Image by Getty Images via @daylife
For those that can't get enough on the business repercussions of Jeremy Lin, please read these Forbes pieces authored by my colleagues Chris Smith (regarding Lin's impact on ticket prices on the secondary market) and Mike Ozanian (regarding the conflict between Time Warner and MSG Network).
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Jeremy Lin, Harvard alum and NY Knicks point guard, has become an overnight sensation in New York and around the NBA with his unanticipated stellar play over his last 5 games.
And people are taking notice, especially in the Far East as Mr. Lin is the 1st U.S. born NBA player of Chinese or Taiwanese descent.
Examples:
- Lin's Twitter following has risen from 82,000 to over 210,000 in just over 1 week;
- Lin’s followers on Chinese website Weibo went from 190K to 384K+ in 1 week;
- Extra Knicks games have been added to Asian TV partners' broadcast schedule. For example, Sina (China) added the Friday night Lakers game where Lin dropped 38 points. Elta (Taiwan) added 3 upcoming games this week. Additionally, ESPN Star Sports Taiwan has added forthcoming games...as has ESPN Philippines.
So what are the economic consequences for the Knicks, the NBA, and for Mr. Lin himself?
By my estimation, Jeremy Lin will boost team revenue by $10-20 million above what it would have been this season without his emergence...with the exact amount depending upon whether the Knicks make the playoffs and whether they can steal a round if they get there.
Remember that the 4 major sources of revenue for pro sports organizations are ticket revenue, media revenue, facility revenue, and ancillary revenue associated with the team's brand.
Considering that the Knicks were headed nowhere and likely were going to miss the playoffs prior to Mr. Lin's arrival, it would not be a stretch to argue that Mr. Lin's presence and continued positive impact on the team's performance could ensure fewer no-shows which may have ensued had the team been destined to not make the playoffs...which means more concessions and merchandise sold on game nights.
If the Knicks were to make the playoffs in part because of Mr. Lin's addition to the lineup, then this generates additional gate and facility revenue from 2-3 home games per series that otherwise would not have arisen.
Because TV contracts are in place, Lin's short term impact on media revenue is relatively nil.
In contrast, his short term impact on merchandise sales is off-the-charts. He's even had a positive influence on the shares of Madison Square Garden Co.
Longer term, the Knicks could see the biggest return with respect to their various media contracts should Mr. Lin's play and impact upon the team be sustained.
Forbes estimated that the Knicks team revenue (net of debt payments) for 2010-11 was $244 million...yielding a franchise value of $780 million.
If Jeremy Lin becomes a mainstay for the organization, then it would not be unrealistic to see net revenues reach the $275-300 million for the 2012-13 season (looking one year ahead since apples-to-apples comparisons can't be made with the current shortened lockout season).
Economic Consequences for the NBA
As noted in my earlier piece, China's interest in the NBA has stagnated some since the injuries and subsequent retirement of Yao Ming.
But Mr. Ming showed the NBA that there is a passionate basketball fan base in Asia and China specifically. The Yao Experience revealed that there was significant untapped market potential for the NBA in the Far East.
The difference was that people saw Yao Ming coming.
Very few saw Jeremy Lin...and as a result, the fan frenzy regarding his brand - both in NYC and China - is escalating at rapid speeds.
The NBA's revenue was $3.8 billion in 2010-11.
Given the market Mr. Lin plays in and the ethnic connection he seemingly has with the largest country in the world, it's not unrealistic to presume that NBA revenues in 2012-13 could be 1-2% higher simply on the strength of higher international TV rights...IF Jeremy Lin proves he is truly a game-changer.
That's an additional $40-80 million from greater international media rights and merchandise sales.
Economic Consequences for Jeremy Lin
For starters, he won't have to sleep on his brother's sofa anymore.
His efforts last week transformed Mr. Lin from a player on the chopping block to at least earning a league minimum $800,000. Clearly, if his strong play continues and he leads the Knicks into the playoffs, this will assuredly result in a longer term contract.
But more importantly, his future endorsement potential seems sizable given the tangibles and intangibles at play which include his play, his story, his heritage, and his demeanor.
It was noted in an earlier piece that Usain Bolt secured a 5-year, $115 million endorsement deal from a Chinese company in 2009. Additionally, Li-Ning has endorsement deals with the likes of Shaquille O'Neal and Baron Davis.
If Jeremy Lin continues his stellar play and flare, the endorsement offers will come flying in...raising Mr. Lin's star and asking price.
I don't see him receiving Usain Bolt money.
But could I see him generating between $10-20 million annually in endorsements from an assortment of American, Chinese, and Taiwanese companies if he proves he's the real deal between now and the end of the NBA season? Absolutely.
Lin's Financial Stat Sheet
Assuming Jeremy Lin continue to be a transformative player for the NY Knicks for the rest of the 2011-12 NBA season and into next season, then it is not unreasonable to expect the following in 2012-13:
- The Knicks team revenues rise by between $25-50 million;
- The NBA's revenues rise by between $40-80 million;
- Jeremy Lin to earn $10-20 million in endorsement income.
For a guy that was a virtual unknown just 2 weeks ago, that truly is lin-sanity.
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Dr. Patrick Rishe is the Director of Sportsimpacts and an Associate Professor of Economics at Webster University in St Louis, MO.
Follow Patrick on Twitter @PatrickRishePhD or visit www.sportsimpacts.net
