The NBA “Bubble”

One thing is for sure, what’s happening now in the NBA isn’t good for anyone involved in the business of basketball and it’s going to get worse before it gets better.

If you’re an NBA fan and you still care, you’re pulling your hair out wondering why the NBA team owners and their players association can’t figure out a way to split billions. To the average fan, it just doesn’t make sense. Even if you’re a casual fan, or you have a warped sense of humor and you like to watch rich people suffer, you’ve undoubtedly heard or read more than your fair share of stories on the NBA lockout. Certainly, you’ve been fed a steady diet of information from the PR machines operating on behalf of the owners and players.

But here’s one you probably haven’t heard and in my opinion it’s at the core of why we’re not watching basketball in November.

Once upon a time, not all that long ago, you could buy an NBA expansion team team like the Dallas Mavericks for $12.5 million dollars. In 1986, you could’ve thrown your hat in the ring for a team in Charlotte, Miami, Orlando or Minnesota for a sum of $32.5 million while a few years later, a team in Vancouver or Toronto had an expansion fee of a hefty $125 million, apiece. It seems like a bargin now, but in the 1980′s, the state of the league was pretty dismal, and you could have made an argument that forking over $32.5 million was an awful investment. Fast forward to 2011 and after Magic, Larry, Michael and David (Stern) made the league a global phenomenon, NBA franchises are now going for over $400 million dollars.

Since the turn of the century, 16 franchises have changed hands. That’s more than half the league and the owners of those franchises all paid top dollar. Even in the year 2000, it was getting pricey, from the $255 million paid by Stan Kronke to acquire the Denver Nuggets to the $285 million Mark Cuban paid to buy the Dallas Mavericks. In 2010, the Detroit Pistons were purchased by Tom Gores for $400 million and in 2011, the Golden State Warriors were bought by the investment duo of Peter Guber and Joe Lacob for a hefty $450 million.

Now here’s the catch, some of these new owners bought teams from guys who paid less than $40 million back in the day. Tom Gores bought the Pistons from the estate of the late Bill Davidson, who purchased the team in 1957 from the original team owner, Fred Zollner, for a mere bag of shells, reported as $6 million. Davidson’s estate reportedly cashed $325 mil for the club that was valued at over $400 million a year before. Dan Gilbert bought the Cavaliers from the Gund family in 2005 and paid $375 million, Gordon Gund had paid $20 million in 1983 and even bargained his way to secure extra first-round draft choices to bail out the woeful franchise. Robert Sarver bought the Phoenix Suns from an investment group headed by Jerry Colangelo in 2004 and paid some $401 million for the Suns and Mercury franchises and arena they play in. In 1987, after a drug scandal nearly took down the Suns, Colangelo’s investment group, highly leveraged, paid 44 million to Richard Bloch and a boat load of other investors, including the legendary Andy Williams. Bloch’s group originally paid $2 million to the NBA in 1968 when they hired the young Colangelo to be the team’s first GM.

You get the idea. The old guard were playing the game with HOUSE MONEY and they knew it. They could afford a bad labor deal or two, or overpay for some wins, because it didn’t matter. They knew their big payday was coming when they sold the team.

The new breed paid staggering big bucks for their franchises. These new guys, rich as they might be, bought at the peak of the market and now have a business on their hands that in many cases is a money loser facing a cash call. So guess what, no more house money, no more huge cushions, the BUBBLE HAS BURST and these owners have to start running these teams like a business nearing oblivion.

With their investments at stake, most new team owners can’t afford a losing deal and it appears they’re using this year’s Collective Bargaining negotiation to try and make up for the mistakes of owners of the past.

When you’re not watching the NBA anytime soon, remember the old adage, “follow the money.” Owners are trying to put a deal in place that will secure the big payoff when they’re ready to sell, and the players can’t understand whey they’re less valuable today than they were a year ago.

***

Ken Adelson is a major player in the broadcasting, production and new media world and previously served as a senior level media executive at the NBA and OKC Thunder.

 

 

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>