TV Networks Will Have To Fund NBA And NHL Playoffs, But Expanded Formats Would Pose Conundrum

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As the NBA and the NHL get closer to settling on formats for resuming their seasons with the playoffs, the leagues will have a big decision to make: how much broadcasting money to allocate toward the playoff teams.

The NBA is targeting a July 31 start date and is probably going to have 22 teams play at the Disney Wide World Sports Complex. The NHL is considering a 24-team format in two hub cities: one for the Eastern Conference and the other for the Western Conference. Should these plans come to fruition, it would effectively mean that the NBA would have six additional playoff teams relative to last season and the NHL eight more teams.

But both leagues are likely to select neutral sites with no spectators for their playoffs, meaning the participating teams will not get any money from tickets, parking, luxury suites or concessions while paying expenses.

That means NBA teams will be without about $2 million to $3 million per home game lost and NHL teams approximately $1.5 million to $3 million. In the highly profitable NBA, playoff success goes a long way in determining if a team is very profitable or moderately profitable, and in the much less profitable NHL, the playoffs often determine if a team makes money or loses money. The playoff pool for NBA players is expected to be $24 million, with the comparable figure for NHL players $16 million.

That means the shortfall in playoff revenue for both leagues will have to come from the networks that broadcast the playoffs. The NBA gets an average of $2.6 billion a year from ESPN and Turner. The NHL takes in an average of $600 million a season from NBC Sports and Rogers Communications. The money is typically divided among the teams, save for the small portion the league offices keep.

With no arena revenue, the leagues will presumably tap into the broadcast contracts to fund the playoff revenue. But that would leave less revenue for the non-playoff teams. For the NHL, part of the conundrum could be alleviated if they can get an upfront payment on the new TV deal they are negotiating with NBC Sports that would begin next year, rumored to be worth an average of $375 million a season.

How the NBA and NHL deal with playoff revenue will say something about how much they believe monetary incentives matter.