Kings Finances

[Glenn]

I found an article about NBA finances that may be of interest. Certainly the teams with more money to spend can be less careful in the deals they make and even shrug off paying luxury tax.

The Knicks team salary is $89 mil as compared to the Kings $63 mil. Picture that $89 mil in competent hands. The Lakers team salary is $72 mil. The salary cap is $55 mil.

http://nbahoopsonline.com/Articles/2007-08/NBArevinuesharing.html

Here's one paragraph:

Income varies from team to team, but many sources claim that the average NBA team makes $100 million dollars annually, with the Lakers and Knicks bringing in close to $150 million annually. All the small markets, except for Utah who made the playoffs and eventually the conference finals, brought in less than 85 million dollars. Subtracting the two mega-franchises(Knicks and Lakers) the average NBA gate income was around $750,000 dollars a game or $32,250,000 a year. That $32 million may even be a little high since I also calculated the two preseason games each team plays at home. Of the $32 million a portion of that goes to the visiting team, but since everyone plays the same number of road games it tends to cancel out. The TV contracts with ABC, ESPN, and TNT bring each team 28 million for every one of the NBA teams. Merchandising also brings in close to 5 million a year and finally add in the 13 million for local TV contracts. If you’ve been following your math closely, you will see that the total here is not $100 million, its $78 Million. Here is where the differences between small and large markets begin to take effect. Large market teams get around $30-40 million dollars in corporate sponsors and advertisers. Medium markets average around $25 million, and the smaller markets $10-15 million.​

The writer also seems to think that all teams make the same amount off of local TV contracts. I doubt it. It escapes logic.

 

[AyeCarly]

Here is Forbes valuation breakdown of the Kings organization.

http://www.forbes.com/lists/2007/32/biz_07nba_Sacramento-Kings_327146.html

**************************************************

Info I can glean from this site

Team Value $385 Million
Maloofs Purchased the Kings for $156 Million

Net profit of ($385M - $156M) = $229M

**************************************************

More calculations to back up what Glenn posted

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Kings Gate Income 2007-2008 (based on avg. of 14000 tickets sold / game)

41 games x 14000 tickets sold per gm x $63 ticket avg cost = $36 million (a little better than the $32 million league avg.)

http://www.sportsnetwork.com/default.asp?c=sportsnetwork&page=nba/teams/Attendance109.htm

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TV Contracts (League)

2007-8 network contract NBA broadcast rights:
TNT + ESPN/ABC = $4.6 billion / 6 yrs = ($766 million / yr) / 30 teams = $25 million / yr / team (assuming an equal share per team)

http://www.insidehoops.com/nba-tv-contracts.shtml
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Kings income (2007) (based on Forbes data)
Operating Inc. $20.5 Million

What does this all mean? I guess that the Maloofs aren't hurting.

 

[cfechter]

Here is Forbes valuation breakdown of the Kings organization.

http://www.forbes.com/lists/2007/32/biz_07nba_Sacramento-Kings_327146.html

**************************************************

Info I can glean from this site

Team Value $385 Million
Maloofs Purchased the Kings for $156 Million

Net profit of ($385M - $156M) = $229M

**************************************************

More calculations to back up what Glenn posted

----------------------------------------------------------------
Kings Gate Income 2007-2008 (based on avg. of 14000 tickets sold / game)

41 games x 14000 tickets sold per gm x $63 ticket avg cost = $36 million (a little better than the $32 million league avg.)

http://www.sportsnetwork.com/default.asp?c=sportsnetwork&page=nba/teams/Attendance109.htm

----------------------------------------------------------------
TV Contracts (League)

2007-8 network contract NBA broadcast rights:
TNT + ESPN/ABC = $4.6 billion / 6 yrs = ($766 million / yr) / 30 teams = $25 million / yr / team (assuming an equal share per team)

http://www.insidehoops.com/nba-tv-contracts.shtml
----------------------------------------------------------------

Kings income (2007) (based on Forbes data)
Revenue $128 Million + Gate Receipts of $48 Million - Operating Inc. $20.5 Million - Player Expenses of $68 Million = $87.5 Million

What does this all mean? I guess that the Maloofs aren't hurting.

