BY Art Thiel 02:19PM 05/08/2012

Thiel: Every team profitable in 3 years, says Stern

NBA commissioner predicts every team can be break-even in 3 years, which means that an investment is more reasonable, but also encourages teams to stay put.

The Maloof brothers, Gavin, second from left, and Joe, second from right, at one of their innumerable public meetings in Sacramento, all of which came to naught. / Wiki Commons

In case you wonder why a smart guy like Chris Hansen would invest $290 million in a project that supports a money-losing industry like the NBA, David Stern offered over the weekend a partial explanation.

The commissioner thinks that, thanks to the new collective bargaining agreement that was signed in December after a lockout, every NBA team can be profitable by around 2014-15, about the time Hansen’s proposed Seattle arena could be near completion.

“This year, we’ll probably have about 10 teams losing money,” Stern told “Political Capital With Al Hunt” on Bloomberg Television. “And next year, I hope the number will be down to under five. And then after that, I would expect that all of our teams will have the opportunity to make money.”’

Setting aside for the moment the argument over the arena’s controversial location in SoDo, as well as Stern’s sometimes fanciful deployment of facts, his prediction is based on a strategy that was years in the planning: At the end of the old CBA, beat back players union’s previous gains with whatever it took to make operating an NBA franchise in any market at least an eventual  break-even proposition.

Apparently, judging by the reaction of most small-market owners, the plan, which includes much broader revenue sharing and a heavy penalty for overspending, has the controls to achieve the goals. If his forecast proves true, annual franchise operations will have become a reasonable financial bet for perhaps the first time in almost 20 years.

Creating the potential for profiitability was the order given Stern by Portland Trail Blazers owner Paul Allen and other smaller-market owners who believed payroll inequities were helping make the NBA a much more competitively lopsided sport than football or baseball, where restrictions in various forms give every fan base (with one notable baseball exception) some expectation of contention.

The need for smaller-market opportunity is even more vital in the NBA, because Stern knows his business has a better chance to succeed when it occupies one-horse towns such as Portland, San Antonio, Salt Lake City, Oklahoma City and, yes, Sacramento. Stern knows but will never acknowledge publicly that the NBA will be, in nearly all big markets,  the third ticket in towns where the NFL and MLB are entrenched.

That’s why he was so easy in 2008 with the the Sonics’ departure from the 13th largest market to the 46th largest market in Oklahoma City, and why he fought so hard to keep the Kings in No. 20 Sacramento — offering loans, time and political, legal and media support to keep the Kings’ arena project alive long after some critics said the disastrous tax-revenue problems crippling Sacramento, and many California cities, would ultimately crush the arena deal.

The Kings’ owners, the Maloof brothers, have been deservedly demonized for backing out of an arena proposal they had agreed to a month earlier. But the fact was, they’ve been financially underwater for years and were in no position to make the stretch the proposal required of them. And many new-arena critics believed the city was in no position to stretch to help the Maloofs when basic municipal services were being cut.

Stern sees this as a ghastly turn of events after the new CBA made success possible down the road for even the Maloofs. But the Maloofs can’t get down the road because they are already roadkill, victims of the recession and their own foolishness.

Failing in Sacramento is symbolically bad for the NBA. But by going to the trouble the NBA did, which includes propping up the franchise for the past season and probably next season, Stern cannot reasonably be accused of failing the city, as he and the league did in Seattle.

So Stern is now in the process of a back-room attempt to separate the Maloofs from the Kings’ franchise, which he will do, because everything is for sale, despite claims otherwise. The Maloofs will continue to say no to selling, until they hear the right price. The trick for Stern is to try to find another Kings owner willing to invest much more than the Maloofs in an arena project in Sacramento — you know, like what Hansen is proposing for Seattle.

Don’t know about those prospects. The Maloofs have spurned previous buyers, and now with the new CBA forecasting profitability for all by its third year, NBA ownership becomes a more plausible idea. But ownership in Sacramento, where the major industry, state government, is in a massive decline, is a sketchier proposition.

