math in the news: 11/21/11
DESCRIPTION
In this issue of Math in the News, we look at the pending NBA strike to find out what the main problem is. This involves analyzing financial data.TRANSCRIPT
11/21/11
NBA Labor Dispute
• It’s unclear if there is going to be an NBA season. Already the season will at best be shortened with games starting no earlier than mid-December.
NBA Labor Dispute
• The reason is that the owners and players have yet to agree on the terms of a new collective bargaining agreement.
NBA Labor Dispute
• To get a better understanding of the labor dispute, let’s review financial information (source: Forbes). Let’s start with Revenue.
NBA Labor DisputeNBA Revenue ($millions)
Year Tickets Sales Other Revenue Total
1989-90 $518 $516 $1,034
1990-91 $578 $783 $1,361
1991-92 $649 $923 $1,572
1992-93 $680 $919 $1,599
1993-94 $775 $1,096 $1,871
1994-95 $826 $1,201 $2,027
1995-96 $950 $1,389 $2,339
1996-97 $2,557
1997-98
1998-99 $1,611
1999-00 $937 $2,038 $2,975
2000-01 $3,091
2001-02 $3,260
2002-03 $1,168 $2,072 $3,240
2003-04 $1,192 $2,231 $3,423
2004-05 $1,220 $2,395 $3,615
2005-06 $1,211 $2,463 $3,674
2006-07 $1,258 $2,562 $3,8202007-08 $1,246 $2,612 $3,858
2008-09 $1,224 $2,661 $3,885
2009-10 $1,146 $2,659 $3,805
NBA Labor Dispute
• Now let’s look at a graph of the Revenue.
NBA Labor DisputeNote the steady increase in revenues, except during the one previous season where there was a strike-shortened season.
Previous strike-shortened season
NBA Labor Dispute
• Notice how revenues have been flat for the past few seasons.
NBA Labor Dispute
• Now let’s repeat the process with Expenses.
NBA Labor DisputeNBA Expenses ($ millions)
Year Tickets Sales Other Revenue Total
1989-90 $420 $394 $814
1990-91 $534 $574 $1,108
1991-92 $686 $598 $1,284
1992-93 $775 $522 $1,297
1993-94 $775 $677 $1,452
1994-95 $934 $520 $1,454
1995-96 $1,097 $785 $1,882
1996-97 $2,297
1997-98
1998-99 $1,830
1999-00 $1,773 $993 $2,766
2000-01 $1,920 $990 $2,910
2001-02 $1,865 $1,093 $2,958
2002-03 $2,021 $1,008 $3,029
2003-04 $2,017 $1,082 $3,099
2004-05 $2,091 $1,258 $3,349
2005-06 $2,166 $1,282 $3,448
2006-07 $2,206 $1,302 $3,5082007-08 $2,219 $1,314 $3,533
2008-09 $2,323 $1,323 $3,646
2009-10 $2,204 $1,418 $3,622
NBA Labor DisputeNotice that expenses have been cut back in recent years due to the decline in revenues.
NBA Labor DisputeAn important statistic is the Operating Income, which is the amount income earned before taxes are paid. This is often a good indicator of the overall economic health of an organization. Let’s look at a table of the Operating Income.
NBA Labor DisputeNBA Operating Income ($ millions)
Year Operating Income1989-90 $2201990-91 $2531991-92 $2881992-93 $3021993-94 $4191994-95 $5731995-96 $4571996-97 $2601998-99 -$2191999-00 $2092000-01 $1812001-02 $3022002-03 $2112003-04 $3242004-05 $2662005-06 $2262006-07 $3122007-08 $3252008-09 $2392009-10 $183
NBA Labor Dispute
• You can see why strikes are such a problem. They lead to dramatic losses in profits.
Previous strike-shortened season
NBA Labor DisputeAnother important statistic is the Operating Margin, expressed as a percent. This statistic provides important information on how a business is growing from year to year.
NBA Labor DisputeNBA Operating Margin
Year Operating Margin1989-90 21.28%1990-91 18.59%1991-92 18.32%1992-93 18.89%1993-94 22.39%1994-95 28.27%1995-96 19.54%1996-97 10.17%1998-99 -13.59%1999-00 7.03%2000-01 5.86%2001-02 9.26%2002-03 6.51%2003-04 9.47%2004-05 7.36%2005-06 6.15%2006-07 8.17%2007-08 8.42%2008-09 6.15%2009-10 4.81%
NBA Labor Dispute
• You can see that since the last strike-shortened season, the NBA’s profitability has declined. This puts added pressure on both sides to strike a deal.Previous strike-
shortened season
NBA Labor Dispute
• The NBA is a in a different position than the NFL. With the NFL the issue was how to divide a growing pie between owners and players. With the NBA the issue is how to divide a shrinking pie.