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Follow Up to the NBA Fan Equity Study & Why We Do This

Our post about which NBA teams have the best fan bases has generated a good deal of response.  This response has included insightful questions about the models and variables.  We wanted to use this post to provide some more detail and examples.

Before we get into the NBA study, it is probably useful to give folks a bit more background on what we are trying to accomplish.  Our unofficial mission is to use marketing concepts and statistical methods to understand the behavior of players, teams, and leagues.  We are both sports fans and academics, so our goal is to go beyond opinion, and use data to generate new insights into the world of sports.

When we start an analysis like the NBA fan equity study we really don’t start with an agenda (though Professor Lewis does acknowledge a personal bias against Duke Basketball).  We start with a bunch of data and some concepts (theory) that guide the way we approach the analysis.  In the case of the fan equity study, our guiding theory is that team revenue is based on the loyalty of fans, the size of the team’s market, the quality of the product and the entertainment value of the team.

The analysis begins with a model of box office revenue based on variables that correspond to market potential (capacity and market population), team quality (winning percentage) and entertainment value (number of all stars, payroll).  The insight or theory that drives the analysis is that this model can be used to predict the revenue that is due to quality and market potential.  Any difference between this predicted value and actual value is due to “fan loyalty.”

In their responses to us, readers tended to ask about a few specific teams.  For instance, there was a great deal of interest in comparisons between the Knicks and the Nets.  The table below shows several differences between the two teams that are drivers of the differential fan equity.  The teams share the largest population metropolitan areas but the Knicks achieve a 10.7% advantage in terms of attendance DESPITE charging much greater prices.  It is this greater pricing power that pushes the two teams to opposite ends of the ranking.

Another illuminating comparison could be made between Orlando and Golden State.  Given the excitement surrounding the Warriors the casual fan would likely assume that Golden State enjoyed a stronger fan base.  However, when we look at the numbers we see that Orlando generates almost the same attendance (and charges slightly higher prices) while operating in a market that is half the size and winning fewer than half as many games.  Our analytics driven approach accounts for these differences.  It also makes sense when you consider that Orlando fans provide about the same amount of box office revenue as GSW fans, while the team draws from a smaller market and wins only 24% of their games.

This last point is really the key to our analysis.  As a further example, while Miami is currently a great revenue driving team, we need to realize that their fans are attracted to a team that won 80% of their regular season games and has three all- stars and the likely MVP in the lineup.  The true test of fan loyalty is what happens when a team slumps.  This is why teams like Orlando and Dallas do so well in our rankings.

Mike Lewis & Manish Tripathi, Emory 2013.

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