OT Bill Simmons Predicts NBA Expansion in Las Vegas With LeBron James as Face of Ownership

[BigGameDamian]

https://www.google.com/amp/s/www.th...n-james-as-face-of-ownership-01fx0xs6y5wg/amp

 

[SlyPokerDog]

Notice they're talking about expansion vs moving an existing franchise.

The rumored expansion fee is $2.5 billion. Or $5 billion for two teams.

That would mean the current owners would each get a check for $167 million.

They would get nothing if an existing franchise moved to either of those locations.

 

[SharpesTriumph]

It is true there could be a financial benefit to expansion. But it is not the simple $167 million you list.

The owners are giving up 2/32 of future revenue. So this year with $10 billion of revenue that is $625 million the old owners would not get. Multiple that by revenue growth and every future year forever, and its a huge sum.

It might come down to if Seattle and Vegas teams will increase the revenue of the league enough to account for splitting the pie in more slices forever, then adjust for the expansion fee.

 

[illmatic99]

Notice they're talking about expansion vs moving an existing franchise.

The rumored expansion fee is $2.5 billion. Or $5 billion for two teams.

That would mean the current owners would each get a check for $167 million.

They would get nothing if an existing franchise moved to either of those locations.

Given the losses they incurred from COVID, expansion is a no-brainer. And there's actually enough talent buried on benches now to not dilute the overall product too much.

 

[SharpesTriumph]

Given the losses they incurred from COVID, expansion is a no-brainer. And there's actually enough talent buried on benches now to not dilute the overall product too much.

All the NBA ownership groups are well capitalized or could get enormous bank financing if needed. I don't think COVID has any impact on this.

If it's a large financial benefit to expanded they will do it.

However if splitting the pie additional ways hurts in a similar amount to the expansion fee they won't.

Depends how much additional revenue they project from Seattle and Vegas.

 

[SlyPokerDog]

It is true there could be a financial benefit to expansion. But it is not the simple $167 million you list.

The owners are giving up 2/32 of future revenue. So this year with $10 billion of revenue that is $625 million the old owners would not get. Multiple that by revenue growth and every future year forever, and its a huge sum.

It might come down to if Seattle and Vegas teams will increase the revenue of the league enough to account for splitting the pie in more slices forever, then adjust for the expansion fee.

Healthy expansion will increase the overall NBA fanbase and resulting TV ratings. It will also result in increasing TV revenue in future contracts.

 

[SharpesTriumph]

Healthy expansion will increase the overall NBA fanbase and resulting TV ratings. It will also result in increasing TV revenue in future contracts.

Well of course revenue will increase. But will it increase enough to lose 2/32 of revenue forever? $600 million per year is $6 billion in only 10 years, more than the expansion fee. Plus revenue growth likely makes that amount larger, and the years go on forever. Plus the opportunity cost will be lost for expansion.

I still think it will likely ultimately make sense for the NBA to go through with this type of expansion plan. Just pointing out its not as simple or profitable as grabbing a free $5 billion.

At least the NBA doesn't have to split with the Silna brothers any longer. They ultimately made $800 million by 2014, for selling a team for $1 million less in 1976.

https://huddleup.substack.com/p/the-greatest-business-deal-in-sports?s=r

Agreeing to give up future revenue can be way more costly than it appears today.

 

[SlyPokerDog]

Well of course revenue will increase. But will it increase enough to lose 2/32 of revenue forever? $600 million per year is $6 billion in only 10 years, more than the expansion fee. Plus revenue growth likely makes that amount larger, and the years go on forever. Plus the opportunity cost will be lost for expansion.

I still think it will likely ultimately make sense for the NBA to go through with this type of expansion plan. Just pointing out its not as simple or profitable as grabbing a free $5 billion.

