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A Couple of Basketball Owners Who AREN'T Losing Money

Newspiritslogo_mediumWhile trying to make sense of the mind-numbing details of NBA basketball team finances, looking for clues to unlock the mystery of whether or not the owners are losing money and just how much, I came across this little side story. You may have heard it before- I was certainly aware of it at one point or another, but it suddenly has new relevance at this point.

It happen back in 1976, at the time of the ABA-NBA merger. Now if all you know about the ABA is what you learned from Jackie Moon in Semi-Pro, I'm afraid that a few of those details were not exactly historically accurate. (The stuff about Jackie wrestling a bear was right, but some other stuff they just made up.)

One thing they got right was that the NBA did indeed insist on a maximum of four teams from the ABA participating in the merger. They were willing to add four teams, and that was all. But it was not simply going to be the four teams that finished at the top of the ABA standings - the financial health of the team, the desirability of the team's market, and maybe a little luck all played roles as well.

The ABA began the 1975-1976 season with ten teams. However, the league was already on its last legs, and several of those teams were in dire straights. If you've never heard of the Baltimore Claws, maybe it's because they never actually played a game. The Memphis Sounds relocated to Baltimore during the off-season, but the team folded after one pre-season game, not even making it to the regular season.

An ABA predecessor of the Clippers, the San Diego Sails, fared little better than the Claws. Having renamed the team after playing several seasons as the Conquistadors, San Diego (a team that featured Caldwell Jones, Mark Olberding and Dave Robisch) collapsed just 11 games into the season. Similarly, the once-proud Utah Stars made it only to game 16 before running out of money.

That left the league with just seven teams for the bulk of the season. The Virginia Squires had once been one of the most competitive teams in the entire ABA. But they were never strong from a financial standpoint, and for instance had to sell Julius Irving to the Nets in 1973. They struggled through their final ABA season with a shell of a team, and made it through 83 games of an 84 game schedule before finally succumbing.

So the league began the final season with ten teams, and finished with six. Four merged into the NBA. What happened to the other two?

It was always known that the Nuggets (with David Thompson) and Nets (with Julius Irving) would be a part of the merger; in fact, those two teams almost joined the NBA a season earlier in 1975, which pretty much would have ended the ABA then and there. The Spurs (with George Gervin) were having great success both on the court and at the box office in San Antonio, and they were a logical inclusion (and have obviously been the biggest success story of the former ABA teams). The fourth team might have been the Kentucky Colonels, who were one of the strongest teams throughout the existence of the ABA; but the Bulls owned the NBA rights to Kentucky center Artis Gilmore and therefore opposed the Colonels as a merger team. Chicago's objection to Kentucky meant that the Pacers were the fourth team.

That left Kentucky and the sixth team, the Spirits of St. Louis, on the outside looking in when the merger occurred. Kentucky owner John Y. Brown Jr. (who would go on to play a role in the history of the Clippers as the original owner of the expansion Buffalo Braves) took a buyout of $3M from the other ABA owners, plus $1.1M from the Bulls for Gilmore in exchange for not being part of the merger.

The St. Louis owners, brothers Ozzie and Daniel Silna, drove a slightly better bargain. They only managed to get $2.2M in cash at the time of the merger, but their lawyer slipped in a little something extra as well: the brothers Silna would receive one seventh of the television broadcast revenues from each of the four merging teams IN PERPETUITY! So, for each national TV deal the NBA has ever struck, the Silna brothers have gotten 4/7th of 1/30th, or almost 2%! This for two guys who owned an ABA franchise for two seasons in the 70s.

It's one of the greatest deals ever struck in the history of sports business. My back of the envelope math tells me that for the $4.6 BILLLION, 6 year National TV deal from 2002 to 2008, the Silna's made about $88M, or almost $15M each year. The current deal presumably pays them even more. Which would place them among the most profitable owners in all of basketball, apparently.

Of course, that money is coming from somewhere, and that would be the bottom line of four other NBA teams. Denver, San Antonio and Indiana are all in relatively small NBA markets, and New Jersey is hemorrhaging money, so none of those teams can really afford to be giving money away. But that's exactly what they're doing - sending 14% of their TV revenues to a couple of midwest polyester barons because of a 36 year old business deal.

So one wonders - does the new CBA have to ensure that the owners are profitable with or without taking the Silna's into consideration?