Benching the NBA's superstars has significant impact on the price of secondary tickets, game attendance, and TV ratings, and results in millions of dollars in welfare losses
New MIT Sloan Management Review Counterpoints podcast interview explores the economic impact of sitting NBA superstars and raises questions about how much teams owe fans when making on-the-court decisions.
CAMBRIDGE, Mass., May 2, 2019 /HalcyonTV/ -- The NBA is widely regarded as a "superstar-driven league." However, superstar players are often intentionally rested by teams, and this practice has serious impact on fan welfare and, ultimately, on the business of basketball. Just how much is everyone losing when stars sit out? And how much do teams owe fans when deciding which of their star players to rest, and when? To get to the bottom of these questions, Berkeley PhD candidate Scott Kaplan investigated the economic impact and impact on fan welfare of the NBA's biggest stars sitting in suits rather than sweating in jerseys. He reveals his findings in "The Economic Impact of Sitting Superstars," Episode 14 of Counterpoints, the sports analytics podcast from MIT Sloan Management Review.
"Research shows there is evidence that ticket prices fall when star players don't play, especially for some of the most popular superstars like Stephen Curry, Kyrie Irving, and Anthony Davis," says Scott Kaplan, who presented his paper detailing the economic impact of NBA superstars at the 2019 Sloan Sports Analytics Conference. "These unforeseen absences leave fans watching a game of much lower quality or having to sell their tickets for a much lower price than they paid for them."
To measure this impact, Kaplan studied listed price changes in the secondary ticket marketplace associated with a specific superstar's absence for a game. He discovered that when star players were benched, the ticket value decreased 9%-24%, or $9.00-$33.00 per ticket. Over a season, this can lead to millions of dollars in welfare losses.
Kaplan found that the percentage of decrease in ticket value depended on the benching of certain players, like Stephen Curry and Kevin Durant, who exhibited much larger away game absence effects, while others like Anthony Davis and Kristaps Porziņģis experienced much larger home game absence effects. Further, the negative impact of a superstar absence was much smaller for games played in larger markets.
Kaplan emphasizes that the impact of sitting players has downstream effects beyond decreases in secondary-market ticket prices. Fan welfare is damaged, as fans don't believe they are getting the value of the ticket they paid for. Teams have to deal with empty seats and consequently, the game's in-person experience suffers. Television networks feel the impact of decreased viewership.
"This analysis has significant ramifications for NBA policies on resting or suspending players and announcement timing of player absences, team decision-making on dynamic pricing, signing free agents, drafting or trading players, and scheduling promotional events, secondary ticket marketplace pricing algorithms, and potential ticket insurance schemes to protect fans from risk associated with these absences," says Scott Kaplan.
His research and data also provoke the questions: Could a player's popularity also become a burden? How should the league mitigate the negative impact on sitting superstars on fan welfare? Should teams take a longer-term planning approach and announce a schedule when players would sit? Will TV networks embed a performance clause in their contracts? And ultimately: How much does the NBA and individual team management owe fans when making on-the-court decisions?
Scott Kaplan and Counterpoints host Paul Michelman, editor in chief of MIT Sloan Management Review, engage in a lively and data-driven discussion to explore these questions and more.
To listen to the full episode, please visit the podcast.