Albert’s possible last plate appearances as a Cardinal.
Kevin Durant played some intramural flag football on Halloween. And as the guy who invited him to the game on twitter said, “He’s just the nicest guy ever.”
NBA Economics 101: NBA Ownership, Sanctity Of Sports, Vincent Van Gogh & Profits
Jerry Colangelo, former Phoenix Suns owner and director of USA Basketball, was on The Herd with Colin Cowherd this morning to discuss his views on NBA ownership, high salaries and how to operate an NBA team. Jerry made a few great points that I wanted to explore. I’ll discuss player salaries and the luxury tax later today, but the one statement Colangelo made that stuck out to me was his theory that NBA owners need to protect “the sanctity of the game of basketball” and not worry so much about their bottom line.
Do NBA owners have a duty to protect the sanctity of the sport? That’s what Jerry thinks, and I have to agree.
I am of the opinion that an NBA franchise is more of a luxury good than just another page in one’s investment portfolio. A team should be purchased as a conversation piece and not as a business venture. Not that NBA franchises aren’t profitable, they are, but they don’t always redeem those profits in a traditional sense.
So if an NBA team isn’t a traditional business, what is it?
The NBA is the Vincent Van Gogh for the extravagantly wealthy person who doesn’t want to buy a Vincent Van Gogh.
Owning an NBA team is like owning a piece of priceless art. You pay millions of dollars for it just to hang it up in your yacht or your fourth vacation home. It is your badge of success. You wave your franchise around at parties, invite strangers to your luxury suite and even use it as leverage to broker billion dollar deals. You invite over millionaires and diplomats and politicians and you point at your priceless piece of art on the wall and say, “look, I have something no one else has. I have a piece of culture.”
Because that’s what an NBA team is, it’s a piece of culture, and a rare one, at that. There are only 30 NBA franchises to go around and the possibility of the NBA expanding is as slim as Van Gogh growing his ear back. In fact, even if you are rich beyond all measure, it would be easier for you to purchase one of the 900 Van Gogh’s in existence than it would be for you to own one of the 30 NBA teams. And if you don’t like Van Gogh, there’s hundreds of Picassos for you to choose from.
Just like owning a piece of rare art, it’s the NBA owner’s job to protect the sanctity of their investment and not worry about their yearly operating income. The owner of a Van Gogh, who spends money out of his or her own pocket to parade the Van Gogh from country to country from museum to museum, does it because they have a love for the art. The money is not important; it’s the sanctity of culture, of that piece of art that trumps short term losses. Jerry Colangelo is right; NBA owners have the same civic duty.
Owners must protect the game and help it grow, evolve and get better not try to wring out every last cent from it. What would a worn and tattered Van Gogh be worth if its owner pimped it out for $5 photo shoots at every elementary school on the planet just to turn a yearly profit? The number one concern of ownership should be to ensure the survival of the essence of basketball. If a new system would return them yearly profits but erase the culture of basketball, what would they have left? Would people even watch the game? People don’t pay to go see an assembly line worker put together a car but people do flock from all over the globe to catch a glimpse of Mona Lisa’s infamous smile. It’s not the business model that attracts us or our dollars, it’s the culture.
Owning an NBA team isn’t about the short-term profits, it’s about owning culture.
But why should NBA owners carry the burden of paying for an NBA team for the rest of society to benefit from? Because owning an NBA team will lead to long-term benefits and profits. Just like owning a piece of valuable art, the value of that art is always appreciating. Look at the list of the world’s most expensive pieces of art and look at those dollar figures. Then go explore the historic sales figure of every piece. The short term losses incurred of owning such an object is nothing compared to the astronomical profits made once the piece is sold off.
Even when the NBA is supposedly losing money, billionaires are willing to invest hundreds of millions into a franchise. Any franchise. They can’t wait to get their hands on them. They bid them us and pay prices much higher than their perceived value. So why would smart business people want to tie up so much cash into a business model that supposedly doesn’t leave any profits at the end of the year?
The one prominent form of profit for an NBA owner that is best hidden is how well an NBA team appreciates in value. Outside of the Bobcats, of which we still don’t know what their purchase and sale values where, never has a team sold for a loss on initial investment, not even the deeply troubled Hornets, who were purchased for $32.5 million and sold for around $300 million in 2010. The Philadelphia 76ers, how supposedly haven’t turned a profit in nearly a decade, just sold for a net profit of $150 million dollars and the old ownership, Comcast, got to keep the arena to themselves. Jerry Colangelo sold the Phoenix Suns to Robert Sarver in 2004 for $400 million dollars.
An NBA franchise shouldn’t be viewed as a tool that only makes you money; it should be viewed as a piece of art that will still make you money. And owning an NBA franchise shouldn’t be viewed the same as being a CEO, it should be viewed as being a curator of art.
If NBA owners don’t want to protect the sanctity of the sport, than may I suggest they leave these 30 businesses alone and find one of the hundreds of thousands of traditional businesses to invest in. Perhaps they’d be more comfortable in a corporate culture rather than owning a piece of human culture.