NBA lockout threatens some hoop dreams…

November 15, 2011

They say it’s only a game, but for a bunch of publicly traded companies, basketball means business — and the lockout and labor turmoil in the National Basketball Association means bad news.

The NBA’s season is in shambles after a lockout by owners this summer dragged on and talks faltered; NBA officials canceled games through November 30. Yesterday, the NBA players’ union said it would disband, paving the way for an antitrust lawsuit against the owners — and raising the specter of a longer, messier fight.

Given the circumstances, some companies’ disclosures are no-brainers: Madison Square Garden (MSG) owns the NBA’s New York Knicks, and notes at one point in the 10-Q it filed earlier this month that its NBA and National Hockey League teams together mean the company earns “a disproportionate share of its revenues” while those sports are in season. In a section on events after the end of the quarter, the company warns that failing to reschedule the games canceled so far would hurt the company’s fiscal second-quarter results, and that further cancelations “could have a material negative effect on our 2012 fiscal year results.” Moreover, the impact of any new revenue-sharing agreement adopted by the NBA after an agreement is reached (assuming one is, of course), is bound to affect the company as well, for better or worse.

Time Warner (TWX) says the lockout didn’t have a material impact on the most recent quarter’s results, and optimistically predicts that it “does not expect it to have a material impact on the segment’s operating results for the remainder of the year.” Not that all’s necessarily well, as its 10-Q goes on to warn:

“However, the longer-term impact of the NBA Lockout will be influenced by many factors including viewer ratings on TNT and advertising demand after the NBA Lockout ends. Because of the inherent uncertainties surrounding the NBA Lockout, the Company is unable to quantify the adverse impact that a prolonged NBA Lockout would have on the Networks segment s operating results.”

Others more peripheral to the off-court action (and all too soon, perhaps, the in-court legal action) tend to be less detailed in their warnings. Buffalo Wild Wings (BWLD), the chicken-wing restaurant chain, simply warned in the 10-Q that it filed on November 3 that “Our sales may be negatively affected by a disruption in the viewing of sporting events in our restaurants such as NFL, MLB, NBA, and NHL due to strikes, lockouts, or labor disputes.”

Take Two Interactive (TTWO), which sells sports-themed video games (and others), warned investors in a new risk-factor disclosure in its 10-Q last week that “The lockout by NBA owners could have a material adverse impact on our business and operating results.” It continued:

“The NBA players union and the owners of the NBA teams are currently renegotiating their collective bargaining agreement, which expired following the 2010-2011 basketball season. Sales of 2K’s annually released basketball game could be adversely affected due to the players being locked out and the reduction in the number of games in, or cancellation of, the 2011-2012 basketball season.”

Some companies are less explicit about the potential for harm than others. Video-game maker Electronic Arts (ERTS) also has contracts with the NBA (presumably for its NBA Jam games). Yet when it filed its 10-Q the same day as Take Two, it didn’t say anything about the lockout. Of course, size may make a difference here: Electronic Arts is more than six times as big as Take Two, by market-cap.

As with so many things tied to the basketball dispute, how big a deal it all turns out to be depends on how long things drag out. So grab a seat, grab a drink, and enjoy the action as best you can.

Image source: NBA Facebook page

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