Ranadive-Mastrov group to pay dearly to keep Kings in Sacramento

No one to date has ever confused Sacramento for a big market. Thanks to a promise made by potential Kings buyer Vivek Ranadive, Sacramento may be treated like one.

The Sacramento Bee’s Dale Kasler wrote today that Ranadive pledged to take the Kings off the NBA’s revenue sharing plan if he and his group were allowed to buy the franchise. It’s no small amount, thanks to terms negotiated as part of the NBA’s 2012 collective bargaining agreement. According to a 2012 Sports Business Daily article, the revenue sharing receipt for a small market team such as the Kings or Milwaukee Bucks was worth as much as $16 million per year. The scheme is similar to MLB’s plan, except that teams in the NBA share 50% of local revenues (as opposed to baseball’s roughly 40%). A ramp-up period was imposed so that the scheme won’t fully take effect until the 2013-14 season, the same time extremely punitive repeat luxury tax penalties will also start being levied.

The Kings will face their own transition to being net payers, as Ranadive has even agreed to receive reduced revenue sharing for the remaining years at Sleep Train Pavilion. The exact amount isn’t known, but even if it were 50% of $16 million, the Kings would be hard pressed to make up the rest of that revenue solely by selling out the arena for the next two NBA seasons (my estimate of increased revenue: $8.8 million). While Sacramento is a top 20 media market, the Kings don’t get TV revenue from Comcast as a bigger market should. Either Ranadive will have to negotiate seriously lucrative increases (2X at least) or the Kings will be a very revenue-limited team.

Ranadive will have one other constraint that doesn’t hamper poor baseball teams – a salary floor. In the NBA, teams have to spend at least 85% of the salary cap. For the 2012-13 season that translated to more than $49 million. The Maloof-owned Kings spent $54 million on payroll during that period. Revenues should be a good deal higher with a new arena and increased goodwill from the community, but the fact remains that Sacramento simply isn’t a big market. It’s not going to surpass Phoenix or the Twin Cities because the population is simply not big enough, and teams like the Orlando and Cleveland will continue to get the competitive benefit of revenue sharing, plus a ton of upcoming draft picks to help their rebuilding efforts. Even Oklahoma City and Memphis, playoff teams with no need for help, will benefit at the expense of Sacramento because they’re small markets.

The Kings’ roster is made up of players without the talent or leadership ability to deserve max contracts, so for the next few years this shouldn’t be a big deal. If the team can make the right moves to have a competitive team built and timed to coincide with a new arena, all will be well. If not, even the solid ticket-buying support by Kings fans will be tested. Ticket prices are sure to be a good deal higher at the new arena, and with that comes higher expectations for success. Even if the team is successful and has multiple max-deserving players, they could be more quickly stuck in a situation like the Thunder and Grizzlies, who had to give up critical players in order to keep their payroll in line.

Sacramento backers framed their argument to keep the team in the Capitol with the idea that unlike Seattle’s competitive multi-sport market, the Kings are the only game in town. By virtue of last week’s relocation rejection, the owners are taking that to heart. Sacramento asked to be treated like a bigger market, and by golly they will be, whether they like it or not.

59 thoughts on “Ranadive-Mastrov group to pay dearly to keep Kings in Sacramento

  1. That is a sweetheart deal for Stern and the Owners.

  2. I’d love to see this guys financial projections for revenues/costs. There must be some additional kick-backs from Sacto that allow him to agree to this. Note, that this is no different than what any ownership group would have to deal with if a ballpark was built in Oakland…equivalent of a small market team but with no more welfare checks. Only way this is happening in Sacto is with huge public investment—and the same will be required of Oakland.

  3. Ranadive makes zero sense to me for a few reasons:

    1. Why would he agree to turn down revenue sharing under any circumstances? That is just bad business and in a small market like Sacramento that puts the team in a bad situation when it comes to free agents and maximizing profit and revenue. No businessman in their right mind would voluntarily agree to this…..even a new arena would not solve the Kings need for revenue sharing. How many small market teams have great arenas but still get revenue sharing?….Indiana, Charlotte, Memphis, just to name a few.