Then again, the NBA found new ownership for the Hornets in New Orleans, another franchise that appeared to be flat-lining, in the person of Saints owner Tom Benson. And news came Monday that the NHL secured a private owner for the Phoenix Coyotes, also a ward of the state, in Craig Jamison, who once owned the San Jose Sharks.

But in Oklahoma City, the moneybags behind Sonics swiper Clay Bennett, Aubrey McClendon, is in a heap of controversy with shareholders of his natural gas company. Seems doubtful his problems would have an adverse effect on Thunder operations, but it is good to see McClendon is who we thought he was. Or do you buy Bennett’s 2008 explanation that McClendon had a “stroke moment” when he told a reporter that the intent all along of the OKC boys was to hijack the Sonics?

As far as how these developments influence Seattle’s proposed arena, it’s important to keep in mind that while no CBA, nor set of league by-laws, make pro sports franchises idiot-proof (we’re watching you, McClendon), the impact of the NBA’s new deal means the chances of financial success are better for all teams than when the Sonics were foundering in the middle of the last decade, which made them vulnerable to predation.

But the increased chances for a break-even operation also makes it more worthwhile for lower-revenue teams to work out deals where they are. In the case of the Kings remaining Sacramento, however, they need a white knight, big time and soon, who sees a future in Sacramento’s downtown the way Hansen sees a future in Seattle.

For Hansen, the location remains a civic debate. But investing in the NBA is not as risky a proposition as when the Sonics were guaranteeing millions to Vin Baker and Danny Fortson to mostly grow behinds big enough to be national parks.


YourThoughts

  • Grover

    If all NBA teams are going to be profitable in a few years, why the hell should Seattle give the NBA any tax subsidies?  Apparently, according to Stern, the NBA can make it on its own, without the public subsidizing the teams.

    This just makes it even more stupid for any city to consider giving any NBA team any tax revenues whatsoever — according to Stern they don’t need it now!!!  How stupid can cities be?

  • Grover

    If all NBA teams are going to be profitable in a few years, why the hell should Seattle give the NBA any tax subsidies?  Apparently, according to Stern, the NBA can make it on its own, without the public subsidizing the teams.

    This just makes it even more stupid for any city to consider giving any NBA team any tax revenues whatsoever — according to Stern they don’t need it now!!!  How stupid can cities be?

  • Grover

    Hell, if every NBA team is going to be profitable, no matter what, then just let some NBA team play in KeyArena.  They will be profitable now, according to Stern.  Revenue sharing will solve all the “problems” KeyArena created, so KeyArena will now be a perfectly suitable arena for an NBA team.

    This is great news for Seattle:  we don’t need a new arena for the NBA now — every NBA team is going to be profitable, even in KeyArena!!!

  • Grover

    Hell, if every NBA team is going to be profitable, no matter what, then just let some NBA team play in KeyArena.  They will be profitable now, according to Stern.  Revenue sharing will solve all the “problems” KeyArena created, so KeyArena will now be a perfectly suitable arena for an NBA team.

    This is great news for Seattle:  we don’t need a new arena for the NBA now — every NBA team is going to be profitable, even in KeyArena!!!

  • Grover

    So, this is why the Maloofs say they can now live with a “remodeled” old arena in Sacramento.  Instead of new revenue from a new arena, if they stay in the old arena, they will get new revenue from other teams in the form of revenue sharing.  So, what difference does it make if they have a new arena, or not?  Either way, they are going to get a lot of new revenue.

    New arenas no longer matter!

  • Grover

    So, this is why the Maloofs say they can now live with a “remodeled” old arena in Sacramento.  Instead of new revenue from a new arena, if they stay in the old arena, they will get new revenue from other teams in the form of revenue sharing.  So, what difference does it make if they have a new arena, or not?  Either way, they are going to get a lot of new revenue.

    New arenas no longer matter!

  • Pantos

    A Vin Baker reference!  I love it!

  • Pantos

    A Vin Baker reference!  I love it!

