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All You Need is Cash
Posted By Evan Weiner On May 2, 2014 @ 8:41 AM In Insider Main,main feature,NBA,News and Rumors | No Comments
By Evan Weiner
On Wednesday afternoon I got a call from Nicole Brewster-Mercury, a producer from the Canadian Broadcasting Corporation asking me if I wanted to appear on a panel with former Toronto Raptors coach and one time National Basketball Association player Butch Carter and former National Football and Canadian Football League player, coach and now Vice-Chair of the Toronto Argonauts football team Pinball Clemons for a show the network was planning. The topic was racism in sports in the aftermath of the National Basketball Association barring Donald Sterling from the league and starting the process of stripping him of his basketball business.
There was one logistical problem, the show was being taped in Toronto and I was in New York. A major cutback in CBC funding has caused the broadcast network to shutter a good number of foreign outposts including New York.
The bigger difficulty though was I wasn’t a former player who could talk about racism in sports with a personal view nor am I an African American. So whatever stories I have heard and I have heard many from Abner Haynes, Wally Triplett, John Wooten, Willie O’Ree, John McLendon, Meadowlark Lemon, Larry Doby and others are hearsay. I have hours of interviews with people who were there but no actual experience or expertise talking about racism in sports directly.
Nicole conducted an informal interview or a screening to establish my credibility and the topic turned to minority ownership in the National Basketball Association and sports. Nicole Brewster-Mercury wanted to know why there is only one minority member who owns a basketball team, Michael Jordan of the Charlotte Bobcats/Hornets.
I said that’s wrong, there are two “minority” North American NBA owners, Jordan and Vivek Ranadive in Sacramento who was born in India. But the rest of the club is comprised mostly of older white men with lots of money.
The next question was why are there so few minority members who own NBA teams?
The answer to that is not very complicated. It takes a lot of money to buy an NBA franchise. Although no one really knows for sure how much Donald Sterling’s Los Angeles Clippers are really worth—there are general ideas of how much money the franchise gets from Rupert Murdoch’s Los Angeles regional sports cable TV network and how much money Sterling got from Disney’s ESPN and Time Warner’s Turner Sports cable TV networks as part of a national deal and how much money he got from league marketing deals—the public is not getting any information of how much money he takes in a night at his Los Angeles arena home base or what his local marketing agreements bring him in cash and promotion.
Still the initial “pulled out of the air predictions” contend that Sterling’s team might get as much as $750 million when the team is placed on the market and the bidding starts.
The NBA has taken the initial steps to put the franchise out to bid but the legal process has to play out.
I also told Nicole Brewster-Mercury of an interview I did with Michael Heisey, the former owner of the Vancouver-Memphis Grizzlies who recently passed away and the mindset of someone who buys a franchise. It was an old interview but some of it still applies. It was done right after Heisey purchased the Grizzlies from John McCaw in 2000.
“Let me be clear, as I said when I bought the team,” said Heisley. “‘Somebody said why did you pick Canada?’ I said, ‘there weren’t a lot of NBA teams available’. I picked the one that I had an opportunity to buy and I wanted to be in the NBA. “What do I think of Vancouver? I think it is a fantastic city. I think there are a tremendous lot of things we have to do to make it a success and, quite frankly, I’m not minimizing the problems involved making pro sports, especially pro basketball, successful in Canada.”
Even people with money don’t just say I want to buy a team. There are very few on the market and leagues are as National Football League Commissioner Pete Rozelle testified in the 1986 United States Football v. National Football League antitrust trial, leagues are natural monopolies. It takes more than just money to get into the brotherhood of major league sports owners.
You have to find a team up for sale or hope a league expands. Then the members of the club have to like you.
Heisey paid an estimated $160 million for his franchise in 2000. That is a small piece of change these days. The last NBA team which went on the market and was sold was in small market Milwaukee. Former United States Senator Herb Kohl sold his franchise after 29 years of ownership for a reported $550 million to hedge fund “billionaires” Wesley Edens and Mark Lansy.
Heisey laid down the rules for owning a team from an owner’s standpoint. There is ego, being the man. The owner. But that’s not the only reason.
“There are various ways you make investments and I have made a lot of them, Heisley explained. “Some of them you make because day in and day out, the company gives you back or the organization gives you back a return on your investment. Some companies you investment in them, invest in them and invest in them and they lose money, they lose money and they lose money.
”Then at some point in time, you look at the value at what you investing in and you have a multiple of what you invested in the actual value. People who invested in the NBA in franchises five years ago (2000) have basically seen their franchise value increase today, even though they have not made much money from the day-to-day operations of their business.”
Donald Sterling paid an estimated $13 million for the San Diego Clippers in 1981. That was seemingly a high price for a franchise in a league that was financially struggling and was on the verge of dropping seven of the league’s 23 teams by 1983. If the estimates are true, Sterling is going to score big on the return of his investment parlaying a $13 million entry fee plus another six million invested as a fine when he moved his team to Los Angeles in 1984 without league permission. His parting gift from the NBA may be as much as a billion dollars under the right circumstances.
Whoever buys the Clippers and their way into one of the most exclusive clubs in the world needs lots of cash. Magic Johnson and Oprah Winfrey are rumored to be on the list of potential buyers for the team, but there are not many minority members or average people for that matter who have the wherewithal to join the lodge. In the 1940s, if could own a club for next to nothing. Today you cannot.
That’s why the answer to Nicole Brewster-Mercury’s question was simple.
All you need is cash and then deemed fit by the lodge brothers.
Evan Weiner can be reached at email@example.com . His e-book, “The Business and Politics of Sports, Second Edition” is available (https://www.smashwords.com/books/view/365489  ) and his e-books, America’s Passion: How a Coal Miner’s Game Became the NFL in the 20th Century, (https://itunes.apple.com/us/book/americas-passion-how-coal/id595575002?mt=11  ), From Peach Baskets to Dance Halls and the Not-so-Stern NBA (https://itunes.apple.com/us/book/from-peach-baskets-to-dance/id636914196?mt=11  ) and the reissue of the 2005 book, The Business and Politics of Sports (http://www.barnesandnoble.com/w/business-and-politics-of-sports-evan-weiner/1101715508?ean=2940044505094 ) and reissue of the 2010 e-book The Business and Politics of Sports, Second Edition (https://itunes.apple.com/us/book/business-politics-sports-selection/id771331977?mt=11  ) are available from e-book distributors globally. 2014 e-book, sports business 2010-14(https://www.smashwords.com/books/view/393652  ). The e-books are available from e-book distributors globally
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