    2. Ranadive is also agreeing to pay cost overruns on the Sacramento arena on a site that needs a massive infrastructure overhaul….I.E. freeway interchanges, tearing down the old mall, new parking structure, etc….He must know of the 2004 study that showed an arena being built on the same site would cost upwards of 500M-600M because of all these issues and he agrees to covering cost overruns? Huh?

    3. Ranadive and his entire group are from the Bay Area and not one is a Sacramento homer. This makes this even more puzzling. Why is Ranadive and his group fighting to save this team in Sacramento when in reality not one of them lives anywhere near Sacramento? Ranadive’s company is based in the South Bay (Palo Alto) and it is 2 hours away easily without traffic to Downtown Sacramento. I understand why Hansen-Ballmer are going all out because they are in fact Seattle “homers” and want their team back….Hansen is from Seattle and Ballmer has lived there for years.

    4. Ranadive is paying 525M for a team he knows full well is not worth that in Sacramento. That price was negotiated based on a Seattle team and their market demographics yet he is willing to pay that same price when he knows its inflated? How does he expect to make his group’s money back by overpaying for the team, paying 200M-300M for the arena, and not taking revenue sharing? This is unbelievable….

    Conclusion: Ranadive and his group have no intention of keeping the Kings in Sacramento. They want to do what Larry Ellison has tried and failed to do several times and that is move the team to San Jose CA.

    In San Jose, the team is worth 525M because of the area being flush of corporate sponsors, affluent fans and a new TV deal would allow the Kings to share all of Northern California/Nevada with the Warriors. Right now the Kings are blacked out in the Bay Area by the Warriors. Meaning Ranadive and his group cannot watch the game from where they live if they buy the team….Another thing that perplexes me.

    In San Jose, Ranadive can partner with the Sharks on a major renovation that will cost far less than a building new in Sacramento and attract affluent fans, corporate sponsors, and a TV deal where revenue sharing will not be needed. San Jose is far enough away from the Warriors that they will be able to get fans because of sheer distance. Right now getting to Warriors games from San Jose is horrendous as traffic flows to Oakland from San Jose at night. The Warriors get very few fans from the South Bay.

    I believe this is what Ranadive and his group want to do but unlike Ellison they are playing it cool like Clay Bennett did with OKC. They are agreeing to anything and everything the NBA wants to get into the door then within 1-2 years from now when it is obvious KJ’s arena plan is vaporware and never was feasible, Ranadive will turn around and move the team to San Jose where his entire group can attend games.

    This is the only explanation I can think of as Ranadive and his group are not making a sound “business decision” buying the Kings and voluntarily shooting down revenue sharing and agreeing to pay cost overruns on the arena? How are these guys supposed to make money and with not one of them being a “homer” it smells real “fishy” to me.

  4. Stern wins again.

    @Sid Sactown is going to lock the Kings into an iron clad lease for who knows how many years if this deal is approved as expected. The only way the Kings move in the near future would be delays in the stadium construction.

    Dumb move and I am sure the Spirit of St Louis owners thanks the NBA for this move.

  5. @Sid–while this might seem outlandish at this point in time anything is possible over the next few years as they try to get this build in Sacto–

  6. Sid brings up a good point: why turn down revenue sharing checks if you don’t have to. This makes no sense whatsoever. I do disagree with with Sid on one point: the Kings won’t wind up in SJ (although that would be nice). The NBA just said no to Seattle; why would they say yes to SJ? Perhaps a slim chance because they’re already in NorCal 90 miles from the Bay, but I doubt it.

  7. Agreed, Tony D. After all the sh*t that Sacto fans have just been through in this crazy roller coaster ride, a move to SJ would just be a cruel, final slap in the face from the league. Even Stern & Co. know better than that.

  8. Sid’s theory makes sense. It was already going to be stretch to make the Kings profitable in Sacramento, but those terms make it darn near impossible. Ranadive may be the new Clay Bennett

  9. It does seem to be that the NBA wants to keep two teams in Northern Cal. I cannot think of any other explanation for this new ownership group to agree to such term.

