Is Free Agency Ruining the NBA?

NBA free agency is in full swing. Is it bad for the league?

Jul 2, 2014 at 9:35AM


Keith Allison, Flickr.

NBA free agency is upon us, and this summer may see superstars LeBron James, Carmelo Anthony, and Chris Bosh switch teams, along with a host of other exciting players like Kyle Lowry and Gordon Hayward. But is this process, which the league has allowed for nearly four decades, ruining professional basketball? A group of researchers might have found an answer.

The big question
It's reasonable to think some fans are turned off by free agency and the roster turnover it creates. In many cases, teams lose their best players as a result. The departures of James and Bosh from Cleveland and Toronto in 2010 are recent examples.

On the whole, sources estimate about a third of all NBA pros switch teams each offseason. So, the question remains: Do fans stop supporting their team when players leave town?

Finding an answer
In a paper set to be published in the International Journal of Sport Finance, researchers Alan Morse, Stephen Shapiro, Chad McEvoy and Daniel Rascher analyzed the issue, and found -- somewhat surprisingly -- no statistical link between roster turnover and NBA game attendance.

This flies in the face of similar research in professional baseball. California State University researchers discovered that attendance falls when MLB players change clubs. "Contrary to popular opinion, the findings showed a distinct difference in the effect of roster turnover in the NBA in comparison to MLB," Morse et al. write.

After looking at a half-decade of data, the researchers uncovered several variables -- winning percentage, number of All-Stars, and team history -- that move in step with NBA attendance. The absence of roster turnover from their list, though, indicates criticisms of basketball's free agency process may be unfounded.

Digging deeper
So why do NBA fans care less about player movement than their MLB counterparts? Morse et al. hypothesize that a "purist mentality" could exist in baseball, more so than in basketball. "NBA fans may be more willing to except roster changes in the interest of winning, where MLB fans may have a stronger affinity for specific players," they write.

There's also a chance, according to the study, that "[NBA] fans have become more accustomed to the increase in player movement." This is certainly possible. Reaction to Jason Kidd's move from Dallas to New York a few years back, for instance, wasn't overly critical. Many MLB fans, on the other hand, crucified Johnny Damon after he left Boston for New York in 2005. Randy Johnson, Alex Rodriguez, and Albert Pujols were all similarly vilified because of their decisions in free agency.

The business implications are enormous
This study also has major business implications. Altogether, the NBA's 30 teams are worth nearly $20 billion, according to Forbes, and free agency plays an important role in determining the competitive balance between them. As I wrote last week, the migration of superstar free agents could generate millions in brand income for their winning teams. James' four years in Miami, for example, coincided with a $406 million increase in the Heat's franchise value.

It's also worth pointing out: NBA executives don't need to worry about ticket sales taking a hit if a key player leaves in free agency, holding all else constant. Although specific numbers vary, gate receipts typically make up $1 billion of the league's $5 billion in annual revenue. And equally as important, Morse et al.'s findings imply franchises needn't cater to superstars' offseason demands if they don't improve team play. MLB owners, conversely, must keep this in mind.

The bottom line
Ultimately, more research on this topic is needed. Do NHL and NFL fans care about roster turnover? Or do they cheer on their teams regardless of which players leave? These questions -- and plenty of others -- will hopefully be addressed in the coming years.

Hence the reason why Morse et al.'s conclusions are so important. They indicate that, despite the LeBron hate, free agency is not ruining the NBA.

You may not make millions in the NBA...
But that doesn't mean you can't take steps toward a better financial future. The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information