SBD/Issue 151/Leagues & Governing Bodies

NBA Increases Shared-Revenue Allotment By 63% To $49M

NBA Owners Approve Plan To
Increase Revenue-Sharing Pool By 63%
NBA owners, seeking to "close the gap between high- and low-revenue franchises," have approved a plan that "increases the amount of shared revenue doled out annually to deserving teams" to $49M, up 63% from $30M, according to John Lombardo of SPORTSBUSINESS JOURNAL. Under the three-year plan, approved April 18 during the NBA BOG meetings in N.Y., teams that qualify for revenue sharing "will receive a maximum of $6[M]" for the '08-09 season, the first year of the plan. The amount grows to $6.6M by the 2010-11 season. Under the current structure, no NBA team receives more than $5M annually. The NBA BOG approved the plan by a "comfortable margin." The structure of the revenue sharing will remain the same. The new plan is "based on market performance, with the amount of shared revenue a team receives depending on a complex formula" created by McKinsey & Co. The "value of a team's media deal in relation to its market size and the number of team sponsors in relation to the size of the local corporate base" are among the plan's performance criteria. Teams that are "losing money but not meeting market performance standards may not receive any shared revenue." The current funding mechanism, which penalizes teams for eclipsing the salary cap, will continue, but the added $19M will come from "contributions from all 30 teams, with the amount based on how much local revenue each team generates" (SPORTSBUSINESS JOURNAL, 4/28 issue).

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