The NBA is considering an overhaul of its revenue-sharingstrategy, with the issue moving to the forefront of discussions for theleague’s long-range planning committee.
The 10-member committee of team governors, chaired by Bostonowner Wyc Grousbeck, participated with NBA Commissioner David Stern in a nearlythree-hour conference call Dec. 5 to address how the league divvies up itsshared revenue.
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“The committee is looking at the entire picture,”
said panel member Jerry Colangelo. |
The call follows reports late last month that eight owners oflow-revenue clubs in late September sent a letter to Stern asking him toaddress the league’s current revenue-sharing strategy, which is based on marketperformance rather than market size.
In addition to those performance-based calculations, the NBAequally splits among its 30 teams national television revenue and merchandiserevenue. The NBA, however, has less revenue-sharing among its teams than thecountry’s other top pro leagues because it does not share its gate receiptsamong its teams. Specifically, the NFL and MLB include a portion of theirteams’ gates, along with national television and merchandise receipts, as partof their respective revenue-sharing agreements.
In the NHL, the teams eligible for revenue-sharing subsidiesare those in the bottom 15 of league revenue and in markets with 2.5 million orfewer TV households.
“The committee is looking at the entire picture and that meanseverything is being discussed,” said Phoenix Suns Chairman Jerry Colangelo, amember of the planning committee. The committee also includes Dallas owner MarkCuban, San Antonio owner Peter Holt, Charlotte owner Bob Johnson, Minnesotaowner Glen Taylor, Los Angeles Lakers owner Jerry Buss, Orlando CEO Bob VanderWeide, Denver owner Stan Kroenke, and Miami owner and NBA board of governorschairman Micky Arison.
Johnson and Taylor reportedly were among eight owners, alongwith Michael Heisley (Memphis), Larry Miller (Utah), Paul Allen (Portland),Herb Kohl (Milwaukee), George Shinn (New Orleans) and Herb Simon (Indiana), whosigned the letter to Stern urging changes to the current revenue-sharingsystem.
Colangelo, however, called the letter “redundant” to theleague’s effort to address revenue-sharing issues under way before the letterwas sent to Stern.
Grousbeck refused to comment on any proposed revenue-sharingchanges.
Since 2003, the NBA has used a report by internationalbusiness consultants McKinsey & Co. to create a comprehensive marketanalysis depicting the effectiveness of each franchise’s operations and helpingdetermine the distribution of revenue to franchises deemed to be incompetitively disadvantaged markets. Those teams then receive allocations leftover from the league’s escrow fund of player salaries set forth from theleague’s collective-bargaining agreement. Teams that are losing money but notperforming well based on the study may not receive additional revenue.
The NBA, using its McKinsey study, is the only league to tieindividual team market performance to revenue sharing.
According to a source, NBA teams deemed worthy of receivingallocations this year received between $2 million and $6 million. The leaguedoes not disclose which teams received money or the amount distributed.
“In all probability, there will be certainly some tweaking atthe very least, and the committee is very open-minded in what works in the bestinterest of the league,” Colangelo said, refusing to disclose any specificchanges under discussion.
One team source said he doubted the league will look to addgate receipts to the team revenue-sharing pool but may increase payments toteams tied to the same system using the McKinsey study.
There is no specific timetable for the committee to make anychanges.
Stern said he wants any changes that are implemented tocontinue to link revenue sharing with market performance.
“It has to be connected with performance so that the teamsthat are the recipients of revenue are maximizing the potential of the marketsin which they’re located, rather than just getting a certain revenue share,”Stern said in a Dec. 4 press conference in Sacramento. “And, as you canimagine, that might be a little contentious. I’ve discussed this with theowners and said to them as recently as prior to that letter, this will notsubside.”
