SBJ/May 5-11, 2014/Leagues and Governing BodiesPrint All
After one of the most astounding weeks in NBA history, Commissioner Adam Silver sits in uncharted waters, faced with the unprecedented task of forcing Los Angeles Clippers owner Donald Sterling to sell his franchise.
While Silver has been universally lauded for his swift and firm actions to drive the NBA’s longest-tenured owner out of the league just days after Sterling’s racist comments rocked the sports industry, there is no proven playbook for forcing an owner to sell. That sets up a showdown between Sterling, an NBA team owner for three decades, and Silver, an NBA veteran in his own right with 20 years of experience at the league but finding himself now at a seminal moment only three months after becoming commissioner.
Sterling’s reaction will determine: clean sale or messy litigation?
Photo by:NBAE / GETTY IMAGES
The cleanest path has Sterling quickly complying with Silver’s demand to sell, setting up what figures to be a blockbuster sale of the Clippers that some sports bankers expect will fetch at least $800 million and possibly even $1 billion, with multiple bidders expected — all of it coming despite a week that had both team sponsors and players distancing themselves from the Clippers brand. A sale price of that level would put the Clippers into NFL franchise-value territory and would represent a huge run-up compared with the NBA’s current record $550 million sale of the Milwaukee Bucks, a deal reached just last month.
Driving the value of the Clippers despite the current controversy is the team’s Los Angeles market, the league’s expected new national television deal, a local TV deal for the team with Fox Sports that is up after the 2015-16 season, and the league’s growing international business.
The other road is a messy, litigious and expensive battle between the league and Sterling. It’s also the path that was most widely being prepared for last week in the days that followed Tuesday’s announcement of the league punishing Sterling. A cadre of NBA attorneys, led by Joel Litvin, president of league operations, and Rick Buchanan, executive vice president and general counsel, would be responsible for preparing Silver and the league for any and all legal obstructions that could come next.
“Two things I know about Sterling: One is that he’s 100 percent unpredictable; the other is that he’s very litigious and has a history of that,” said Alan Rothenberg, a former attorney for Sterling and Clippers president from 1982-89. “To my knowledge, this is uncharted waters. If you ask me whether Donald Sterling will continue to own this team, that’s something I would bet against — but whether that will be five years from now or one year from now is a different story. Adam Silver is an extraordinarily capable person and attorney, and he has some of the best sports lawyers working for him who will do everything as carefully as possible in anticipation that it all gets challenged.”
A three-fourths vote of the NBA’s 29 other owners is needed to determine whether to separate Sterling’s ownership from the NBA.
“No. 1 is that the [board of governors] will be required to vote to authorize the commissioner to exercise his power to rescind Sterling’s membership,” said Rob Tillis, chief executive officer of Inner Circle Sports, which took part in the recent Milwaukee team sale after being retained by prospective new Bucks owners Wesley Edens and Marc Lasry. “Then, before any sales process would kick off, any litigation would have to be resolved.”
None of that, Tillis said, would affect the end result of the process, in terms of selling the Clippers. “It will be a record price,” he said.
“Sterling can challenge, but it serves everyone’s interest to achieve an accommodation where the team is sold in a manner that generates the highest sale price,” said Marc Ganis, president of SportsCorp Ltd., which advised Tom Benson during his 2012 purchase of the New Orleans Pelicans. Ganis added that any delays by Sterling would be like “holding a snowball in his hand in July in Los Angeles.”
After news of the ban, fans flocked to support Paul (below) and the team.
Photo by:NBAE / GETTY IMAGES
Based on the steady stream of support seen and heard from the league’s owners beginning minutes after Silver announced he was banning Sterling for life from the NBA, along with issuing a $2.5 million fine and forcing his sale of the Clippers, little ownership opposition is expected. The process to get there began last week, with Silver turning to the league’s advisory/finance committee to
Photo by:GETTY IMAGES
That committee is made up of owner representatives for 10 teams (see box), with most of the committee members having deep experience in dealing with the league’s most critical issues — such as collective bargaining, team sales and franchise relocations. The group began meeting last week via conference call. Ultimately, they will inform and update the rest of the league’s owners on the process and suggested next steps.
The NBA itself could assume ownership and operations of the Clippers while a new buyer is sought, as the league did in 2010, when it bought the then-New Orleans Hornets from George Shinn after his inability to find a buyer for the franchise. The league went on to sell the team to Benson in 2012. Last week, though, the focus was on forcing a sale to a new, outside buyer in Los Angeles rather than having a league-owned Clippers franchise.
