A major factor in the decision regarding the expansion of professional sports teams is the size of the television market for the respective city proposing to join one of the major sports leagues.
In the changing landscape of the medium of television, live sports event programming is a ratings gold mine for the networks. Due to the advancements in smart phones, tablets, social media, and other devices it has created a scenario where it is very difficult for a fan to not learn the outcome of a given sporting event.
These advancements have changed the practices for the viewing of sporting events because many of them are no longer recorded to watch at a later point. The fans of a respective sport want to watch the event live as it happens, which has created a surge in the ratings for sporting events on television, and it also creates added importance for the major sports leagues to be in position to capitalize on those ratings.
Each league has their own unique challenges when it comes to expansion and the maximization of television ratings and other revenue streams. This first part in a multi-part series will detail the current status of each of the “Big Four” sports leagues and their future potential expansion prospects.
The “Big Four” leagues are each in different positions in their own respective growth cycles with regard to expansion. This is driven by a variety of factors:
- Size of the league currently
- Locations of their current franchises
- Current revenues/revenue projections for the future
- Stadium/arena situation
- Dedicated and stable ownership in the respective market
- Corporate Sponsorship and local/state government support
A point of clarification on the revenues and projected revenues item listed above before moving into the individual leagues. Each league divides certain revenues among all of the respective member franchises.
Some leagues (NFL, NBA) have ownership boards that like the number of teams they currently have and do not want to “split the pie” too much further with expansion franchises. Particularly because most expansion teams will not be successful in the standings, so they could qualify to receive higher amounts of revenue sharing funds based on the rules for that respective league.
The revenues for the National Hockey League (NHL) are expected to rise but the league is at a point where they just came through a labor disruption with the 2012 lockout. The owners and players both have an interest in getting more out of their “piece of the pie”. One way for them to do this quickly is to expand the league because the fees paid by the new owners for entry into the league is an immediate revenue injection.
National Basketball Association (NBA)
The National Basketball Association (NBA) currently has 30 member franchises split into two conferences of fifteen teams each, within each conference are three divisions consisting of five teams in each division.
The NBA could conceivably expand by two teams to 32 at some point in the future. Those who follow the league know that they NBA just went through a roller coaster saga with the Sacramento Kings franchise and their ownership change.
The former owners, the NBA, and the city government could not come together on a deal for a new arena, and the current arena in Sacramento is badly outdated compared to other venues in the league.
It appeared that the team might be relocating to Seattle, where the league had a presence for years, until they moved the Seattle Supersonics to Oklahoma City in 2008 (www.nba.com). The loyal fans in Seattle have been trying to get their NBA team back and were very upset that it was moved away (also over a failed new arena deal) and the NBA has been trying to correct that public relations nightmare ever since.
In the end, the city of Sacramento put together a solid ownership group to bid for the team to keep it in the capital of California. The NBA approved the deal because it did not want to relocate another franchise and have angry fans in Sacramento like they did in Seattle. The new ownership group quickly moved on a new arena deal in a different location of Sacramento than the previously failed sites, and the team did not move out of Northern California (www.nba.com).
This last minute change thwarted all of the work that Seattle did up to that point to secure a new team to replace the franchise the city lost. Therefore when you consider the expansion markets for the NBA they are as follows: (all TV markets data courtesy of www.stationindex.com and the demographic info was provided by www.census.gov and the Fortune business info is courtesy of www.money.cnn.com )
- Seattle – they have a history and established fan base from the Supersonics years of being located there.
TV Market: ranked 14th
Metro area population: ranked 15th
Fortune 500 companies: 4
Synopsis/Outlook: The Seattle market is too large from a population and TV market size perspective for the NBA to ignore. They have a dedicated potential ownership group lead by Chris Hansen, who has spent large sums of his own money to secure land near the other 2 stadiums in downtown Seattle to build a state of the art arena. The political climate has changed because the officials there learned from the past mistake of not allocating government
funds to a new arena back in 2007-08. The public there is very dedicated to gaining a new team, and they have a built-in fan base. The outlook is highly likely that they will gain a team, either through expansion or relocation. The latest news here is the Milwaukee Bucks have an arena issue, and the NBA has said they need to solve it or else they would entertain relocating the team elsewhere. Seattle would be the first destination on the list for a relocated franchise, if the Bucks cannot get an arena deal consummated with the State of Wisconsin.