An accountant you are not - Operating income IS the net, before any interest or depreciation being charged off against it.

Before we even question how reliable the Forbes information is, as great as $20,000,000 of net looks, in the NBA's business model, any profit over a period of time could be wiped out by just one bad basketball deal. I doubt the Maloofs have pulled any money out of this enterprise knowing that they'll probably need every spare cent to fund future operations and/or a bad year.

 

[AyeCarly]

An accountant you are not - Operating income IS the net, before any interest or depreciation being charged off against it.

Before we even question how reliable the Forbes information is, as great as $20,000,000 of net looks, in the NBA's business model, any profit over a period of time could be wiped out by just one bad basketball deal. I doubt the Maloofs have pulled any money out of this enterprise knowing that they'll probably need every spare cent to fund future operations and/or a bad year.

I should have added that, and to check my numbers. And of course how valid Forbes data is.

 

[SacTownKid]

I remember the Maloofs saying even at the best of times they have gone into the red. Pro basketball teams are not seen as a business, they are more of a rich man's play toy. I doubt they are hurting, they are so succesful in many other areas, specifically the Vegas thing. I also remember reading that they refuse to take money from that part of their business to use in the basketball side, because it just wouldn't be good business. I doubt that is true however. I think that was one of they reasons they used as to why they shouldn't build their own arena.

 

[Glenn]

Hmmmmm. How'd that post get moved? Anyway I posted it in the middle of the night Friday with the intention of showing that the Kings are NOT as rich as many teams.

It was placed under the "Expectations" poll because the limitted resources of the Kings limit the quality of players the team can have. At a minimum, our limitted finances mean we cannot make a mistake 'cause we are in no position to warehouse expensive mistakes, like the Knicks. The Knicks pay about $40 mil in luxury tax fees yet as a team, sucking or not, they still make a profit.

The Knicks and Lakers income is roughly twice of that of the Kings if you can believe that article. I think in general it is intuitive that the article is accurate even if specifics are stretched a little bit this way and that.

My ultimate point is that unless all the holy people of the world combine their prayers, luck intervens in a big way, etc., the Kings will never be the Lakers and we should not expect it. Anyway, I don't expect it and thank goodness for my ability to enjoy, I don't NEED it..

I have set my sites lower and can be thrilled by this team with far less achievements than that of the Lakers.

The salary cap rules only go so far and cannot keep the playing field totally level and although this may be another argument, maybe for the good of the NBA, it is good that the playing field is not absolutely level. The NBA needs big markets battling it out for championships because so much of their income depends TV and radio contracts of BIG GAMES. A playoff between Memphis and Toronto will not draw the immense advertising money of Lakers vs Boston. Much of this money is split among the poorer teams so amen to that.

I don't think the Maloofs are making much money (if they are) and I heartily believe that if they invested their money elsewhere, they would be better off financially. We are lucky there are always the rich boys and girls who like big toys.



None of this applies to San Antonio.

 

[fnordius]

I remember the Maloofs saying even at the best of times they have gone into the red. Pro basketball teams are not seen as a business, they are more of a rich man's play toy.

They are also a rich man's equity. The Maloofs can want financing for a palatial casino, and point out to potential lenders that they own a $350M NBA team, so they're going to be good for it.

Teams can't go on appreciating like they have over the last 20 years, but the long-term gains have been very, very good during the Maloof period. If they've lost $10M a year, which I doubt, they're still in the black by many millions. If they are the Maloof's toys, it's only because more prudent businesspeople might have decided that $100M profit was a good point to cash out, and they haven't done that.

 

[Glenn]

They are also a rich man's equity. The Maloofs can want financing for a palatial casino, and point out to potential lenders that they own a $350M NBA team, so they're going to be good for it.

