Where does the money spent on high-priced NBA Finals tickets go?
Knicks fans poured into Madison Square Garden, witnessing a heartbreaking loss in Game 3 of the NBA Finals -- and they paid a pretty penny for the privilege.
The game's cheapest ticket ran nearly $4,000, according to Vivid Seats. The average ticket topped $7,000.
Those eye-popping prices -- which made Monday's game one of the most expensive in NBA Finals history -- drew attention to a lingering question: Where does all that money go, anyway?
Most of the millions of dollars in ticket sales end up in the pockets of home teams, while a slice finds its way to the league, analysts told ABC News. Plus, a chunk of the revenue goes to secondary-market companies that rake in fees for resold tickets, they said.
Analysts at J.P. Morgan forecasted each Knicks playoff game would generate about $12 million in revenue, according to a report shared with ABC News, which was issued by the firm last month. That estimate would add up to a total of about $108 million in sales over the course of the playoffs, in the event the Knicks end up playing two NBA Finals games at home.
Roughly 75% of the revenue generated by championship ticket sales goes to the home team that hosts a given Finals game, some analysts told ABC News.
Madison Square Garden Sports Corp. (MSGS), the parent company of the Knicks and Rangers, has likely incurred some additional staff and maintenance costs from hosting the extra home games, but those losses pale in comparison to the ticket revenue, Victor Matheson, a sports economist at the College of Holy Cross, told ABC News.
“The costs as a percentage of sales fall to basically nothing when ticket prices go up this much,” Matheson said. “It’s a good chunk of change for the teams.”
In all, each playoff home game is set to deliver about $5 million in profit, J.P. Morgan said, or $45 million over the estimated length of the playoffs.
Speaking to analysts in February, MSGS Chief Operating Officer Jamaal Lesane touted the possibility of a playoff run for one or both of the company’s teams, pointing to the opportunity for “valuable, incremental home games.” At the time, the NBA Finals remained months away.
“We are, of course, monitoring the standings,” Lesane said.
Shares of MSGS have soared more than 13% since the Knicks began their playoff run on April 18, registering at about $71 a share as of Tuesday. Over that same period, the Dow Jones Industrial Average has ticked up just 1.5%.
While the Knicks’ success is sure to have delivered a windfall for MSGS, the playoff run has also boosted revenue for secondary-market ticket sellers, said Michael Leeds, a professor of sports economics at Temple University.
The highest ticket prices for Game 3 at Madison Square Garden were found on the secondary market, he added. Those sales have netted sizable fees for the ticketing platforms.
Once the team takes 75% of the revenue on the primary ticket market, the remaining 25% of sales go to the NBA, analysts said. That revenue helps the league cover costs incurred during the playoffs.
Overall ticket revenue also factors into “basketball-related income,” a term used to describe league revenue related directly from the sport. NBA players receive roughly half of all basketball-related income, while team owners receive the other half. In turn, some of the NBA Finals ticket revenue will end up in a pot to be divided up by the league’s roughly 450 players, primarily in the form of their salaries, Matheson said.
Sky-high prices, Matheson added, stand to benefit "every player from the best to the worst in the NBA. It trickles down to everyone."
Since the amount of ticket sales depends in part on the number of postseason games, Knicks ownership may hold one small complaint, Matheson said: The Knicks won all of their games in the previous two rounds, meaning each series ended before the team could play all of its potential home games.
"They've been too successful for their own good," Matheson added.
