Software tycoon Vivek Ranadive, the team's leader, speaks at a Downtown Plaza news conference with other investors and officials in the background.

Sacramento group tells NBA it'll stop taking revenue sharing

Published: Monday, May. 6, 2013 - 9:42 am
Last Modified: Friday, Aug. 16, 2013 - 10:30 pm

In a move that surely strengthens their bid for the Kings, the investors trying to keep the team in Sacramento told the NBA they'd stop taking revenue-sharing dollars earmarked for the league's struggling franchises.

By making the promise, the ownership group led by Vivek Ranadive would forfeit $15 million or more in annual assistance from the NBA's wealthier clubs. Ranadive's pledge, to take effect once the team moves into its proposed new arena, bolsters his argument that the Kings can prosper in Sacramento.

The pledge also undermines a key claim reportedly made by investors trying to move the team to Seattle - that the small-market Kings would remain one of the NBA's charity cases, draining cash from the richer franchises, if they don't relocate to the Pacific Northwest.

"This is another step to show their commitment to the team and their belief in the opportunity (in Sacramento)," a source close to the Ranadive group said Monday.

The pledge, first reported by Sports Business Journal, was made shortly before the NBA relocation committee voted last week to recommend the team stay put. That 7-0 vote sets up a climactic decision May 15 by the NBA board of governors.

It was disclosed Monday that the board, consisting of all NBA team owners, will meet in Dallas.

Ranadive's group is trying to dislodge the Maloof family's deal to sell its controlling interest in the Kings for $357 million to Seattle's investors, led by hedge fund manager Chris Hansen and Microsoft CEO Steve Ballmer.

Ranadive and Mayor Kevin Johnson have been lobbying the NBA on Sacramento's virtues. They also are trying to wrap up a deal with the Maloofs to present Sacramento's bid as a backup offer if the NBA rejects Seattle.

The Ranadive group's refusal to take revenue-sharing money is "a bold position on their part," said Irwin Raij, a sports attorney in New York.

He said he isn't aware of a team in any pro sports league that has rejected revenue sharing.

"They are without a doubt sending a message to everyone (about) their supreme confidence in the market," said Raij, who served on Sacramento's arena task force in 2009.

Larry Coon, a University of California, Irvine, economist and expert on the business of the NBA, said the pledge weakens Hansen and Ballmer's case. "It would directly counter one of the main incentives for having a team in Seattle," he said.

The NBA declined comment.

Ranadive's group isn't surrendering the more than $40 million a year the Kings get as their share of the NBA's national TV contract and other leaguewide revenue.

Instead, the investors have promised to forgo their slice of the enhanced revenue-sharing plan the league adopted in November 2011 to help ailing clubs. In a letter that month to the Maloofs, NBA executive Joel Litvin said the team could expect $15 million a year under that plan.

Coon said he believes only Memphis and Indiana get larger subsidies than the Kings.

Sports Business Journal said the Kings are expected to receive $18 million next season, one of the biggest subsidies in the league.

The Bee's source wasn't able to confirm that figure. But he said the Ranadive group promised to take gradually reduced revenue-sharing checks while the team is still playing in Sleep Train Arena. Once the Kings moved into the arena proposed for Downtown Plaza, scheduled for 2016, they would take no revenue-sharing money at all.

"It phases out as the arena gets built," said the source, who wasn't authorized to speak publicly on the issue.

The NBA said a year ago it believed the Kings could earn a $13 million annual profit in a spacious new arena without revenue sharing. Profit would have doubled with revenue sharing thrown in.

The NBA made that projection to try to persuade the Maloofs to accept an arena deal at the Sacramento railyard. The Maloofs initially embraced but later rejected that deal.

This year's deal for an arena at Downtown Plaza is considerably different. Ranadive's $190 million contribution to the arena is nearly three times as large as the contribution the Maloofs would have made.

The Ranadive group also would keep a much bigger share of the arena revenue. Under the Maloofs' deal, the team would have surrendered big chunks of revenue to arena operator AEG. AEG isn't part of the new deal.

The source close to the Ranadive group also said the investors made certain promises to the NBA about "timelines and objectives" relating to arena construction. He wouldn't elaborate.

Assistant City Manager John Dangberg said the city has been meeting with the investors' arena consultants as the two sides fine-tune the construction schedule.

"We will continue to refine those schedules," Dangberg said. Another meeting is set for Tuesday.

Environmental reviews are under way and should be complete sometime next summer, setting the stage for construction to begin.

Call The Bee's Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler.

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