Politics & Policy

Donald Sterling Will Face an Economic Death Spiral if He Doesn't Sell the Clippers


Los Angeles Clippers' owner Donald Sterling applauds his team's performance against the Atlanta Hawks in Los Angeles in 2008

Photograph by Noah Graham/NBAE via Getty Images

Los Angeles Clippers' owner Donald Sterling applauds his team's performance against the Atlanta Hawks in Los Angeles in 2008

On Tuesday, NBA Commissioner Adam Silver dropped the hammer on Los Angeles Clippers owner Donald Sterling, banning him from the league for life and fining him $2.5 million for the racist rant he delivered to his mistress. Silver also said he hopes the owners of the NBA’s other 29 teams will force Sterling to sell the Clippers—which, under league rules, will require the support of at least 75 percent of them.

If you ask me, the vote will almost surely be unanimous. What owner will want to explain to fans and reporters why he’s sticking up for a guy like Sterling? But on the slim chance that Silver can’t persuade a critical mass of owners to force Sterling to sell the Clippers, the economics of holding on to the team almost certainly will.

The scenario that would unfold in that event is basically the opposite of the one I describe in my recent profile of Boston Red Sox owner John Henry. One vital building block of a winning team is a strong revenue base to help pay those eight- and nine-figure player contracts. As Henry explained, the first thing he did after acquiring the team was hunt for new sources of revenue. “When we came in, the Yankees were spending extraordinary sums. What we determined we had to do to be competitive … was be extremely aggressive about revenues,” Henry said. “Everything we did, whether it was with regard to Fenway Park, NESN, sponsorships, we were determined to leave no stone unturned to increase our revenue so we could go toe to toe with the Yankees.”

What’s happened to the Clippers since Sterling’s comments became public is that many of the team’s revenue sources have evaporated. According to my colleague Ira Boudway, 16 corporate sponsors have terminated or suspended their affiliation with the Clippers. Ticket sales, another important source of revenue, are also drying up. One could reasonably assume that a Clippers team owned by Sterling, even in absentia, would see its marquee players, such as Blake Griffin, bolt for another team as soon as they were able and find it impossible to lure brand-name free agents to replace them. This would give fans even less of a reason to show up or tune in.

In short, Sterling would face a rapid economic death spiral that would quickly diminish the current $575 million value of the franchise. I doubt that even Donald Sterling is stubborn enough to let that happen.

Green_190
Green is senior national correspondent for Bloomberg Businessweek in Washington. Follow him on Twitter @JoshuaGreen.

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