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SBD/June 2, 2014/Franchises
Ballmer On Plans For Clippers: Confident He Can Make Money, Will Pay For Top Free Agents
Published June 2, 2014
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ALL ABOUT STEVE: In N.Y., Nick Wingfield wrote Ballmer will "have to quickly learn the ropes in a business that has little to do with the one he has been in for more than three decades." A source said that Ballmer "valued the Clippers in a manner similar to the way many technology companies are valued ... based on what the buyer thinks they can become." Many people "predict that Ballmer’s style of ownership and his demeanor are likely to resemble" those of Mavericks Owner Mark Cuban. Video game publisher Activision Blizzard President & CEO Robert Kotick said, "I think that’s going to change the character of owners and ownership. I think you get someone who will add a whole new dimension of strategic thought, professionalism and management capability" (N.Y. TIMES, 5/31). In L.A., Mark Medina noted some around the league "expect Ballmer to spend lavishly." They "expect him to launch a new cable channel to maximize the team’s revenue." Those in the league also "anticipate he will provide colorful behavior, just like he did at his Microsoft presentations." Ballmer’s "abrasive personality reportedly alienated those in Microsoft, which could explain why the company declined on Friday to make any officials available to speak about him." But league sources "downplayed Ballmer’s apparent abrasiveness" (L.A. DAILY NEWS, 5/31). In San Jose, Mark Purdy wrote NBA teams "might not fully understand what they're facing" in Ballmer. Cuban has "specialized in sideline emotional displays," but Ballmer could be "Cuban in a Godzilla suit." Wealth "does not automatically equate to championships," but it "makes those championships less financially thorny to pursue." Warriors co-Owners Peter Guber and Joe Lacob "have dough," but "it ain't Ballmer dough" (SAN JOSE MERCURY NEWS, 6/1). ESPN’s Bomani Jones said Ballmer “is surprisingly energetic and over-the-top to be like a Windows guy.” ESPN’s Dan Le Batard: “I hope he brings this particular fandom to the NBA because he’s going to make Mark Cuban look like a Buddhist monk” (“Highly Questionable,” ESPN2, 5/30).
ROI, OR A TOY? In N.Y., Josh Kosman noted Bank of America "lined up" the Clippers' sale, and typically, the sell-side investment bank gets 2% "of the deal price," or $40M in this case. Kosman: "Not bad for less than a week's work." Sources said that Raine Group, the bank boutique that is advising Ballmer, "hired Bank of America, in part, because Donald Sterling was a client of the bank for years on his real-estate deals." Raul Anaya has been Bank of America's "lead banker on the deal" (NYPOST.com, 5/30). DC-based Economic Policy Institute President Lawrence Mishel said of the $2B sale, "This reflects an enormously wealthy person buying a toy. It's not a financial investment." Smith College sports economics professor Andrew Zimbalist: "When I try to make sense of it economically, I can't. You might be able to justify a price that's maybe half of that, but you can't justify $2 billion." Former NBA Kings co-Owner Joe Maloof "agreed that Ballmer is overpaying," but insisted that the bid was a "smart move." Maloof: "These teams are rare gems. Owning a sports franchise in today's world is a very secure investment. They always appreciate value" (L.A. TIMES, 5/31). N.Y.-based Inner Circle Sports Managing Partner Rob Tilliss said, "If you believe in the growth of the league, you believe in the TV rights renewals and you want to be the big guy in L.A., it makes sense. But I can’t make the economic argument for you” (N.Y. TIMES, 5/31). Former Rockets President & CEO George Postolos said, "It's a positive outcome for the league and a good financial outcome for the Sterlings. And they can get this story off the front page, which I think would be good for everybody." USA TODAY's Josh Peter noted "everybody" includes the government, which would collect about $600M in "capital gains taxes" (USATODAY.com, 5/30).