Teams can't go on appreciating like they have over the last 20 years, but the long-term gains have been very, very good during the Maloof period. If they've lost $10M a year, which I doubt, they're still in the black by many millions. If they are the Maloof's toys, it's only because more prudent businesspeople might have decided that $100M profit was a good point to cash out, and they haven't done that.

As long as equity can be used, which it can, the owners come out ahead.

 

[The Hammer]

I would guess the main benefit the Maloofs are recieving by owning the Kings is fame and notoriety. That will help them make more money in the future than anything. Also, the equity of the franchise looks good too. But really I think it's an image thing for them.

 

[creAtivetfh]

i've heard that the Maloofs only make money on the season if the team makes it to the playoffs.

 

[RKid]

I agree Glenn that a small market team like the kings has a tougher decision to make when it comes to paying the tax. But you cant attribute the majority or lack of success with the size of the teams wallet.

You use the lakers as an example of the unfairness of the system, but if you compare the Lakers and the Kings and look at the what they have done since they both went down hill, you will see that the money -to an extent- has not really played a a major role.

The Lakers unlike the Kings are back in the mix due to trades (Lamar and Gasol), the Draft (Bynum, Turiaf, Critt, Farmar, Walton, Sasha) good use of the MLE (Fisher) a little luck, and knowing when to rebuild.

Now all these tools are available to the kings aswell, they just havent taken advantage of them. The Kings have for the most part tried the band aid approach, (Ostertag, Bonzi, Mobley, Moore, Ron Artest) and botched the one huge trade. (Webber) What you should have done three years ago, was blow up the team and start over. You have good players in Martin, Beno and maybe Salmons to build around.

My intention is not to thrash the Kings! So please don take it the wrong way.

Im just pointing out to you kings fans that all is not lost and you can compete with the larger markets by having a well runned team. If San Antonio can do it, why not you?

 

[Spike]

1 - "well run", not well runned.

2 - San Antonio fell into Duncan when they already had a pretty strong team (it was an injury to Robinson, that helped them secure a top spot.) It's true that they are the model for smaller markets, but then again, apparently so were we in 2001, so was Utah prior to that. Smaller markets have smaller windows for opportunity.

3 - Los Angeles is an infinitely larger market than Sacramento. As such, there are many built in advantages. Larger revenue, Jack on the sidelines, etc. Do you want to rub elbows with Hollywood starlets, or shop at the outlets in Vacaville? Hmm..

3a - As someone pointed out earlier, it's easy to rebuild when you have Kobe keeping the team afloat.

 

[Warhawk]

i've heard that the Maloofs only make money on the season if the team makes it to the playoffs.

A number of years ago the Bee ran an article on the Kings finances. The team was losing millions something like 75% of the previous # of years. Indeed, making the playoffs helped push the team into the black those years it was profitable.

No owners, to the best of my knowledge, are making any real (to them) money off their team. As stated previously, they are hobbies that, if you are lucky, pay off when you sell only.

 

[Glenn]

I agree Glenn that a small market team like the kings has a tougher decision to make when it comes to paying the tax. But you cant attribute the majority or lack of success with the size of the teams wallet.

You use the lakers as an example of the unfairness of the system, but if you compare the Lakers and the Kings and look at the what they have done since they both went down hill, you will see that the money -to an extent- has not really played a a major role.

The Lakers unlike the Kings are back in the mix due to trades (Lamar and Gasol), the Draft (Bynum, Turiaf, Critt, Farmar, Walton, Sasha) good use of the MLE (Fisher) a little luck, and knowing when to rebuild.

Now all these tools are available to the kings aswell, they just havent taken advantage of them. The Kings have for the most part tried the band aid approach, (Ostertag, Bonzi, Mobley, Moore, Ron Artest) and botched the one huge trade. (Webber) What you should have done three years ago, was blow up the team and start over. You have good players in Martin, Beno and maybe Salmons to build around.

My intention is not to thrash the Kings! So please don take it the wrong way.

Im just pointing out to you kings fans that all is not lost and you can compete with the larger markets by having a well runned team. If San Antonio can do it, why not you?

Did you read the article?

 

[RKid]

1 - "well run", not well runned.

