Mar 20Liked by Ethan Strauss

While I agree with the overall premise about the NBA and its relationship to its customer base overall, I find the analysis of the NBA in respect to capitalism to be a bit off.

Every capitalist who understands the game in any meaningful way knows that the ultimate goal is to attain monopoly power, not to make consumers happy. And in that sense the NBA has long ago achieved monopoly status. Since the owners of all NBA franchises have agreed to operate as a cartel, they have no competition for the goods they provide. Which is way more valuable than providing a quality product to consumers.

The NBA’s product has become more valuable while becoming less popular, but they’re only able to squeeze every dollar out of this value because there are no real competitors (at this moment) for what they provide.

So in that sense the NBA hasn’t broken capitalism, it’s capitalism personified.

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Heck, you might even be able to extend this to the entire global economy over the past 15-ish years… In a super-low interest rate world, we saw a lot of businesses survive despite not actually being popular or profitable, based on factors ranging from the belief that they might _someday_ make a lot of money (maybe defensible, maybe not) to just trends, elite preferences or outright scam-based motives. There was a lot of easy money floating around, and where it went didn’t always seem correlated with what regular people wanted or needed. So perhaps it’s no surprise to see that disconnect also apply to sports of the same era.

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As a 55-year-old guy with an 11-year-old daughter and 13-year-old son, I think the lack of youth engagement is a real ticking time bomb for sports.

My daughter has attended progressive schools in DC and Connecticut. Yet her interest in sports—playing or watching—is the same as my sister’s four decades ago (i.e., zero).

When I was my son’s age, I was obsessed with football generally and the Miami Dolphins specifically. I painted my the walls of my bedroom orange and teal, diagramed plays during class, and cried when the Dolphins lost in the playoffs..

By contrast, my son calls himself a “gamer.” And given the fun of online gaming, who can blame him? I often think I’d be same if today’s games had existed back in the day.

To the extent my kids engage with the NFL and NBA, it is though my enthusiasm. They love it when we put on Dolphins or Wizards jerseys to watch a game. But they ditch dad by halftime. If we go to an NBA game, they take iPads. And last season they actually declined my offer to go to an NFL game.

So, based on my lived experienced, I think the sports leagues will face a day of reckoning in the future. I doubt the female audience will dramatically grow. The male audience increasingly has other, more engaging options. And both have attention spans that recoil at the idea of watching others play a game for three hours.

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Great analysis.

A piece of this, though, is that the leagues incorrectly assumed that demand was inelastic, no? That no matter what they did the fans would always be there. It's not like they're going to start watching softball or the IFL.

It seems to me that that's where they went terribly wrong. I'm old enough to remember when ESPN really started to take off. The dubious felt the same way as they did about CNN - who the hell wanted to watch that much sports and news? But they were wrong. People ate it up.

Well not "people". Men. Sports is - was, it isn't anymore - our lingua franca. It was our small talk; it was the way men were able to spend an evening out together when all they had in common was that their girlfriends knew each other.

But this ecosystem was built on the assumption that sports organizations were on the same page as we were. That they were made up of people more or less like us who loved bullshitting about the game. When it turned out they weren't - say when they tried to inject politics into the sport, among other things - it became something other than neutral ground to shoot the shit about, and men seemed to realize that they didn't really need it. It was always way more optional than was assumed.

I feel like this little opera has been playing out in different ways the last twenty years or so. The big one is in the sexual sphere. I think part of the confusion going on in the narrative now is over how young men seem to be fine with life lived through porn and video games. I think it was assumed that they would always push for sexual relationships no matter what, but it turns out that the system was more fragile than everyone thought.

But it doesn't have to be on topics that politically fraught. I feel like it's happened with casinos, malls, you name it. I've lived in a few places where giant battles over building casinos occurred, with the "no" vote concerned about the massive traffic and seedy elements that were just around the corner. But the traffic and seediness never came, because it turns out that you can't really create gamblers and building a casino isn't the same thing as printing money and lasciviousness. The foundational prior - that there is this infinite market that all you have to do is tap into - just isn't accurate, and you end up with these sad little empty casinos.

I'm rereading this and I'm being too sweeping - I was never a sports guy, but I'm turning into one late in life, so at least one new fan was created - but I think there's SOME truth to this. People's goals and desires don't map the way we assume, and people aren't all that malleable.

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I think Vic's analysis is incredibly insightful. It reminds me of something Nassim Taleb writes about that Nick Wright also mentioned in his latest podcast with Ethan - one of the first signs that a business or industry is in trouble is when they start making products to impress their colleagues as opposed to their customers. This has plagued sports media for the last ten years especially.

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Very well done Vic. Spot on especially in regard to the NBA.

