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$2 Billion for Clippers?

In Time, It May Be a Steal for Steve Ballmer


By KEN BELSON and RICHARD SANDOMIRMAY 30, 2014
Men with vast fortunes who have bought professional teams as toys are not uncomm
on. Whether they considered the franchises sound investments is almost beside th
e point.
The latest major player in the business is Steve Ballmer, the former Microsoft c
hief executive, who agreed on Thursday to pay $2 billion for the Los Angeles Cli
ppers nearly four times as much as the previous record price for an N.B.A. franc
hise.
On Friday, the league said that in light of the sale, it would withdraw its pend
ing charges against the current owner, Donald Sterling.
Could the team possibly be worth that much, fans immediately wondered or is Mr.
Ballmer, whose net worth is estimated at $19 billion, simply indulgent?
In time, the $2 billion bid that seems shocking today may be viewed as a relativ
e bargain.
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RELATED COVERAGE
On Friday, Donald Sterling sued the league for $1 billion, saying it had violate
d antitrust laws and his constitutional rights. Legal experts said it was unlike
ly he would win.With Sale Pending, Vote on Sterling Is CanceledMAY 30, 2014
Donald Sterling in 1981, the year he bought the Clippers.Rich and Richer: Sterli
ng to Reap 15,900 Percent Return on SaleMAY 30, 2014
Steve Ballmer greeting the ex-N.B.A. star Bill Russell at a college game in Janu
ary. Ballmer is estimated to be worth $20 billion.Steve Ballmer Said to Sign $2
Billion Deal to Buy ClippersMAY 30, 2014
It seems that Donald Sterling may want to sell, but he is also vowing to battle
the accusations against him to the bloody end, his lawyer said.Clippers Draw Some
High-Profile Offers MAY 28, 2014
There was a time when $10 million was considered an outrageous sum to buy the Ya
nkees. It was 1973, the Bronx was crumbling, and George Steinbrenners purchase (f
or about $50 million in todays dollars) made jaws drop. Jerry Joness $140 million
outlay for the Dallas Cowboys in 1989 had the same effect, as did the 2012 sale
of the Los Angeles Dodgers for $2.15 billion.
Photo
T-shirts on seats at Staples Center in Los Angeles before an opening-round playo
ff game between the Clippers and the Warriors. Credit Mark J. Terrill/Associated
Press
Mr. Ballmer, like Mr. Steinbrenner, Mr. Jones and others before him, may be bett
ing that sports will continue to be a growth industry, bringing expanding revenu
e from broadcast rights, ticket sales and sponsorship deals.
Everyone looking at this is looking at the future of the N.B.A. and the upcoming
TV deals, said Sal Galatioto, the president of Galatioto Sports Partners. He adde
d, It does significantly boost the price of large-market N.B.A. teams, and all N.
B.A. teams.
The Clippers are the 13th-most valuable franchise in the N.B.A., according to ca
lculations by Forbes, which estimated that the team generated $128 million in re
venue last year. Nearly 40 percent of that came from fees for television rights
the driving force for major sports deals these days.
The deal for the Dodgers, for example, was largely predicated on the prospect th
at the new owners investors from Guggenheim Partners could set up a local sports
network. They did that last year, in an $8 billion, 25-year arrangement with Ti
me Warner Cable.
The Clippers local cable television contract, for $18 million a year, is nearing
renewal, and projections suggest that the team could get as much as $60 million
a year. Mr. Ballmer would also benefit from the N.B.A.'s next round of national
television deals, which begins in the 2016-17 season. The teams are expected to
receive substantially more than the $30 million a year each one currently gets.
The Clippers are a scarce asset, another factor that might have enticed Mr. Ball
mer. Clubs in big-market cities like New York and Los Angeles, and cornerstone f
ranchises like the New England Patriots and the Dallas Cowboys, are in position
to generate significantly higher bids because there are so few available.
The Clippers are not a cornerstone team, but they are in Los Angeles. And after
decades as a doormat, they are on the upswing, with stars like Chris Paul and Bl
ake Griffin. Their more glamorous local rivals, the Lakers, are down.
Assuming his purchase is approved by the N.B.A., Mr. Ballmer, 58, is likely to e
njoy significant personal financial benefits. When an investor purchases a sport
s team, he can attribute a large part of the purchase price to the player contra
cts he is acquiring. As those contracts expire, their depreciation can offset in
come.
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Given how low interest rates are, he could finance part of the purchase of the t
eam relatively inexpensively, and he could later bring in minority shareholders
to recoup some of his purchase.
