NBA Commissioner Adam Silver has hinted at a future expansion, a move that will significantly impact the league’s revenue and structure. This expansion would mark a major milestone for cities that land new teams while providing substantial benefits to team owners, players, and the league’s economic ecosystem.
NBA Business: How Much Revenue Will Expansion Generate?
Expansion Fees: A Windfall for NBA Owners
A standout feature of NBA expansion is the enormous expansion fee. Prospective franchise owners will pay this fee, which the league will then distribute among its 30 team owners. Reports indicate that each new team could command a fee between $4 billion and $6 billion, a stark contrast to the $300 million that the Charlotte Bobcats (now Hornets) paid when they joined the league in 2004. With two new teams likely, total fees could hit $8 to $12 billion.
Under the Collective Bargaining Agreement (CBA) and the media rights deal active as of September 2024, NBA owners will keep the expansion fees without sharing them with the players. Since this money doesn’t count as basketball-related income (BRI), players won’t receive a direct cut. If two teams join, each owner could see between $266 million and $400 million. This sum will come in addition to other revenue streams, making it a one-time financial boon for NBA team owners.
Revenue Streams Under the Current CBA
Owners have various ways to make money under the current CBA. These include revenue from ticket sales, local and national media rights deals, merchandising, and sponsorships. Smaller market teams benefit from revenue-sharing agreements, which help maintain competitive balance across the league. The NBA’s lucrative media deals, particularly with Disney (ABC/ESPN) and Warner Bros. Discovery (TNT), are set to expire in 2025. An expansion could prompt even larger media deals, as new markets and increased broadcast reach will enhance the NBA’s appeal.
Another key revenue source for owners is the luxury tax system. Teams that exceed the salary cap must pay a tax, which the NBA redistributes to teams that stay under the cap. This system encourages fiscal discipline while ensuring owners of under-cap teams receive extra funds.
The Financial Impact of Expansion Fees
The expansion of two new teams will provide significant revenue for the NBA. Beyond the initial expansion fees, the new franchises will bring fresh local media deals, sponsorships, and ticket sales, all contributing to the league’s overall revenue. Additionally, the arrival of new teams would increase the value of future national broadcast rights deals. The potential for a $76 billion media deal following the expiration of the current one in 2025 makes expansion even more attractive to current team owners.
For context, the $300 million expansion fee paid by the Charlotte Bobcats in 2004 seems minuscule compared to the reported $4 to $6 billion fee for each new team in 2024. Adjusted for inflation and considering the NBA’s massive growth in profitability, this dramatic increase underscores the league’s booming popularity and global reach.
Expansion Benefits for Players: Job Security and Indirect Gains
Although NBA players won’t directly benefit from the expansion fees, they will gain from the creation of approximately 36 new roster spots—30 for full-time players and six for two-way contracts. These additional positions will enhance job security for both current players and new prospects. Players on the fringes of NBA rosters or those hoping to extend their careers will have more opportunities to secure contracts.
Moreover, the players’ union can leverage the league’s expansion to negotiate additional benefits in future CBA negotiations. The NBA’s increased market size and revenue will give the union bargaining power, leading to higher salaries, enhanced benefits, and more lucrative endorsement deals as the league grows. Even though players won’t receive a direct share of the expansion fees, the overall growth of the NBA could lead to long-term financial rewards for them.
The Last Word: A Win-Win for Owners and Players
The NBA expansion stands to benefit both team owners and players, albeit in different ways. Owners will enjoy a financial windfall from the expansion fees, which will not be shared with players, while future revenue from local and national media deals will continue to flow into their pockets. Players, on the other hand, will indirectly benefit through the creation of new roster spots, which provides more job security and career opportunities.
In conclusion, the planned expansion offers long-term advantages for everyone involved, ensuring continued growth and success for the league. While owners will experience the immediate financial rewards, players will gain from a more competitive and profitable NBA that expands their career prospects.
