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The Business of Sports

The Grinch Who Stole Christmas Basketball

It’s (almost) official—you’re not going to be able to use the Los Angeles Lakers or the Miami Heat as an excuse not to talk to your relatives on Dec. 25. In fact, if you listen carefully to the words of Commissioner David Stern and NBPA Executive Director Billy Hunter, there’s a “high probability” there won’t be an NBA season at all.

Love and Basketball reruns and uncomfortable silences, here we come.

This week, NBA executives are running around trying to figure out, among other things, what happened to Monday’s offer that wasn’t accepted. On Tuesday, the NBPA filed two separate antitrust complaints, one in Minnesota and the other in the Northern District of California, seeking summary judgment and damages of three times wages lost because of what the Minnesota complaint alleges is “an illegal group boycott” of players by the owners.

NBPA Executive Director Billy Hunter and President Derek Fisher announced the move in a press conference attended by team representatives and other players, including the Los Angeles Lakers’ Kobe Bryant, the Oklahoma City Thunder’s Russell Westbrook, and the New York Knicks’ Chauncy Billups. The collective bargaining process has “completely broken down,” Hunter said during the press conference. “We have negotiated in good faith for over two years … but the players just felt that they have given enough.” Fisher added that the players’ decision was made “in unanimous fashion … this is where it stops for us as a union.”

We’ve watched this decertification movie before. The minute the players filed the antitrust lawsuits, we’re witnessing the same loss of control from the hands of the businessmen into the hands of the judges, just as we did with the NFL four or five months ago.

What about the cities? When you look at the big picture, Portland, Memphis, and Oklahoma City rely on their NBA teams. It’s the only major league professional game in town. Sacramento is looking for a new arena, or else the Kings might move to Anaheim. And in Orlando, where the NBA All-Star Game is scheduled for late February, $150 million of local economic impact could be lost.

As discussions migrate from the hard court to federal courtrooms, fans and business interests remain divided, however, on who the Basketball Grinch really is. Is it Stern, mindful of his legacy, and his cadre of unrelenting owners, fueled by self-interest and billion-dollar TV rights deals? Or is it the multimillionaire players who refused to take the last, best, and arguably only decent deal they’re likely to get?

For these players, it’s paycheck time. Nov. 15 was to be the first day they would get their biweekly paychecks. Lakers star Bryant loses $1.05 million every pay period, while Dwight Howard is out $745,000, LeBron James $667,000, Kevin Durant $566,000, and Chicago’s Derrick Rose $291,000.

Even though Bryant and these other stars presumably have hefty savings accounts, they will still feel the pinch, as will every other player, the cities, and basketball as a whole.

The Legal Lineup

Legal wranglings between the NBA and NBPA are proving to be almost as dramatic as fourth-quarter action on the hard court late in the season, with the NBA Playoffs hanging in the balance.

After labor talks completely broke down over the weekend, the NBA players union hired attorney David Boies to file its antitrust suits against the NBA. Boies, you may recall, worked against attorney Jeff Kessler in the NFL’s labor war. Now he’s working with Kessler, and together they form a power duo that ought to give NBA owners pause.

Another discrepancy from the NFL’s legal moves: Instead of decertifying their union outright, the NBA players filed a “disclaimer of interest” allowing them to speed up the process and immediately file the antitrust suits. Decertification is a formal process requiring that a petition of union members be signed and a waiting period of 45-60 days be mandated so that the National Labor Relations Board can conduct a full vote of rank-and-file union members. Disclaiming interest also potentially preempts a long, drawn-out court battle and makes it easier to reconstitute the union should the players need to regroup to approve a new collective bargaining agreement quickly—which is what happened last summer with the NFL.

What happens next? NBA owners are now regrouping with the commissioner and their own attorneys to figure out their next legal counterpunch to the lawsuits, which could take months (or years) to resolve. Even facing the potential loss of an entire season, however, industry analysts are almost unanimous in their prediction that the NBPA’s legal actions will not send the owners rushing back to the bargaining table. They’ve long anticipated this day, and have thus made provisions for a long, cold season without any basketball related income. Even a legal settlement is likely a long winter’s rest away.

