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The NBA has an opportunity to make an additional $3 billion or more over the next 12 months.
Time for thread
Time for thread
1) With COVID-19 putting all professional sports on standby, the NBA has been bleeding cash for months.
The pandemic is projected to cost the NBA over $1B in revenue, and if it stretches on without a vaccine, billions more could be lost in the future.
The pandemic is projected to cost the NBA over $1B in revenue, and if it stretches on without a vaccine, billions more could be lost in the future.
2) The NBA is projected to lose ~$2M per game without fans in attendance.
With 259 games left when the league shutdown, and 82 playoff games, the loss from arena revenue alone would be ~$700M - and that’s before we talk about advertising.
What’s my plan to fix it? Expansion.
With 259 games left when the league shutdown, and 82 playoff games, the loss from arena revenue alone would be ~$700M - and that’s before we talk about advertising.
What’s my plan to fix it? Expansion.
3) The easiest way to view expansion is to think of it as the sale of a team that does not currently exist.
An individual or group of investors purchase the team from the league itself, rather than an existing owner, and the current teams within the NBA split the expansion fee.
An individual or group of investors purchase the team from the league itself, rather than an existing owner, and the current teams within the NBA split the expansion fee.
4) How do we determine the expansion fee?
Typically it's considered to be a slight inflation of the perceived value of a team in a similar market.
Here are the last 3 NBA transactions:
Brooklyn Nets (2019) - $2.35B
Houston Rockets (2017) - $2.2B
Atlanta Hawks (2015) - $730M
Typically it's considered to be a slight inflation of the perceived value of a team in a similar market.
Here are the last 3 NBA transactions:
Brooklyn Nets (2019) - $2.35B
Houston Rockets (2017) - $2.2B
Atlanta Hawks (2015) - $730M
5) While the $2 billion expansion fee commonly mentioned is likely far-fetched, it is not a stretch to suggest $1.5 billion as a starting point.
With two expansion teams paying $1.5 billion, each current NBA team would get a $100 million payout.
With two expansion teams paying $1.5 billion, each current NBA team would get a $100 million payout.
6) Now that we know the price, where are we going?
Here are my requirements for an expansion city:
- Residents must show demand for an NBA team
- Need to have an NBA-ready arena
- Enough corporate presence to fill luxury seats
- An appropriate distance from other NBA markets
Here are my requirements for an expansion city:
- Residents must show demand for an NBA team
- Need to have an NBA-ready arena
- Enough corporate presence to fill luxury seats
- An appropriate distance from other NBA markets
7) My choices for NBA expansion?
Seattle & Kansas City
- Both have NBA ready arenas in KeyArena & Sprint Center
- Both have corporations like Amazon & Anheuser Busch
- Kansas City has 4.2M potential viewers
- Seattle has 2.4M potential viewers
Seattle & Kansas City
- Both have NBA ready arenas in KeyArena & Sprint Center
- Both have corporations like Amazon & Anheuser Busch
- Kansas City has 4.2M potential viewers
- Seattle has 2.4M potential viewers
8) What do current players think?
Short answer, it doesn’t matter. Since expansion fees aren’t considered basketball-related income, the teams keep every cent of that money for themselves.
Players see none of it, and they have no say in whether or not the league can expand.
Short answer, it doesn’t matter. Since expansion fees aren’t considered basketball-related income, the teams keep every cent of that money for themselves.
Players see none of it, and they have no say in whether or not the league can expand.
9) Ultimately, it’s unclear if the COVID-19 pandemic, and it’s associated revenue loss, would be enough to convince commissioner Adam Silver to add multiple teams through expansion.
But if expansion is “inevitable” like commissioner Adam Silver has said, why not now?
But if expansion is “inevitable” like commissioner Adam Silver has said, why not now?
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