Silver and other league officials have put no timeline on a Clippers sale. One sports finance industry executive said the league would only be able to complete a sale by the start of 2014-15 season — roughly six months from now — if Sterling were to immediately follow Silver’s demands. “It will be awhile before we have clarity in the sales process unless he completely capitulates,” said this industry finance expert, who requested anonymity because of the sensitive nature of the situation. “The only way this asset goes into a distressed sale [and the price goes down] is if Sterling remains the owner.”
Other sports bankers were unconcerned about the effect of any protracted litigation — even though the immediate impact of Sterling’s comments included some 15 team sponsors quickly dropping or suspending their deals with the team. The Clippers’ first home game since the Sterling story broke on April 26 saw the team hosting a playoff game in an arena that was nearly devoid of sponsorship signage after the team removed or covered up brands that dropped the team due to the controversy.
By later in the week, after the announcement of the punishment, some of those sponsors changed tack and said they would re-engage with the franchise. But the impact of the sponsors’ quick response to the story remained.
“If Sterling and his representatives decide that the best thing would be to do whatever helps maximize the price, that suggests that he will work with the league to generate the highest price,” said Bob Caporale, chairman of Game Plan, which has been involved in numerous professional sports team sales. “The interesting thing is how it won’t make a significant difference because of the market.”
The Clippers played to full capacity this season at the 19,060-seat Staples Center and entered this season ranking among the NBA’s top franchises for full-season-ticket sales. Going forward, it’s unknown how anyone from current players and coaches to prospective free agents, new ticket-buyers and other business partners might view (and engage with) the franchise over the summer, depending on how the league’s desired sale of the franchise is playing out. What was certain last week was that the Clippers will remain in the spotlight for the months ahead, and that Silver had firmly established himself as the NBA’s commissioner.
Said Ed O’Hara, senior partner and chief creative officer at SME Branding, which has helped brand various NBA teams: “Silver did a great job in stemming the tide of the rapid decline in value not only for the Clippers brand but for all of the NBA franchises and for the NBA itself.”
Staff writer Terry Lefton contributed to this report.
Could a new era of solidarity be ahead for NBA players in the wake of the Donald Sterling controversy?
Players and NBA agents expressed hope that the unity and strength displayed by the National Basketball Players Association could give the union, which has been plagued by its own controversies as well as player apathy, a fresh beginning.
Sacramento Mayor Kevin Johnson won praise from players and agents for his leadership.
Photo by:GETTY IMAGES
The NBPA has been plagued by a leadership void since the firing of Executive Director Billy Hunter, and the search to find a replacement has been filled with conflict and criticism.
But last week, both players and agents were praising the union and the role of Sacramento Mayor Kevin Johnson after players came together over racist remarks by Los Angeles Clippers owner Sterling.
NBA Commissioner Adam Silver’s lifetime ban of Sterling and effort to force him to sell the club was applauded by players individually and the union as a whole. Johnson, who was asked by NBPA President Chris Paul to assist the union’s response to the issue, had lobbied Silver for strict action against the Clippers owner. Players, in fact, said they were planning to boycott playoff games had Silver not ruled aggressively.
Jeff Schwartz, founder and CEO of Excel Sports Management, viewed the players’ response as a game-changer.
“In dealing with the repugnant and indefensible comments that were made by Donald Sterling, the NBA players as a whole are now at a huge turning point, in the way the issue at hand is fostering player unity,” Schwartz said. “The players are seeing the strength of their collective voice and their ability to speak loudly and effectively on matters that affect them.”
NBPA vice president Roger Mason Jr. agreed, saying that as painful as the Sterling incident was for players, it could result in a positive for the union. “It was an opportunity for us to grow as a union and to get stronger and to band together,” he said.
Both Duffy and Schwartz praised Johnson, who helped lead players though talks with the league about what punishment Sterling should receive.
“The addition of Kevin Johnson’s leadership on this issue has helped solidify their response and call for action, which is setting the tone for future dealings with the owners,” Schwartz said.
Johnson first became involved in the NBPA in early April after Paul asked him for help with the NBPA executive director search. The day after Sterling’s remarks were aired publicly, Paul announced that the union had expanded Johnson’s duties to help determine the players’ response and next steps.
Duffy called Johnson “a star among stars” who has proactively reached out to players and agents. Duffy noted Johnson had credibility with both groups because of his history as a star NBA player and role in the community.
“Every agent looks at him and every player looks at him and says, ‘This guy is legit,’” Duffy said.
There has been speculation in the industry that Johnson would be a candidate for the NBPA job. But in a brief telephone interview with SportsBusiness Journal last week, Johnson said he was not interested in the post.
