Net Profits Suffer From NBA Lockout - small business impact of National Basketball Assn lockout

Nation's Business, Feb, 1999 by Dale D. Buss

The players and owners weren't the only ones to take a hit from the loss of games. Related small businesses and workers did, too.

When the National Basketball Association lockout began last summer, Mike Gamble took a charitable view. As the head of sales and marketing for the Philadelphia Convention and Visitors Bureau, he figured reason would prevail and the work stoppage would end long before it threatened local businesses and the city's hosting of the league's All-Star Game.

Gamble remained confident that on Feb. 14, the biggest spectacle in pro hoops would come off as scheduled, energizing the City of Brotherly Love and local cash registers like a backboard-crashing slam dunk.

So in late December, on the 17 1st day of the standoff between the players union and NBA management, Gamble was crestfallen to learn that the league had canceled the All-Star Game, an annual extravaganza he believes has come to rival the Super Bowl as a sports showcase.

"This affects us dramatically because this was going to be a $35 million event for the city," Gamble said as he immediately laid plans to paper over the economic void by hyping the other activities planned for the week of the All-Star Game: a pharmaceutical-product launch and a jazz festival sponsored by PECO Energy Co., the area's major utility

The cancellation announcement also left Lou Yaffe feeling like he just got stripped of the ball. Yaffe's company, PSP Marketing, publishes the programs for the all-star matchup and for regular NBA games and will take at least a $1 million bath from lost advertising revenues because of the All-Star Game's cancellation.

Until the players union and the NBA owners approved a new collective-bargaining agreement at the 11th hour in early January--an accord that needed only tom be put in writing and signed for an abbreviated season to begin in early February--things had looked even bleaker for Yaffe, the Philadelphia-based regional director for PSP, a 200-employee company headquartered in New York City

"We're getting hit twice because we re not able to sell the regular season--and now the All-Star Game," Yaffe said before the end to the lockout was announced.

As players union Executive Director Billy Hunter and NBA Commissioner David Stem wrangled for financial control of the league and the eight-month NBA season was threatened with cancellation, the score was stacked against small firms that depend on catching some of the runoff from the huge flow of revenue generated by professional basketball.

From national restaurant chains to advertising agencies, from transportation companies that haul the NBA stars to arenas to manufacturers of NBA-licensed gear, businesses across the country were hurt badly by the lockout, with some estimating sales losses of $1 million or more as 1999 began.

Such effects from the lockout were perhaps more acute than the effects of the 1994 Major League Baseball players strike, which resulted in the cancellation of all games after Aug. 11, including the playoffs and the World Series.

Towns Feeling The Pain

To a greater extent than any of the other leading professional sports leagues, the NBA is a "small-town" pursuit that is played not only in metropolises such as New York City, Chicago, and Los Angeles but also in medium-sized cities-- including Sacramento, Calif.; Vancouver, British Columbia; and Charlotte, N.C.--and in larger cities with only one major sports team, such as San Antonio.

In downtown San Antonio, close to the Alamodome, where the NBA's Spurs play, Landry's Seafood typically has revenues of nearly $10,000 a game. "On a regular night we normally have around 250 to 450 people, but on game nights we get from 600 to 900," says Robert Martinez, assistant general manager at Landry's. "People start coming in at 4:30, the place clears out for the games at 7:30, and we are packed again right after they are over."

Score Virtual Sports World, across the street from General Motors Place, the Grizzlies' arena in Vancouver, is a vast entertainment complex featuring computer games and other diversions. The lockout sapped a significant amount of business, says Marty Thompson, a manager.

In downtown Cleveland, business owners-with baseball's Indians out of season and a new National Football League team not set to begin play until late this summer-were hurting as well.

At the DiamondBack, a 28,000-squarefoot restaurant near Gund Arena, home of the NBA's Cavaliers, business fell off like the scoring of a team with an injured shooting guard. About 35 percent of DiamondBack's profits come from traffic generated by Cavaliers games, says co-owner David Allen Hill.

For Cleveland's entire business community, revenues lost because of the lockout in November alone amounted to more than $15 million, according to the metropolitan-area chamber of commerce, the Greater Cleveland Growth Association.

Less-Visible Effects

Not only restaurants, entertainment centers, and merchants were bit hard by the lockout. In Salt Lake City, for example, Lewis Brothers Stages had far fewer extremely tall passengers on its 30 motor coaches-it lost its usual business of providing transportation for teams playing the NBA's Jazz and for the team's training camp. That combination amounts to about 10 percent of the family-owned company's revenues.