Okay, now the Kings are really being sold to Seattle (reportedly)

Here we go again:

The Maloof family has agreed to sell the [Sacramento] Kings to a Seattle group led by investor Chris Hansen, two people familiar with the decision said Sunday night. The people spoke to The Associated Press on condition of anonymity because the deal is still pending approval from the NBA Board of Governors.

One person said Hansen’s group will buy 65 percent of the franchise for $525 million, move the team to Seattle and restore the SuperSonics name. The Maloofs will have no stake in the team.

That $525 million would be the total valuation of the team, specifies AP, meaning that Hansen’s group would actually be spending about $341 million for the Maloofs’ share of the team. (ESPN, which has its own report on the deal citing “league sources,” says the $525 million would include any NBA relocation fee.) The Seattle group is also reportedly hoping to buy out other minority investors as well, according to those “people familiar with the decision,” so the ultimate cost could eventually rise to the full $525 million.

If this latest rumor is true — and lord knows we’ve heard enough by now that haven’t been — then the next step would be approval by the NBA, which has promised to give Sacramento a chance to find local owners willing to make a counteroffer. It seems like you’d have to be crazy to pay $525 million for an NBA franchise in Sacramento — the Golden State Warriors just sold for $450 million in 2010, and they play in a much larger media market — but then, I thought that Hansen’s group would be crazy to pay $400 million for a team to move to Seattle, and here they are preparing to pay a lot more than that. Either something about the value of NBA franchises is changing dramatically — maybe owners really think they’ll be able to cash in on rising cable TV revenues without having to pay more in player salaries, to which I can only say good luck to them — or Hansen and company are willing to punt on making a profit so long as they get to sit in the owner’s box at a new arena and cheer on the neo-Sonics. I guess rich people have done stranger things with their money.

[UPDATE: KING-TV’s Chris Daniels tweets that the Maloofs have confirmed the sale.]

27 comments on “Okay, now the Kings are really being sold to Seattle (reportedly)

  1. Isn’t that what we want? Owners who aren’t trying to squeeze every dollar of profit out of a franchise, but who are in it for the experience of being owners? If we had more owners like that, our cities might have not dropped so much taxpayer money on stadiums in pursuit of private profit.

  2. Owners who are more into it for the ego than the cash are still perfectly capable of making outrageous demands — look at how George Steinbrenner ran the Yankees for many years. But sure, if there were more owners like Chris Hansen who were willing to pay their own costs (mostly) and not worry so much about exacting maximum profit, potentially we could be better off. Though I think this has as much to do with Seattle being an outlier in terms of its demands as Hansen being a special owner — whatever you think of his arena plan, there’s no way he would have come up with anything even 1/10th that equitable if not for I-91.

  3. Maybe, although if you’ve got over $16 billion in your ownership group and are motivated by altruism then it seems a bit silly to need $120 million rebated from (mostly) taxes over 30 years to make a deal work.

    Bill Gates is giving much of his fortune away (via the Gates Foundation) and if Ballmer likes basketball so much he could easily afford to do that AND pay the taxes on the arena.

  4. Right, Hansen seems to have approached this using the same criteria as most sports owners: How much can I get out of the public? The only difference is that when the answer in this case was “not all that much,” he still went ahead with the deal.

    Something about the whole thing still seems off to me, I have to say. Either we’re not understanding how the new cable rights values are affecting NBA team profitability, or we’re underestimating the revenue possibilities of a new arena (most don’t do the kind of business necessary to turn a profit after construction costs, but maybe Seattle would be an exception?), or something. Because it’s hard to believe that the only thing standing in the way of a new arena in Seattle all these years was $120 million in tax rebates.

  5. Not to take too much of a detour but I think this is where the next sportspocalypse is coming from: “Either we’re not understanding how the new cable rights values are affecting NBA team profitability…”

    At some point consumers are going to start to balk at the fees regional sports networks are charging and the impact that has on cable bills. If I’m not mistaken, the price of the Dodgers and the spending by the Angels was largely predicated on the anticipated (or actual in the case of the Angels?) values of their next massive cable deals for the LA market. Ultimately that gets passed on to consumers in the form of higher cable bills. I’m not sure how this all shakes out, or if there is something that disintermediates the entire cable viewing experience so that you can get something closer to a al carte channel selection, but what’s happening currently doesn’t seem sustainable.

  6. I think right now, even if customers start to balk, either the cable companies or the sports cable networks will just eat the difference. Right now sports is the only thing that people actually watch in sizable numbers on TV, so you can charge the moon for commercial time — and even if you can’t, it’s the only business model the cable companies have left, so they can’t exactly abandon it.

    Five to ten years from now, when everybody is watching sports on their Retina-display two-way wrist radiophones and nobody owns TVs anymore, I agree with you, sportspocalypse ahoy. But I don’t see an immediate consumer backlash as being what sets it off.

  7. KJ thinks he can still make his pitch in April. If I said I think he’s dreaming, that would be a huge understatement. KJ is just trying to look good here.

