This is an excerpt from an interview with Carol Sawdye, CFO of the NBA, conducted by Peter Alpern from BusinessFinance (businessfinancemag.com).
From the pure power of LeBron James, to the artistry of Dwayne Wade and understated stardom of Dirk Nowitzki, the NBA Finals represents a climactic two weeks of fan interest to celebrate a staggeringly successful year.
With viewership of all four rounds of the playoffs up double digits, along with sharp upswings in attendance and merchandise sales, the NBA is enjoying a cultural boom not seen since its Golden Age of Michael, Magic and Larry.
But Carol Sawdye, who was hired as the new CFO for the NBA a year ago, recognizes the harsh realities facing the $4 billion industry. There is a rapidly approaching labor war between players and owners on tap this summer, along with alarming growth in the percentage of expenses. According to league commissioner David Stern, 22 of 30 clubs are losing money.
In an exclusive interview with Business Finance, Sawdye shared the fiscal perspective of the NBA as a business, the managing of risk amid bustling gate receipts and the role finance plays in creating a winning product.
Business Finance: As the 65th season of the NBA wraps up, how does the landscape from a financial perspective compare to what you saw earlier in the decade?
Carol Sawdye: Despite the state of the economy, the 2010/11 season has been very successful in terms of fan response to our teams, players and the game.
Overall revenues are at the highest they have ever been with gate receipts up significantly and team sponsorship sales at an all time high. We are on pace to have our most-watched season ever on TV. Subscriber growth has increased dramatically on NBA TV to 55 million homes in the U.S. We are experiencing double-digit revenue growth this year both in the digital business and internationally.
However, in order to achieve the revenue growth that we have experienced over the last decade, we have had to spend much more to generate the same $1 of revenue than we had to in decades past. As a result, the league overall has been experiencing significant net losses now, which wasn’t the case back in the mid 1990s.
BF: What does the office of finance do to contribute to the success of the league as a product?
CS: Finance is responsible to the commissioner and the owners for assisting business units in maximizing the financial results of the league and managing the financial risks associated with running this business.
The Finance department is involved in the financial aspects of all transactions, including ensuring league-wide financing is available at competitive rates and supporting financial analysis for significant business agreements and team sales transactions. Although much of these activities are invisible to the fans, they are all critical to delivering a consistently successful product for them.
BF: What were some of the steps you’ve initiated since you came onboard as CFO?
CS: My principal area of focus has been on expanding our capabilities in connection with financial reporting on and analysis of the results of our teams and the league as a whole.
We also have a growing business to support. Much of that growth is coming internationally and has required a lot of my focus on planning for profitable growth and managing the financial risks of operating in so many different tax, regulatory and labor environments.
BF: When you stepped into this role as CFO, what have been some of the organizational changes that you made to help finance become more effective?
CS: The single biggest change I have made is to expand our resources and interaction with the teams. This allows us to provide better combined financial information for use in all aspects of our business, ensuring that we are running a more effective and efficient business in general.
BF: What is your philosophy of finance and what kind of job have you wanted to create?
CS: The CFO should be a trusted adviser to the CEO and all business leaders and a critical member of the senior management team of any business enterprise.
In the NBA’s case, this extends to the owners and team management as well. The entire finance department should view itself as a critical service provider to all departments throughout the organization and, in our case, to all of the teams as well. The league office and our 30 teams are only as strong as our weakest link so we always have to serve with a view that support to any one team or department will raise the bar for all of us.
To continue reading the full interview, visit www.businessfinancemag.com. Thanks again to Peter Alpern for sharing this interview with us!