Nba Lockout Essay, Research Paper

Economic Effects of the NBA Lockout

The National Basketball Players Association lockout greatly affected the United States economy. Greedy team owners and greedy players fighting over large amounts of money caused the lockout. In March of 1998, team owners felt that they were paying players too much money, causing clubs to lose money, so they voted to reopen discussions on the collective bargaining agreement. The players on the other hand felt that any team financial problems were the owners doing, not how much money players were being paid. When the two sides could not settle their differences and the collective bargaining agreement expired, the owners decided to lockout the players until they reached an equal agreement.

Lasting six months and into the NBA season, the lockout had a huge effect on those businesses or people associated with the games. First of all, since the games were not taking place this meant that employees were not able to work in the stadiums. Those employees who are usually hired to work the concession stands or sell food, drinks, and souvenirs around the stadium were out of work while the lockout persisted. Lack of work meant less income for the old stadium employees, thus lowering the demand for other goods that these people would normally buy. Lower incomes make people purchase fewer amounts of goods from stores, restaurants, and other recreational activities.

In an article entitled “Playing With Fire: A NBA Lockout Could Leave Fans Out in the Cold,” a Phoenix Suns fan, Phil Lester, discusses the NBA lockout and how much money he spends on game nights. Phil says that “he can easily spend between $50-$100 on a night when the Suns are in town, counting dinner before the game, then some snacks and a couple of adult beverages during it. And that doesn’t include the money spent on the tickets.” Without the NBA, the money usually spent by fans will go unspent, greatly affecting businesses, workers, and the economy as a whole.

Restaurants near the basketball stadiums lost money because of the NBA lockout. Basketball fans eat or drink at restaurants and bars before and/or after games, but these fans were absent from the restaurants and bars because there were not any games to go watch. In an article entitled “Check, Please,” John Donovan writes that when the Suns are playing at their home arena in Phoenix, people crowd the city. He says that on game nights an owner of a bar or restaurant, A.J. Sulka, can expect to serve at least 1000 people when on non-game nights, Sulka would serve 200 people. The NBA lockout would cause Sulka, and other restaurants and bars in town, to lose several thousands of dollars per game night. Fewer people to serve results in restaurant owners and employees having a lower income. Less food and drinks are demanded, which decreases owners profit and at the same time, waitresses are not needed to work as many hours and are not paid as much in tips. Lower incomes affect the economy as a whole because business owners and workers will spend less money on other goods and services. Lower incomes lower the demand for other goods and services and affect the businesses offering those “other” goods and services. Businesses rely on basketball games to bring them people who will buy goods and services from them.

Although the lockout results in less income for businesses related to basketball, it does mean that fans who normally go to games and spend money will not be spending the money or would spend the money elsewhere. Basketball fans have more money to spend on other goods, services, or activities. For example, if a basketball fan could not go to a basketball game, they might decide to go to a movie instead. This would bring more business to the movie theater that would not exist if the NBA lockout were not taking place. Also, since basketball fans would not be spending money on a game, they might decide to spend the money at the grocery store and buy some extra snacks. This would bring greater amounts of income to the grocery store. The NBA lockout would then increase the demand for other goods, services, and activities, which would increase the income of non-related basketball businesses.

Owners and players suffered from a lower income because of the lockout. Owners of teams have rent contracts with stadium owners that are paid in advance. The owners rent the stadiums the teams play in and even if there are no players, the rent is still paid by the owners. Paying the rent and making no profit from the games causes owners to not make a profit, have a lower income, and decrease demand for other goods in the market.

During the lockout, basketball players were not paid any money. When the lockout ended it had dragged into the middle of a regular season so players were forced to play less games than usual. Fewer games played meant that the players were paid a less money, creating a lower income for them. The lower income means that players will have less money to satisfy their wants and needs. Demand for any goods and services that the players would normally buy with a higher income would decrease and players would spend more money on what they actually need.

The NBA lockout ended when the owners and players compromised on a new seven-year collective bargaining agreement. Each side made significant compromises to end the lockout, but the owners walked away with a much better agreement than the previous one. The new agreement gave owners control of individual salaries that will be in place for six years, with the owners having a choice of a seventh year. Players did not benefit like the owners, but non-superstars will be paid bigger salaries.

Although the lockout ended, the affects on the economy remain. The lockout made fans unhappy with the players, so many fans are not interested in basketball like they were before the lockout. Games do not attract as many people so businesses related to basketball are still affected by the lockout. Stadium employees, team owners, and players are once again earning their regular incomes, but fewer fans attending the games will have a long run effect on the income of the NBA, which affects the income of the stadium employees, team owners, and players. The higher the income of the NBA, the more money everyone working under them is paid.

The baseball strike of 1995 caused baseball fans to lose interest in the sport because fans felt like players did not care about them. Fans became angry because they felt like players were too greedy and selfish. The same results happened with the NBA lockout. Fans did not approve of the fighting between owners and players over money so they decided not to help support the NBA. Whether sports teams have a lockout or strike, the ending result greatly affects the sport’s ability to attract fans and make money, thus affecting the whole economy.