  10. I think this paves the way for an A’s move to Railey Field.

  11. ML, not quite sure I understand your reasoning here, “The Kings will face their own transition to being net payers,”

    Just because they’re not being paid by the system doesn’t mean they’d be net payers into it.

  12. @Dan – Assuming that the Kings hit projections during the honeymoon period of the arena, they should be at least slight net payers just like the Thunder are currently. The problem occurs when revenue drops $15-20 million annually. They’d still be paying into the system but couldn’t receive rev share.

  13. Mia, you have no clue what you are talking about. Go troll somewhere else.

  14. I’m still scratching my head as to how the NBA benefits from this proposal. Aside from a handful of small market teams receiving a slightly bigger piece of pie, does this really increase franchise values league-wide?

    • @Briggs – Sure it does. Kings’ sale price remains set at ~$525 million, so future resales of even small market teams are guaranteed to be in the half-billion range. In the near term the Kings may have trouble producing revenue to support such a valuation, but they’ll have a few years to get there. Same thing happened to the Washington Nationals.

  15. @Jeffrey,
    I think the name says it all. Kind of funny in a high-school kind of way..

  16. Privately financed Cisco Field at 36k seats is looking better everyday. Is Marlins Stadium officially the Jamarcus Russell of new ballparks?

  17. That Marlins ballpark deal has created a lot of hostility in the Miami area. Instead of bringing goodwill and recreation, the Marlins and MLB have brought anger with how the ballpark is being funded.

  18. The season might still be early but it looks like the Marlins knew what they were doing when they traded away dead contracts to the Bluejays last winter. Owners can’t come out and say we fracked up and need to rebuild. Even though you think by now Miami would be used to it. Still the team has a decent farm system and should be contending again in a few years. They just wont be able to lure in FAs to South Florida until Loria sells the team. As for the tarp thing, who cares. Until the A’s build a new ball park somewhere on this planet, becomes a perennial winners like the Giants than ppl will choose to support the Giants over the A’s in the Bay Area. Most ppl will always choose between a winner over a team or person that is down on their luck. Why do you think there are so many Yankee, Red Sox, Cardinals, and omg Giant fans wherever you go.

  19. Mike2, the A’s are defending AL West Division Champs. Hardly “not winning.” The difference between the A’s and Giants is the locale in which they ply their trade.

  20. screw the midgets, their idiot stupid prop hat wearing fans, and the rat faced curly haired ass who runs the team!

    there i feel better now.

    go a’s!

  21. @Jeffrey

    People don’t care about division titles. I know I don’t rattle off how many division titles my favorite teams have won to my friends. Last time I checked the A’s don’t hang division flags on their flag poles. The A’s have had 2 winning seasons in the past 7 seasons. During that time the Giants have won 2 WS. Which one will the causal fan in the Bay Area remember in 5 years. The 2012 AL West Div Champ A’s or the 2012 WS Champs Giants? Pretty sure it’s the latter. Like I said ppl gravitate towards a winner. People only remember who won and who came in 2nd. Look how many causal A’s fans who suddenly became Giants fans once the A’s were eliminated last year. Sorry for the rant. I am drunk after watching the Sharks win tonight.

  22. Mike2, how about, in order, the most WS victories:
    Yankees
    Cardinals
    A’s

  23. Just because the Kings get sold for 525M in Sacramento does not mean another team in a small market gets the same price….The NBA would be stupid to assume so.

    Right now, at the current rate the NBA is out pricing ownership groups all over the country. The Warriors in big market Bay Area were sold for 450M only 3 years ago.

    The Kings 525M was a ploy by the NBA to ensure the highest bid possible, hence why the Hansen deal was done without an open bidding process.

    The NBA double crossed the Maloofs once KJ found Ranadive’s group to the pay the same price and keep the team in the Sacramento.

    Because of this, I feel the Maloofs will spurn the NBA and the KJ group and not the sell the team to them under any circumstances.

    The Maloofs turned down Ellison and Burkle on record and Ellison said openly to them he would move the team to San Jose immediately.

