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Everyone wants a piece of the NBA, and the NBA wants a piece of everything
MJ sells out of the NBA, and the NBA might be buying into its leading media partner. Bad news.
Good morning. Let’s basketball.
The Prodigal Son in the Brothel; Rembrandt; 1635
Two pieces of related news.
First, the sale of the Charlotte Hornets was approved by the NBA Board of Governors. Michael Jordan led a group buying the team for $275 million in 2010. The sale put the team’s valuation at $3 billion. Unless the team somehow lost $200 million in each of the past 13 years, MJ — the world’s first billionaire pro athlete — has raked in an excellent return on his investment. Assuming no overall net losses for the Hornets, the return is right around 10x.
What happened between in 2010 and 2023 that made trading in NBA franchises so lucrative? A few things.
The 2011 lockout and resultant labor deal in the NBA shrunk player salaries by about $300 million per year in 2012 dollars. In terms of next season, the 2011 labor deal will cost players about $600 million. This is because the NBA owners won agreement to reduce the percentage of total basketball-related income devoted to player salaries from 57% to 51%. This victory completed changed the margins for teams like the Hornets who aren’t printing cash by virtue of existing.
Between increased usage of asynchronous T.V. viewing and cord-cutting, live sports became even more important to the media business, leading to a surge in media rights revenue (one that isn’t really showing signs of abatement). The live sports media rights boom is helping boost basketball-related income, which is boosting the value of individual franchises that get a cut of that income. Teams also have the opportunity to cash in on their own media rights, though this market is in major flux right now.
Owning an NBA team continues to be seen by the very wealthy people involved as a worthwile use of time and money. Michael Jordan needs no help being famous, but some of these other billionaires appear to enjoy being seen courtside.
The NBA owners’ cartel and the players’ union just negotiated another new labor deal, one that mostly locks in the status quo with some elements that serve to make the team salary cap harder, likely at the expense of the well-paid NBA middle class. It’s hard to get too worked up because the total salary guaranteed to the player base remains level. But the owners appear to continue to win these negotiations.
So that’s the first piece of news: Michael Jordan, the all-time face of the NBA, is cashing out at a 10x return after owning the highly disappointing Charlotte Hornets for 13 years.
As Disney considers a strategic partner for ESPN, Chief Executive Officer Bob Iger and ESPN head Jimmy Pitaro have held early talks about bringing professional sports leagues on as minority investors, including the National Football League, National Basketball Association and Major League Baseball, according to people familiar with the matter.
ESPN has held preliminary discussions with the NFL, NBA and MLB about a variety of new partnerships and investment structures, the people said. In a statement, an NBA spokesperson said, “We have a longstanding relationship with Disney and look forward to continuing the discussions around the future of our partnership.”
The NBA and its fellow major domestic sports leagues are so ascendant and lucrative because of the circumstances that contributed to MJ’s huge return that they are apparently in the mix to become investors in ESPN. Disney is in a heap of trouble due to spending billions of dollars on acquiring intellectual property that appears to have diminished returns; the “strategic partner” line in the first paragraph of the CNBC story linked and quoted above is a euphemism for the concept that Disney is looking for someone to buy ESPN without necessarily taking it completely off of Disney’s hands.
Needless to say, direct ownership — even partial — of the leading media partner and journalistic outfit covering the NBA by the NBA would be a nightmare for fans. I suspect it would be an even bigger nightmare for the journalists at ESPN. I suspect it would make life more difficult for Turner Sports and any future media partners. This isn’t because Adam Silver is going to come in with a 20% ownership stake in a spun-off ESPN and start ordering people around. It’s because of what tone it sends off rip, and how it makes whoever leads ESPN at that point decide where to invest resources.
If Adam Silver, Rob Manfred and Roger Goodell are three of your bosses, are you going to invest in making broadcasts of their products shine, or hard-hitting journalism that puts their products under scrutiny? Idealism can only carry so far in corporate America. You see it already with regional sports networks owned in part or fully by the local team. Those team-owned RSNs are breaking unflattering news about players or front offices. They will reluctantly react to news, and in many case they don’t hide it from fans. But there’s a line there the managing editors/producers and journalists are unwilling to cross.
What if the whole industry was like that? Where does the sunlight come from then?
There are credible reports from over the years of David Stern dictating some facets of ESPN’s presentation of the NBA broadcast — announcers he did or didn’t like, studio show line-ups, etc. Maybe you think Silver is above that. I’m not convinced, but even if it were the case, Silver isn’t going to be commissioner forever.
NBA ascendancy is usually seen by fans as a good thing. This is definitely an area with a downside. Here’s to hoping ESPN remains as indepedent as possible from the leagues it covers.
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Ayo Dosunmu, surprisingly back with the Bulls on a 3-year deal. The Bulls are surprisingly close to the luxury tax line.
Katie Heindl on Joel Embiid and Prometheus. Read Katie Heindl.
Also in The Athletic, Mike Vorkunov argues that we should focus on cap percentages for individual salaries, not raw numbers. It’s intuitive but difficult, because a) it’s unnatural to talk about athlete salaries like that and b) the salary cap level probably isn’t the right denominator here because just about every team exceeds the cap. Simplicity is really the endgame here: this is why the terms “max contract” and “mid-level” and “minimum contract” have caught on so thoroughly. Some fans want to know the minute detail of the team’s cap structure so they can cheer or boo the front office. Some fans don’t really care. The broad casual public certainly doesn’t care.
If this new high-detail jumper analysis tool got a glimpse of my form, it would probably implode.
Disaster at the FIBA U18 boys’ European Championship due to bad court conditions thanks to a heat wave, a storm, broken (or unavailable) air conditioning and leaks. FIBA’s impulse here was to keep playing as players were getting injured. FIBA also reportedly issued copyright takedown notices on Jonathan Givony’s footage of the slow-rolling nightmare. Eventually, teams boycotted the action and shut down the tournament. How?
Instead of continuing to compete, the two teams passively moved the ball back around the 3-point line to teammates and opponents while incurring multiple shot clock violations and intentional turnovers to avoid the risk of additional injury, while parents and observers stood and cheered from the stands.
Good on them. Shame on FIBA.
Mike Sykes on the return of Yeezy to sneaker retailers. Plus: Sykes on what you need to know about the rising hype in Asics. I miss my old Onitsuka Tigers.
Alright, back on Wednesday. Be excellent to each other.