There are currently two groups vying to buy the Sacramento Kings.
One is a Seattle-based group that plans to move them, and the other a Sacramento-based group that plans to build a new stadium and keep them in town.
Last week a relocation committee of NBA owners voted to block the team from moving to Seattle.
It was a huge victory for the Sacramento group (headed by software CEO Vivek Ranadivé) and mayor Kevin Johnson — who organised the local ownership group and negotiated a deal for a new $449 stadium ($258 million of which will be paid for by taxpayers).
Today, Daniel Kaplan of Sports Business Journal is reporting that the Sacramento group made one massive final concession before the relocation committee voted: the group agreed to not take money from the NBA’s revenue-sharing program once the new arena is built.
This will potentially cost the franchise millions of dollars a year and, interestingly, save big-market NBA owners from forking over revenue to a small-market teams.
Under the NBA’s new revenue system (as spelled out by SBJ last year), every team contributes 50% of annual revenue to a revenue-sharing pool. Not matter how much a given team contributes, it gets back an amount equal to the league’s annual average payroll.
So high-earning, big-market teams like the Knicks end up losing money, and light-earning, small-market teams like the Sacramento Kings end up taking money as revenue recipients.
It transfers wealth from rich teams to poor teams, and it’s designed to make sure everyone has enough financial wiggle room to stay competitive.
The Kings are currently one of those small-market teams. They are slated to takes in $18 million in revenue from other teams next year, based on SBJ’s estimates.
If the report is true, it’s a big gamble.
Opting out of revenue-sharing sweetened the Sacramento group’s offer and ensure the other owners that the cost of keeping the Kings in Sacramento wouldn’t be coming out of their pockets.
But it also took away a financial safety net that the team has been depending on heavily in recent years.
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.