The idea of moving the Sonics to Oklahoma is idiotic

[MikeWaters]

Originally Posted by TripletDaddy

The NBA already engages in revenue sharing associated with television broadcasting to help offset the large market/big market issue. If anything, Seattle is GETTING revenue sharing bucks from the league, not paying in. OKC would be the same.

So I guess in a way, revenue sharing and salary cap creates a situation where teams can be incentivized to be lured to smaller markets, even if this is damaging to the league overall. I guess the league tries to prevent this by having owners vote on moves?

[TripletDaddy]

Originally Posted by MikeWaters

So I guess in a way, revenue sharing and salary cap creates a situation where teams can be incentivized to be lured to smaller markets, even if this is damaging to the league overall. I guess the league tries to prevent this by having owners vote on moves?

I am not sure if rev sharing and salary cap were to incent people to move to small markets, more than even out the playing field for the 90% of teams that are already in small markets.

When owners move franchises, they have no motivation to move to a large media market....one, local teams with loyal fans already exist in those areas (Lakers, Knicks, Bulls). Two, leases will be more expensive. Look at the NFL in LA. The city WONT pay a team to come, so it makes it tough for a team to make the jump--even though it is the second largest media market in the country. Building a stadium would cost hundreds of millions. Smaller markets incent teams to move by offering public funding...this isnt the NBA's doing, it is the local governments wanting to get in on the economic boost pro sports usually brings.

Owners do not directly vote on moves. No NBA owner will have a say in whether the Sonics relocate. They vote on new franchises, expansions, and new ownership of existing franchises. The NFL, MLB, and NBA league offices approve re-los. Not sure about NHL.

[Parrot Head]

Originally Posted by TripletDaddy

How do you depreciate a sports team? Are you talking about amortizing the associated goodwill? What is the useful life of a sports team?

You can deduct certain aspects of transactions costs associated with the deal (while capitlizing others). Is this what you mean? transaction cost recovery?

It's an IRS loophole known in the industry as the Veeck Convention. (Bill Veeck, the guy who gave us Disco Demolition Night with the White Sox.) It allowed for 50% "roster depreciation" over five years, but it has actually improved lately and now allows 100% depreciation over 15 years, so there's a little more incentive to keep the team longer.

So, FM Coug is making bank of $5 MM a year from his options trading and he doesn't want to pay the enormous taxes on those gains. He buys a n MLS franchise for $150 MM and he can now write off the entire amount at 10MM/year over 15 years. At the same time, he's bringing in money from other sources, plus paying himself as CEO or whatever of the FC, but he never pays a penny in taxes unless he goes over that 10MM mark.

There are several key ways to never make a taxable profit in sports, but that's a huge one.

[TripletDaddy]

Originally Posted by Parrot Head

It's an IRS loophole known in the industry as the Veeck Convention. (Bill Veeck, the guy who gave us Disco Demolition Night with the White Sox.) It allowed for 50% "roster depreciation" over five years, but it has actually improved lately and now allows 100% depreciation over 15 years, so there's a little more incentive to keep the team longer.

So, FM Coug is making bank of $5 MM a year from his options trading and he doesn't want to pay the enormous taxes on those gains. He buys a n MLS franchise for $150 MM and he can now write off the entire amount at 10MM/year over 15 years. At the same time, he's bringing in money from other sources, plus paying himself as CEO or whatever of the FC, but he never pays a penny in taxes unless he goes over that 10MM mark.

There are several key ways to never make a taxable profit in sports, but that's a huge one.

OK, I now know what you are talking about. If I am not mistaken, you are overgenaralizing a bit. You are not allowed to depreciate the purchase price of the team, but rather you can expense the value of the player contracts...which is different. From a TCRS perspective, you can also deduct or capitalize a portion of the purchase price, as well, but you are not "depreciating" the franchise itself, no? What code section are you referring to?

I am kind of into tax so feel free to discuss.

[Parrot Head]

You can pretty much depreciate the entire purchase price through the roster, media contracts, suite revenues, lots of things. Previously, it was just the player salaries approximated to 50% of the purchase price over 5 years. Now it's almost everything, over 15 years.

I'm not an IRS hound so I can't provide the code number, but it was a change instituted in 04 or 05.

