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Why the Kings might stay

hoodwink
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Why the Kings might stay

The Sacramento/Seattle situation has become increasingly tense. Below are some of the real considerations the BOG will carefully evaluate, and many of which are advantages for Sacramento. Perhaps some momentum has begun to shift toward Sacramento and their ability to compete from the perspective of the national narrative, but it was always going to be a real battle (especially with KJ at Sac’s helm). Here is just some of why.

MARKET DIFFERENCES

There are 23 years of overlap where both cities had the NBA. For 20 out of those 23 years, Sacramento beat out Seattle in attendance figures. And this is despite only 7 of those seasons being above .500 for Sacramento, while Seattle had 16 above that mark. Sacramento had 19 sellout seasons; Seattle 6.

Furthermore, Sacramento has the second highest ratio of TV market population to number of pro sports franchises at roughly 1.4 million TV households : 1 pro sports franchise. (Orlando edges out Sac for #1 in adjusted market, for anyone wondering.) Seattle has 1.8 million TV households, but would have 3 and maybe 4 pro sports franchises with the Mariners, Seahawks, Sonics, and possibly new NHL – not to mention MLS and WNBA.

Seattle does have a higher median income, but with sports entertainment dollars and attention split so many ways, Sacramento’s monopoly NBA market carries a decisive advantage.

PUBLIC ARENA SUBSIDIES

This has consistently been the most overlooked aspect of the whole situation. The NBA business model works closely with its affiliated cities, and over the last couple of decades the league has accepted Billions of dollars (2.5 billion dollars since 1980) from these cities to help construct new arenas. Any owner who will need to build a new arena at any point in the next handful of years will put large stock into this situation, since every recent arena subsidy acts as a precedent for future subsidies. And in this case, Sacramento’s subsidy offer will exceed that of Seattle’s by a significant percentage of construction cost.

Additionally, Sacramento has done literally everything it has been asked by the NBA, and the league immediately risks losing leverage with other cities in future negotiations if it were to turn its back and walk away from a cooperative municipality. Any risk to this billion dollar industry of public subsidy is of considerable concern.

EFFECT ON FRANCHISE VALUES

Even if the Sacramento (20th market) bid is ‘slightly lower’ as has been reported, it could actually raise the average NBA franchise value MORE than the Seattle (12th market) bid of a 525 million dollar franchise valuation. If a smaller market team such as Sacramento is purchased for a 500 million dollar valuation and stays in Sacramento, it actually not only matches but probably exceeds the average franchise value escalation as compared to the Seattle bid due to the market size difference.

As far as the money to the Maloofs --

With differences in the SAC and SEA transaction types, including existing city loan (inherited vs. paid) and relocation fee, plus the fact that the SAC offer will assuredly rent the Maloof-owned Sleep Train Arena for 2-3 seasons, the SAC bid will almost undoubtedly be more lucrative for the Maloofs. They are of course in a binding agreement with the SEA group and can’t switch offers prior to BOG ruling without threat of serious litigation, but if the NBA opts to stay in Sacramento then there will be no complaint from the Maloofs in selling to a SAC group that offers a money match plus a multi-year arena rental agreement. And so what about that 30 million dollar deposit? Well, built into the SAC bid is likely an option to transfer 30 million to the SEA group to balance the money if the team remains in Sacramento.

My bold prediction –

Yes, the NBA has recently shot down the idea of expansion. And Stern even hedged on the possibility of expansion in specific relation to this possible relocation. However, there is no way he could give light to the potential of adding another team when he has two cities currently driving up the value of all league franchises.

Regardless of any arguments against expansion, I believe the following trumps expansion opposition:

1) Having two record sales solidify the comps for franchise value, both in a slightly smaller and a slightly bigger market.

2) Owners would pocket a huge expansion team fee.

3) Adding 1.8 million TV households instead of exchanging it for 1.4 betters the upcoming TV contract deal.

I think, and hope, Stern wants to ride into retirement with a win-all situation. He would do that by avoiding the negative publicity and impacts of either leaving Sacramento or teasing Seattle while substantially increasing franchise values. For the sake of two great fan bases, let’s hope it happens.


BasketBalAllan
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Great evaluation of important

Great evaluation of important facyors in the upcoming vote.

The only way I can see Stern even considering expansion is if the vote goes the way of Sac. There would be a lot of negative press from many under informed media outlets who have basically told people that Seattle is a done deal.

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