math in the news: 11/21/11

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11/21/11

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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.

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Page 1: Math in the News: 11/21/11

11/21/11

Page 2: Math in the News: 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.

Page 3: Math in the News: 11/21/11

NBA Labor Dispute

• The reason is that the owners and players have yet to agree on the terms of a new collective bargaining agreement.

Page 4: Math in the News: 11/21/11

NBA Labor Dispute

• To get a better understanding of the labor dispute, let’s review financial information (source: Forbes). Let’s start with Revenue.

Page 5: Math in the News: 11/21/11

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

Page 6: Math in the News: 11/21/11

NBA Labor Dispute

• Now let’s look at a graph of the Revenue.

Page 7: Math in the News: 11/21/11

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

Page 8: Math in the News: 11/21/11

NBA Labor Dispute

• Notice how revenues have been flat for the past few seasons.

Page 9: Math in the News: 11/21/11

NBA Labor Dispute

• Now let’s repeat the process with Expenses.

Page 10: Math in the News: 11/21/11

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

Page 11: Math in the News: 11/21/11

NBA Labor DisputeNotice that expenses have been cut back in recent years due to the decline in revenues.

Page 12: Math in the News: 11/21/11

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.

Page 13: Math in the News: 11/21/11

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

Page 14: Math in the News: 11/21/11

NBA Labor Dispute

• You can see why strikes are such a problem. They lead to dramatic losses in profits.

Previous strike-shortened season

Page 15: Math in the News: 11/21/11

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.

Page 16: Math in the News: 11/21/11

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%

Page 17: Math in the News: 11/21/11

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

Page 18: Math in the News: 11/21/11

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.