NBA Expansion Plans Face Owner Resistance Due To New TV Money Distribution

[RealGM Wiretap]

NBA expansion beyond 30 teams faces significant owner resistance as league governors prioritize collecting revenues from the new $76 billion media rights deal, according to multiple senior team officials. Seattle remains the top candidate for expansion, but momentum has stalled among ownership groups.

The reluctance stems from the league's massive 10-year media contract beginning next season with NBC, Peacock, Amazon Prime, ABC and ESPN. Several owners prefer splitting the new revenues among existing teams rather than adding franchises that would reduce individual payouts.

"There are people who are, I wouldn't say rethinking, but asking why we need to move as quickly as we expected," a senior team official told The Athletic. The official added that expansion will likely occur eventually, just not immediately as there is not currently overwhelming momentum. 

Financial Considerations Drive Delay

Commissioner Adam Silver has softened public comments on expansion inevitability, citing the league's focus on processing the sales of the Boston Celtics and Los Angeles Lakers. The new media deal represents hundreds of millions in additional revenue per team over the contract's lifetime.

Adding two expansion teams within the next two years would significantly dilute national television revenue distribution. Teams collectively lost nine figures in revenue as regional sports networks collapsed, making the national media windfall more crucial.

"They want to see how the new TV money plays out next year," another senior executive said.

Seattle, Las Vegas Remain Top Markets

Seattle has been the frontrunner for a new expansion team since the SuperSonics relocated to Oklahoma City in 2008. Climate Pledge Arena was specifically built to NBA specifications and houses the NHL's Seattle Kraken.

Las Vegas also remains under consideration, with Oak View Group announcing plans for a $1 billion privately-funded arena. Expansion fees for either market are expected to reach $5-6 billion per franchise.

Silver acknowledged during June's Finals that expansion means "selling equity in the league" and depends on ownership's perspective of the NBA's future growth potential.

Via David Aldridge, Mike Vorkunov/The Athletic

[TheCage4]

Doesn't the expansion fee get divided up amongst the existing franchises?

[dubbmotta]

We don't need expansion, need to move some teams
Pelicans-Seattle (Zion can be a broke man's Shawn Kemp)
Hornets-Vegas (IF Melo could ever stay healthy he would be box office in Sin City)

Pelicans & Hornets are two shiiiittty franchises in two cities that do not attract Free Agents, always at the bottom of the league for attendance. Move them. And potentially move another bottom feeder to a city like Vancouver.

[the_process]

I believe the old St.Louis Spirits owners made like 300M over 40 years off of only 1/8 of the TV revenue of four teams before accepting a 500M buyout of their contract.

It's that kind of money on the aggregate over the long term why owners don't want two more mouths to feed. But it seems to me 32 is a more optimal number of teams.

Vegas and Seattle are getting teams in the near future regardless IMO, whether by expansion or relocation.

[hauntedcomputer]

Doesn't the expansion fee get divided up amongst the existing franchises?

Say it's $5 billion valuation per team. 30 owners splitting 10 billion. That's $333 million each one time.

$7.6 billion per year for media rights equals $253 million per team for 10 years. Split among 32 teams instead of 30 reduces that to $238 million. I guess the calculus is to make the extra $15 million for a few years because the $333 million will always be there.

"Heck, that's enough money to buy out a Patrick Williams type that we gave an awful contract to!"

[toooskies]

I think you absolutely have to take advantage of the high valuations of the Celtics and Lakers and act quickly after they sell. You expand now, you get to set pricing based on your prime markets. If you wait, you might be setting your new owner fee based on the value of a small market team.

[ciueli]

Doesn't the expansion fee get divided up amongst the existing franchises?

Say it's $5 billion valuation per team. 30 owners splitting 10 billion. That's $333 million each one time.

$7.6 billion per year for media rights equals $253 million per team for 10 years. Split among 32 teams instead of 30 reduces that to $238 million. I guess the calculus is to make the extra $15 million for a few years because the $333 million will always be there.

"Heck, that's enough money to buy out a Patrick Williams type that we gave an awful contract to!"