Cities on the Sidelines

In Memphis, where the Grizzlies are the only pro sports option for fans, Memphis and Shelby County Sports Authority executives told the Memphis Commercial Appeal that a year-long NBA lockout would “likely mean a loss of about $4.5 million in revenue at FedExForum from a $1.15 seat-use fee and from tax on NBA sales in Shelby County.” Sports Authority Chairman Bill McGaughey told the city council, however, that a $13 million surplus fund built up over the past eight years will “help the city and county endure the financial impact from a long-term NBA lockout.” Good news for local taxpayers: The city and county are not required to pay back money drawn from the reserve fund.

In Oklahoma City, where the Thunder went deep into the 2011 NBA Playoffs and seemed poised for their first possible title run in 2012, diehard basketball fans are disappointed that the promise of the last season won’t come to fruition, at least for now. Oklahoma City officials estimate that a canceled season would lead to an impact in direct spending on the local economy of at least $1.28 million per game played at Chesapeake Energy Arena, or at least $55 million, even if the Thunder were to miss the Playoffs, the Daily Oklahoman reports. Echoing the quiet optimism in Memphis, however, the Oklahoma City Convention & Visitors Bureau reported on Tuesday that $115 million worth of conventions, meetings, horse and livestock shows, and other sporting events have been booked in the city, numbers that are slightly ahead of the bureau’s predictions for the quarter.

Despite the cash cow magic kingdom in its backyard, Orlando looks to be hit especially hard if the NBA season is canceled. The Magic is the marquee tenant in the year-old Amway Center, which needs the consistent flow of NBA revenue to pay off construction debts. According to the Orlando Sentinel, Orlando’s government will “still collect an annual $2.8 million payment from the Magic even if the season is scrapped.” But the city “could lose another $2.5 million or more in ticket surcharges and parking revenues.”

Then there’s the specter of a lost All-Star Game in Orlando. The three-day event could pump up to $150 million into the area’s economy, and while the Magic, the NBA, and city of Orlando are proceeding as if the 2012 NBA All-Star Game “will be played as scheduled” on Feb. 26, including holding regular planning meetings for the event this week, the weekend is clearly in jeopardy, and the league allegedly has no contractual obligation to award another All-Star Game to the city in the near term.

Ancillary damage from the NBA labor impasse and canceled games is not limited to the U.S. The league has long been at the forefront of global expansion by American sports concerns, with its games televised in more than 190 countries and more than 50 languages. The league has 14 international websites that provide comprehensive coverage of its games, players, and events. NBA TV, which was launched internationally during the 2000-01 season, reaches a record number of fans each new year, with a presence in close to 50 countries in 2011. The league has also significantly expanded its footprint in China, where it now reaches more than 315 million TV households through primary partner China Central Television (CCTV).

Right across the border, Michael Thompson, chairman of the Toronto Economic Development Committee, on Tuesday told the Globe & Mail, “We want the season to start. There’s an economic impact that will occur,” while Councillor Josh Colle added, “It could really hurt the Raptors‘ lock on the market. This could really hurt the team and have a larger negative impact on Toronto. We saw it in baseball.”

At Primetime Sports’ Sports Management Conference in Toronto on Tuesday, Tom Wright, director of Ultimate Fighting Championship’s Canadian operations, echoed that sentiment. “The NBA’s return is not a layup for this city, because [basketball is] not the No. 1 sport in Toronto,” he emphasized, “just [as] hockey wasn’t the No. 1 sport in some American cities [when that sport went through its own labor troubles a few seasons ago].” The ambivalence of fans and businesses,” Write went on, “showed in the aftermath of the NHL labor stoppage, and we may experience that here when the NBA impasse is over.”

Rick Horrow is a leading expert in the business of sports. As chief executive officer of Horrow Sports Ventures, he has been the architect of 103 deals worth more than $13 billion in sports and urban infrastructure projects. He is also the sports business analyst for CNN, Fox Sports, and the Fox Business Channel. Karla Swatek is vice-president of Horrow Sports Ventures and co-author of Beyond the Box Score: An Insider's Guide to the $750 Billion Business of Sports (2010). Horrow is also the host of Sportfolio, a new program on Bloomberg TV that airs Wednesday nights at 9 pm ET.

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