  • jafabian

    I wouldn’t even say the NBA is 3rd behind the NFL and NBA.  IMO, it’s behind the NHL in a lot of markets and the NBA should keep an eye on MLS as well.  If the Lakers were the Clippers the Galaxy would be outdrawing them and the Sounders easily have a fan base that beats any NBA team.  NCAA football and basketball outdraws the NBA as well.  People are lukewarm to the Thunder in OKC until football season is over.

    I’m not sure if the NBA has a grasp on what direction fans are going in.  The NBA seems to be focusing on the arena experience when they could be reaching so much more via media and the internet.  I’d think a Key Arena type of arena and a far reaching media market would be more desirable than a small local market and a 20,000 seating arena that fills up most of the time and said team breaking the bank in salaries.

    Really, the NBA needs to get a tighter rein on their players salary structures.  Fans are having a hard time relating to these guys when they have the attitude that players like Latrell Sprewell, Stephon Marbury and Kenny Anderson displayed over the years.  

  • jafabian

    I wouldn’t even say the NBA is 3rd behind the NFL and NBA.  IMO, it’s behind the NHL in a lot of markets and the NBA should keep an eye on MLS as well.  If the Lakers were the Clippers the Galaxy would be outdrawing them and the Sounders easily have a fan base that beats any NBA team.  NCAA football and basketball outdraws the NBA as well.  People are lukewarm to the Thunder in OKC until football season is over.

    I’m not sure if the NBA has a grasp on what direction fans are going in.  The NBA seems to be focusing on the arena experience when they could be reaching so much more via media and the internet.  I’d think a Key Arena type of arena and a far reaching media market would be more desirable than a small local market and a 20,000 seating arena that fills up most of the time and said team breaking the bank in salaries.

    Really, the NBA needs to get a tighter rein on their players salary structures.  Fans are having a hard time relating to these guys when they have the attitude that players like Latrell Sprewell, Stephon Marbury and Kenny Anderson displayed over the years.  

  • RadioGuy

    “I wouldn’t even say the NBA is 3rd behind the NFL and NBA.”  I think you maybe meant “behind the NFL and MLB?”

    It’s a little ironic how Stern has come to understand that it’s the smaller cities where the NBA has the most impact, since it was smaller cities like Syracuse, Fort Wayne and Rochester that carried the NBA during its first ten years.  Ned Irish hated having a marquee reading “KNICKS vs. SYRACUSE” at Madison Square Garden, but Syracuse had a fan base at least as rabid as Irish’s Knicks had in New York (the brawl at Auburn Hills was nothing compared to what usually went on in Syracuse…I think any old player would verify that).

    Now, as far as all NBA franchises being profitable in the near future, I’m from Missouri on that one.  The Soviets used to trot out Five-Year plans regularly, and we know how that ended up.

    • Hammtime

      “Now, as far as all NBA franchises being profitable in the near future, I’m from Missouri on that one.”

      Agreed!  No reason to believe anything Stern says.

      • Artthiel

        Now he’s on the record about it, which I’m guessing means he’s fairly sure of his position. My concern with Stern has always been his views of what happened in the past, not what he says about the future. He can be lying about the past, but merely wrong about the future.

    • Artthiel

       Radio, your skepticism is warranted. Then again, he’s far more ruthless than your average Soviet dictator, so I suspect he’ll find a way to make it happen.
      As for small markets, it’s economic fact — the only way you can ruin a one-horse market is to treat it like one.
        

    • jafabian

      I did mean MLB.  My bad. 

      I just don’t see how being in a small market helps the NBA in the long term.  Seems to me Seattle is an ideal market for the NBA because the M’s and Seahawks are so inconsistent.  Fans are very fickle and follow winners.  If a team in the NBA is inconsistent in winning and plays in a city where the NFL/MLB/NHL/MLS consistently wins then that NBA dollar won’t translate to much since they’ll be in competition for the fans sport dollar.  The Seattle media market is large enough to contribute a hefty portion to the NBA budget and being on the coast it has overseas potential.  But the NBA knew that and still allowed the move to OKC.  Well, at least they have a full arena even though most people can’t name anyone on the team beyond Durant and Westbrook.  Because a full arena is what’s important right? 