It doesn't really make sense mathematically though. First off, the expansion fee per team is going to be more like $6B, so $400M per team. Then I looked up the money each team makes from the new TV deal, it runs 11 years, starts at $140M per team and ends at $290M per team. If there are 32 teams instead of 30 teams each team only loses around $160M over the 11 year run, obviously that is a lot less than the $400M they will get in an expansion fee and they get that money right away, so it's even better than just an extra $240M, it's $240M plus interest, plus whatever additional benefit they can get by virtue of getting the money immediately instead of over 11 years.

There may be other reasons the teams aren't saying as to why they don't want to do expansion. More likely the source of any reluctance is owners just not wanting to increase the pool of available teams, if you're an owner that is looking at what recent teams sold for and thinking that bringing two more teams into the league might cut the valuation of your own team since there are fewer and fewer buyers capable of throwing huge dollar figures around for a sports team. Seems like the big payday for NBA owners only comes when they actually sell, so I suspect they are interested in doing whatever they can to enforce the scarcity of NBA teams.

[tigerae]

Well there's a big surprise. Billionaires being greedy. They would get 12 billion off the bat (6b for each expansion team fee) and the new TV deal is a 300% increase from the old one, but still not enough for them.

[HartfordWhalers]

Doesn't the expansion fee get divided up amongst the existing franchises?

Say it's $5 billion valuation per team. 30 owners splitting 10 billion. That's $333 million each one time.

$7.6 billion per year for media rights equals $253 million per team for 10 years. Split among 32 teams instead of 30 reduces that to $238 million. I guess the calculus is to make the extra $15 million for a few years because the $333 million will always be there.

"Heck, that's enough money to buy out a Patrick Williams type that we gave an awful contract to!"

It doesn't really make sense mathematically though. First off, the expansion fee per team is going to be more like $6B, so $400M per team. Then I looked up the money each team makes from the new TV deal, it runs 11 years, starts at $140M per team and ends at $290M per team. If there are 32 teams instead of 30 teams each team only loses around $160M over the 11 year run, obviously that is a lot less than the $400M they will get in an expansion fee and they get that money right away, so it's even better than just an extra $240M, it's $240M plus interest, plus whatever additional benefit they can get by virtue of getting the money immediately instead of over 11 years.

There may be other reasons the teams aren't saying as to why they don't want to do expansion. More likely the source of any reluctance is owners just not wanting to increase the pool of available teams, if you're an owner that is looking at what recent teams sold for and thinking that bringing two more teams into the league might cut the valuation of your own team since there are fewer and fewer buyers capable of throwing huge dollar figures around for a sports team. Seems like the big payday for NBA owners only comes when they actually sell, so I suspect they are interested in doing whatever they can to enforce the scarcity of NBA teams.

I don't think anyone was considering adding expansion teams just for this deal, and then removing them going forward. Ignoring the entire future beyond 11 years -- least of all the ability to sell expansion teams in the future -- seems a questionable assumption.

[SkyBill40]

So, as usual, greed and "gimme what's MINE and to hell with everyone else" rules the day?

Got it.

[ciueli]

Say it's $5 billion valuation per team. 30 owners splitting 10 billion. That's $333 million each one time.

$7.6 billion per year for media rights equals $253 million per team for 10 years. Split among 32 teams instead of 30 reduces that to $238 million. I guess the calculus is to make the extra $15 million for a few years because the $333 million will always be there.

"Heck, that's enough money to buy out a Patrick Williams type that we gave an awful contract to!"

It doesn't really make sense mathematically though. First off, the expansion fee per team is going to be more like $6B, so $400M per team. Then I looked up the money each team makes from the new TV deal, it runs 11 years, starts at $140M per team and ends at $290M per team. If there are 32 teams instead of 30 teams each team only loses around $160M over the 11 year run, obviously that is a lot less than the $400M they will get in an expansion fee and they get that money right away, so it's even better than just an extra $240M, it's $240M plus interest, plus whatever additional benefit they can get by virtue of getting the money immediately instead of over 11 years.

There may be other reasons the teams aren't saying as to why they don't want to do expansion. More likely the source of any reluctance is owners just not wanting to increase the pool of available teams, if you're an owner that is looking at what recent teams sold for and thinking that bringing two more teams into the league might cut the valuation of your own team since there are fewer and fewer buyers capable of throwing huge dollar figures around for a sports team. Seems like the big payday for NBA owners only comes when they actually sell, so I suspect they are interested in doing whatever they can to enforce the scarcity of NBA teams.

