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Economics of expansion

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Post#1 Economics of expansion
Wed Oct 3, 2012 6:41 pm by Mike333637

Any article or interview that I see regarding the possibility of an expansion team in Seattle states that expansion is unlikely. This Spring, David Stern said that he didn't think there was a majority of owners that would vote in favor of expansion. In a recent radio interview, Mark Cuban said that he didn't think there was much support among the owners for expansion. What I haven't been seeing is any attempt to explain why owners would not vote in favor of expansion to Seattle.

I'm trying to understand the full pros and cons for the league's owners of expansion to Seattle. I know that there would be an expansion fee of at least $300 million that would be split up among the current teams. I also understand that each team's piece of the league's national TV deal would be a bit smaller because there would be one more team getting a cut. Are there other financial implications, either direct or indirect? People always bring up the "talent pool" argument, but I don't see why the owners would care very much about that. Am I selling that point short?

Also, I imagine that the owners in major markets would feel differently about the expansion possibility than the small market owners, in general. Considering that Seattle would be a large market and therefore a revenue sharing payer as opposed to a recipient, it would seem that adding them to the league would lead to larger revenue sharing payments to the small market teams. Am I misinterpreting this dynamic? What other implications would be particular to the small market owners and to the major market owners?
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Post#2 Re: Economics of expansion
Sun Oct 7, 2012 12:04 pm by Dunkenstein

The league is not opposed to putting a team in Seattle. They just want a Seattle ownership group to purchase an existing franchise (like the Kings or Bucks) and move it to Seattle. The league and its owners think that for now 30 teams is the proper size for the league and is opposed to expansion in general.
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Post#3 Re: Economics of expansion
Sun Oct 7, 2012 9:01 pm by shrink

"Economics" is one of my favorite words, so let me add two economic ideas:

1. While the buy in may land each owner $10 mil, it costs them one potential buyer when they want to sell their team for $250-450 mil. I think the Shinn situation had to make owners nervous.

2. Adding a 31st team also turns 15-20 low-talented players who couldn't make it in the NBA into legit NBA players, and may water down the product for everyone.

SEA-TAC passed PHX again this year and is #12 in DMA for American cities, so I'm sure that the NBA would love a franchise there. They just need to move an unprofitable franchise to Seattle, not create one through expansion.
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Post#4 Re: Economics of expansion
Mon Oct 8, 2012 11:57 am by Dunkenstein

Commissioner David Stern offered this little nugget on the future of basketball in Seattle. "It would be my hope that within the time frame that you mentioned, five years, that if everything works out perfectly, there would be a new arena and new team in Seattle. That's always for the board of governors, but I know that many governors are favorably inclined."
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Post#5 Re: Economics of expansion
Tue Oct 9, 2012 1:43 am by DBoys

Dunkenstein wrote:Commissioner David Stern offered this little nugget on the future of basketball in Seattle. "It would be my hope that within the time frame that you mentioned, five years, that if everything works out perfectly, there would be a new arena and new team in Seattle. That's always for the board of governors, but I know that many governors are favorably inclined."


Important to reiterate that "new team" in that quote does not necessarily connote an "expansion team." New is only in contrast to the "old' NBA team there, the Sonics. The BOG would have to approve a team for Seattle under all circumstances, whether by expansion or by relocation.

I have to think that if Seattle can get its ducks in a row rapidly enough, the Kings will be the team headed that way.
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Post#6 Re: Economics of expansion
Tue Oct 9, 2012 6:44 pm by Dunkenstein

I agree with DBoys that the Kings would be the likely team to move to Seattle.

I also read somewhere that if an ownership group is able to buy an existing team and jumps through all the hoops necessary to begin building a new arena, the league will let the team play in Key Arena until the new arena is completed. This would be similar to the Nets playing in Newark until the Brooklyn Arena was ready to open.
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Post#7 Re: Economics of expansion
Sat Nov 24, 2012 12:21 pm by HurricaneKid

I don't know why more people aren't considering the Bucks a likely candidate to move.

It is owned by Herb Kohl who couldn't possibly sell the team while he was a US Senator. Well now he is stepping down. And the team acted peculiarly around Jennings' possible extention (electing not to sign anything). They are in one of the smallest markets in the NBA, have very little support (I have sat courtside for LeBron games for $20), have a TERRIBLE venue, and the lowest regional sports TV ratings (biggest growing income generator in the NBA) in the league.
fishnc wrote:If I had a gun with two bullets and I was in a room with Hitler, Bin Laden, and LeBron, I would shoot LeBron twice.
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Post#8 Re: Economics of expansion
Mon Dec 31, 2012 4:25 am by Dsharpyo

HurricaneKid wrote:I don't know why more people aren't considering the Bucks a likely candidate to move.

It is owned by Herb Kohl who couldn't possibly sell the team while he was a US Senator. Well now he is stepping down. And the team acted peculiarly around Jennings' possible extention (electing not to sign anything). They are in one of the smallest markets in the NBA, have very little support (I have sat courtside for LeBron games for $20), have a TERRIBLE venue, and the lowest regional sports TV ratings (biggest growing income generator in the NBA) in the league.


Actually he's gotten quite a few offers, but refuses to sell it to anyone who might move the team elsewhere. Wisc. fans are loyal, they get a lot of benefits from the city. They rank 28th in terms of revenue, but 15th in the NBA in terms of operating income, and that is with their team being terrible. One of the reasons why they may not sign Jennings is that maybe they don't want to him the Max? Or maybe they're waiting to match a qualifying offer who knows.
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