NBA Owners Approve Advertising on Jerseys Starting in 2017-18

The NBA board of governors on Thursday approved a three-year pilot program to allow teams to sell advertising space on their jerseys. The program will begin with the 2017-18 season, and extend through the 2019-20 season.

Each team will be responsible for selling its own sponsorships. The sponsorships, in the form of patches that will measure approximately 2.5-inches by 2.5-inches, will be placed on the front left of game jerseys. Teams can now start engaging with potential advertisers, giving them enough lead time to secure contracts.

The value individual teams could hope to generate from such jersey ad sales could range widely, from perhaps as low as $1 million per year for smaller-market or lower-profile teams such as the Memphis Grizzlies or Charlotte Bobcats to more than $15 million per year for larger-market or higher-profile teams such as the New York Knicks, Los Angeles Lakers, Golden State Warriors or Cleveland Cavaliers, which could equate to at least $150 million per year in total.

Individual teams will keep 50 percent of the ad money they generate, and contribute the remaining 50 percent to the revenue-sharing pool for the benefit of smaller-market, lower-revenue-generating teams.

The new revenue would be counted as basketball-related income in accordance with the terms of the 2011 Collective Bargaining Agreement and, therefore, split with the players. It would also, in turn, increase future salary cap levels.

Based upon the currently negotiated split of revenues, players would be in line to receive 51 percent of the new revenues, which equates to $77 million of a potential $150 million total.

Based on the current salary cap calculation methodology, the new revenues would increase future cap levels by at least $2.2 million (excluding any associated adjustments).  

Both the league and the players association have the right to opt out of the current Collective Bargaining Agreement after the 2016-17 season, at which point the sources of revenue to be included in basketball-related income, the split of that revenue, and the salary cap calculation methodology could all potentially be subject to review.

The pilot program will begin in the same season in which Nike replaces Adidas as the official supplier of NBA jerseys. Nike is paying about $1 billion over eight years for the contract, an average of $125 million per year. The current contract with Adidas calls for $400 million over 11 years, an average of $36 million per year. That represents an average annual increase of 244 percent.

The Nike swoosh will appear on the front right side of game jerseys.

The NBA, which has been considering the idea since 2009, now becomes the first of the four major U.S. sports league to allow advertisements on regular game-day jerseys. The practice has long been associated with European soccer leagues, and the transition has been slowly happening domestically for years. Teams in NASCAR, Major League Soccer and the WNBA currently allow for such advertisements. Major League Baseball has allowed advertising on uniforms during some overseas games, as do the NFL and NBA on its practice jerseys.

The sponsorship patches will be adjusted to fit the dimensions of each sponsor’s logo. They won’t appear in retail versions of the jerseys, but teams can sell jerseys with sponsorship patches in their team stores.

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