I don't think anyone was considering adding expansion teams just for this deal, and then removing them going forward. Ignoring the entire future beyond 11 years -- least of all the ability to sell expansion teams in the future -- seems a questionable assumption.

There would have to be some serious national TV money coming in on the next contract to make the decision to expand now look like a bad deal, even at the $290M per team level it's basically only a difference of around $18M less per team with 32 teams instead of 30, it takes a really long time to make back that $240M difference if we're just looking at TV money distribution. And in reality it's not a $240M difference because any sane ownership will use the money to invest or pay off debt, either way it's a massive savings over a long period of time.

[Itzmotto]

We don't need expansion, need to move some teams
Pelicans-Seattle (Zion can be a broke man's Shawn Kemp)
Hornets-Vegas (IF Melo could ever stay healthy he would be box office in Sin City)

Pelicans & Hornets are two shiiiittty franchises in two cities that do not attract Free Agents, always at the bottom of the league for attendance. Move them. And potentially move another bottom feeder to a city like Vancouver.

Like Vancouver worked out the first time huh. NBA definitely need 2 more teams a lot of young players don't get to show the talent now..

[Vegeta10176]

Would there be more players therefore reduce the max of top players? Curious..

[Pickled Prunes]

Would there be more players therefore reduce the max of top players? Curious..

Theoretically yes, but practically, probably not. The players get a predetermined slice of BRI and the TV deal is locked in for the next 11 years, But new teams sell a lot of tix and merch. Sonics fans are as hungry as fans can be and casinos in Vegas will buy up all the season tix and push merch in their shops. Plus it opens up new Local TV markets. It should come close to balancing out.

This seems to be a ploy by the owners (and possibly Silver) to push up the buy in price. Expansion will go forward as planned.

[Cactus Jack]

More of the same...

Read on Twitter

[SkyBill40]

More of the same...

Read on Twitter

Not even remotely surprised that this is the play by Silver. Just more "we'll wait and see" and keep brushing it off even if it'd be good for the league as a whole.

[Vegeta10176]

So, as usual, greed and "gimme what's MINE and to hell with everyone else" rules the day?

Got it.

That is the USA for you there is not even long term thinking now its all quarterly.. They arent thinking about the good of the game but the good of there pockets on the other hand this is what happens when your sporting teams are owned by billionaires and also when they start paying sooo much money they have to start really thinking about how to get money back from such a massive investment.. In Aus out major sport the clubs are mostly owned by the members.. Very few private ownership I never hear a peep about owners or turning down expansion or anything else..

[CaHgO]

We don't need expansion, need to move some teams
Pelicans-Seattle (Zion can be a broke man's Shawn Kemp)
Hornets-Vegas (IF Melo could ever stay healthy he would be box office in Sin City)

Pelicans & Hornets are two shiiiittty franchises in two cities that do not attract Free Agents, always at the bottom of the league for attendance. Move them. And potentially move another bottom feeder to a city like Vancouver.

Absolutely! Exactly my thinking. The league is already filled with crap teams no one cares about as it is. We don't need additional markets (who will suck for the first 5-6 years anyway) to dilute the interest even further. I would even add the Wizards and Jazz to the teams who need urgent relocation.

[hauntedcomputer]

This seems to be a ploy by the owners (and possibly Silver) to push up the buy in price. Expansion will go forward as planned.

This makes more sense. Also heard a theory that current owners may want to vote on some issues without a possible dilution of votes. Maybe they want to tackle the CBA or have some other political goal in mind before they bring in a coupe of wild cards.

[dubbmotta]

We don't need expansion, need to move some teams
Pelicans-Seattle (Zion can be a broke man's Shawn Kemp)
Hornets-Vegas (IF Melo could ever stay healthy he would be box office in Sin City)

Pelicans & Hornets are two shiiiittty franchises in two cities that do not attract Free Agents, always at the bottom of the league for attendance. Move them. And potentially move another bottom feeder to a city like Vancouver.

Like Vancouver worked out the first time huh. NBA definitely need 2 more teams a lot of young players don't get to show the talent now..

Vancouver was bad Management. Check out the doc "The Grizzlie Truth" really good, they were ran worst then the Hornets, Kings, etc. As far as young stars who are we talking about that's going to make an impact that's not getting a chance?? Too many bad teams in the NBA to add two more.