2 - San Antonio fell into Duncan when they already had a pretty strong team (it was an injury to Robinson, that helped them secure a top spot.) It's true that they are the model for smaller markets, but then again, apparently so were we in 2001, so was Utah prior to that. Smaller markets have smaller windows for opportunity.

3 - Los Angeles is an infinitely larger market than Sacramento. As such, there are many built in advantages. Larger revenue, Jack on the sidelines, etc. Do you want to rub elbows with Hollywood starlets, or shop at the outlets in Vacaville? Hmm..

3a - As someone pointed out earlier, it's easy to rebuild when you have Kobe keeping the team afloat.

What are you an English teachers? It was 3:30 in the morning Im surprised I spelled Lakers right.

But yeah good point on Kobe I thought about that after I had posted and I didnt want to edit. But what is "afloat" to you? Is missing the playoffs and being crap for a whole year afloat?

 

[Spike]

Good grammar waits for no one.

Anyway, the Lakers certainly weren't out of contention for a playoff spot in January last year, so I'm not sure you could call them crap (although I would because they're the Lakers, which is for another post.) But only one year of "crap" and a contender the next, yeah, I'd take that in a heartbeat.

On a side note: I'd be interested to see how much Donald Sterling loses per year, since he has the reputation of a penny-pinching miser.

 

[RKid]

Did you read the article?

Yeah I did read the article and it had many of the arguments that I wanted to use. Here is a quote from the article:

"the bottom 8 will have to rely on their wits and some luck to stay competitive. But as long as they hire competent management and the bigger markets keep hiring irresponsible management all will work out in the end. "

Now the kings are not in the bottom 8.

Now I am not arguing that the Lakers and the Knicks dont have over small market teams. My argument is that that advantage is not as insurmountable as people make it seem.

 

[Glenn]

Now I am not arguing that the Lakers and the Knicks dont have over small market teams. My argument is that that advantage is not as insurmountable as people make it seem.

I totally disagree but that's just my opinion.

There will always be an exception such as San Antonio and the Knicks but in general, the more money you have, the more off court money opportunities you offer a player, the more history you have, the better chance you have.

History proves me correct so I'm not sure where you are going with this. Wanna compare the Lakers records over the last 50 years to the Kings/Royals? As to having competent management, the is no salary cap on management. Teams with a lot of money can offer the most and therefore end up with the best coaches, the best GMs, etc.

In your off time, where would you rather be, LA or Sacramento?

I am not saying to throw in the towel but at least be somewhat rational in what to expect from the Kings. According to the poll I set up, most Kings fans are satisfied with either any team with any record or they will settle for roughly 50 wins and call that a good year.

There are those who will not be happy unless we achieve much more but then I think they will be chronically unhappy.

 

[fnordius]

I found an article about NBA finances that may be of interest. Certainly the teams with more money to spend can be less careful in the deals they make and even shrug off paying luxury tax.

Being in a big market has some advantages, although it's not always enough of an advantage to make much difference. And the advantages have varied over time. You're comparing the Kings with the Lakers, but remember that by 1954 the Lakers had five championships to the Royals' lone championship, and the Lakers were still in Minneapolis. Between '46 and '58, Boston won a title, and Philly won two. All of the other championships went to teams that were not in the top dozen TV markets. So let's scratch the five Minneapolis titles off the list of evidence and move on.

In more recent history, professional basketball has become a far more expensive sport. Team payrolls have gone from $50K to $50M. Sure, that hurts the smaller market teams, despite efforts by the NBA to partly even things out. What has the result been? Since 1993, the Lakers have played in 4 championship series, the Bulls have played in 3, the Knicks in 2, and the 76ers in 1. That's 10 out of 28 for big market teams. The other 18 were: Spurs (x4), Rockets (x2), Pistons (x2), Jazz x2), Nets (x2), Heat, Pacers, Sonics, Magic, Mavs and Cavs. The Nets or Mavs might be considered big market, but not the others. Six out of 14 titles having gone to San Antonio or Houston also shows that smaller market teams can win it all -- at least in Texas.

