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September 26, 2011
The Nets and NBA Economics
David Stern would have you believe the Brooklyn-bound franchise embodies everything wrong with the league's finances. It's not true.
Grantland
by Malcolm Gladwell
Speaking of must-reads, here's one from Malcolm Gladwell, who does his best impression of Toto pulling back the curtain on the Great and Powerful Bruce's big Monday morning press conference.
Here's an excerpt — but be sure to read the whole thing.
Ratner has been vilified — both fairly and unfairly — by opponents of the Atlantic Yards project. But let's be clear: What he did has nothing whatsoever to do with basketball. Ratner didn't buy the Nets as a stand-alone commercial enterprise in the hopes that ticket sales and television revenue would exceed players' salaries and administration costs. Ratner was buying eminent domain insurance. Basketball also had very little to do with Ratner's sale of the Nets. Ratner got hit by the recession. Fighting the court challenges to his project took longer than he thought. He became dangerously overextended. His shareholders got restless. He realized had to dump the fancy Frank Gehry design for something more along the lines of a Kleenex box. Prokhorov helped Ratner out by buying a controlling interest in the Nets. But he also paid off some of Ratner's debts, lent him $75 million, picked up some of his debt service, acquired a small stake in the arena, and bought an option on 20 percent of the entire Atlantic Yards project. This wasn't a fire sale of a distressed basketball franchise. It was a general-purpose real estate bailout.
Did Ratner even care that he lost the Nets? Once he won his eminent domain case, the team had served its purpose. He's not a basketball fan. He's a real estate developer. The asset he wanted to hang on to was the arena, and with good reason.
...Let us recap. At the very moment the commissioner of the NBA is holding up the New Jersey Nets as a case study of basketball's impoverishment, the former owner of the team is crowing about 10 percent returns and the new owner is boasting of "explosive" profits. After the end of last season, one imagines that David Stern gathered together the league's membership for a crash course on lockout etiquette: stash the yacht in St. Bart's until things blow over, dress off the rack, insist on the '93 and '94 Cháteau Lafite Rothschilds, not the earlier, flashier, vintages. For rich white men to plead poverty, a certain self-discipline is necessary. Good idea, except next time he should remember to invite the Nets.
Related coverage...
ESPN.com, What kind of business are the Nets in?
In a must-read story on Grantland, Malcolm Gladwell uses the Nets as an example of how an NBA team's business role can have almost nothing to do with what's at the crux of the current CBA debate: Basketball revenues.
Gladwell tells the tale of Bruce Ratner's business goals in buying the Nets, which he explains started not with a love of basketball, but with a need to build a stadium to inspire the eminent domain seizure of some particularly valuable land he had his eye on.
Posted by eric at September 26, 2011 5:22 PM