At least the NBA doesn't have to split with the Silna brothers any longer. They ultimately made $800 million by 2014, for selling a team for $1 million less in 1976.

https://huddleup.substack.com/p/the-greatest-business-deal-in-sports?s=r

Agreeing to give up future revenue can be way more costly than it appears today.

Wouldn't make even more sense for the league to file bankruptcy and then reform with only the Knicks and Lakers? Imagine how much money those owners would make if the pie was only cut in half instead of 30 slices.

 

[oldmangrouch]

Here's a question for you. If The Blazers did move to Vegas, would Portland get a new expansion team?

Disclaimer: I'm not convinced they actually intend to put a team in Seattle either.

 

[calvin natt]

It is true there could be a financial benefit to expansion. But it is not the simple $167 million you list.

The owners are giving up 2/32 of future revenue. So this year with $10 billion of revenue that is $625 million the old owners would not get. Multiple that by revenue growth and every future year forever, and its a huge sum.

It might come down to if Seattle and Vegas teams will increase the revenue of the league enough to account for splitting the pie in more slices forever, then adjust for the expansion fee.

Is this the real math? It seems a little too simple and if it were accurate there is no way ever they would expand. Doesn’t seem like it tells the whole story, namely increased revenue.

 

[SlyPokerDog]

Here's a question for you. If The Blazers did move to Vegas, would Portland get a new expansion team?

Disclaimer: I'm not convinced they actually intend to put a team in Seattle either.

If there were an ownership group that wanted to pay the $2.5 billion, sure.

Even better...

I will make you the following promise:

If the Blazers move to Las Vegas, you guys start a GoFundMe and if you get me $2.49 billion, I will an expansion team and place it in Portland.

 

[oldmangrouch]

If there were an ownership group that wanted to pay the $2.5 billion, sure.

Even better...

I will make you the following promise:

If the Blazers move to Las Vegas, you guys start a GoFundMe and if you get me $2.49 billion, I will an expansion team and place it in Portland.

That isn't so much going out on a limb as it is clinging to the trunk with all 4 paws and your willie in a knot hole!

 

[BigGameDamian]

Here's a question for you. If The Blazers did move to Vegas, would Portland get a new expansion team?

Disclaimer: I'm not convinced they actually intend to put a team in Seattle either.

If we lost the Blazers I wouldn’t be surprised if we got NHL before another NBA team. There are a couple of teams that will be looking to relocate in the next few years. Portland has been rumored for NHL for years now.

 

[SharpesTriumph]

Is this the real math? It seems a little too simple and if it were accurate there is no way ever they would expand. Doesn’t seem like it tells the whole story, namely increased revenue.

No the math, it's not complete or perfectly accurate, just general numbers. Youd have to know the incremental revenues increase from 2 expansion teams, and more data. My main point is it's not as simple as owners getting a free 2.5 billion fee.

 

[handiman]

No the math, it's not complete or perfectly accurate, just general numbers. Youd have to know the incremental revenues increase from 2 expansion teams, and more data. My main point is it's not as simple as owners getting a free 2.5 billion fee.

But for an owner looking to sell (cough, Jody, cough), that's a nice perk on top of the sale price, when they don't have to worry about diminished future revenue as a result of the additional sharing.

The diminished shared portion of revenue might be why the league has pushed so hard for overseas expansion. That way, teams are fighting over a bigger pie, rather than carving up smaller slices of mostly the same pie.

 

[SharpesTriumph]

But for an owner looking to sell (cough, Jody, cough), that's a nice perk on top of the sale price, when they don't have to worry about diminished future revenue as a result of the additional sharing.

The diminished shared portion of revenue might be why the league has pushed so hard for overseas expansion. That way, teams are fighting over a bigger pie, rather than carving up smaller slices of mostly the same pie.

But even if Jody is looking to sell, would a new owner be willing to pay the same full price after Jody just pocketed $167 million and they now only have a lower share of revenue? You might have a potential new owner willing to buy for an extra $300 million more if they can get the team prior to expansion fees. Or maybe not, its hard to know.