    I am really glad that we won’t execute the plan KJ “engineered” last February. Yes, it’s not fun to see a team leave. It would have been way less fun to turn into Hamilton County. The numbers used to justify everything were just so outrageous. It was never going to pencil out, much less yield $7B in new economic activity over 30 years.

    I prefer to see them leave than to have executed Stink Big’s proposal.

  8. I know this is the worst kind of Tommy Friedman folksy data-point of one or two; and I’m going to compound it with the worst kind of Gladwellian extrapolating from a few to a large theory thinking but… I’ve ditched cable. So have a handful of my friends (and we are sports fans). I get plenty of NFL and college football over the air free (yes, networks still broadcast over the air), and about halfway through the season, I’ll buy the half season MLB.tv package for about $90. Add in some pirated streaming of Euro soccer (I know, I know…) I’m pretty much covered for what I would pay $120/month for. I do have a $40/month broadband connection, but I still come out about $900/year ahead.

    Yes, sports draws sizeable numbers and makes lots of money for the Mouse (EPSN and their $5 per subscriber fee is gold mine), but I don’t think demand is nearly as inelastic as the networks (and the teams that are basing their current spending sprees on it) think it is. And no, I have no hard data to back that up.

    Anyway back to your normal Kings/Sonics chat.

  9. Before we get back to Kings/Sonics chat: Michael, what do you do for local MLB coverage? I know for me, and a lot of others I know, that’s been a major holdup to cable-cutting: You can’t get your local team’s games via MLB.tv. (Not without some subterfuge, anyway…)

  10. I’m lucky. I’m a transplant, so my “local” blacked-out team, isn’t the team I care to watch. As for subterfuge, is there anything illegal about using a proxy? I would imagine it’s covered in the ToS, but there are plenty of legit reasons for using a proxy. So, its’s not hard to make MLB think you live somewhere you don’t. But point taken about MLB.tv. If what you really want is your home team, it’s not very useful.

  11. Not illegal, but against the terms of service. And more complicated than the average consumer is going to bother with, which is I assume why MLB hasn’t tried to crack down on it yet.

    Steering this back to the original topic, though, it does seem awfully risky for Hansen & Co. to be gambling their finances on future cable riches, if that’s indeed what they’re doing. The first cable deal they get in Seattle will almost certainly be a rich one, but it’ll probably be the last big payday they get out of cable before the broadcast market changes irrevocably. Unless they think they can get a 25-year deal like the Dodgers…

  12. Kudos to Michael for cutting the cable/sat cord.

    But it doesn’t work in a lot of markets… you can get some things you like, but not all. And the beauty of digital transmission, of course, is that over the air broadcasts can be converted to fee for service at some point – much easier than analog can.

    I don’t expect that to happen in my lifetime, but one never knows. When the old C-band satellite channels started encrypting, many of us thought we’d lose the premium (IE: non-commercial) channels but still have those that were advertiser supported. It made little sense for ad-running channels to deliberately reduce the number of viewers they had, even if some of those viewers weren’t paying the paltry dime or so that those channels saw from the cable companies each month.

    Well, we know how that worked out… the advertising supported sat channels were told “Encrypt or you no longer appear on our channel list”. And they did…

    That said, I do agree that sportopocalypse is coming. I don’t know when (in fact, I thought it would be before ordinary working fans began paying more for season tickets than they do for their cars), but eventually it will. At some point, no matter how much you love something, you simply have to adjust priorities. For me, that came many years ago. But clearly it didn’t come for all, as we are still seeing upward swings in ticket and tv revenues.

  13. “The first cable deal they get in Seattle will almost certainly be a rich one, but it’ll probably be the last big payday they get out of cable before the broadcast market changes irrevocably.”

    Okay, so maybe “cable”, as we know it today, will eventually become less relevant, but why would anyone assume that the guys who manage the monopolies that are the NFL, MLB, NBA and NHL wouldn’t find a way to continue to pull in the big bucks? At the moment they’re benefiting from being able to charge every cable subscriber, but I kinda doubt they’d do any worse in a system where they were only able to charge every fan. They’re not going to say “Well, cable is dead, guess we have to give everybody access via the internet for less.” The idea that everything will eventually be available via the interwebz for less than what it costs you now is pretty funny.

  14. Chris, you are in a dream world, not a realistic one. Even if an individual owner isn’t interested in stuffing the place with revenue generators the league office is. League officials of any sport/biz constantly push the franchises to add to the dollar grab so that franchise “values” increase,
    that’s their job.
    Michael, you’re right the current biz model isn’t sustainable. As cable/satellite tv content providers and local providers are increasing subscription fees to pay for their inflated sports right fees more customers will walk away and find other ways to watch or not – like me.

  15. I got out of the cable game back in December 2000. Tired of my bill going up (albeit slowly) every month. As for the sports:

    I believe the NFL is required to broadcast all home games on local TV, so I haven’t missed a single game. The ESPN feed is put on a different free channel; usually UHF tho it used to be ABC.
    NHL: No home games were on TV & none on free TV (that’s changed now) and games are sometimes on free TV weekends.
    NBA: 19 of 41 games so far were on free TV.
    MLB: I live in a two-team town, and each team is on about 70 games each on free TV, and I really have zero desire to watch all 162 games even when I did have cable.

