Friday, July 18, 2008

Sonics Settlement Revisited

Some time has passed and much (though not all) of the anti-settlement argument has coalesced over the belief a) the Judge was poised to uphold the lease terms and b) that would have put the City in a better position to extract more money and/or the promise of a new NBA team.

I could nitpick assumption that the judge was going to uphold the lease. But I won't because I don't think it really makes a difference.

Rather, I am going to question the assumption that "winning" the case would have left The City in a better position to extract concessions.

Unlike the NFL or MLB, were you can make money even if you team sucks and your attendance is poor, even successful NBA teams that win and draw well seem to lose money hand over fist. This leads many people to state that the NBA's business model is broken. Whether that's true or not, I don't think most people have internalized what that model is. NBA owners don't buy teams to make money. They buy them to gain respectability and announce to the world that they are players. The Cities that subsidize these purchases by building arenas don't do it to make money either, they do it to announce to the world that they are big time cities and not powdunk towns. In otherwards, buying and owning an NBA team is all about status. Because they don't make money owning teams, the owners have a vested interest in getting repeated public subsidies or making sure they can sell their teams.

I think what you saw in Seattle is that we are no longer a small City that needs to prove to the world how big we are. So when the time came to get that big subsidy the State/City balked. And here's the key. Because NBA owners don't make money on their team's operations and they can't compell Cities to give them subsidies, the owners as a group need to protect their ability to sell the team at all costs.

Had the City won the case, it may have been in Bennett's individual short-term interest to negotiate a better deal or sell. But, it would have been in the NBA as a whole's best interest to stick out the remaining two years of the lease and even reimburse Bennett for the costs of doing so. Why? Because the NBA is dependent on the sale-ability of their franchises and want to discourage other Cities from doing what Seattle did. To be honest, I think the NBA overplayed their hand here and have hurt their ability to sell/move franchises. But I think their next best option would have been to wait the lease out to send a message to other Cities that you may be able to force the NBA to stay but in the end you'll get nothing.

*and yes I realize there are some Cities (like NY and LA) that can make money from operations but those are the exceptions and are unique in the underlying size of the cities.

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