Ethan, in this same vein re your old stomping grounds, the Warriors, I'd love to hear your thoughts re the extended, unexplained disappearance of Andrew Wiggins. Wiggs has said absolutely nothing and the Warriors themselves have followed suit in basically telling the fans to pound sand despite the Warriors title defense floundering in no small part by the absence of Wiggins, an All Star game starter from just last year.

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There are many interesting points to this reader theory, but I think it misses that team valuations can be explained better by viewing them as scarce luxury goods than as money-making capitalist enterprises.

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Mar 20·edited Mar 20

I think this theory is largely true, but there’s also a place for some economic pedantry here. I don’t know that “capitalism” is the best way to think about pro sports leagues. For one, that word has become terribly overloaded in modern political settings. Politically, it’s used to describe sort of un-remediated market failures. Then, there’s the more traditional meaning of a certain brand of market economy.

I think a primary issue in understanding pro sports leagues is that the function more as monopolies than as companies in a market economy. That’s a key point to me. The NFL and NBA are competing with other forms of entertainment for attention, but they haven’t truly competed with other leagues in their same sport. There are historical examples of interesting failures (e.g., USFL, ABA), but it’s not like there are 10 different pro basketball leagues all offering slightly differing versions of the product to consumers.

Let’s put it simply. The NBA’s biggest problem seems to be that players care less about playing basketball than they once did. I think that’s sort of the fundamental complaint with load management, super teams, etc. unfortunately, there’s no version of a basketball league where players “care” more. I suppose you could say college sports, but given the difference in rules and performance, they’re hardly perfect substitutes. Furthermore, live events have a special place in a streaming media landscape, so as players have cared less, the nba has also gained a competitive advantage by offering a live product for TV rights.

All this to say, the NBA has no market incentive to get its players to care more. They are insulated from that risk by being the only game in town. This is pretty traditional monopoly failure in market economy. The firm doesn’t respond to the demands of the consumer, and why should it? As the emailer points out, they’re only making more money despite lagging on other key metrics.

In short, sports didn’t break capitalism. That is, sports aren’t beyond the influence of the market. Sports leagues just happen to be monopolies, perhaps even natural monopolies. And monopolies break capitalism.

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I agree with a lot of this particularly with respect to the NBA not being forced to address that there are far too many regular season games. However I do think they've done a really good job trying to improve the way the game is refereed to make it a lot more watchable, with probably 7 or 8 big changes over the last few years to eliminate intentional fouls on fast breaks, getting 3 free throws for just throwing up some crap when feeling contact on the perimeter, jumping into defenders for fouls on jumpers, holding players off the ball, etc. That has improved the product a lot, if only the regular season games actually meant something now.

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I’m very interested in how this economic collapse affects sports.

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So there's some interesting stuff in here and it's well written, but the foundational premise is completely off base:

"NBA players still want the benefits of capitalism (i.e. tremendous wealth) and have actually succeeded in attaining this wealth despite palpably not caring what their customers want, and actually losing customers...."

NBA players are labor. They are not the league. They are not the individual franchise owners. They may be incredibly well paid labor, but the provide services to the clubs in exchange for money. There's no indication that the team owners have any issues with the financial arrangement.

The league and the owners have to walk the tightrope of balancing the desires of their customers and their labor force. That's how the NFL ends up with ridiculous slogans like "End Racism" in the endzone -- non-offensive enough that most fans can ignore it, and lip service to players who want the leagues to use their platform to affect change in the communities that most of these players come from.

Most of the non-basketball DEI messaging that people deride is driven by the players. The team owners (nearly all white billionaires) likely care very little about this stuff. But when a guy has already made $100M in salary, the prospect of losing out on some future salary isn't so scary. So the owners need to do this stuff in order to keep players from withholding services.

As Wos says, this is capitalism at its core. As soon as the owners stop making money under the current arrangement, they'll lock the players out. But as was pointed out earlier, there doesnt seem to be any indication that the demand (and price) for live sports rights is going anywhere -- particularly with legalized gambling now part of the picture; that's what's driving investments into pickeball leagues and the like.

As to the impending doom from kids not watching sports.....maybe? I always used to think that. I grew up on baseball and when playoff games in the 90's were routine going past midnight, I assumed that an entire generation of kids were being lost and the sport was doomed. That hasn't come to pass.

Maybe kids that play a lot of video games grow into adults who also watch sports. Not of a lot of Fortnite talk around the water cooler in my office, ya know? I think as kids become adults, they more often socialize at/around sporting events (with booze) and it's just part of the American sports ecosystem. Some fans become superfans that way.

