Archives For October 2011

Sharing The Revenue Pie

Darius Soriano —  October 3, 2011

As the Collective Bargaining talks continue today, one of the ongoing topics of discussion is how to make teams profitable for the greater health of the league. This subject isn’t without controversy as there are many angles to view this from…

Is owning an NBA team a business or something entirely different? What of the other ways owners make money on their afiliation with their NBA team? Owners can talk endlessly about what they believe is fair to them, but what about what’s fair to those fans that invest in their teams?

There are no easy answers here. But if we’re truly going to discuss how to make an NBA team profitable, it seems the logical place to start is revenue sharing.

Recent reports state that David Stern and the owners plan to triple and, eventually, quadruple their revenue sharing in a new model. The plan is ambitious to say the least. But, with such an agressive plan, come questions about its viability. Chris Broussard says that owners whose pockets will be dug in the deepest aren’t necessarily keen on the idea of having their coffers raided to prop up those that can’t do so for themselves:

The divide centers around the large-market owners’ refusal to share their local television revenue. For instance, while Lakers’ owner Jerry Buss is willing to share national TV revenue, he wants the money made from his 20-year, $3 billion deal with Time Warner all to himself, according to sources.

That said, it is pretty clear that some teams need this assistance. Over at Sactown Royalty, Tom Ziller states openly that the Kings would be a team in the line with their hands out:

The Sacramento Kings rate in the bottom 10 market sizes in the NBA, and if you looked at local revenue, they could be bottom five most seasons. As the Nexus Report outlined, there’s a small corporate base here, a relatively small TV market and a struggling economy that’s worse than most comparable metro areas. The one bonus is that there’s no competition: Sacramento has no other major league teams to compete with the Kings, though we all know crazy Niners, Giants, A’s and Raiders fans who make the trek into the Bay Area on a regular basis.  The Kings would definitely be a receiver … but how many other teams would join them? Are the Kings in line to take in $20 million a year when revenue sharing fills out in a few years? More? Less? Every bit helps, but the mechanism by which it moves matters greatly. Until we see that, it’s hard to say whether it will put the Kings on anything like an even playing field with the other three teams in California. Let’s hope it does.

The implication of that last sentence gives me pause. Don’t get me wrong, I’d love a more competitive league and wish for strong competition from and between all teams (yes, even Boston). But, building that ability to compete on the backs of only those owners that can afford to financially contribute doesn’t address issues related to the lack of viable, superstar level talent around the league. Nor does it account for the lack of capable front office men that navigate complex path of team building better than their peers. These are factors that greatly influence a team’s success on the court.

Meanwhile, it’s not even clear who should be doling out these large stacks of cash. Sure, the Lakers have been identified as a team that could share as much as $50 million a season and the Knicks would chip in $30 million. Since they’re two of the highest revenue producing teams, this makes sense (though trying to dig in my pockets for that much – even if I could afford it – might lead to fisticuffs). But who else is on that list and how is it determined?

From where I sit, the most logical way to share the revenue pie is that all teams contribute a set percentage of their revenue into a gigantic pot. This pot would then be distributed amongst all teams equally. Strangely, this rarely gets mentioned even though really smart people (like Kevin Arnovitz with an assist from Bob Costas) have been saying it for months (if not years if you go back to Costas’ argument that was suggested for MLB’s revenue sharing issues).

To these eyes, the only way to actually share revenue amongst teams is for all teams to participate in the giving and receiving. Altruism is a nice idea but as we’ve been reminded nearly every 15 seconds by owners like Robert Sarver and Dan Gilbert, the NBA is a business and should be run like one. With that in mind, I find it strange that they’d be willing to take handouts (especially large ones) while not contributing anything to the process other than running their franchise(s) incompetently and then bringing a large duffle bag to shovel cash into to further aid in the profitability of their sub-standard teams.

Mind you, this argument isn’t made to protect Dr. Buss’ bank account or to ensure that the next time he goes all in with pocket fours and suffers a bad beat on the river he can cover his losses. I’m not trying to spend his money now just as I’m not trying to spend it in the off-season when that shiny new player is on the open market.

That said, I’m a firm believer in the overall health of the league; that success in the NBA matters only because other NBA teams are on the other side of the wins that the team I root for stacks up. Dr. Buss should be asked (and willing) to share the revenue he makes on his team as he has no ability to generate revenue without other teams to compete against in the league that his team is a member of. But asking him to give while others will only take breeds bad blood and has the feel of dressing up financial woes as the lack of competitive balance when the two topics aren’t as firmly tied together as we’re being told.