    Ranadive has seen how Ellison has failed with Seattle, New Orleans, Memphis, and now Sacramento getting a sale because he upfront says he wants the team in San Jose.

    While Ellison’s honesty should be appreciated and he is willing to pay the extra cost to move the team it does not sit well with the NBA. Ellison offered Howard Schultz a blank check 6 years ago if he moved the team to San Jose immediately….Schultz sold to Bennett who promised otherwise.

    Ranadive is playing the game…..Guys like him and Mastrov do not drop money for fun and games. They want the team nearby, Ranadive is a part owner of the Warriors right now and Mastrov was a bidder for the team itself 3 years ago.

    It is the smart move by Ranadive….One shown proven to work by the Seattle hater Clay Bennett himself.

  24. Forbes has the Kings at 300M this past year on their somewhat reliable report.

    No way the price increases to 525M without a new arena coming or a new TV deal.

    Sacramento has neither. That # was based on a Seattle team and their TV market.

    Since Bennett moved the Sonics TV deals have gone through the roof.

    Why?

    Because of technology, Sports are the one thing people watch live. Plus with all the devices out there (Phones, tablets, flat screen TVs) the media rights bubble will not burst anytime and soon and will grow the next 20 years.

    It used to be each household had 1 device (TV in the living room), now its 2-4 devices average per household and will grow over time. Seattle would out pace Sacramento like wildfire in this area.

    San Jose is far ahead of both cities and metro areas present day and will continue to outpace both of them.

    Sharing the entire Nor Cal TV market between two teams instead of splitting it like now builds two big market teams (SF and SJ). Instead of one big market (Warriors) and one small market (Kings).

    If the Kings move to San Jose that would be on the contrary.

    Hence, Ranadive can make a case and move the team and convince the other owners of the profitability that lies by moving to San Jose. It will be around that time the Sharks will need to do something themselves.

    Remember…the NBA let Bennett move once he tried and failed (fake attempt) for an arena after paying “Seattle market” value at the time for the team. He knows even with his current arena and market he can never “outpace” the Seattle price he paid anytime soon when it comes to current market value.

    Bennett knows this, and despite being a OKC homer….He is not happy about this and does not want to see a Seattle team exist ever or thrive for that matter…

    This guy is the head of the relocation committee? Bad choice Stern….He has a serious conflict of interest based on prior history.

    Another bad move by Stern as commissioner amongst many…Another story for another day.

    Timing is everything…..Ranadive is playing it perfect, he is playing Bennett’s playbook to the bone.

  25. I will say the Maloofs might sell to Ranadive if he can match the Hansen offer 80% of the details/terms for 525M valuation…other reasons besides the money.

    I am just stating Ranadive’s thinking based on the facts of his attempted deal.

  26. “San Jose is far ahead of both cities and metro areas present day and will continue to outpace both of them.”

    What does that even mean? How is SJ “far ahead” of Seattle? Seattle Metro = 3.5 million people, SJ metro = 2 million people

  27. And Sacramento metro = 2.6 million people

  28. I think he probably means money wise. And Sacramento’s metro area is ridiculously large, it’s not like 2.6M people (it’s actually 2.4M in the Combined Statistical Area which includes 8 counties that stretch from the Oregon/California Border to the Nevada California Border, to the Bay Area to San Joaquin County)) live remotely close to Sacramento. That number includes people from as far away as Lake Tahoe. The MSA includes El Dorado, Sacramento, Yolo and Placer counties. That’s about 1.5M people.
    .
    If you compare apples to apples, CSA v CSA, San Jose is an area that encompasses 8.3M people. Far larger than either Seattle or Sacramento. Though, you’d be correct to point out that Seattle isn’t part of any CSA and MSA v MSA they would be larger than San Jose, but that’s sort of ridiculous. The Bay Area is way bigger than the Seattle area, on a population basis.
    .
    All of this is beside the point, the Kings aren’t coming to San Jose.

