Expansion

Today, the NBA Board of Governors will decide if they will give the league the go signal to formally look into the plan of adding potential new franchises in Seattle and Las Vegas.  They will examine the viability of the expansion markets, meaning, the financial outcome of two more franchises.

This does not necessarily mean that after this meeting, team owners will be ready to vote to approve expansion.  According to Commissioner Adam Silver, the meeting will make the league “ready to take the next step in terms of potentially talking to interested parties”.  Two of the interested parties for the Vegas franchise are reportedly Magic Johnson and LeBron James.

The concern here is whether the owners would be willing to lose significant amounts of revenue if the league expands to 32 teams.  A vote of 23 out of 30 from team owners is needed for approval.

An 11-year broadcasting rights deal was made beginning this season up to the 2035-2036 season with Disney (ABC and ESPN), Comcast (Peacock) and Amazon Prime Video.   It is worth $76 billion and team owners just might be reluctant to have the pie sliced to 1/32 instead of 1/30.

Currently, expansion fee could run up to $8 billion, so there will be an extra $16 billion for owners to share, if and when the Seattle and Vegas expansion will get the green light.  But, like other major revenue sources like TV and ticket sales, expansion fees are not split with the players.  Yes, people, players get their share of team revenues, aside from their massive salaries.

There’s also the issue of getting players for the expansion teams since they get their players thru an expansion draft to complete their roster.   Existing teams are allowed to protect up to eight players, which then allows the expansion teams to choose from the available unprotected pool.

In the PBA, expansion drafts were held when then new teams Pepsi, Pop Cola, Red Bull, Kia and Blackwater selected players from the expansion pool.

Historically, expansion teams struggled in their first few years because of roster construction and chemistry issues.   Often, these teams get veteran players, those with expiring contracts or those with big salaries.   Development takes some time and it’s highly likely that they will be cellar dwellers for a while.