The new revenue-sharing plan will produce a roughly $200 million pot by the 2013-14 season. But it infuses low-revenue franchises with money they can use to entice their best players to stay or assist in a rebuilding project.
View full sizeThe Los Angeles Lakers draw big bucks from fans like actor Jack Nicholson, left, and "Saturday Night Live" producer Lorne Michaels. It means the team will be chipping in quite a bit to the league's revenue-sharing plan.CLEVELAND, Ohio — For the first time in nearly a decade, the Cavaliers are expected to draw money from the NBA revenue-sharing pool rather than deposit into it.
The sum probably won't cover Kyrie Irving's rookie salary -- he is expected to make $5.1 million this season -- and the idea of being on the dole doesn't appeal to a franchise that under owner Dan Gilbert has never viewed itself as a typical small-market team.
But if there were ever a time to start opening checks from Commissioner David Stern, it's now.
The new revenue-sharing plan, adopted last month with the collective bargaining agreement, will produce a roughly $200 million pot by the 2013-14 season. That's a staggering increase from the previous total of $60 million, and marks the greatest redistribution of wealth in league history.
Will it prevent the next Chris Paul from leaving New Orleans for Los Angeles? Maybe not. But it infuses low-revenue franchises with money they can use to entice their best players to stay or assist in a rebuilding project.
When the progressive plan is fully implemented in two seasons, seven of the lowest-revenue franchises will receive at least $16 million, while half the 30 teams will earn some compensation through a complicated redistribution formula, a league source said.
Under the previous deal, luxury-tax revenue funded revenue sharing. The new agreement funnels money from lucrative local media deals like the one the Los Angeles Lakers signed with Time Warner Cable -- reportedly $200 million per year over 26 years.
The Sports Business Journal reported many of the plan's details earlier in the week.
"The new revenue-sharing model clearly helps create a better competitive balance across the league," wrote Len Komoroski, president of the Cavaliers and The Q in an email to The Plain Dealer. "We think the new model is not only good for the Cavaliers, but good for the entire league."
"Ultimately, we still have to do the many things we need to do on and off the court to build the team and our business the right way and put the team in the best position for sustainable success."
During the final few seasons of the LeBron James era, the Cavaliers were winning playoff games and writing checks to the league's revenue-sharing plan. They had robust attendance, excellent sponsorship and one of the league's top-10 local cable deals -- 10 years at $25 million per from Fox Sports Ohio, which began in 2006.
But James' departure in summer 2010 signaled a new reality for the club. According to Forbes, the franchise's value is $326 million, a 33 percent decline from James' final season in Cleveland. While the Cavaliers turned their biggest profit last season ($33 million in operating income), the figure is anomalous. It was achieved by slashing $30 million in payroll, not having to pay $16 million in luxury tax, and retaining a majority of the season-ticket base because renewals were due before James announced his decision to play for the Miami Heat.
The club declined comment on the Forbes report. The Cavaliers, who finished third in attendance last season, ranked 18th, averaging 15,803 fans through their first seven home games.
As the team attempts to remake the roster and replenish the season-ticket base, the Cavaliers will draw from the remodeled revenue-sharing pool. They hope it's only for a few seasons and that Irving can help them return to the days of being a top-10 revenue-producing team.
Gilbert was not part of the 13-member planning committee, chaired by Boston owner Wyc Grousbeck, that spent two years working to overhaul the system. He voted in favor of it, however.
The core of the plan, according to the Sports Business Journal, requires all teams to contribute roughly 50 percent of their total annual revenue, save for certain expenses such as arena operating costs.
Each team then gets an allocation equal to the league's average team payroll for that season from the pool. If a club's contribution is less than the league's average team payroll, then it is a revenue recipient. Conversely, teams that contribute an amount exceeding the average team salary are payers.
Benchmarks exist to spur growth. They require small markets to generate at least 70 percent of the leaguewide average in total team revenue to receive full revenue-sharing benefits.
The Lakers, New York Knicks and Chicago Bulls will be among the largest donors, with none giving more than 50 percent of their total profits. The Lakers reportedly will contribute around $50 million annually. No large-market teams are eligible to draw from the pool.
Whatever money the Cavaliers receive likely will go back into the club. While Gilbert remains a polarizing figure, his commitment to the franchise seems resolute. In a season the Cavaliers lost a league-record 26 straight games, they traded for Baron Davis. A month ago, they turned around and paid Davis $24 million to walk away because management thought it in the best interest of the team.
It will take several years before the effectiveness of the revenue-sharing plan can be accurately assessed. Some wonder if enough is being collected from big-revenue teams signing these massive cable TV deals.
Bur few can argue the plan, which runs concurrent with the 10-year CBA, isn't a significant upgrade. And if the money is spent wisely by small markets, it should make for a more competitive league.
To reach this Plain Dealer reporter: treed@plaind.com, 216-999-4370
Source: http://www.cleveland.com/cavs/index.ssf/2012/01/cleveland_cavaliers_will_reap.html
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