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Volume 20 No. 41
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The Sit-Down: Steve Ballmer, L.A. Clippers

How change in sports media may follow the seismic shift in the music business, thoughts on arena options, and why partners in the NBA are different from partners in the technology world.

T he music business isn’t a perfect analogy,
but I’ll use it anyway because I probably won’t come up with another one.

There was a time when people bought CDs. … There was a discussion about what would happen with the big retailers — Wal-Mart, Best Buy — not wanting music to move to digital. That was like fighting a tidal wave.

When it happened, it didn’t go from you buy CDs in the store to you buy CDs online. … The whole consumption process for music changed.


Who wound up doing the innovation? … It wasn’t the traditional retailers, despite the fact they put money into it. It was this new form of retailer, which was Apple for all intents and purposes. In the movie business, it’s kind of become Netflix, for all intents and purposes.

What will happen in this industry? The rights holders are still going to own the rights and the viewer’s still the viewer.

The question is, along the food chain, will it be the rights holder who makes these changes? Will it be the league [that] makes these changes? Will it be the networks who make these changes? Will it be the cable providers who make these changes? It won’t be all of them.

There’ll need to be a coherent vision for innovation. We know that’s not going to come from any one party here. It’s going to come from some technology providers — we’ve picked NeuLion and Second Spectrum for basketball to go innovate.

There’s still the question, Who’s going to package it all together? I didn’t want to wait to get started till the cable guy decided with the network guy decided with the league guy, who’ve already got their rights licensed for 10 years. I didn’t want to wait for all of that.

So we figured, “OK. I’ve got a passion for technology. We’re at the end of our media contract. Fox is willing to work with us. We’ve got technology partners ready to go. Boom! Let’s go ahead and move forward.”
When you have seven [or] eight years left on your [arena] lease — at least last time I checked with any of my friends who are in the real estate business — you better have an option other than just going back to your current landlord hat in hand and saying, “Please, please, sir. Please give me the chance to play in your building again.”

We’re going to have real options. We’re out putting together those options today.

Staples [Center] is a great building, but if you look around the NBA today, there are other great buildings too that were really optimized for basketball.

If you want to build a new building, you can’t come up with that idea six months before the season and sign a contract. There is a long period that would be required to put a site together, to get it permitted, etc. So we’re out now evaluating options.

I think Staples is the last of an older generation of arena designs. I think particularly in basketball, if you look at the arenas today, especially if they’re not designed to host hockey, they’re closer. They feel more intimate. The noise gets louder. The seat sight lines get better.
I’m a new owner and I’ve heard this is the golden age of basketball economics. You should tell our finance people that. We’re sitting there looking at red ink, and it’s real red ink. I know, it shows up on my tax returns. So it is real red ink.

OK, some of that’s decisions we made … the luxury tax, etc. But there’s still real issues for the owners [and] real issues for the players, and people get a chance to go through that.

Our labor committee, with the league, with the players association, I think that’s a healthy process, and I have my fingers crossed that our fans will continue to see full basketball seasons.
We used to talk about having partners at Microsoft, but the partners were guys like Oracle. We didn’t share any money with them. We kind of made stuff work together.

But in this NBA thing, those guys that I fundamentally think of as competitors, they really are business partners. Their revenue is our revenue and vice versa.

I actually have to think about folks differently because we all do stand together and we stand actually with the players. I call the players our partner. With the players sharing in revenue, in a sense we’re all partners.

What’s important to us is to figure out who gets what. … Owners with owners. Players with players. Players and owners together. The CBA actually has elements of all of those.

These players, they can get traded from Team A to Team B, and all of a sudden somebody who was supposed to be their archenemy is now their teammate.

It’s just still blowing my mind how different all of this makes the world culturally. The best of competition. And yet the best of good human interaction and sociability.