Comparison of television and gate demand in the National Basketball Association

Highlights

► This paper uses four linear regressions to analyze the differences between the determinants of economic demand for television audiences and gate attendance. ► We find that fans who watch the games on television are 4.5 times more sensitive to winning and that the demand for television audiences is decreased more by direct substitutes compared to gate demand. ► From our findings, particularly regarding winning and substitutes, enhanced models describing league and team behavior are prescribed.

Abstract

This study analyzes the differences between the determinants of economic demand for television audiences and gate attendance. Due to data availability problems, there are few studies focused on television demand for North American sports leagues, and most of those studies do not compare the differences between television and live game audiences. The primary determinants of demand that are compared are income, team quality, and both direct and indirect substitutes. Using data from the National Basketball Association (NBA), we find that fans who attend games live are inherently different from fans who watch games on television. Although insignificant to gate attendance, income is an inferior good to television audiences. Fans who watch the games on television are 4.5 times more sensitive to winning. The demand for television audiences is decreased more by direct substitutes compared to gate demand. However, demand for gate attendance is decreased more by indirect substitutes compared to television demand.

Keywords:

• Demand
• Attendance
• Television
• Basketball
• Sports Economics
• National Basketball Association

Notes

1 Tel.: [phone]; fax: [phone].

2 Gate revenue was calculated from the attendance and ticket price data from rodneyfort.com and local television revenue is from (http://nbahoopsonline.com/Articles/2007-08/NBArevinuesharing.html).

3 Fig. 1 compares revenues from the national television contract with stadium revenue. One estimate of stadium revenue is simply attendance times the average ticket price, given by team marketing report. The other estimate of stadium revenue is attendance times the Fan Cost Index. The Fan Cost Index includes various concessions, as well as the ticket price, in the total cost of attending a game. The actual amount of revenue teams get may be somewhere in between the two estimates.

4 The literature on gate demand also gives a great deal of evidence stadiums and other variables.

5 Zhang, Pease, and Smith (1998).

6 Baimbridge, Cameron, and Dawson (1996), Allan (2004), Forrest, Simmons, and Szymanski (2004), Buraimo, Forrest, and Simmons (2006), Buraimo (2008), and Allan and Roy (2008).

7 Kaempfer and Pacey (1986), Fizel and Bennett (1989), and DeSchriver and Jensen (2002).

8 Siegfried and Hinshaw (1979), Zuber and Gandar (1988), Putsis and Sen (2000) and Tainsky (2010).

9 Baimbridge, Cameron, and Dawson (1995), and Carmichael, Millington, and Simmons (1999).

10 This is also referenced in the preceding paragraph summarizing the demand literature.

11 Becker (1971), Kahn (1991), Wallace (1998), Jenkins (1996), Hamilton (1997), Kanazawa (2001), Bodvarsson and Brastow (1999), and Bodvarsson and Partridge (2001).

12 Kock and Vander Hill (1988), McCormick and Tollison (2001), and Berri and Schmidt (2006).

13 Hausman and Leonard (1997) and Berri, Schmidt, and Brook (2004).

14 Taylor and Trogdon (2002).

15 Caudill and Mixon (1998).

16 This data can be found at http://www.rodneyfort.com/. All of the data in the sample were originally from USA Today.

17 Fixed effects for each year is included in the estimation, therefore a constant term would make the X matrix completely dependent.

18 The calculations use the coefficients from the regressions that contain both time and team effects.