark Cuban was a guest on CNBC’s town hall on the coronavirus pandemic Wednesday night. When discussing a possible return, he predicted the NBA would start playing games without fans as the league waits for a coronavirus treatment to become available.

Like Silver, Cuban expressed optimism the NBA would return “as early as we can, without spectators, just on TV and streaming and just give people something to celebrate.”

An image of Kemba Walker of the Boston Celtics inside TD Garden, on March 12, 2020 in Boston, Massachusetts.

Maddie Meyer | Getty Images

Locals need love 

Though health is the main priority, there are other potential issues to work through with any modified return.

One problem media experts pointed to is with regional sports networks, which could dispute any return that doesn’t include a portion of games for their outlets.

Perhaps the rights to the play-in contest for lower seeds would help satisfy any issues that would arise from regional outlets. The NBA could also follow its current postseason media format, granting the rights to shortened first-round playoff games before ultimately shifting the tournament and a modified NBA Finals to its national partners.

Experts suggest another way the NBA can satisfy media partners is offering another year to current deals with no fee increase. Currently, the league is paid roughly $2.6 billion by Turner Sports and ESPN, in deals that run through the 2024-2025 season. 

And the NBA could offer access to future content for media partners to monetize, which would help offset advertising losses that Sports Business Journal estimated could total more than $130 million.

Daniel Cohen, a senior vice president of Octagon’s global media rights consulting division, said networks could make it a legal battle but ramifications of any lawsuit could prevent future business with the NBA.

“We don’t know if it’s two weeks, two months or six, but the NBA is going to be back on TV,” Cohen said. “That content is so critical to the cable ecosystem, the TV industry, that they can’t turn their back during this difficult time on these sports operators.”

“And the flipside of that, the sports properties, they can’t try to hold these networks over a barrel or over a league contract because they very much need that financial support.”

A painful bounce back

Whether the NBA returns depends on Silver’s creativity, the approval from the National Basketball Players Association, and a significant assist from science, as the coronavirus outbreak will ultimately decide if any U.S. sports league will return this year.

The NBA will continue to suffer, though, especially when factoring in the loss of two of its icons, former commissioner David Stern and Lakers star Kobe Bryant, mixed with the damage from Morey’s tweet. Throw in the blow from the coronavirus, and it turns into “the ultimate case study for a sports industry,”  Conway said.

And there is no hiding the financial hit.

Last month a league official told CNBC it already adjusted its 2020-2021 salary cap to roughly $115 million, which is still up from its approximately $109 million figure this season. Projections are distributed to teams throughout the season to help cap planning.

With the current interruption, it’s difficult for the NBA to determine next year’s cap, but some player agents fear it could drop below its current figure, and perhaps arrive borderline $100 million. If so, it would be the first decline since the 2009-10 season, and the third time in NBA’s salary cap history.

Ponturo said the NBA’s revenue hit should only be short-lived, perhaps a year, as it’s a “healthy league with a future healthy balance sheet.”

Though the future still appears bright, the NBA is running out of time to decide how to rescue the current season. And since the NBA needs its postseason to help prevent a massive revenue blow, Las Vegas might be the league’s best safety net to crown a champion, and in the process, partly satisfy those who support it financially. 

“It may not be what we’re all used to, but if [the NBA] can make it safe, make it interesting, create some excitement, I think they would do that,” Ponturo said.

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