Though they have already announced their intention to move to Little Caesars Arena, some details about the Detroit Pistons’ arrangement at the venue remain unknown.
On November 22, the Pistons announced that they had a preliminary agreement in place to move to Little Caesars Arena next fall. The downtown Detroit venue will also be home to the Detroit Red Wings, and operated by Olympia Entertainment. Leading up to that announcement, a few potential terms were reported, including one in which it would be stipulated that the Pistons play at the venue as a partner and not merely a tenant.
The announcement of the pending move lead to the revelation of new public investment in the project. However, what remains unknown is how the Red Wings and Pistons will manage key revenue sources generated by Little Caesars Arena. More from Crain’s Detroit Business:
A question that remains to be answered is how the teams will handle revenue streams such as corporate sponsorships and suite leases. And what makes revenue splits among teams in a shared arena especially complex are the labor deals between pro sports leagues and player unions.
Collective bargaining agreements define what team revenues are used to calculate how money is split between team owners and the players. Cash streams from ticket sales, premium seating and suites, corporate sponsorships, parking, merchandise, concessions, local TV rights and much more, must be itemized for the purpose of calculating how much revenue gets paid to players — often governed by salary caps and floors that can fluctuate annually based on total league revenue.
Additionally, the cash a pro sports team generates is subject to league-level revenue sharing agreements intended to subsidize poorer clubs in smaller markets with money from more affluent teams, usually in larger markets.
The myriad revenue sources and need to meet labor deal requirements mean any deal short of a simple rent payment is likely to be complicated.
“No two (team) deals and relationships are the same for a variety of reasons,” said David Carter, principal at The Sports Business Group consultancy and executive director of the University of Southern California’s Sports Business Institute.
The deal is pending various layers of approval from the NBA, the City of Detroit, and Detroit’s Downtown Development Authority. If the agreement is finalized, the Pistons will leave their current home–the Palace of Auburn Hills–after the current NBA season.
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