As the NBA begins its effort to force Donald Sterling to sell the Los Angeles Clippers, some observers last week were asking if the team needs a new nickname along with its forthcoming new owner.
“As far as the brand identity is concerned, that in my opinion is a wait-and see-proposition,” said Ed O’Hara, senior partner and chief creative officer of SME Branding, which has done branding work for a number of NBA teams. “I believe that eventually and under the guidance of the NBA and new ownership that the brand identity must change as it now and will forever be associated with a racist owner and the only owner ever removed from his position by a league commissioner.”
Name changes aren’t foreign to the NBA, especially in recent years. The league’s New Orleans franchise jettisoned its former Hornets nickname last year to become the Pelicans. That freed up Hornets for the league’s Charlotte team, which played as the Bobcats since debuting in 2004 but now will return to playing as the Hornets — a nickname held in the city from 1988 until 2002, when the franchise moved to New Orleans.
The situation in Los Angeles, of course, is different. And while changing a nickname in the wake of a controversy such as what the Clippers are facing might be extreme, there’s little precedent for anything that’s played out in Los Angeles over the course of the past 10 days.
To that end, while some say a name change could be the best move for the franchise, others say the situation could become a positive turning point of sorts for associations with the name Clippers.
“You saw where the Clippers’ website moved from being in the owners’ corner [and having traditional operations] to that ‘We Are One’ branding by Tuesday, so it appears the franchise was already trying to distance itself from the incident and recover,” said Chris Raih, founder of Zambezi, a Venice, Ca.-based advertising and marketing agency. “You could even see a scenario where the Clippers brand has a sort of renaissance as the place where all the right things were done.”
— John Lombardo and Terry Lefton
The Los Angeles Clippers’ local TV deal with Prime Ticket runs for another two seasons, putting negotiations for a new deal atop the to-do list of any new owner of the franchise.
According to sources familiar with the current deal, Prime Ticket owner Fox Sports Net pays the team on average between $25 million and $30 million a year for the rights. The deal ends after the 2015-16 season.
The timing of the negotiations would appear to benefit the Clippers: Los Angeles has seen an explosion of potential bidders, with at least six regional sports networks now operating in the area. In the past 19 months, Time Warner Cable has been responsible for the launch of three of those Los Angeles-based RSNs after outbidding Fox Sports for the rights to the Lakers and Dodgers. Time Warner Cable agreed to a 25-year, $8.35 billion rights deal with the Dodgers, ($334 million per year) and a 25-year, $5 billion rights deal with the Lakers ($200 million per year).
But the Clippers face some uncertainty when it comes to that next media deal.
It appears unlikely that Fox would get into a bidding war to keep the Clippers’ rights on Prime Ticket or to move them to FS West. Over the past two years, Fox has walked away from the bidding process for higher-profile Los Angeles-based teams when company executives felt that bids got too high.
Even Time Warner Cable could have second thoughts about an aggressive Clippers bid. The Clippers almost certainly would not be part of TWC SportsNet, a channel devoted to the in-town rival Lakers. And while Clippers rights could serve to complement the Dodgers’ channel, SportsNet LA, with winter programming, there’s a question about whether the channel can afford another big rights deal. More than one month into the MLB season, SportsNet LA has not signed distribution deals beyond Time Warner Cable.
Audio hits the media on TMZ, Deadspin; Commissioner Adam Silver addresses the media before the Thunder-Grizzlies game in Memphis; Barkley cuts to the chase on TNT.
Photo by:NBAE / GETTY IMAGES (middle)
Magic Johnson weighs in; the Clippers protest with inside-out warmups, followed by the Heat; the Rockets (and their opponents, the Blazers) don black socks to show their solidarity; a fan’s sign at the Bobcats-Heat game echoes popular sentiments.
Photos by:AP IMAGES; GETTY IMAGES (3)
As sponsors begin to flee the Clippers, newspaper headlines anticipate the coming judgment from the league.
Silver announces a lifetime ban for Sterling and the plan to force a sale; Kevin Johnson praises the move, while Sterling quickly signals a fight.
Photos by:GETTY IMAGES (3)
Back to basketball, and the Clippers return to the floor under the new “We Are One” slogan.
Photos by:NBAE / GETTY IMAGES; GETTY IMAGES
Sterling, the Clippers and Silver’s decision dominate the hometown paper.
The NBA is not the only major professional sports league with the power to ban an owner with cause or to force the sale of a franchise. The NFL, NHL, Major League Baseball and Major League Soccer also have mechanisms available to take such action.
