NBA Strike Would Hurt Businesses

About this time of year, Americans have become accustomed to advertisers launching television and print campaigns telling them they need to "Be Like Mike."

Yes, it's basketball season. Well, it used to basketball season.

The National Basketball Association, which has been the darling of the Madison Avenue advertising gurus for more than a decade, is suffering through the worst labor discord in its history. The players have been locked out of training camps and the exhibition season has been canceled.

To make matters worse, there are almost 200 free agents who have yet to be signed including endorsement superstar Michael Jordan. No one seems to know for sure who will be with what team and if there even will be a regular season.

The league and the NBA Players Association are scheduled to meet on Oct. 13 to try to salvage at least the start of the regular season.

Patrick Ewing, head of the players association, wasn't too optimistic when the last rounds of talks broke off the week of Oct. 5. "Well, nobody walked out," he said. "So in that (respect) it was a lot better. But we're still in the same place."

So what does a labor dispute involving employees whose average salary hovers above $1 million have to do with the stock market?

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Nike Inc. (NKE)

Under the current television deal, the team owners get about $23 million for the rights to air their games nationally. But if a part of the regular season or the entire season is lost, that money will have to be repaid to the networks during the remaining three years of the contract.

NBA deputy commissioner Russ Granik has estimated that each team would lose aadditional $600,000 to $700,000 in ticket and local broadcast revenues for each missed regular season game.

The loss of regular season games will also impact the bottom line at NBC, Turner Broadcasting, Fox Broadcasting, whose regional sports network airs games in many local markets and The Tribune Co., whose WGN-TV operations airs the Bulls games in the Chicago market.

Bob Ramsey, director of programming for WGN, has summed up the situation by simply concluding: "There's really nothing we can do. If the games aren't paid, they aren't available."

NBC and, possibly Turner, may be able to come up with an attractive make-good to appease the media buyers who have already booked time during NBA telecasts. Turner owns a library filled with thousands of movies and NBC hadn't plan on gearing up its weekly broadcast until after Christmas.

The real impact will be felt at the local level. Given the choice between advertising during old movies or replays of classic old games aired in place of a canceled NBA regular season contest or taking their money back, most media buyers will likely opt for the refund.

The biggest impact of the strike may be felt along Madison Avenue were many top NBA stars have been able to line their pockets with endorsements riches. This year, the league's upcoming season has been greeted with a cold shiver.

"The silence has been deafening," concluded Bob Williams, president of Chicago-based Burns Sports Celebrity Inc., one of the nation's leading sports talent agencies. "Advertisers are in a holding pattern. They don't know what to do."

Generally, the NBA advertising season begins to gear up in the summer months. The players are off and available to shoot commercials.

"There's usually a flurry of activity four to six months in advance of the season," Williams said. "But the lock out went into effect almost as soon as the season ended. That brought the advance activity to a halt."

Endorsement contracts, particularly shoe deals, have been hard to come by for many players. Troubled Nike Inc. (NKE), the leader of the pact when it comes to sports marketing, has cut the amount of money it is spending on shoe deals.

However, at the company's annual shareholders meeting, Nike officials remained bullish on Jordan's market strength, strike or not, retirement or not. The Oregon-based shoe and apparel giant is going ahead with plans to launch even more products in its new Jordan line.

"We don't want to dilute the impact Michael has had," said Larry Miller, who was named in the past six months to run the Jordan line. "But Jordan transcends sports. He goes beyond basketball."

Reebok (RBK) , likewise, feels that Philadelphia 76ers guard Allen Iverson has marketing power beyond the game. The Stoughton, Mass.-based company will launch its advertising campaign for a new Iverson shoe on Oct. 19.

"We feel Allen's appeal will not be impacted by the lockout,"said Dave Fogelson, a Reebok spokesman. "That may not have been the case two years ago, but the industry has changed. We have designed our campaign to be less about playing in the NBA (and more about technology and fashion). We don't even show Allen in a Sixers uniform."

But other companies may not be so willing to take a risk.

McDonald's (MCD), which has fashioned major campaigns around NBA players the last five years, just signed baseball sluggers Mark McGwire and Sammy Sosa to an endorsement pact.

A spokesman for Gatorade, a division of Quaker Oats Co. (OAT) , which was the first company to ask America to "Be Like Mike," said the lockout has hit during the firm's planning stages for its 1998 advertising campaign. He did not know if the company would be changing any plans, but admitted the lockout had impacted the planning process.

So no matter where you stand on the issue, the NBA lockout is not just about overpaid athletes. It's a major work stoppage, just like a auto strike, and it will have a trickle down effect throughout the economy and market.

Written By W.D. Murray