Is owning a sports franchise a business or a toy?
Right now, the NBA owners are telling you the NBA is a business, and a bad one at that. One that needs to be fixed. Even if it means costing an NBA season.
But you look at owners like Mark Cuban and you see him treat it like a toy — he has said the Mavericks have lost money every year. He has been sued over it. He can kind of erase that on the books because he also owns American Airlines Center and he has said he will cover the debt. But he treats this as a toy and bought himself a title. (Go ahead and say the Heat are trying to buy a title, but the Mavericks paid $20 million more last year in salary and in the last decade only the Knicks have paid more.) Of course, Cuban has made his money on franchise valuation, that has flattened out a lot for owners who bought recently.
In an interesting piece over at Grantland, social commentator Malcolm Gladwell — he of Blink and Outliers and TED — says that NBA owners shouldn’t expect to make financial profit off a team. He notes that owners get a “psychic benefit,” an emotional benefit from owning the team that is what makes owning a sports team different than owning a car repair shop.
The rationale for the NBA lockout, from the owner’s perspective, goes something like this. Basketball is a business. Businesses are supposed to make money. And when profits are falling, as they are now for basketball teams, a business is obliged to cut costs — which in this case means the amount of money paid to players. In response, the players’ association has said two things. First, basketball teams actually do make money. And second, if they don’t, it’s not the players’ fault. When the two sides get together, this is what they fight about. But both arguments miss the point. The issue isn’t how much money the business of basketball makes. The issue is that basketball isn’t a business in the first place — and for things that aren’t businesses how much money is, or isn’t, made is largely irrelevant….
The Financial Times recently interviewed Diego Della Valle, the chief executive of the Italian luxury goods manufacturer Tod’s. Della Valle owns the celebrated Italian football club Fiorentina. “I ask if the decision to buy the club was made from the heart, or for business reasons,” the Financial Times interviewer writes. Della Valle replies: “With football, business reasons don’t exist.” Exactly.
The question to me has become, “has that attitude changed among owners?” I would say Gladwell’s perspective was true 20 years ago, it has shifted some now. The guys who form a partnership and spend hundreds of millions to get a team — guys who are leveraged — get their psychic benefit but do not let that get in the way of the bottom line. They are the hardliners pushing for change.
But should they feel that way? Or should they enjoy the psychic benefits (and the profits they will make when the team is sold) and stop treating their toy like a business? Not sure there is one simple answer to those questions.