  • RadioGuy

    “I wouldn’t even say the NBA is 3rd behind the NFL and NBA.”  I think you maybe meant “behind the NFL and MLB?”

    It’s a little ironic how Stern has come to understand that it’s the smaller cities where the NBA has the most impact, since it was smaller cities like Syracuse, Fort Wayne and Rochester that carried the NBA during its first ten years.  Ned Irish hated having a marquee reading “KNICKS vs. SYRACUSE” at Madison Square Garden, but Syracuse had a fan base at least as rabid as Irish’s Knicks had in New York (the brawl at Auburn Hills was nothing compared to what usually went on in Syracuse…I think any old player would verify that).

    Now, as far as all NBA franchises being profitable in the near future, I’m from Missouri on that one.  The Soviets used to trot out Five-Year plans regularly, and we know how that ended up.

    • Hammtime

      “Now, as far as all NBA franchises being profitable in the near future, I’m from Missouri on that one.”

      Agreed!  No reason to believe anything Stern says.

      • Artthiel

        Now he’s on the record about it, which I’m guessing means he’s fairly sure of his position. My concern with Stern has always been his views of what happened in the past, not what he says about the future. He can be lying about the past, but merely wrong about the future.

    • Artthiel

       Radio, your skepticism is warranted. Then again, he’s far more ruthless than your average Soviet dictator, so I suspect he’ll find a way to make it happen.
      As for small markets, it’s economic fact — the only way you can ruin a one-horse market is to treat it like one.
        

    • jafabian

      I did mean MLB.  My bad. 

      I just don’t see how being in a small market helps the NBA in the long term.  Seems to me Seattle is an ideal market for the NBA because the M’s and Seahawks are so inconsistent.  Fans are very fickle and follow winners.  If a team in the NBA is inconsistent in winning and plays in a city where the NFL/MLB/NHL/MLS consistently wins then that NBA dollar won’t translate to much since they’ll be in competition for the fans sport dollar.  The Seattle media market is large enough to contribute a hefty portion to the NBA budget and being on the coast it has overseas potential.  But the NBA knew that and still allowed the move to OKC.  Well, at least they have a full arena even though most people can’t name anyone on the team beyond Durant and Westbrook.  Because a full arena is what’s important right? 

  • Hammtime

    What will the NBA look like in 10-15 years?  The Sioux City Kings vs the Boise Bobcats.

    • Artthiel

      Yeah, but they’ll be sellouts and NBA fans will be paying $250/yr for TV access.

      • Grover

        The Sonics tried pay-per-view way back before Schultz bought them, and it just broke even.  Didn’t make any money at all.  In fact, the Sonics tv ratings were always very low, and that was on free tv.

        About 10 years ago, Dave Grosby said that the internet was going to make billions for pro sports.  How is that working out?  Have you ever paid to watch or listen to a sports event on the internet?

        But, again, if there really are the big bucks in tv, then new arenas won’t even matter any more.  So, why should Seattle or King County subsidize a new NBA arena?  The revenue is all going to be from tv, apparently.

  • Hammtime

    What will the NBA look like in 10-15 years?  The Sioux City Kings vs the Boise Bobcats.

    • Artthiel

      Yeah, but they’ll be sellouts and NBA fans will be paying $250/yr for TV access.

      • Grover

        The Sonics tried pay-per-view way back before Schultz bought them, and it just broke even.  Didn’t make any money at all.  In fact, the Sonics tv ratings were always very low, and that was on free tv.

        About 10 years ago, Dave Grosby said that the internet was going to make billions for pro sports.  How is that working out?  Have you ever paid to watch or listen to a sports event on the internet?

        But, again, if there really are the big bucks in tv, then new arenas won’t even matter any more.  So, why should Seattle or King County subsidize a new NBA arena?  The revenue is all going to be from tv, apparently.