NBA Deputy Commissioner Adam Silver speaks at a press conference during the 2011 lockout.( Getty... [+]
For a long time. sports franchise owners have been mocked by the press for pleading poverty every time a collective bargaining agreement with their players comes up. Operating losses? So what. Owning a team is about fun and ego, about joining the club. Then there's the inevitable growth in franchise value - the money always comes back to you when it's time to sell.
But some in sports' power structure - NBA Deputy Commissioner Adam Silver, Patriots owner Jonathan Kraft and Dodgers CEO and minority owner Stan Kasten, beg to differ. At least as far as the modern sports business world works. Addressing a big crowd at the MIT Sloan Sports Analytics Conference in Boston, they largely pitch the case that the notion of running your team under the model of championships trumping EBITDA is becoming a thing of the past.
"That's changing, if there aren't profits to reinvest, we aren't going to grow," says Silver. "These are (now) huge investments with enormous risks." The biggest changes the panel noted over the years: the size of sports organizations today compared to the prior generation. Kasten noted his first Atlanta Hawks team - he became GM in 1979 - employed a about five people in the front office (he was exaggerating). The Hawks club he left in 1990 employed 1oo or so. Yet in both years, "if absolutely everything went right, we could maybe make a million bucks." Kraft mentioned things like research - for both monitoring fan databases and football analytics - that didn't exist when his family bought the Patriots in 1994 but now require a dozen employees to run.
The overriding point: business comes first, something most owners and league execs would have been loathe to admit not so long ago. This a bigger, more sophisticated industry that requires a lot more capital to get into than it used to. The notion that each club enjoys monopoly rights in its home market is outdated - you're competing against myriad entertainment options these days. Even the high selling prices are a bit misleading, since many owners could get higher returns investing that money in their core businesses.
Why do new owners come along and pay premiums for, say, the Dodgers or the Golden State Warriors? There's the growing media rights money and there's personal gratification, for sure. Kraft acknowledges that the "coolness" factor plays a big roll, that in many cases the underlying business does not justify the high valuations.
Also, as Kasten puts it: "I have never known an owner who doesn't come in and say, 'I can make it better, I can fix it.'" Of course, that's just what his group is trying to do in L.A. Kasten, an irascible, likable sort - like that grumpy uncle who everyone adores even as they roll their eyes at him from time to time - likes to air his gripes about the job even as he keeps doing it as a lifer. The ice cream truck he once drove didn't have 500 media outlets dissecting his every move, or 56,000 potential customers to serve 81 times a year."It's daily struggle," he says.
It's managing a visible, public brand with a lot of money behind it. Winning a title is great, but generating returns is paramount. Yes, the two go hand-in-hand, but not entirely. As Silver put it from his league's growth perspective: "Winning is a zero sum game, we can't manufacture more wins on a collective basis."
