OK. The race is on. Which NBA franchise is going to move next? The Sonics or the Hornets?
The Associated Press reports that the Hornets have completed an important step that the Sonics have not: negotiating an out from their lease.
[The new lease] also allows the Hornets to opt out after next season, albeit with penalties ranging from $50 million to $100 million. The precise cost would depend on inducement reimbursements by the team to the state and a relocation fee imposed by the NBA.
The lease says the Hornets may leave only if average attendance is worse than 14,735 for the final five months of this season and next season. The benchmark is close to the team's average attendance for the three seasons before Hurricane Katrina. Such an average still would leave the Hornets in the bottom third of NBA attendance, league officials said.
"We believe that we have come up with an agreement that gives us a realistic expectation of success," Hornets owner George Shinn said. "Everyone in the organization is in New Orleans because they chose to be here. We want this to be our home for a very long time, and we have great confidence that we will succeed."
Brian Berger of Sports Business Radio has long been saying the team would never last in New Orleans, and reacts to news of this lease:
... the Hornets, who have a current estimated value of $272M according to Forbes, could be purchased and then moved to a city like Kansas City (with a brand spanking new arena they need to find an anchor tenant for), Anaheim, San Jose or even Las Vegas and the person or group purchasing the team would most likely pay a premium to Shinn because the young team would be portable.
There are several eager groups out there who want NBA teams and the biggest challenge is getting a team out of its current lease agreement so the team can be moved to one of the aforementioned cities. If the Hornets can get out of their lease after the 2008-09 season because the attendance numbers fail to meet the requirements of the new lease, you can bet there will be buyers knocking on George Shinn's door offering to buy the team and make him whole.
I'll say it again. Its honorable that the NBA and George Shinn are making every effort to make pro basketball work in New Orleans. But with 41 home dates to sell and the attendance numbers we're seeing so far this season, it just doesn't pencil out. Shinn is going to lose his shirt if the team continues to play in New Orleans. Unless the NBA subsidizes his losses (very unlikely), I think the Hornets' days in New Orleans are numbered.
Out of all those cities that might have NBA teams in the future (Seattle, New Orleans, Las Vegas, San Jose, Kansas City, Oklahoma City, Anaheim) my hunch is that the cities with the biggest and best economies will eventually be the ones with the NBA teams. Teams have a tendency to follow the money. And as the league does not like teams moving around much, following the short-term incentives from local government -- which is how the Hornets wound up in New Orleans to begin with -- might be less important than ever. Staying close to the long-term revenue stability is the key.
That's why my bet is that one way or another, by say, 2013, my bet is that Seattle and Las Vegas will be the cities that end up with teams, while the others will be left wanting.