[8ballrollin]

Originally Posted by TripletDaddy

The luxury suite revenue has been the main issue all along with this team. They operated at Key with an unfavorable lease and no luxury revenue, yet only lost 17MM. Imagine if they had luxury suite revenue rolling in as well as a cheaper lease payment.

Staying in Seattle is fraught with financial risk, not moving to OKC.

The issue, as you mention, is with the lease to the Key, not the market.

There are two different entities here who have offered FREE land to build a new arena. But the Okie doesn't want to talk, unless he is getting a publicly-financed $500 million dollar arena.

The bad guy in this situation is going to be Starbucks' Howard Schultz. There were members of his ownership group who wanted to buy the team from him or at least veto the sale to the Oilers, but he out maneuvered them. If they leave, he'll never be able to show his face around town again.

At the home opener the fans all started chanting, in unison, "Save our Sonics!" And Bennett left his luxury suit and went and hid. Yes, there are luxury suites already in the Key - like 60 of them.

A side note on the Key, I think it is one of the best places in the league to watch a game. There are a few blind spots but huge majority of the seats are right on top of the action. It's much more intimate than many of the new arenas I've been in.

[SeattleUte]

Originally Posted by 8ballrollin

The issue, as you mention, is with the lease to the Key, not the market.

There are two different entities here who have offered FREE land to build a new arena. But the Okie doesn't want to talk, unless he is getting a publicly-financed $500 million dollar arena.

The bad guy in this situation is going to be Starbucks' Howard Schultz. There were members of his ownership group who wanted to buy the team from him or at least veto the sale to the Oilers, but he out maneuvered them. If they leave, he'll never be able to show his face around town again.

At the home opener the fans all started chanting, in unison, "Save our Sonics!" And Bennett left his luxury suit and went and hid. Yes, there are luxury suites already in the Key - like 60 of them.

A side note on the Key, I think it is one of the best places in the league to watch a game. There are a few blind spots but huge majority of the seats are right on top of the action. It's much more intimate than many of the new arenas I've been in.

The NBA deserves to fail if it trades Seattle for Oklahoma City. As it is, if the NBA were publically traded, would you buy stock in it? I wouldn't; it's dying a slow death. It's a rich man's NHL. But I bet we won't pay that Okey his $500 million ramsom. We've been taken twice, already, but it was locals who did it the first two times, including Paul Allen. I predict Okey will wind up unloading the team to a local high roller like Behring did the Seahawks.

[MikeWaters]

I'm personally against tax payers paying for arenas and stadia.

Dallas wouldnt' foot the new Cowboys stadium, and the mayor took a lot of heat for it. But I supported her. Jerry Jones can give up ownership to the city, if he expects the city to pay.

[hyrum]

Originally Posted by MikeWaters

So I guess in a way, revenue sharing and salary cap creates a situation where teams can be incentivized to be lured to smaller markets, even if this is damaging to the league overall. I guess the league tries to prevent this by having owners vote on moves?

Why is it damaging to the league? Because one team moves and breaks persistance of team locations? I can see that, but otherwise the league gains a very nice arena with better revs for the owner than Key Arena, and proven support for the NBA. Yeah, it sucks if you are the host team losing the team, but that is the fact of life in the pro sports world, not to mention business in general. Someday the escalation will end, but for now, Seattle is not cutting the mustard for the NBA. They spent their money on two separate baseball and football venues. Maybe they could have handled that better and kept the NBA, too.

[MikeWaters]

Originally Posted by hyrum

Why is it damaging to the league? Because one team moves and breaks persistance of team locations? I can see that, but otherwise the league gains a very nice arena with better revs for the owner than Key Arena, and proven support for the NBA. Yeah, it sucks if you are the host team losing the team, but that is the fact of life in the pro sports world, not to mention business in general. Someday the escalation will end, but for now, Seattle is not cutting the mustard for the NBA. They spent their money on two separate baseball and football venues. Maybe they could have handled that better and kept the NBA, too.

Because who is doing to care about the small-market Oklahoma team? Where are the TV eyeballs going to come from?

Imagine if all the NBA teams were offered better arena deals, but every deal placed them in a market smaller than 35th largest.

Would that be smart?