  29. Seattle MSA vs. SJ MSA is the relevant comparison. But yes, it is all quite besides the point because the Kings aren’t moving to SJ and talk of that is silly.

  30. Please Mike2 – Only a giants fan could work in a comment about that team at a thread involving the NBA Kings. Besides, their 2012 WS championship was likely fueled by PEDs – likely with a huge coverup effort, similiar to the Lance Armstrong scandal.

  31. Not to be argumentative but just to understand, why would you consider MSA versus MSA the relevant comparison? The San Jose MSA doesn’t include several very well populated areas that are much closer to San Jose than some of the farther flung, well populated areas that the Seattle MSA takes into account? The real measure should be concentric circles moving further and further away from the center of either city.

  32. “The real measure should be concentric circles moving further and further away from the center of either city.”

    Do you have that information?

  33. Tim, Are you saying that MSA v. MSA is a better approximation of that information than CSA v. CSA? I don’t have recent info on concnetric circles, nor time to spend figuring it out.
    .
    I double checked, there is a CSA v CSA comparison to be made between San Jose and Seattle. 8.3M v 4.2M.
    .
    I am pretty confident that if we had concentric circles it would show that San Jose area is way larger than either Sacramento or Seattle and not all that much different at around 30 miles out (except in Sacramento’s case, which would be much smaller than either Seattle or San Jose).
    .
    Still, the Kings aren’t moving to San Jose.

  34. I don’t have that info either but I always thought it would be more interesting in the context of Oakland v SJ. People like to point to SJ’s population compared to Oakland as if that in and of itself is a reason to move. City boundaries are rather arbitrary. Residents of Berkeley, Alameda, San Leandro, etc are closer to downtown Oakland than many residents of far flung SJ suburbs.

  35. No to mention residents of San Francisco

  36. Ah, I get it. You are framing this in a “How Oakland is better than San Jose” sort of reference.
    .
    No argument from me, that there is greater population density around the center of the Bay (SF-Oakland). Marine Layer actually has a post that compares the East Bay to Santa Clara County in terms of population density. It’s called Size Does Matter, check it out.
    .
    It’s wrong, though, to assume that MSA’s are much less arbitrary than city boundaries. All MSA’s are is a collection of counties combined together to form a gathered population. Even though San Mateo County and Alameda County border Santa Clara County, and say Fremont is closer to San Jose than Oakland, the MSA for San Jose versus Oakland comparison would “award” the population of Fremont to Oakland in this sort of scenario.
    .
    In other words, it’s all arbitrary. And I agree with your point that San Jose’s population (in and of itself) is not as compelling as San Jose boosters would make it seem to be. But it’s also not insignificant.

  37. Yes it’s all arbitrary. The point not being that Oakland is “better” than SJ because of population density, but that the real picture is a little more complex than just pointing to SJ’s population as if that alone makes it a no brainer to move.

    I will look up that post.

  38. Post is here if anyone else is interested – https://newballpark.org/2010/03/26/size-matters/

    Short version is that Oakland+neighboring cities more or less equals SJ size and population-wise, but SJ has the obvious advantage of having one city hall and one tax base.

  39. Tim, I agree with you. That’s true. “10th largest City” is not as significant as some would make it out to be.

  40. It’s not size matters it’s money matters. We all know that is why the A’s and Warriors want to move to locations to where they can generate more.

    @duffer No I am not a Giants homer. I do respect the Giants as an organization and wish the A’s had their crap together like the Giants do. At some point you have to say OK we are going to build here in Oakland or just shut and say sue us we are moving here. The A’s ownership group does not have the balls for the latter. 7+ years of playing nice guy has done what for the teams fan base. Also can you prove your Giant PED theory? I could use that same argument for the A’s winning the AL West last year. with that weak argument.