Which (never having cared for Texas) makes me think of another point. Maybe some people would prefer living in LA to living in Sac. But wouldn't anyone in their right mind prefer gorgeous Vancouver over (insert your adjective of choice here) Detroit? Seattle and Portland are also beautiful cities, but the Sonics seem destined to leave to *cough* glamorous Oklahoma City, and Portland was rumored to be on the verge, while cities I never cared for a bit, like Salt Lake City and Houston, have had far fewer problems in the NBA. So it may be that some players don't want to come to our boring little podunk, but for every Webber or Artest that longs for a real city, there is a Bibby or Martin who likes Sac. Again, edge to the bigger markets, but not by much.

Instead of getting caught up in a sour grapes sentiment over the Lakers' latest personnel coup, I think we should be looking at Houston and San Antonio to see what they've done differently from us. The playing field may be slanted, but it's a gentle enough slope that really well managed, small market teams have made it despite that. And badly managed big market teams? NY, LA, Chicago and Philly are the big four, and three of them are absolutely horrid right now. Dallas and the SF Bay Area are the 5th and 6th biggest markets, but between them they've only managed one NBA finals appearance in the last 30 years. Atlanta is the 8th largest market, lotta good it's done them.

So I'm not going along with the idea that we should all give up on winning a title because Sac is a small market. We just need a front office that's as crafty as they have in San Antonio. The occasional bit of good luck wouldn't hurt any, either.

 

[Glenn]

fnordius, San Antonio is the exception and I swear they tanked the season that Robinson got injured. Certainly I remember thinking so at the time. Let's see what happens to San Antonio when Duncan retires and I mean over decades after his retirement. Having Robinson and Duncan may have been calculated but only to the point that once Robinson was injured, he never came back that year. This gave San Antonio the rights to draft Duncan. These two guys are very special and I don't know how to acquire people like them other than blind luck. Not only are they wonderful athletes but great guys and very stable leaders.

I'm not saying give up. Not at all. All I want is to be reasonable and in part the poll I set up and this financial link were inspired by the people who place our "failure" at the feet of Petrie. The issues are far more complicated and I hope this article is read by the people who might not want to understand that there is more to developing a team than a clever GM. Whining at Petrie ignores the factors beyond his control.

If the people that are arguing with each other do not take the time to try to understand the other point of view (and maybe even say so) this is a failure for this forum. We talk "at" each other and not "to" each other.

 

[Circa_1985_Fan]

On a side note: I'd be interested to see how much Donald Sterling loses per year, since he has the reputation of a penny-pinching miser.

I think I remember hearing somewhere that he pockets like $20-$25 million in profits for himself every year, so whatever he does with that team to suck so bad obviously works for his bank account.

 

[Glenn]

I think I remember hearing somewhere that he pockets like $20-$25 million in profits for himself every year, so whatever he does with that team to suck so bad obviously works for his bank account.

The team is in LA.

 

[fnordius]

fnordius, San Antonio is the exception and I swear they tanked the season that Robinson got injured.

No argument from me, they tanked and it paid off beautifully. Houston also blatantly tanked away the end of the '83 season in order to get Olajuwon. Tanking doesn't always pay off, to be sure, but for those particular small market teams, it made all the difference. Other teams from small to middling markets, like the Jazz and the Pistons, have been successful without that, so nobody should claim that intentional tanking is the only way for a small market team to compete. Every team has to find its own way of getting there -- or not.

I'm not saying give up. Not at all. All I want is to be reasonable and in part the poll I set up and this financial link were inspired by the people who place our "failure" at the feet of Petrie... Whining at Petrie ignores the factors beyond his control.

We don't really have a clue as to what Petrie, the Maloofs, or anyone else involved is doing. All we have are incomplete and unconfirmed rumors. That's why I have lately stopped talking about Petrie much, and instead refer to "the front office." Neither critics or supporters of Petrie can prove or disprove what his role has been, so rather than go around in circles endlessly about what trade possibilities might have existed, or who might have made a questionable decision, I just blame (or credit) team management/ownership in general. Then I only have to worry about facts, which aren't really debated, or debatable. Others can play the blame game if they like.