    If I need or want to see a game I can’t, I’ll go to a friends or a sports bar. And there’s always radio.

  16. Keith: Oh, sure, sports will still rake in the money one way or another. But as things stand now, webz money goes to the leagues, not the individual teams, and while eventually that filters out to individual owners, you get the same chunk of that cash regardless of where you play or the strength of your particular fan base. Which makes paying a premium to be in a sizable market, expecting that you’ll make it back on the increased TV rights fees, kind of silly.

  17. Keith: Don’t doubt that they will continue to make money, just that they can’t all keep thinking: “We’ve got x cable subscribers time Y dollars so we can bank of Z dollars.”

    One of the things that was a catalyst for me was when I realized that each of the member schools of the Big 10 got more money from their cable deal that Notre Dame got for its deal with NBC. I don’t give a shit about the Big 10, never watched the BTN, yet here I was coughing up money to schools that I don’t care to help enrich the athletic departments of. Now, I realize that people who just want to watch Oprah and Burn Notice were cross subsidizing my sports watching, but that’s not fair to them either.

    I’m sure that as (or if) this becomes disintermediated, that the prices of many things will go up. A la carte ESPN might be $10/month. But that might be worth it as I don’t then also pay for Project Runway and the Karsdashians. Or even the Tennis Channel or Speed.

    If that happens, some entities and teams depending on cable fees will certainly do worse. How many people you think are willing to pony up for the Longhorn Network? Or even the BTN? If Rutgers helps BTN get on a lower tier for cable in NYC (more people paying for it), then it’s a great business move. If suddenly BTN is up against other cable networks fighting for individual a la carte subscription fees, then having a pool of marginally enthused Rutgers sports fans in the area doesn’t do nearly as much for them.

    I don’t think any of us are saying if cable goes, there goes the TV money. But it’s going to look a lot different for a lot of different players. The NFL will do just fine no matter what (assuming the sport doesn’t eat itself in head injuries in 15-20 years) but teams living of RSN money, might have to face the possibility of less money at some point.

  18. Let’s remember to thank the Fed as well. If interest rates weren’t poo-poo then stashing $525 million in the Sonics would look far less attractive.

  19. Agreed, though I think at this point the Fed couldn’t make interest rates raise if it flooded the market with trillion-dollar platinum coins.

  20. I think the huge price is what Bill Simmons talked about a few years ago: some owners don’t want to sell the teams, so you gotta make an offer they just can’t refuse if you want to guarantee you’ll get the team. If someone offered Don Sterling 350 million for the Clippers, would he sell them? Hell no. On the other hand, if they offered 600-700 million? There’s a huge chance he will take that. I think it’s the same thing with the Kings; the value of the team probably actually was somewhere between 300-350 million, but the Maloofs were not going to agree to sell for that. By offering way more than the teams value, the Maloofs realized the money was too good to pass up, especially since this Seattle group was going to keep going around, and someone was going to get a lot of dough.
    The only question now is if they will make a run after the Coyotes so they can have an NBA and NHL team in the new arena.

  21. Actually no one has promised Sac a chance to counter offer. Stern just said it would be “fair” but not that they’d actually do it. And letting Kevin Johnson speak at the BOG meeting in no way requires the BOG to listen.

  22. I ditched cable 4 years ago and haven’t ever regretted it for a single moment. I’ve always liked to go to bars or stadia for the atmosphere of a ‘big game’ (and did so even when I had cable) and find that I just don’t care that much about minor games if they’re not easily/expensively available.

    Besides, I’ve watched streaming rugby online for as long as the technology has existed, and I’ve found it enjoyable to continue doing so for other things.

    Speaking of rugby, I’d love to see Sacramento rally around it without a ‘Big 4(5?)’ sport in town now. The rugby in that area is quite good, and the non-profit Sacramento valley youth folks have been trying to build a field/stadium complex without much assistance for quite some time now. Screw major sports- go enjoy a free local rugby game.

  23. The latest MLB TV agreement with Fox removed the Saturday afternoon blackout restrictions for mlb.tv (starting in 2014). It’s a step in the right direction.

  24. I feel sorry for the Kings fans. I’m a Nuggets fan. Our building was built in 1999. In eleven years is my team going to leave also? I guess it’s almost like contraction for the Kings. No more moving. The league lost Sac and Van, but gained OKC, Memphis and New Orleans. In the long run, that may be viewed as a net-loss. One man’s opinion.

  25. Sacramento still has the AAA Rivercats in the PCL and they draw well.

    And I’ve not watched hardly any tv in the last two years. My GF and I are going to dump the cable for netflix and radio. Besides, we would rather go to a minor league baseball or hockey game than pay the $120 a month for cable tv

  26. I ditched cable in 2010 (this is starting to sound like an AA meeting), eventually picking up Netflix. Live games are the only thing I really miss. I watched a lot of A&E, History Channel, etc. but they just started rerunning the same stuff ad nauseum, so I’d seen everything that they had that I remotely cared about (same with ESPN Classic and VH1/VH1 Classic). If there was an a la carte option I might go for it, but too much money for too many channels with nothing on.

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