The Business of Winning in the NBA

I had the opportunity to attend two recent Houston Rockets games against Cleveland Cavaliers and Milwaukee Bucks, both great games ending with Rockets with nail-biting wins. More importantly, I had the opportunity to gain some inside perspective on how an NBA team operates. The first game was with the MIT Alumni Club, where we heard directly from Rockets General Manager Rafael Stone about how the team is rebuilding for basketball success. Last week at the second Rockets game hosted by the Houston Wharton/Penn Club, I listened to Samir Mayur, the Rockets’ VP of Strategic Planning, explain how the business side of the franchise works to keep it profitable and growing.

Hearing from both leaders, it became clear that an NBA team is really two organizations in one: the basketball operations side we see from the outside, which is focused on winning games and championships, and the business side, which ensures financial stability, brand growth, and long-term profitability. These two priorities are not contradictory, but they don’t always align perfectly, either. The basketball team wants to win games now or not too distant future, while the business team needs to think about longer team. Striking the right balance between short-term success and long-term sustainability is the key to building a great franchise—not just in basketball, but in any business.

The Business Side: More Than Just Ticket Sales

Many people might assume that the NBA makes its money from ticket sales and in-arena purchases, but that’s just a small piece of the puzzle. The larger revenue comes from TV rights, sponsorships, and global merchandise sales. It is easy to understand when you realize that 99% of NBA fans never set foot in an arena. The business side isn’t just about selling tickets—it’s about selling a brand to a worldwide audience, especially with the increasing presence of star players from around the world.

The Rockets know this well. Thanks to Yao Ming, the team built a massive following in China, turning millions of international fans into Rockets supporters. That connection became even more real for me when I once ran into Yao Ming in an elevator in Beijing. He’s about three times my size, and let’s just say, when Yao is in an elevator, you suddenly realize how small elevators really are. Unfortunately, that international fan base can also be affected by geopolitical dynamics, proving that in the business of sports, off-the-court events can be just as impactful as what happens on the court.

The Basketball Side: Win Championships

While the business side focuses on long-term financial health, the basketball operations team has a more focused and simpler objective: win games. Coaches and general managers aren’t judged by revenue growth; they’re judged by the scoreboard.

Sometimes, this can create tension between the two sides. A perfect example? The Rockets’ 2017-18 season. With James Harden and Chris Paul, they built a team that was one game away from the NBA Finals. But in the offseason, they let go of key role players. The next season, they weren’t quite the same team, and their championship window closed. The team may not quite a championship team yet but they have had great success this season.

Lessons for Business Leaders

At its core, the NBA’s challenge isn’t all that different from running any other business. Companies must balance short-term performance with long-term growth. If a company focuses only on quarterly profits, it might cut investments in innovation and talent, harming its future. But if it focuses only on long-term growth without generating immediate returns, it might not survive long enough to see that future.

NBA teams face the same dilemma. Do you spend big now to chase a championship, knowing it might hurt your long-term flexibility? Or do you play it safe financially, even if it means delaying success? The best-run teams—like the Warriors in recent years—find a way to do both.

The Rockets, like all teams, are constantly navigating this balance. And if there’s one thing I’ve learned from my recent Rockets experiences, it’s that success in basketball, just like in business, is all about resource allocation by managing competing priorities. Finding the right balance between short-term wins and long-term vision is the key to sustained success.

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