David Stern’s Reverse Solomon
As much as I enjoy much of the drama in the Kings-Sacramento-Seattle love triangle, even I don’t want to bog down this blog with daily updates on the situation. If a deal is signed, the Maloofs apply for the move, or something happens in April when the NBA’s Board of Governors is set to meet, I’ll write about it. Until then, the Kings issue is best relegated to the weekly newswrap.
However, I’ll take this story in a different direction. There’s a solution on the horizon, one that can satisfy all parties: the Maloofs, Chris Hansen, Mayor KJ and Sacramento civic leaders alike. It all starts and ends with two old guys who spent a couple of years in St. Louis.
What’s that, you say? There’s no NBA team in St. Louis? Well, that’s absolutely correct. There hasn’t been a NBA franchise in St. Louis since the A’s moved to Oakland. The St. Louis Hawks moved to Atlanta and never looked back. The only other pro basketball team that has graced the city since is the ABA Spirits of St. Louis, whose two-year stint in the Gateway City was marked more by off-the-court actions than on-court.
That’s because when the ABA merged with the NBA, Spirits team owners Ozzie and Daniel Silna pulled off one of the greatest deals in the history of pro sports, one that continues to benefit the Silnas and haunt David Stern to this day. As several ABA franchises such as the Baltimore Claws and Virginia Squires sputtered to the end, other franchises that were in better financial shape were under consideration to be brought in as new NBA franchises. Eventually, the NBA decided it would accept only four teams into the league: Denver, Indiana, San Antonio, and the New York Nets. It was the culmination of several years of lawsuits, threats, and strife for both leagues as the NBA was struggling with huge image problems. Two teams remained to be dealt with, the Spirits and the Kentucky Colonels, long regarded as the most stable franchise in the ABA. The Chicago Bulls had NBA rights to Artis Gilmore, and they wanted him so badly that they blocked the Colonels from being included in the merger. The NBA paid $3.3 million to Colonels owner John Y. Brown, Jr. to fold the franchise. Soon after the merger, Brown, who owned KFC prior to getting into the pro hoops business, bought the Buffalo Braves and later swapped that for the Boston Celtics.
Ozzie and Daniel were a different story. Instead of taking the $3.3 million payout, they chose to take only $2.2 million and a 1/7th share of national TV revenues for the 4 merged teams in perpetuity. Back in the mid-70′s, no one knew how big the NBA would be. It was common for playoff games and even the finals to be broadcast on tape delay. The Silnas’ prescience became legendary as the league took off only a few years later with Magic-Bird and then soared to unimaginable heights with Michael Jordan. Ever since, the brothers have been getting a 4/7ths team share of national TV money, which has grown exponentially since 1976. In recent years that 4/7ths share has meant around $17 million every year for doing absolutely nothing. It’s the height of rent-seeking, and the crazy thing is that last September, they filed suit to get even more! Now they want cable and international TV dollars, claiming that they lost everything during the Bernie Madoff scandal. No settlement has yet been reached between the Silna brothers and the NBA.
This is where the Kings come in. We know that the franchise’s value has been inflated because of the sale talk and the Maloofs’ financial liabilities. It’s a situation in which one city will come out the winner of the franchise, while the loser may get a “promise” of an expansion team down the road. When it comes to expansion, leagues tend to be hazy on their promises, especially when the leagues don’t really need the cash (like the NBA) and owners naturally don’t want to slice off another piece if they can help it. Yet there’s an interest in getting rid of the Silnas, who have long been a thorn in Stern’s side. Some kind of buyout would also help the 4 former ABA teams, since they’d be on a level playing field in terms of national TV money. 3 of the 4 franchises are in small/mid-markets, so this is no joke.
While the Kings will be sold in a straightforward transaction, the “losing” city’s prospective ownership group can pay an expansion fee, which thanks to Kings-related inflation, should be $500 million. Take some of that money ($200-250 million) and give it to Silnas and their lawyer, while splitting the rest up 29 ways (new Kings owners not included). The other teams would get a one-time $8.6 million-$10.9 million infusion, and future TV money would be split 31 ways instead of 30.57 ways inequitably. The downside is that all other shared revenues would also be split 31 ways, but that’s limited to merchandise and other non-TV sources (not tickets). The Silna brothers walk away with a quarter billion dollars, Stern fixes that nagging legacy problem, and fanbases in Seattle and Sacramento are happy. The NBA would do well to solve this problem before TV contracts come up for renewal after the 2014-15 season. By acting now, owners will have complete cost controls and expanded revenue sharing throughout the life of the CBA.
Funny thing to point out – the total combined national TV revenue for the ESPN/ABC/TNT deals is $930 million annually. It’s quite a coincidence that the total splits into 31 neat, $30 million shares. The solution only works if the Silnas are interested in a big lump sum payout, which they have rebuffed twice already. A quarter billion dollars, however, may be an offer they can’t refuse.