The league’s Personal Conduct Policy states that all NFL owners, executives, game officials and players are required to avoid “conduct detrimental to the integrity of and public confidence in the National Football League.” Commissioner Roger Goodell has the authority to fine, suspend and ban an owner but needs approval of three-quarters of the league’s teams to force a sale.
When reading the NFL’s explanation of the Personal Conduct Policy in its bylaws, one cannot help but think of Donald Sterling and the public relations impact of the past week’s stories on the NBA:
“For many years, it has been well understood that rules promoting lawful, ethical, and responsible conduct serve the interests of the League, its players, and fans,” the NFL bylaws state. “Illegal or irresponsible conduct does more than simply tarnish the offender. It puts innocent people at risk, sullies the reputation of others involved in the game, and undermines public respect and support for the NFL.”
Commissioner Gary Bettman has full authority to discipline any individual, including via suspension or expulsion.
According to the NHL bylaws, the individual must be “guilty of conduct (whether during or outside the playing season) detrimental to the League or the game of hockey.”
Ownership of a franchise can be terminated by approval of three-quarters of the teams.
The empowering “best interests of baseball” clause goes back to 1922 and Commissioner Kenesaw Mountain Landis. Article 2 (“The Commissioner”), Section 3 of Major League Baseball’s bylaws states: “In the case of conduct by Major League Clubs, owners, officers, employees or players that is deemed by the Commissioner not to be in the best interests of Baseball, punitive action by the Commissioner for each offense may include any one or more of the following: (a) a reprimand; (b) deprivation of a Major League Club of representation in Major League Meetings; (c) suspension or removal of any owner, officer or employee of a Major League Club.”
A vote of three-quarters of the major league clubs is needed for involuntary termination of the “rights, privileges and properties of a major league club.” The bylaws outline 12 instances where this action could be taken, including if the party in question should “fail or refuse to comply with any requirement of the Commissioner.”
As commissioner, Don Garber has broad disciplinary powers that include the full and complete authority to discipline any owner, governor, team president, general manager, coach or other employee, including suspending such person. It falls to the league’s Board of Governors to terminate any team’s operating agreement and to purchase the associated equity under circumstances that are deemed worthy of such action.
— Christopher Botta
USA Swimming this week will launch its largest marketing campaign, a $500,000 effort called “Swim Today” that’s aimed at boosting swim participation.
The campaign is being underwritten by nine of USA Swimming’s partners, including swimwear brands Arena, Speedo and Tyr, and five-time Olympian Dara Torres has signed on to be its spokeswoman.
Creative features children and lighthearted tag lines that highlight what’s fun about swimming.
For example, there’s a digital ad that shows a kid underwater in a cannonball tuck beneath the words, “Basketball. Football. Cannonball. Which sounds the most fun to you?” There’s a 15-second spot that shows a kid in green goggles breaking through the water’s surface as a voice-over says, “I’m dedicated. I’m passionate. I am an alligator.”
USA Swimming and participating companies like Arena, Speedo and Tyr hope the campaign helps boost consideration of swimming as a sport among parents and kids. A recent study commissioned by USA Swimming showed that 80 percent of parents don’t view swimming as a sport in the same way they do soccer, basketball and tennis. They typically get their children lessons for safety reasons but don’t sign them up for swim teams. They also view swimming as less fun than other sports because there’s a misperception that their kids would have to join year-round teams.
“There’s a chance to change perception of the sport and make it less intimidating,” said USA Swimming chief marketer Matt Farrell. “It’s the first time we’ve done this kind of campaign, so there are no benchmarks, but if we raise participation by a percentage point or two, that’s thousands of swimmers.”
Speedo USA President Jim Gerson added, “Learn to swim is important, but shifting to the fun and inspiration of the sport is important. Kids do things that are fun, and that’s what this campaign highlights — it’s fun to get in the water. It’s going to help all of our businesses.”
Arena, Speedo and Tyr contributed $50,000 each to the campaign. Six other partners, including the American Swimming Coaches Association, National Swimming Pool Foundation and Swimming World Magazine, contributed $25,000 each. USA Swimming contributed $200,000.
The ads will be targeted toward families with kids and appear on Facebook and specific sites visited by mothers of young children. The PlowShare Group is placing the public-service ads on TV stations nationwide and expects there to be more than 13,000 airings this year.
USA Swimming currently has 400,000 members. Its membership increases 1 percent to 2 percent on average in non-Olympic years and more than 10 percent in Olympic years. Farrell wants the non-Olympic-year membership increases to rise to the same level as Olympic-year increases.
“Sports like golf, tennis and hockey are doing more to promote youth participation,” he said. “We don’t want to be asleep at the switch.”