THE PRICE IS RIGHT? Columnist Kevin Blackistone said of the $2B sale price of the Clippers, "It doesn’t seem like to me that’s the right price for this particular franchise.” The Denver Post's Woody Paige said the sale price is “bloated but it’s a unique situation” with it being L.A. ESPN’s Pablo Torre said the price is “not surprising” because the “L.A. market has been undervalued with regards to the Clippers” (“Around The Horn,” ESPN, 5/30). ESPN’s Tony Kornheiser called the price “outlandish.” But ESPN’s Michael Wilbon said the “league has to be thrilled on a lot of levels,” including getting Sterling “off the stage” and “completely dominate with a new story and a new theme and a franchise that was thought of as just the laughingstock of the league is now worth so much money.” Kornheiser: “This thing is a big win for the owners and, by the way, it is a big win for the players because it happened with unbelievable speed” (“PTI,” ESPN, 5/30). Detroit Free Press columnist Mitch Albom said, "It remains to be seen whether this elevates the price of every other franchise to this ridiculous level because all the stars aligned for this” (“The Sports Reporters,” ESPN, 6/1).
SILVER LININGS PLAYBOOK: GRANTLAND's Zach Lowe wrote the sale of the Clippers "could not have gone any better for the NBA." Commissioner Adam Silver "already has a triumph that will be in the first or second paragraph of the stories about his retirement two or three decades from now." The Clippers price is a "healthy indicator, but it’s also something of an outlier." L.A. is a "mega-market; it’s unclear how much the $2 billion eye-popper really affects what teams in smaller and midsize markets might someday draw." The $550M that Wes Edens and Mark Lasry paid for the Bucks "might be more meaningful leaguewide." Lowe: "There is a growing sense that some owners have to be looking at that $2 billion price tag and thinking, Jesus, how long am I going to wait if I can cash in like that now?" It seems "counterintuitive to cash out now, and some owners big and small will dismiss the idea out of hand." The league is "on an upward trajectory." But there is "growing resentment today from several players," who "do not get to share directly in the profits from the sale of a team." It is "unclear exactly where the union falls, but it has a lot to be happy about here -- a new big-spending owner, signs of increased revenue, and the ability for players to approach the Clippers right away in free agency on July 1 without reservations" (GRANTLAND.com, 5/30). Meanwhile, the N.Y. POST's Kosman reported Oracle CEO Larry Ellison "pulled out" of the Clippers auction "without making an offer." A source said that the rest of Ellison's "quickly assembled bidding group," including Oprah Winfrey and DreamWorks SKG co-founder David Geffen "bid by Wednesday's deadline on their own without Ellison" (N.Y. POST, 6/1).
RIPPLES IN STILL WATER: ESPN.com's Brian Windhorst noted Ballmer's bid for the Clippers "dealt a significant blow to Seattle's long-running hopes to reacquire an NBA team." Sources said that although it was "not Ballmer's intention, the role he played in helping force arena deals in Sacramento and Minnesota plus starting the process in Milwaukee played a role" in Silver "helping him land the Clippers." With the values of NBA teams "expanding rapidly," getting a team in Seattle now "likely would cost in excess" of $1B (ESPN.com, 5/30). In Seattle, Danny Westneat wrote, "I bet the ripple effects of this atomic money bomb on Seattle politics will be profound. Remember that public-private partnership for an NBA arena down in Sodo, for which Ballmer was to be the big private money? It’s said to be forging ahead, as if nothing seismic had just happened." How can the Seattle City Council "possibly remain committed to the idea this arena needs public money to be built?" The "ground has shifted," and Ballmer's "money bomb just unwittingly blew up the already shaky political support for this project" (SEATTLE TIMES, 6/1). Meanwhile, in N.Y., Richard Morgan reported MSG "saw its value spike" by about $111M following the Ballmer bid. Albert Fried & Co. Dir of Research Rich Tullo said, "The Knicks are intrinsically worth 40 percent to 50 percent more than the Clippers." MSG's stock closed Friday up 3.3% to $54.85 -- "giving it a market cap" of $4.2B (N.Y. POST, 5/31).
NO, YOU LOCK IT UP: ESPN’s Bill Simmons said, "The next lockout is going to be a lockout. The players union is going to have a much better person in charge and they’re going to want a piece of this. With the amount of money that’s flying around right now, I just don’t see how the players feel good about their deal. … All these team prices went way up so I feel like there’s going to be a lockout coming the next time they come to the table.” Meanwhile, ESPN’s Jalen Rose said of Ballmer, “I think it’s a very good purchase. I wouldn’t be surprised if he changes the name of the team. I think their brand has been damaged by what has happened with Donald Sterling” (“NBA Countdown,” ESPN, 5/30).