Subscribe to JohnWallStreet

May 22, 2023

NBA Hopes In-Season Tournament Will Spur Step Function Growth

The NBA is reportedly planning to hold an annual in-season tournament.

The entirety of the competition, save the final game, will be played within the construct of the 82-game regular season schedule. The league believes a format change can spur excitement in, and add importance, to its early season slate.

Longer-term the hope is that the tournament becomes a marquee event on the league calendar. The NBA recognizes media rights are its largest revenue stream, that much of the value in those deals is tied to tentpole events like Christmas Day, All-Star Weekend, and the NBA Finals, and that the best way to keep the pie growing is by creating and nurturing more properties like them.

While the concept of an in-season tournament is new to big four sports, it has long been embraced abroad. The first FA Cup was played in 1871.

The NBA has been tossing around the idea of hosting an in-season competition for at least fifteen years. But with the league thriving, it was always difficult to get all of the stakeholders (think: owners, players, media partners etc.) to agree on a radical modification to the season format.

The COVID-19 pandemic forced the league to implement change. The NBA held its first postseason play-in tournament in 2020. The success of that event (it has since become a permanent fixture) changed stakeholder sentiment as it relates to an in-season tournament.

The NBA’s first in-season tournament will take place next season. All 30 teams will participate. 

The clubs will be broken down into six groups of five. Each team will play the other four in its pod one time in a group stage. Two of those games will take place at home. 

The league intends to designate select regular season matchups as group stage games. Those matchups will be played on Tuesday and Friday evenings throughout the month of November. No other league games will be scheduled on those nights.

Making tournament matchups exclusive to Tuesdays and Fridays should raise the competition’s profile and help fans to understand games played on those nights hold additional significance. It also enables the league to give both Turner Sports and ESPN a weekly tournament double-header, and avoid going head-to-head with the NFL.

At the conclusion of the group stage, the six group winners, along with two wildcards, will advance to a single-elimination knockout round. The quarterfinals games will take place in home markets before the final four teams advance to a neutral site to determine the in-season tournament champion. 

Speculation exists the 2023 Final Four will be held in Las Vegas (December 7-9). 

But that isn’t necessarily a permanent location for the event. If successful, the league could look to bid it out to other interested cities in the future.

Success with the inaugural in-season tournament could also spur the league to carve up its schedule further and add additional competitions throughout the season. Remember, college basketball has early season non-conference tournaments and conference tournaments alongside its regular season slate and high-profile postseason.

But it’s not a given that the in-season tournament will be a slam-dunk. There are a host of reasons why these competitions work abroad, several of which will be hard for the NBA to replicate. 

For starters, the FA Cup gives teams across the U.K. the opportunity to compete against one another. Clubs in lower leagues get the chance to take their shot at the country’s most prominent teams. 

That dynamic does not exist in a closed league like the NBA. All 30 franchises already play against each other each season.

But the NBA doesn’t see that reality as a hang-up. 

It recognizes that lower-level clubs contribute to the excitement in the tournament’s early rounds. However, it also is cognizant of the fact that the FA Cup Final draws the competition’s largest audience, and that the game has been almost entirely comprised of Premier League teams for ~30 years. 

The in-season tournament’s structure, with regular season games doubling as group stage matchups, makes adding non-league teams a challenge. 

However, the NBA could consider adding some international clubs down the road. 

Including G-League teams makes sense too, at least conceptually. It’s just not clear how the league does it within the construct of the existing affiliate model. Teams are not going to want to play their own affiliate. 

The NBA’s in-season tournament won't have the tradition of a tournament like the FA Cup to start with, either.

The FA Cup “used to be the biggest thing in the U.K,” former Swansea City Football Club chief operating officer Chris Pearlman said. “It has lost some of its luster [with the emergence of the EPL and Champions League]. But fans still appreciate it because of the historical significance.”

There’s also no playoff at the end of the English football season. Whoever has the best record is crowned champion. 

“So, a tournament is a way to get a different kind of winner,” Pearlman, currently the CEO of Aggregate Sports, said. 

But the league remains optimistic that creating a second championship for its teams to pursue, in a different format than the NBA Playoffs, will drive attention and viewership at a time on the league calendar when its games tend to be an afterthought. 

Naturally, the league can place a premium on games drawing outsized audiences, and the NBA is coming up on its next round of rights negotiations.

The tournament will also give the league one additional game that could have significant standalone value to sell. 

"This past season, the average viewership of the play-in games was 70-75% higher than the average regular season national TV broadcast, so consider ~$17-18m a higher-end water mark [based on current deal economics] for what the in-season final could represent in terms of added regular season value should it perform at a similar level to recent play-in games," William Mao (SVP global media rights, Octagon) said. "The NBA really hopes that it will draw closer to recent regular season games featuring LAL or GSW (or their Christmas Day game) which drew double or triple TV viewership over the average national broadcast."

While media rights present the greatest growth opportunity, the league should be able to use the in-season tournament to drive its partnership business too (think: sponsorship of the event at-large and activations on-site at the final four). 

“From a brand association standpoint, there is certainly more money behind [the games than a standard regular season matchup],” Pearlman said.

Particularly if the league begins to use the Final Four as its Super Bowl from a marketing and experiential standpoint. Remember, the ASG is ultimately an exhibition and the uncertainty surrounding where the NBA Finals will be played until a few days prior prevents the league from building premier events around it. 

The NBA understands to find the step function growth desired it needs to create new assets for teams, fans, and players to chase and celebrate. Logic suggests the other U.S. sports properties will come to a similar conclusion in the years ahead upsetting traditional league models and challenging the status quo in the process.

That doesn’t mean every league and effort will be successful. 

But failure shouldn’t prevent rights owners from trying.