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The business of basketball

In a no-profit sporting economy, how does owning a PBA team make sense?

By: May 27, 2019

There is no business like the pro business. In fact, owning a team in the Philippine Basketball Association doesn’t even seem to make business sense at first glance.

Imagine having the spend millions a year to maintain a professional basketball team and, as Rain or Shine co-owner Raymond Yu puts it, “very little of that money ever comes back.”

And yet twelve of the biggest companies in the country continue spending a fortune to compete in the league—with several more knocking at the PBA door.

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Wilfred Uytengsu, Alaska team owner, says the cost of maintaining a PBA team is around P85 million—and that’s just the basic operating expenses of a team that isn’t performing well.

That cost is built around salaries of players, the coaching staff, and members of the support team: Practice players, ball boys, medical personnel, therapists and statisticians.

Then there are the other yearly expenses like team uniforms for games and practices, training equipment, scouting equipment, rental of gyms for practices, allowances for out-of-town trips, food before and after every game and practice and other things that may crop up like medical emergencies.

That cost, said Uytengsu, could balloon to P150 to P200 million for a winning team once bonuses kick in.

Wilfred Uytengsu, team owner of the Alaska Aces. Photo by Tristan Tamayo/INQUIRER.net

And there is no payoff for these costs. Mostly, what teams get are savings on marketing and advertising. And that intangible value of getting people aware of your brand.

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“When we did a study in 1985 to determine the feasibility and sustainability of maintaining a PBA team, initial research was that the marketing value was about 25% of the cost of traditional advertising,” said Uytengsu.

That means, at that time, instead of spending P100,000 on advertising, owning a PBA team cut that cost to about P25,000. That value increases exponentially when a leading TV station can charge north of P1 million for a 30-second spot on primetime. And PBA games normally run for two and a half hours.

A decade later, the operating costs rose but still, maintaining a PBA team shrunk advertising expenses to about 33%, according to another study by Alaska. The conclusions on both studies were reached based on the amount of time a team was on television, radio and newspapers.

“We’re not even quantifying word of mouth in there, the value of having people talk about your team in everyday conversations,” Uytengsu said.

And the PBA is a powerful tool for marketing.

“In terms of awareness, we’ve closed the gap with the leaders in the paint industry,” said Yu, who co-owns the Rain or Shine squad with Terry Que.

“It’s different when you have a PBA team and guys like James Yap as ambassadors and endorsers,” Que added. “That’s a big plus for the brand.”

Rain or Shine assistant team manager Edison Oribiana, who also works in marketing, added that some business trends can be tracked to owning a PBA squad: “We are the No. 1 elastomeric paint right now and a big reason for that is our PBA team.”

“In some measures, there really was a spike in popularity of, and awareness in, our product , especially when we won championships,” Oribiana added.

“There is more connection with the PBA team than normal advertising. People relate to the product more because the product becomes human.”

But the link between team and product success cannot be quantified.

“It’s hard to attribute what percentage of our awareness and popularity as a paint brand comes from having a PBA team and that team winning championships. All we know is, as far as name recall, it’s there. Before and after a game, whether you win or lose, people talk about your brand,” Yu said.

Uytengsu agreed.

“In some cases, you may say that having a PBA team win championships may boost sales. What we do is run promos around every championship and at the very least, you know that your brand is cast in a positive light,” he said.

James Yap Rain or Shine Magnolia Game 7

Since moving to the Elasto Painters, James Yap has become the face of the Rain or Shine brand. Photo by Tristan Tamayo/INQUIRER.net

Lately, though, there has been a lack of a definitive study on the marketing impact of owning a PBA team on a business or brand.

“Going by mere gut feel, just by the increase of operational costs like rising import salaries, the value proposition is not as good as it used to be,” Uytengsu said.

What makes the spending still rational, though, is that for teams like Alaska, the association is helpful.

“You’re still getting awareness. You can’t control the outcome of a game, or how the public views your team. But the mere association of drinking milk and a healthy endeavor like sports still makes it worthwhile,” Uytengsu said.

“Brand recall, brand equity. In this day and age of different advertising forms, being in a league as loved as the PBA has its advantages,” added Yu.

But that means the brand polish that a PBA team provides is only as glittering as the league itself is.

“You have to take the controversies, how the league is perceived or how people view the league, into consideration and having said that, there are things we need to work on. The league has to start to look at really long-term strategies,” said Uytengsu.

“For example, now,” Yu added, “it’s not really exciting to watch a game if the live audience isn’t that big. There’s a concern that really needs to be addressed.”

The commissioner’s office is aware of those concerns and is seriously trying to fix the attendance problem.

“We know the sacrifices of team owners and we’re aware of the problems of the league,” said PBA boss Willie Marcial. “We’re working hard with the PBA board to make sure we address those concerns and bring the PBA back to its glory days.”

As it turns out, the business of basketball depends on that.

“I mean, Terry Que and I love the sport and we love our team and we love the PBA. But if everything reaches a point where it no longer makes business sense [to maintain a PBA team], we might have to seriously reevaluate things,” Yu said.

That may not happen yet. While attendance is a major concern, there is still a strong viewership on TV and the PBA live stream caters to a highly engaged audience. Which means products and brands are still getting the eyeballs that would be costly via the traditional advertising means.

Also, “there is more connection with the PBA team than normal advertising. People relate to the product more because the product becomes human,” Oribiana said.

Plus, there are the altruistic reasons team owners are in the league.

Like NorthPort owner Rep. Mikee Romero for instance. For starters, his company doesn’t belong to the fast-moving consumer group that generally benefits from such advertising and marketing the PBA provides.

“He just really, really loves the game and is passionate about it,” said Erick Arejola, Romero’s long-time deputy who also serves as the Batang Pier governor.

So do Yu and Que. You can even still find Que running around in seniors’ tournaments, balling like a pro.

Uytengsu, meanwhile, sees Alaska’s involvement in the PBA as a chance to inspire the youth, a lot of who see the league as a life goal.

But because of the PBA’s aspirational status, “it is incumbent on us as a league to conduct things professionally,” Uytengsu said.

It is more than just business that depends on it.