I think you are right on overseas expansion, that could potentially bring much more revenue than just one more US team. Travel just seems like it would be a nighmere. It would probably have to be 2-4 teams if in Europe. Asia just has too much of a time difference. Mexico doesn't seem like it would be enough additional revenue.

 

[oldmangrouch]

But even if Jody is looking to sell, would a new owner be willing to pay the same full price after Jody just pocketed $167 million and they now only have a lower share of revenue? You might have a potential new owner willing to buy for an extra $300 million more if they can get the team prior to expansion fees. Or maybe not, its hard to know.

I think you are right on overseas expansion, that could potentially bring much more revenue than just one more US team. Travel just seems like it would be a nighmere. It would probably have to be 2-4 teams if in Europe. Asia just has too much of a time difference. Mexico doesn't seem like it would be enough additional revenue.

The issues surrounding putting a team in any major city in Mexico would overwhelming.

 

[handiman]

But even if Jody is looking to sell, would a new owner be willing to pay the same full price after Jody just pocketed $167 million and they now only have a lower share of revenue? You might have a potential new owner willing to buy for an extra $300 million more if they can get the team prior to expansion fees. Or maybe not, its hard to know.

I suspect future projections like that wouldn't have much impact on a franchise's current valuation. And with it being a seller's market when it comes to pro franchises, prospective buyers aren't really in a position to make a fuss about that.

 

[Fairly-Hard]

Well of course revenue will increase. But will it increase enough to lose 2/32 of revenue forever? $600 million per year is $6 billion in only 10 years, more than the expansion fee. Plus revenue growth likely makes that amount larger, and the years go on forever. Plus the opportunity cost will be lost for expansion.

I still think it will likely ultimately make sense for the NBA to go through with this type of expansion plan. Just pointing out its not as simple or profitable as grabbing a free $5 billion.

At least the NBA doesn't have to split with the Silna brothers any longer. They ultimately made $800 million by 2014, for selling a team for $1 million less in 1976.

https://huddleup.substack.com/p/the-greatest-business-deal-in-sports?s=r

Agreeing to give up future revenue can be way more costly than it appears today.

They simply add a couple more games to the season. This is mitigated quickly. Plus you add Vegas and Seattle. Think about that?

 

[SharpesTriumph]

They simply add a couple more games to the season. This is mitigated quickly. Plus you add Vegas and Seattle. Think about that?

If adding games helped revenue the NBA could do that now. Its an independent action and independent result of expansion fees.

Yes Vegas and Seattle incremental revenue would need to be factored into the analysis. I have stated that in other posts.

 

[SharpesTriumph]

I suspect future projections like that wouldn't have much impact on a franchise's current valuation. And with it being a seller's market when it comes to pro franchises, prospective buyers aren't really in a position to make a fuss about that.

If so then Jody and any other owners considering selling would want to do expansion now then sell the team.

Has similarities to new TV revenue deal. If the NBA can sign a huge new deal now then owners might be able to sell for a larger profit after that deal is signed. However selling now before a new TV deal, a potential buyer would likely price in paying way more money than the current year profit, with the expectation a huge new TV deal is coming. So the TV deal may have no impact on a sale price at all. Third possibility is the TV deal signed doesn't end up quite as lucrative as some hoped, it could actually be better to sell now before the TV deal is signed as a buyer may price in a higher estimate than what is actually possible.

 

[trailblazer18]

Simmons mentioned they could potentially exclude the expansion teams from revenue sharing for a set time period. He mentioned something like that has been done before, but didn't go into detail.

 

[SlyPokerDog]

Plate tectonics dictates that the Blazers will eventually have to move!

 

[Fairly-Hard]

Plate tectonics dictates that the Blazers will eventually have to move!

Or just a really really big wave. The Pocatello TrailBlazers.

 

[Mediocre Man]

Nice. With him in charge I hope they’re in our division