In this case, you are saying that Petrie gets blamed too much, and suggesting that the NBA should be blamed more for their policies, or perhaps that the Maloofs should be blamed for having the team in the #20 market, rather than in #13 Tampa, which doesn't have a team. (Every other market larger than Sac already has one.) But how big of a difference are we talking about? The teams with the 10 biggest markets (NY, NJ, LAL, LAC, Bulls, 76ers, Raptors, Celtics, Mavs, Warriors) collectively have a 235-226 record (.5098), while the 10 smallest market teams (NO, Memphis, SA, Utah, Milwaukee, Indiana, Charlotte, Portland, Sac and Orlando) have a 239-232 record (.5074). Although it's a perfectly sensible-sounding theory, the advantage would only appear to account for a 0.24% difference in record. Perhaps the cost of doing business in a place like Indianapolis or Charlotte is low enough, relative to SF or NYC, to make up for the difference in revenue. Or maybe there's some other cause. Whatever the reason(s), I don't deny that market size could have some impact on team performance, I'm just not seeing any convincing evidence to support the idea.

So my skepticism cuts both ways. Just as I will not conclude that Petrie (or any other individual) must be entirely responsible for the state of the team, I will also not conclude that the Sacramento market will make the team fail. I want more evidence than that before I start pointing fingers.

 

[Superman]

An accountant you are not - Operating income IS the net, before any interest or depreciation being charged off against it.

Before we even question how reliable the Forbes information is, as great as $20,000,000 of net looks, in the NBA's business model, any profit over a period of time could be wiped out by just one bad basketball deal. I doubt the Maloofs have pulled any money out of this enterprise knowing that they'll probably need every spare cent to fund future operations and/or a bad year.

It doesn't matter. They're not losing money, clearly. Clearing $20 million a year on a "hobby", as owning a professional sports franchise is often referred to, is pretty good.

If the numbers are wrong, and if you still have to tax the net, that's fine. There's still clearly a significant profit.

 

[kingsfan101]

The teams with the 10 biggest markets (NY, NJ, LAL, LAC, Bulls, 76ers, Raptors, Celtics, Mavs, Warriors) collectively have a 235-226 record (.5098), while the 10 smallest market teams (NO, Memphis, SA, Utah, Milwaukee, Indiana, Charlotte, Portland, Sac and Orlando) have a 239-232 record (.5074). Although it's a perfectly sensible-sounding theory, the advantage would only appear to account for a 0.24% difference in record. Perhaps the cost of doing business in a place like Indianapolis or Charlotte is low enough, relative to SF or NYC, to make up for the difference in revenue. Or maybe there's some other cause. Whatever the reason(s), I don't deny that market size could have some impact on team performance, I'm just not seeing any convincing evidence to support the idea.

So my skepticism cuts both ways. Just as I will not conclude that Petrie (or any other individual) must be entirely responsible for the state of the team, I will also not conclude that the Sacramento market will make the team fail. I want more evidence than that before I start pointing fingers.

Interesting data and nice post.

 

[kennadog]

Well, the main benefit to being in a big revenue-producing market may be that those fans don't generally have to worry about their team moving elsewhere. Could you imagine the Lakers moving to OK City?

 

[fnordius]

Well, the main benefit to being in a big revenue-producing market may be that those fans don't generally have to worry about their team moving elsewhere. Could you imagine the Lakers moving to OK City?

I can't understand why ANYONE would pick OK City. It's the 45th-largest market, smaller than any other NBA cities except for Memphis and NO. Bigger targets are:
Tampa, #13
St. Louis, #21
Pittsburgh, #22
Baltimore, #24
San Diego, #27
Raleigh/Durham, #28
Hartford/New Haven, #29
Nashville, #30
Kansas City, #31

Albuquerque (#44) and Las Vegas (#43) are also unlikely candidates, I'm happy to say.