  41. Disagree Mike 2, no true A’s fan admires the giants, or discusses them. The A’s remain the superior franchise because they own four world series titles to the giants two. The giants possible PED usage is plausible – their roster is very average and lacks power (last in MLB in HRs) Their pitching isn’t that great either. If their stats were fed into a computer program which projects MLB team over/under W/L – the giants would be .500 – They were big time underdogs in each of their 2012 playoff matchups, the stats don’t add up. I suspect that you are a giants fan who claims to pull for both teams in order to justify commenting about the giants at an A’s site. Furthermore, the giants mgt’s attempt at monopolizing the bay area MLB fanbase would be illegal in the business world (a court will likely determine that if and when the A’s/San Jose challenge MLB and/or the giants mgt. in a courtroom.)

  42. @duffer

    You are so wrong. Just to let you know I stopped watching baseball last year after the A’s got eliminated and my last Giant’s game I watched in person was 2008 when I game back from Afghanistan. Free tickets behind home plate at AT&T, I could not turn down that. Find someone else to bash on this blog.

  43. Mike 2, As an A’s fan residing in SJ, I am very annoyed with all the pro giants spin from the media. I have no respect for that franchise at all. If, for example, a new prospective owners group bought the A’s from Wolff, and planned on building a new ballpark in Oakland – the giants mgt. would likely attempt to stall that alo. It is also offensive to receive pro-giants propaganda at an A’s website, since there is excessive giants media coverage elsewhere. By all means, continue supporting the A’s. If, however, you wish to make comments about the giants – please do so at one of their websites, thank you.

  44. Sid makes some interesting points but the NBA would only allow a move if the Arena deal falls through or is seriously delayed (both ARE possible however). However when you consider the state of the economy in that area and the lack of revenue sharing it looks very possible that SacTown fans may spend the next decade watching a cash-strapped team that is out of the playoffs almost every year. Even a loyal SacTown fanbase will start to whither in their support in that scenario. This could have happened to a new Seattle franchise too however their odds of success would appear to have been a lot higher.

  45. Wow. We put that in at the exact same time. A close horse race

  46. I’d be surprised if Stern & the BoG suddenly decided to allow a bidding war at this stage when they weren’t entertaining one up to this point.

  47. Let’s take a moment to promise ourselves that we will not go nuts when a decision is made with the A’s and San Jose, one way or another. It may not be as ‘sure’ as it seems.

  48. @LS,
    I won’t gloat here, but after 8 years I will go nuts outside of this forum. Trust me, the cold Great Whites will flow! Also, respectfully disagree with your last sentence (but we can agree to disagree). 😉

  49. Looks like the Maloofs want the money.

  50. OT: you know, the more San Francisco tries to make the proposed Super Bowl ALL THEIRS, the more I’m starting to pull for Miami. Yes, I know, the team will still be “SF” when they’re playing 40 miles to the south, but everything (from quotes from SF pols touting the game from announcements all being made in SF) is becoming quite sickening IMHO.

  51. Upcoming Super Bowls: New York City Super Bowl, being played in East Rutherford, New Jersey; Frisco Super Bowl, being played 40+ miles away in Santa Clara…Like I’ve said, the 49ers and the media are going to pretend the stadium is in Frisco – that’s how they are getting around the issue of Frisco, the glamor city, not building a new stadium while zzzz Santa Clara did. It’s already going on. Get used to it. (Nothing against Santa Clara. I go there all the time.)

  52. Looks like the owners voted for the Kings to stay put. That does not mean the Maloofs have to sell to the Ranadive group. We could be seeing this drama unfold again next year.

    • Will be interesting but they would only hang on to the Kings if the league would allow the 20% minority stake with Hansen. Almost noone thinks they will ever be approved. Even if there were any chance of that it would have to wait until that low life Stern is out of office and I doubt the Maloofs could wait that long. So they are literally being forced to sell for a lower $$ figure, technically that is no doubt a major anti-trust violation but with all the owner legal waivers they have to sign it makes a lawsuit a non-starter. The Maloofs indicated as such in the new conference yesterday.

      Hansen is saying all the right things about continuing to persue the NBA but the public sentiment in Seattle seems to shifting to preferring the NHL or nothing. From looking at the blogosphere up there most are sort of happy for Sacramento but even more have serious doubts that franchise will ever be successful there sans revenue sharing. Sort of congrats and good luck SacTown, you are going to need it!

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