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Volume 20 No. 42
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NBA eyes flexibility in revenue sharing

Teams could fund plan from mix of local revenue sources

The NBA’s emerging local revenue-sharing system won’t tie its teams to specific sources of local revenue such as gate receipts in funding the drastically increased plan.

Instead, teams would fund revenue sharing from any combined amount drawn from local revenue such as local television, gate receipts and sponsorship. Those funds would then be put into a still-to-be-determined revenue-sharing pool based on overall team revenue.

The league for months has been working on a plan to greatly enhance revenue sharing among its teams, an effort that league officials have said is on a dual but separate track with a new collective-bargaining agreement. Negotiations over that new CBA continued into last weekend.

While the specific percent of local revenue to be shared hasn’t been finalized, NBA Commissioner David Stern said after a recent bargaining session that the league likely will quadruple local revenue sharing among its 30 teams within three years. While Stern did not disclose a specific local revenue-sharing figure, the league this year was expected to share $60 million in local revenue, putting the targeted new revenue sharing at $240 million after three years. In addition, the NBA is discussing a provision that will require teams to meet market performance benchmarks as part of the plan.

NBA teams also share in national television revenue, which last year amounted to about $30 million per club.

While the league hasn’t yet completed its new revenue-sharing plan, it has shared some of the details with the union. League officials would not comment on any specifics of the plan.

“What the union has heard is they are working on a plan that would phase up to $150 million by year three,” said a source close to the National Basketball Players Association who was not authorized to speak publicly on the subject.

This source added that the NBA has advised the players union that the high-revenue teams would provide money to lower-revenue teams and the low-revenue teams would have to meet performance criteria to receive it “so they can’t simply pocket the money.”

NBPA officials did not return calls for comment on this story.

The NBA has long pledged to overhaul its current limited revenue-sharing system and align it with a new collective-bargaining agreement as the league tries to make more teams profitable. The league says it lost $300 million last year, with 22 of its 30 teams unprofitable.

The formula for change has been influenced by the rise in some big-market teams’ revenue. The Los Angeles Lakers, for example, have signed a new 25-year local television deal with Time Warner Cable for about $200 million annually.

Also, the Boston Celtics recently signed a new local television deal with Comcast SportsNet New England that gives the team equity in the network as well as a boost in rights fees that average between $15 million and $20 million a year.

Those teams, along with the New York Knicks and Chicago Bulls, rank among the top revenue-generating teams in the league and would stand to contribute the most under a new revenue-sharing system.

The dependence on high-revenue teams for the lion’s share of local revenue sharing is similar to Major League Baseball’s system that has some teams sharing about 45 percent of their local revenue before the deduction of expenses, according to Marc Ganis, president of SportsCorp Ltd.

“In baseball you have high-revenue teams like the Yankees and Red Sox sharing the bulk of the revenue,” Ganis said.

Part of the NFL’s revenue-sharing plan calls for teams to share 40 percent of their gate with the league, with about 80 percent of total revenue shared among the league’s 32 teams.