NBA Teams Score Big in the Suite Market

The following was published in SEAT Magazine, Fall 2010

Editor’s Note: Suite pricing across a multi-variant landscape is further investigated in this article, the second of a four part series. The average low and high cost of a suite for each team is sourced from the ALSD Reference Manual. However, the research does not take into account how many suites are priced at each price point, slightly misrepresenting accurate averages, but still providing a credible means of comparison. Addressed second in this issue is the NBA, following up our NFL analysis in the fall issue of SEAT. Check back in subsequent issues for similar analysis for the NHL and MLB. 

 

This second installment in our series on how professional sports teams in each of the four major leagues stack up to each other in the suite market takes its shot at the NBA. Our data provides useful information that should be considered when pricing a suite; however, it will not take into account variables that have not been reported. For example, the number of suites at each listed price or if prices include food and beverage packages with the purchase of the suite.

 

The current NBA season is underway, and the reigning champions, the Los Angeles Lakers, will look to defend their title on the court. Off the court, they also achieved the Forbes crown in 2009 for the highest-valued NBA team at $607 million. The Milwaukee Bucks were valued lowest at $254 million. While it is apparent that all sports franchises are not equal, how far apart they are varies for many reasons. These reasons go much further than recent on-court success, the age of a team’s facility or geographic location. This article explores several criteria and identifies trends that reveal the disparity in pricing of suites across all NBA venues.

 

The variables taken into account are areas that impact the demand for suites, as reported by industry leaders in the field. They are likely to change by geographic market. The game plan for this article is to organize data across many variables in tables, allowing trends to emerge that shed light on why some teams can charge more than others for a seemingly comparable product.

 

The following list includes the variables chosen with the sources in bold type.

 

Forbes – Team value of the total franchise (2009 valuations)
Forbes – Team value ranking among all 30 NBA teams
Arbitron – Population of metropolitan area
Arbitron – Market ranking compared to other metropolitan areas
Fortune – Listing of the top 1,000 companies in the United States and listing of Fortune Global 500
Full House Entertainment Database Marketing – Breakdown of the number of Fortune 1000 companies by metropolitan area
NBA – Conference, Eastern or Western
ALSD – Low and high average cost of a suite
ALSD – Maximum suite seating capacity for all suites
ALSD – Suite seating percentage of total arena capacity

 

Similarities, as well as some large discrepancies, are found among teams when studied across these criteria. For example, the Detroit Pistons have 193 suites, which is the most in the NBA. This represents nearly 25% of the overall seating at the facility, a remarkable fact when it is remembered that the Dallas Cowboys only designed their new stadium with 10% of the seats assigned to suites. In comparison, the Miami HEAT are at the low end of the NBA scale, with 24 suites, representing less than 4% of overall seating.

 

The Orlando Magic market includes only three major corporations, as defined by the Fortune 1000 listings. Given the population, corporate presence and number of suites available, one might infer the overall value of the Orlando Magic is low, but the Forbes listed-value outweighs half of the teams in the league. Tables 1 & 2 show team standings on all criteria; the charts are broken down by division and conference.

 

The most affordable suite presently is found at the United Center, home of the Chicago Bulls, at $32,000 for a season. In contrast, the Toronto Raptors, who play in Air Canada Centre, have a suite offering that brings in $540,000 annually. Before a reader argues that we have not taken into account the conversion rate, at the time this article was written, the Canadian dollar was nearly equivalent to the US dollar. At an exchange rate of 1 CAD = $.99 US, a suite for the Raptors would still be the most expensive in the NBA.

 

Considering the entire NBA, the average low cost of a suite sells for $128,708, whereas the average high end cost is $283,735. The picture varies when dividing the teams by conference. The Eastern Conference casts a shadow on the Western Conference in all phases of the game at this point, with one exception- the average for the low cost of a suite in the East is $123,747, versus the West’s $134,000; however, the average high cost of a suite in the East is $297,673, versus $268,867 in the West.

 

How does the East manage to command more for the highest price and total team value? Could it be that it includes more northeastern cities that tend to be more densely populated, or is it that the roots of basketball in the East breed a stronger commitment to the game? When it came to population, New York City was ranked highest by Arbitron in 2010 with 15,669,500 people. The smallest NBA metropolitan area was New Orleans with 1,003,700 residents. As a whole, the West plays in a smaller marketplace, averaging 3,805,553 people versus the East, which averages 4,952,119 people in their cumulative regions.

 

Table 3 displays the commanding lead the Eastern Division has over the Western Division in all but one variable. The insights, taken from these tables show how teams stack up against each other in terms of suite pricing in the NBA. A great deal goes into the business side of suites and how teams justify setting their suite prices. It is not a small consideration. Many factors contribute to the final pricing structure that teams employ. Nobody wants to leave potential untapped revenue, but how do teams know how they compare unless they consider the variables and how they stack up against others in the league?  

 

CLICK HERE to see how the 32 NFL teams stack up against each in the suite market.

CLICK HERE to see how the 30 NHL teams stack up against each in the suite market.

CLICK HERE to see how the 30 MLB teams stack up against each in the suite market.

 

TABLES 1 & 2: Conference Variables (PDF)
TABLE 3: East vs West (PDF)

 

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