The Grassroots Economics of Youth Basketball

In a September AC article entitled The Economics of Basketball Development, I argued the United States' professional sports system eliminated the professional investment in youth basketball development because professional teams receive no benefit from local talent development. An NBA team does not benefit from a local player's development, as he enters the draft like any other player; if no local players develop, an NBA franchise looks across the globe to find the talent it needs.

The argument was a top-down argument, as it looked at the economic investment or lack thereof from those organizations which eventually profit most from youth basketball development: shoe companies, DI universities and the NBA.

However, without the economic investment from professional organizations, youth sport is a billion dollar industry. Therefore, the finances exist to create a better developmental model. However, despite the money involved, few development programs exist because they are not guaranteed moneymakers. One such organization tries to provide professional development for players, but charges $100 per workout. With three workouts per week, that's $1200 a month or over $14,000 per year, beyond the means of almost everyone.

Development programs are not cost-effective compared to other basketball activities. Basketball organizations and facilities run tournaments and leagues because they make more money compared to a development program. To run a league, a company does not need any employees, which saves on costs like insurance and worker's comp. Instead, they hire some officials and rent a facility. The costs are fixed and they charge as much for the tournament as the market allows. Small tournaments run as much as $300 for a 3-game guarantee over a weekend. A team of ten pays $30/player for each tournament. But, it's easy to reconcile the costs because the parents see the action, the games: the proof that the money is spent on something. And, organizers make money from ticket sales (guaranteed audience since kids cannot drive themselves) and concessions.