Blog: Does Racism Pay In America?

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tIn the Donald Sterling (potential soon-to-be-ousted-owner of the NBA’s Los Angeles Clippers) vs. Adam Silver (NBA Commissioner) battle, the winner is Donald Sterling and the loser is America, along with Silver.

tBefore I tell you why, in absolutely no way, shape, or form do I absolve Donald Sterling from his recently-aired racist views or comments. I do not endorse, try to explain, encourage, rationalize, or associate myself with his comments at all.

tDetroit-area native and former Microsoft CEO Steve Balmer has won the bidding for the LA Clippers at an astonishing and jaw-dropping $2 billion, pending a signed deal and NBA approval. This is a result of Commissioner Silver handing down a NBA lifetime ban to Sterling on April 29 and announcing his intention to seek the forced sale of the Clippers (with the approval of other NBA owners).

tIn its January 2014 issue, Forbes ranked the LA Clippers as the 13th most valuable NBA franchise at $575 million, citing surging ticket sales from high profile players such as Chris Paul and Blake Griffin, increased TV ratings, and the fifth biggest audiences in the NBA.

tComparatively, the smaller-market Milwaukee Bucks just sold in April for $550 million, a 35 percent premium to the January Forbes value of $405 million. Prior to that, the Sacramento Kings sold for $534 million in 2013. In 2011, the Philadelphia 76ers — who like the LA Clippers are only a tenant in their building and also in a Top-5 media-market — sold for $287 million. Forbes valued the 76ers at $469 million in its January 2014, a 63 percent increase since purchased, and No. 23 on the list. (In case you’re wondering, the Pistons placed at No. 25 with a value of $450 million. Owner Tom Gores paid $325 million in 2011.)

tThe No. 1 valued NBA franchise by Forbes was the New York Knicks, at $1.4 billion on $287 million of revenue. Based on Balmer’s proposal to acquire the Clippers for $2 billion — 3.5 times the Forbes value — that makes the Knicks instantly worth $4.9 billion in the No. 1 media market. So they’re worth $2 billion more than the New York Yankees or Dallas Cowboys, the highest valued sports franchises by Forbes? Let alone the Clippers seemingly valued just under the Yankees and Cowboys? I don’t think so.

tWhere NBA Commissioner Silver didn’t think it through, and got it wrong, was the forced sale of the Clippers. It appears Balmer could pay a massive altruistic-ego-driven premium for the team. But you don’t punish the actions of someone like Sterling by increasing his franchise value 3.5-times in the period of 30 days.

tRather you kill the value of his brand and franchise by doing things like taking away draft picks and instantly granting free-agent status to the entire Clippers team, albeit at the expense of Clippers fans. Sterling would have essentially ended up with an expansion-like team, declining ticket sales, shrinking TV viewership, and a reduced franchise value.

tInstead, Sterling may be the one laughing all the way to the bank. America really taught him a lesson, didn’t they?

tJustin Winkelman is a business consultant in the areas of strategic planning, business operations, and social media marketing and implementation.

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