Bloomberg News

Clippers Face Crisis Management as Sponsors Flee After Remarks

April 29, 2014

Clippers Owner Donald Sterling

Donald Sterling, owner of the Los Angeles Clippers, looks on as his team plays against the Minnesota Timberwolves in Los Angeles, California, on April 10, 2013. Photographer: Andrew D. Bernstein/NBAE via Getty Images

The National Basketball Association must focus on its relationships with sponsors as it investigates comments attributed to Los Angeles Clippers owner Donald Sterling, according to a crisis manager.

The NBA scheduled a news conference for 2 p.m. today in New York to discuss a recording on which, according to TMZ, Sterling told a girlfriend he didn’t want her to bring black people to games. The comments have drawn criticism from Hall of Famer Michael Jordan and U.S. President Barack Obama.

CarMax Inc., Virgin America Inc.. Mercedes-Benz and Chumash Casino Resort said they were ending their relationships with the Clippers, while Kia Motors (000270) Corp. and State Farm Mutual Automobile Insurance Co. were among sponsors suspending their agreements.

“Once sponsors begin bailing, you have a financial crisis,” said David Johnson, chief executive of Suwanee, Georgia-based public relations firm Strategic Vision LLC. “Now this becomes yet another reason to discipline him quickly and something more for the league and team to focus on.”

The NBA should be reassuring its marketing partners, a group that includes Coca-Cola Co. (KO:US), Nike Inc. (NKE:US), Samsung Electronics Co. and State Farm, Johnson said. Civil rights activist Al Sharpton told Bloomberg News that he planned to target marketing and broadcast partners in an effort to pressure the league into imposing a punishment on Sterling.

Sponsorship Value

Sponsorships are worth $30 million-$50 million annually for an NBA team in Los Angeles, according to William Sutton, a marketing consultant who worked in the NBA’s Team Marketing and Business Operations division. The sponsors that have announced changes to their approach have done so only in their relationship with the Clippers.

“The next question is: Will the NBA also begin losing sponsors if they don’t take faster action?” said Johnson, whose firm has represented Grand-Am Road Racing drivers in their sponsorships.

The NBA is confronting what happens when unacceptable behavior more-often reported about players extends to the ownership level, said Jason Maloni, chairman of the sports and entertainment team at public relations firm Levick. Maloni compared it with a similar situation that the National Football League faced last month, when Indianapolis Colts owner Jim Irsay was arrested on suspicion of intoxicated driving and possession of a controlled substance.

“If you’re going to bring penalties down on players for bad behavior, you better well do the same when it happens at the top,” said Maloni, whose firm represented baseball pitcher Roger Clemens during his federal trial for lying about performance-enhancing drug use.

Owners Penalty

That probably means the NBA imposing a financial penalty scaled up to the ownership level, Maloni said, and possibly other penalties that limit punishing the team’s players or coaches.

Maloni and Johnson disagreed about how the NBA has responded so far. Maloni said it was prudent for the league to buy time as it investigated the veracity of the recording; Johnson said the NBA waiting until today before issuing any kind of discipline has allowed the story to grow and dominate the news cycle without resolution.

Tim Beecher, head of crisis communications at St. Louis-based public relations firm FleishmanHillard Inc., said there is often a thin line between doing proper due diligence and waiting too long.

“There’s no hard and fast of how much time you need,” Beecher said in a telephone interview. “But you want to communicate that you’re acting forcefully and willfully to fully understand what’s happened.”

Clippers Response

Clippers president Andy Roeser three days ago issued a statement saying Sterling was “emphatic” that what is reflected on the recording is not consistent with his beliefs. Various Clippers players have expressed outrage at the recording, and coach Doc Rivers said returning to Los Angeles after two games on the road may not be the “safe haven” it used to be. Game 5 is tonight at the Staples Center.

“How do you distance yourself from your owner?” Johnson asked. “The best-case scenario for them is that Sterling falls on his sword, or the NBA swoops in with a quick ruling.”

Inside-Out Jerseys

Before the team’s 118-97 playoff loss to the Golden State Warriors two days ago -- which tied their best-of-seven series at 2-2 -- Los Angeles players warmed up with their jerseys turned inside out, obscuring the Clippers logo. Maloni said the gesture satisfied a core crisis management tenet of “letting your actions speak louder than words.”

“They didn’t need a press conference, a blog strategy or an ad campaign for everyone to understand where their sentiments were,” Maloni said. “There was no mistaking what that was about.”

Sterling bought the team in 1981 for $12 million, according to Forbes. The Clippers are now worth $575 million -- No. 13 in the 30-team league -- with $128 million in revenue last year, according to the magazine’s annual valuations.

For the owner, the recording’s damage may be irreparable. Johnson said there are three types of public scandals that are career-ending -- those involving mistreatment of children, mistreatment of animals and race.

“There’s really nothing from a crisis communications standpoint that you really can do, except try to get him out of the way,” Johnson said. “He needs to say he’s sincerely sorry, denounce racism, then step aside. He can’t save his reputation.”

Eli Broad, a Los Angeles-based homebuilding and insurance billionaire, echoed Johnson’s call for Sterling to part ways with the Clippers.

“I think clearly the Clippers need new ownership,” Broad said in an interview yesterday at Bloomberg’s Los Angeles office. “He finally got a winning team and he screws it all up.”

To contact the reporter on this story: Eben Novy-Williams in New York at enovywilliam@bloomberg.net

To contact the editors responsible for this story: Michael Sillup at msillup@bloomberg.net Dex McLuskey, Rob Gloster


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