Chapter 1887 3: Entering the Game in Person_2

The negotiations continued at 1:30 pm, and Stern agreed with Gan Guoyang's suggestion to establish a Gambling Commission and allocate a portion of the dividends as League revenue.

After reaching consensus on this, both parties further discussed the new team's salary cap, expansion draft rules, and advertising revenue sharing in the afternoon.

These were relatively minor issues, and after some exchanges, both parties quickly reached an agreement.

However, the most challenging and significant hurdle, the second point of contention, unfolded in the final stages of the negotiation.

David Stern demanded that the Las Vegas team must achieve a total revenue of $1 billion over the next five seasons.

If unable to meet this, as Stern said, the team's shares would be discounted and compensated to the League.

In essence, if your revenue doesn't meet the requirements, other teams will unite to take you down.

A $1 billion revenue means an average of $200 million in annual revenue per season!

Bear in mind, last season's NBA champion, the Los Angeles Lakers, had just over $30 million in annual revenue.

The Portland Trail Blazers, at their peak, only had a revenue of over $50 million a year, and in 2001 it dropped to $20 million.

Therefore, for the current NBA, $200 million is essentially an impossible task.

Gan Guoyang isn't foolish and would certainly not agree to this figure, leading to another intense debate in the afternoon.

Gan Guoyang first disagreed with this wager agreement, saying, "I came to increase your revenue, how can you set such a high sales target?"

"Am I here to harm you?"

Yet Stern responded, "You might indeed harm us."

This expansion was unplanned, involving gambling and a casino city, plus the impact of the 9/11 events, making the risks extremely high.

To hedge against these risks from bringing in a new team, a wager agreement is necessary, though the amount and timeframe can indeed be relaxed a bit.

This time, Gan Guoyang took a step back, agreeing to the wager but demanded to extend the timeframe to 10 years and reduce the amount to $800 million.

"10 years, $800 million, that's not in line with your business level, Sonny. Too long and too little," Stern said with a sarcastic remark.

Gan Guoyang thought to himself, "I haven't said 11 years $900 million to provoke you yet," and seeing Stern's stubbornness, he became quite annoyed.

"Then let's make it $500 million over 10 years. If not, that's my bottom line, and if we can't agree, then forget it; the previously promised benefits will all be written off!"

The parties had already reached many cooperations before, and even without this wager agreement, the team owners could still earn quite a bit.

Seeing Gan Guoyang on the verge of walking away, David Stern softened his tone to pacify him.

In truth, Stern was very anxious internally; the huge impact of the 9/11 attacks had struck a massive blow to his spirit.

That's why he exceptionally led a delegation to Las Vegas for negotiations; after all, this would seem to outsiders that the NBA is pleading with Gan Guoyang to establish a new team.

As for laying down various harsh conditions in the negotiations, it's part of Stern's professional habit, and he's not the sole decision-maker, he has to be accountable to the team owners.

So the interactions between him and Gan Guoyang were half-negotiation, half-show; it was not to let this drama fall apart—it was all endurance, something Stern had experienced for more than a decade.

Thus, Stern took another step back, extending the time to 7 years and reducing the total revenue to $500 million, which was much better than the previous $1 billion over five years.

However, this is still an outrageously high number, requiring average annual revenue of $70 million, which is a figure no past team, not even the Portland Trail Blazers, has achieved.

Gan Guoyang's team found this number challenging, and Wang Fuxi even told her husband, "If it truly doesn't work, just let it go; this revenue figure is too awful. $70 million is like two Los Angeles Lakers."

In fact, the revenue figures indicate that many NBA teams operate at a loss or with very thin profits.

Because in 2001, the League's salary cap reached $35 million, and that was a soft cap, with actual team payments often exceeding this figure.

Next season, the 2001-2002 season, the League will also establish a luxury tax system, penalizing teams that exceed the cap by too much, which will be another expense.

Most teams only have total revenue in the range of several million to over $10 million, and after deducting player salaries and other costs, it's essentially a loss.

Without League subsidies, or with very little revenue-sharing subsidies from the League, some small-market teams are effectively operating at a loss for visibility.

Gan Guoyang fell into contemplation, holding his last trump card in his hand, hesitating to use it.

He was calculating whether $70 million in revenue was truly difficult for the team.

He wasn't concerned about sharing money with other teams and was confident he could earn enough operating income.

However, Gan Guoyang had his own long-term calculations, not just the 7 years and $500 million.

Seeing Gan Guoyang's prolonged silence, Stern became anxious again, pondering whether to lower it further to 8 years, $400 million, making it $50 million annually.

Ultimately, Gan Guoyang spoke first, saying, "I can agree to the 7 years, $500 million wager agreement, and I'm willing to abide by the terms of the agreement. But what if I win the bet? If I fulfill the 7-year, $500 million requirement, is there nothing for me? Just fulfilling the requirement with no reward?"

Stern said, "If you want to add any conditions, just say it."