NBA AM: It Won’t Be Expansion, But How About Relocation?

Expansion Not Likely, Relocation More Reasonable

With the silly part of the NBA offseason mostly behind us, the topic that tends to dominate the dull month of the NBA cycle is the notion of expansion. Some of that is fueled by the availability of NBA Commissioner Adam Silver, who does a lot of talking in the summer months, and one of the questions he is asked about a lot is the idea of expanding the NBA.

While we have covered this topic in this space several times, it seems relevant to weigh in again.

In case you missed it, David Aldridge of NBA.com, penned an excellent update on the situation in Seattle.

As much as fans want to talk about expanding the NBA, there are two core issues facing the idea of more NBA teams—the biggest being that not all the existing teams are turning a profit. Even with a massive windfall in new TV rights money, there are still some franchises that are not in the black. Some of the losses are of their own choosing with massive luxury tax spending, but when you look at what some franchises generate before revenue sharing, the financial health of the league isn’t so good that current owners want to share the revenue pie even more.

Add to that, while the current TV rights deal is historically high, the landscape of broadcast rights is changing by the second, and no one knows what the future of broadcasting rights really looks like.

The doomsday scenario is adding two more teams to the league, and then the bottom falls out of rights fees in the next decade. Some may counter and say that’s why the league should add more teams while the market is high, and maybe there is value to that, but the long-term vision of the league isn’t exactly clear enough to justify diluting the pool more than it is already.

The NBA and many of its owners have a better understanding of what expansion and relocation really mean in the big picture, and the notion of a one-time cash infusion by way of an expansion fee is outweighed by the idea of sharing revenues with new partners forever.

So, if expansion is off the table, at least for the next decade, is relocation more likely? The short answer is yes. While most NBA teams have locked themselves into long-term leases, there are a couple of situations worth watching.

The biggest is the New Orleans Pelicans. In 2012, when the NBA agreed to sell the franchise to current owner Tom Benson, the idea was to find a local owner committed to keeping the team in New Orleans. The NBA and Benson negotiated a lease package that locked the team into New Orleans through at least 2024.

Benson, who just turned 90 this July, has endured a lengthy court fight with his children. While he has started to put things in motion to ensure continuity of his teams in the event of his passing, it’s not hard to envision a scenario in which Benson is not controlling the team by the time 2024 rolls around. That makes the Pelicans the team to watch on the relocation front.

The flip side to relocation is while the team’s owner ultimately has to decide to move the team, the NBA has shown a tremendous amount of interest in keeping its teams where they are, if at all possible. Historically, the city of New Orleans and the state of Louisiana has stepped up to support keeping its teams where they are with lots of favorable inducements.

The challenge for any city looking to obtain an NBA team is that you typically must have the right mix of opportunities, usually bigger market, better tax incentives, newer buildings and things an incumbent market can’t or more importantly won’t offer.

That is going to be the challenge in trying to poach an NBA team; there currently are not any adversarial situations brewing. The Hawks got their deal with Atlanta and the State of Georgia to refurbish and restructure their arena situation. The Bucks, Pistons, and Warriors are moving into new arenas over the next three years, locking them into their respective markets for at least two decades.

The major market teams in New York, LA, Chicago, and Houston are not going anywhere.

A run through the NBA pegs the Pelicans as the only team on the low end of the revenue and attendance scale, while also having a lease that could be terminated in the next decade.

While it’s way too early to start pegging any teams as willing to consider a move, in reality, most of the NBA is under a long-term lease or play in a building owned or controlled by their current owner.

So, while expansion is the topic most want to talk about, the truth is the NBA is not going to seriously consider expansion anytime soon, making relocation the only real means for an NBA team to change cities. In that scenario, it couldn’t happen for at least seven years, and that’s only viable if the Pelicans decide to consider it, and that won’t happen while the Benson family controls the team.

It’s not hard to see the sequence of events that would need to play out for a viable relocation team to emerge. Today, though, it doesn’t seem very likely that changes in where NBA teams currently play are on the horizon. We’ll just have to see how the future plays out.

For now, it seems safe to say that expansion won’t be part of it. The rest remains to be seen.

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