Sports league expansions are always a tricky calculus. Existing owners must weigh the new franchise fee and value new markets bring to the table, versus the everlasting dilution to their share of league revenue and equity.
The math has an added layer for WNBA owners, as they only own 42% of the league; the NBA holds another 42% of the league and the remaining 16% belongs to a 2022 investment consortium. Any expansion dilutes solely the 42% held by WNBA teams and not the share held by the NBA or investors, according to multiple people familiar with the details who were not authorized to speak publicly.
Those are favorable terms in particular for the outside investors, who got in ahead of the explosive interest generated by last season’s arrival of Caitlin Clark and other high-profile college stars. In addition to keeping their equity intact, they are entitled to an annual preferred equity payment and will receive their share of nine-figure WNBA expansion fees, the sources said.
“The WNBA’s distribution model, which includes expansion proceeds, was intentionally designed to provide for an appropriate distribution of league economics to the WNBA’s various stakeholders,” a WNBA spokesperson said. “Those running WNBA teams and covering player costs and operating expenses receive a greater portion of league distributions.”
The current WNBA expansion process has attracted more than a dozen groups interested in bringing a women’s basketball team to their market. The league hired Allen & Company to help facilitate the process, which was originally expected to select just the league’s 16th franchise. Now it seems likely the league will approve multiple new additions, further diluting the WNBA owners’ share of the league.
In 2022, the WNBA raised $75 million from a group of strategic investors including Nike, Michael Dell, Linda Henry, Dee Haslam, Condoleezza Rice, Micky Arison and Laurene Powell Jobs. Some, such as Ted Leonsis (Washington Mystics), Joe Tsai (New York Liberty) and Herb Simon (Indiana Fever), tripled down on the league by investing as part of the raise, owning WNBA teams and owning a stake in the league through their NBA team ownership. The deal was negotiated in 2021, as COVID-19 dented sports team finances, and announced in early 2022.
Previously, the league’s equity was split 50-50 between WNBA owners and NBA owners. This 2022 deal carved out 16% for the new consortium at a $400 million valuation, or $475 million post-money value. The deal left each of the existing 12 W teams with a 3.5% stake in the league; that dropped to 2.8% with three new teams announced. The Golden State Valkyries start play this year, while the Toronto Tempo and Portland franchise tip off in 2026.
WNBA teams do receive more than 42% of national revenue under a complex formula with part of the NBA’s share flowing to W teams. That is particularly important given the league’s new TV contracts with ESPN, NBC and Amazon are worth $200 million a year, six times its previous ESPN annual average. The WNBA also expects to sell additional packages of games that could be worth $60 million or more per year.
The surge in revenue and attention is part of why the WNBA players opted out of the league’s CBA agreement late last year. The current labor accord now expires at the end of this upcoming season, and union head Terri Carmichael Jackson has said the players will push for an “equity-based” economic model, perhaps adding more complexity to an already crowded cap table.