NBA owners want parity not for you but for their pocketbooks

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When was the NBA at its peak of popularity? When one dynamic star — Michael Jordan — dominated the game and his team was a dynasty for the better part of a decade.

Based on that — and what we saw with Bird and Magic, and what we saw last year with the Heat — I see the idea of parity in the NBA as being to way to bring in more fans as flawed. The NBA is about selling its stars, but because that has worked.

The owners disagree. Strongly. The owners want their hard cap and parity with it. NBA owners point to the NFL where “competitive balance” is hailed as the reason for the sport’s success and massive television ratings. The league contends that if you don’t let the rich owners overspend and you put in a system where even the smallest markets can make money then the rising tide will float all boats.

Is competitive balance good for the NBA? Over at the Wages of Wins journal, Dave Berri destroys that idea (link via TrueHoop). They use a ratio that shows the NBA has been the least balanced of all American sports for decades, despite having a cap and limits on player salaires, and that has not slowed its growth.

David Stern and the NBA owners want to impose further limits on the spending of owners in the NBA. The NBA (in 1984) was the first to impose any kind of cap on team payroll. And in 1999 the NBA was the first league to cap the salaries of individual players. As one can see, the 1984 cap didn’t alter competitive balance. And since 1999, the average ratio in the NBA has been 2.7 (by far the highest in American sports). So the 1999 salary cap also didn’t seem to have much impact on balance.

This is not a surprising result. Martin Schmidt and I presented research this past summer that looked at the impact of various institutions (i.e. salary caps, luxury taxes, etc…) the NBA, NHL, NFL, and Major League Baseball have created to alter competitive balance. We found that none of these institutions had any statistically significant impact on balance in any of these leagues.

Berri notes that in the NBA market size does not help a team win — Utah and San Antonio have had great success in small markets in the last decade, the Knicks and Clippers floundered in large markets.

Berri also throws out there that the NBA was a much more balanced league before David Stern took over as commissioner, yet he has been heralded for the growth of popularity of basketball.

So why are the owners so driven on competitive balance? It’s about the money. It’s always about the money.

Henry Abbot does a great job looking at the issue of parity and television ratings over at TureHoop, using the English Premiere League and other sports. His conclusion is spot on about the issue of competitive balance in the NBA:

I must tell you, of course, that whenever, any economist is asked this question, they will say well, the league in question, and I’m not getting at the NBA here, it’s true of every league, including the European soccer governing body at the moment, every sports league when it proposes something to improve parity, says it is what the fans want.

But every such scheme also reduces the salary costs to the owners. It’s a way of containing costs.