Posted by John Vrooman on Friday, April 17, 2015 in National Basketball Association.

Interview with International Business Times.

— How does the revenue a NBA franchise earns from a single playoff series compare to the regular amount of money it earns during the regular season?

The basic rule of thumb is that a playoff team grosses about $1 million per home playoff game.

The big difference is that the NBA Commissioner’s office captures 45% of playoff revenue compared to 6% during the regular season.  About 20% of the NBA Commissioner proceeds are distributed as regular season rewards and the remaining 80% is used for post season player bonuses.

The home playoff team gets the remaining 55%, unless the series ends in an odd number of games, in which case the Commissioner gets 30%, the home team gets 45% and the visitor takes 25%.

— Do NBA teams (or teams in any pro sports leagues) benefit from lots of activity in the secondary market?

Most of the capital gains (buy low sell high) in the secondary are captured by the season ticket holders and the secondary ticket resellers themselves. Because the season-ticket holders can resell their tickets at a premium, then it obviously makes season tickets more attractive for playoff clubs. The season ticket carries the option to renew from season to season but also the first option to buy poste-season playoff tickets.

A season ticket is also an implicit contract between the club and the ticket holder that the season ticket fan will be rewarded with lower ticket prices relative to willingness to pay during good seasons because they endure higher ticket prices relative to team quality during bad seasons.

NBA clubs can benefit from the secondary market if they cut a side deal with the secondary seller such as stub-hub or if they force the fans to resell ticket through only through their own platforms. Stub-Hub is currently suing the Golden State Warriors  and Ticketmaster for conspiracy in restraint of trade by threatening to revoke season ticket holder rights if tickets are sold in any platform other than Warrior/Ticketmaster.

This may work in the short-run for the Warriors this season because they have the best record in the NBA .817,  but it may it difficult to sell season tickets in the long-run because they have restricted season-ticket holder option rights and voided the implicit contract between club and season-ticket holder.

The existence of the secondary market (Stub-Hub) serves as evidence of the inefficiency of ticket pricing in the primary market. The best way for the clubs to capture all of the gains is through variable or dynamic pricing where variable primary market ticket prices virtually mimic secondary market prices by rising and falling depending on the quality of the game.

If variable/dynamic prices are efficiently set in the primary market then the secondary market would no longer exist. Dynamic pricing is becoming a growing trend in throughout MLB and now spreading to the NBA.

— During the regular season, the amount of money NBA teams earn from television contracts dwarfs the amount they take in from ticket sales. Does that same rule apply in the playoffs?

After the new national TV deals that almost tripled revenues to an $87 million per club per season on average over 2016-25,  I would agree regional and national TV media revenues taken together will probably more than double the NBA average gate of $45 million by next season. Broadcast rights to the NBA playoff games are already part of the rights fee packages and almost all of the games will be broadcast on NBA media partners and those that are not will be shown on NBA TV.

Regional carriers can only carry a very few games in the first round, and although the TV money for the playoffs is a prime driver in determining the rights fees the actual amount of money distributed to the clubs does not vary in the playoffs, because it is already part of the overall package.

The gate revenue is taxed very heavily by the League Office (see the tax rates above) and so the teams share shrinks from 94 percent in regular season to 55 percent in the playoffs. The real difference is of course in the higher playoff primary ticket prices and other venue revenues from concessions, marketing and sponsorships.

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One last thing: would you say that the NBA, on the whole, has an attendance problem? I know there are a number of franchises that pack their arenas with ease all season, but there are quite a few that do not.

Not really: The Association just set a new overall attendance record of 21.9 million this season. Some demand elasticity with respect to winning is expected for 41 home games, especially when played in the backdraft of a mega TV and new media explosion.

There is still some imbalance. Here is the bottom 5 breakaway pack in terms of attendance and their respective performances. All of the clubs but the Bucks had miserable tanking type seasons, and the Bucks are playing in an economically obsolete arena in an small market with a long history of mediocrity.