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Vic forgets that owners also generate revenue in two new ways compared to 1998 that help pay inflated salaries: (1) more room for sponsorship dollars on jerseys, arenas and all over the arena; and (2) ticket prices are skyrocketing and upper middle class to upper class attendees who go with kids or their business partners are willing to pay more than the average fan to watch crap in-season play because many in this demo (at least where I have tickets at Barclays) don’t know anything about how the game should be played. Just look at how many courtside seats are empty to start the 3rd at MSG, Barclays and whatever the hell that arena in LA is now called. At these large city arenas fans go to be “seen” not watch. 20 true mid-size city fans can out cheer 80% of Barclays (I didn’t forget the “%” next to the 20).

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Good observations by OP. However I have a few other points that I haven't seen brought up.

I believe the NBA is not as responsive to their "core" (aka USA) audience is because it has expanded substantially internationally so when the NBA or it's players don't show proper respect for their domestic fans it's that they feel like they can take them for granted, which is in stark contrast to any other American sport. Now I don't know how much the NBA gets from overseas but that is also not just about people watching their games because they are also captured by the apparel companies like Nike and the others who can't afford to alienate China (only major media figure I know, and he's been bounced from the major platforms is Whitlock).

2nd I loath the guaranteed contracts that the NBA has, it is not some mystery why players don't care about not playing as much and it is directly tied to the fact that they have unlimited Paid Time Off, now they don't have a grinding 9-5 like most of us but if I could take any amount of time off and still be paid insane amounts of money I would. The pay mechanism in the NBA is untethered from reality because injuries used to be the exception not the rule. Simple fix as lord of the NBA is waive a magic wand and say you can miss x amount of games but their is a diminishing return on the dollar for the more you miss, sorry everyone if you have a career ending injury you aren't getting paid max dollars. If the NFL which has many more really serious injuries doesn't have fully guaranteed money then neither should any other sport.

As a corollary to the previous point, need to be able to waive a player and get rid of horrible contracts, sorry players can hold out then an owner can simply waive a player for less than their contract and let them go on the market. How does it help a fan or the league to pay Daron Williams money many years after he retired? Or I sign a player then he just quits on the team as we've all seen when some players get big paychecks? Or how about the guy who's hiding an injury and sells out to be toast in short time? The big media seem to take it upon themselves to get these guys paid and that works against the league, the team, the fan's interest.

Last is the big media, they do a horrible job of actually talking about what's going on and selling the game, they take sides against the fans in favor of the players, no matter what the issue we have a majority of the media that have as much if not more contempt for Joe Fan. ESPN is the worst offender because they are the largest player in the game but by no means the only one, I can't tell you how awful their coverage of sports is, I used to watch it all the time but just slowly moved away. Go to a bar and hang out and you won't hear about the latest take from Malika Andrews, the only one that occasionally gets on the radar is Perk and that's because he just tosses stuff against the wall to get a reaction, he's more Skip than Chuck.

P.S. also to fix the NBA should take away half the timeouts a team gets, games shouldn't take 20 min to finish 2 min of game time, also get rid of the monitors by refs, I don't care if something is flagrant 1 or 2 just pull the trigger for hells sake, I'd rather get calls wrong and then correct after the game or during timeout then kill the momentum of a game.

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I come to this place for the astute, heterodox analysis of the intersection of sports, business, and culture.

But I stay for the thinly-veiled shots at "Veronica's Closet".

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Semi-related: It'd be great to have Ben Thompson on to discuss this article i.e. cord-cutting on the NBA, but how Formula 1 is growing by cultivating their audience https://stratechery.com/2023/what-the-nba-can-learn-from-formula-1/

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Mar 20·edited Mar 20

1) One big way most of the major sports leagues have been propped up is the very large subsidies they tend to get from government on the facilities front. It is hugely beneficial to their valuations and very against the type of free market model we should follow (where it isn't harmful). Specific industries holding their communities hostage because them leaving would be a salient point for voters. "Oh without me the community would be worse off".

Literally half the citizens in a community (and over half the businesses) can probably make that point? Should they all be able to extort the government down to no net tax obligation or leave? This is one of the biggest failures in modern governance, one of the biggest things governments should be doing is make sure these hostage situations are not effective.

Markets are one of our most powerful tools, so we should use them where they work (and patch them where they don't). Right now we both don't patch them in places we need to, and break free markets in areas where they would work perfectly fine (sports for example).

2) While the above is part of what is going on, there is also the long decried problem of the marginal user. The typical NBA fan is super into watching the NBA. So you can make the experience twice as bad for them chasing marginal fans, and the hardcore person isn't going anywhere. Sport is a little unusual in that what the hard-core want and what the marginal people want are not often super related.

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