- Tampa/ St. Petersburg – attractive location for the league could join Southeast Division in expansion.
TV Market: 13 (pretty big compared to markets currently in league)
Metro Population: 18th ranked
Fortune 500 companies headquartered: 0 (5 in Fortune 1000)
Synopsis/Outlook: The population demographics and the TV market size are strengths for this city. The arena there hosts an NHL team and is state of the art. The issues with a bid from this city are the lack of major corporations which could negatively impact: corporate sponsorships, luxury suite spending, and media air time buys. The other factor to consider was the area was hit hard by the recession and that could have an impact on attendance figures. The two other major detriments are no known committed ownership groups and the NBA has two other teams in Florida including one a couple of hours away in Orlando.
- Pittsburgh – has the other 3 sports and wants to be a “Big 4” city
TV Market: 23rd
Metro Population: 22nd
Fortune 500 company HQ: several- including suburbs estimated 13-15
Synopsis/Outlook: The strengths for this city for the NBA bid are numerous including top 25 TV market, a brand new arena built for the NHL Pittsburgh Penguins, and very strong major corporation presence. The Sporting News has named it the “Best Sports City” in the past, and the fans of their current teams are known for their passion. If the right ownership group could put together a strong bid, this could be a very viable option for an NBA expansion franchise.
- Kansas City – an outsider looking in – some good points and some question marks for a potential expansion bid.
TV Market: 31st
Metro population: 30th
Fortune 500 Company HQ: 3 (several other large corporations with offices here)
Synopsis/Outlook: This city is a solid contender for NBA expansion bid with the location being between Oklahoma City and Denver, which would create regional rivalries which help expansion teams. The arena, Sprint Center, was built in 2007 and the taxpayers desperately want a full time professional tenant to use it, since they shelled out money to pay for it. The players in exhibition games have raved about the arena being completely state of the art and nicer than some current facilities in the league. The arena is a huge component of an NBA bid and it is a very strong positive for this city. The issues here could be public support long term of the team with the immense popularity of the University of Kansas basketball team in competition directly. The right ownership group could be a challenge as well.
- Louisville – my last entrant for the NBA based on a mention in an interview by NBA Commissioner David Stern regarding potential expansion sites.
TV Market: 50th
Metro population: 42nd
Fortune 500 Company HQ: 3
Synopsis/Outlook: Louisville is an interesting contender for an expansion team but might be on the outside looking in. If the NBA expands it will be by one or two teams and I think Seattle will definitely be one of them. The TV market rank looks bad at 50th – but then the NBA has a current team in New Orleans, the Pelicans, and that TV market is ranked 53rd. Since basketball has very strong local support it generally does a solid rating even if it is a small market. The corporate presence is good here, and the arena is only a few years old. It is very close to Indianapolis (about 90 minute drive time) which could be looked at as a plus or minus by the league with a team currently in Indiana.
Europe?
The last consideration as far as NBA expansion is concerned is the potential for European teams. Some might feel this is further away than it actually is, it could be a serious consideration in the next 5 years. The NBA and soccer are the only two global sports.
The NBA has so much international appeal that David Stern has talked about a potential division of teams in Europe. In my opinion, you are probably looking at London, Paris, Rome, one team in Spain (probably Madrid), and because of the health of the German economy probably two teams there for a total of six. I would think six teams would be the only way it would be worth launching in Europe, and is a solid number without overreaching in the early stages. The players would probably dislike the travel, but it is something that could become viable in the future.
The second part of this series will detail Major League Baseball, and the potential for expansion of the game that has defined America for generations.