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RECENT COMMENTS
I Boesky 2 hours ago
There's one thing I can't stand, slightly less than "no problem" from a waiter a
s the new "you're welcome", and that's a reporter pretending...
Byron 2 hours ago
Maybe he'll bring them to Seattle ...
Ignatius J. Reilly 2 hours ago
This is not an investment, in the normal sense, for Ballmer. It is a toy. An exp
ensive bottle of wine. A supercar. It gives his life...
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Still, there are no guarantees that the Clippers will make a profit for Mr. Ball
mer. Rob Tilliss, who runs Inner Circle Sports, which advised one of the other b
idders, said that there were reasons to be optimistic about the Clippers financia
l outlook but that the $2 billion offer was based on wishful assumptions that wo
uld all have to come true for Mr. Ballmer to get his money back.
If you believe in the growth of the league, you believe in the TV rights renewals
and you want to be the big guy in L.A., it makes sense, Mr. Tilliss said. But I c
ant make the economic argument for you.
The bid was three and a half times the amount the team was recently valued at by
Forbes. It was also 20 percent more than the next closest offer. Some analysts
said Mr. Ballmer might have purposely submitted a bid that would far surpass tho
se of the other contenders including a group with Oprah Winfrey so he could swif
tly end the auction and win the support of Rochelle Sterling, who co-owns the Cl
ippers with her husband.
Mr. Ballmer took a similar approach when he ran Microsoft, paying what some anal
ysts thought were obscene amounts for companies. In 2011, for example, Microsoft
paid $8.5 billion for Skype, more than tripling what eBay had paid for the comp
any several years earlier.
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The team Mr. Ballmer is hoping to buy has never made it past the second round of
the N.B.A. playoffs and does not have its own arena, a significant financial ha
ndicap.
Mr. Ballmer made one previous attempt at buying a stake in an N.B.A. team. Last
year, his groups bid to buy the Sacramento Kings failed; the group had planned to
move them to Seattle. Now he stands to play the role of savior and could lobby
from within the league to expand to Seattle.
This comes on the heels of Ballmer going through a wretched fight for the Kings,
and hes leaving Microsoft and wondering about what to do next, said Marc Ganis, wh
o advises owners and potential owners. Now hell be a hero for stepping up to take
over a franchise that the nation wants taken away from Donald Sterling. He will
ride in on his shiny steed.
****
Phil Jackson Gives Knicks Carmelo Anthony a Plan C
By SCOTT CACCIOLAMAY 30, 2014
Photo
Phil Jackson said he gave Carmelo Anthony a notification date to inform the team
of his plans this summer. Credit Mark Lennihan/Associated Press
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GREENBURGH, N.Y. With the embers still smoldering from his failed pursuit of Ste
ve Kerr, Phil Jackson has managed to remain in the hunt for another elusive targ
et: Carmelo Anthony.
Anthony has maintained for months that he intends to opt out of his contract wit
h the Knicks this summer so he can explore his options as a free agent. But Jack
son, the teams new president, said he recently presented Anthony with another pat
h: Why not stick it out for one more season and see how it goes? In other words,
opt in rather than opt out.
I just offered that as, This gives you an opportunity to see how this is going to
change,'? Jackson said Friday morning in a 40-minute question-and-answer session
with several reporters who cover the team on a regular basis. But thats his option
, thats what hes earned, and thats part of his contractual agreement. He has that r
ight.
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RELATED COVERAGE
Phil Jackson, left, as the coach of the Lakers and Pat Riley as the coach of the
Heat at a game in 2005.On Pro Basketball: Knicks New President Could Look to Pat
Rileys Success With the HeatMAY 28, 2014
It was Jacksons 74th day on the job. It is his first time as a team executive aft
er a storied career as a coach, and he is still charting a course through uncert
ain waters. He remains without a coach after being spurned by Kerr, who opted to
join the Golden State Warriors. In fact, Jackson said, he had received what he
described as a commitment from Kerr and then the Warriors came calling.
So I had to kind of release him to actually go to this job and say, You have to do
whats right for yourself,'? said Jackson, adding that he felt the Warriors job ap
pealed to Kerr primarily because of his California ties. I understood entirely th
e process he was going through to have that job open up. That was something he t
hought would be a good fit for him. So thats good. Were happy for him.
It was an act of unusual benevolence given the Knicks sizable investment in Jacks
on, who said he had interviewed a number of candidates. He indicated that Derek
Fisher, a veteran guard with the Oklahoma City Thunder, was on his list, perhaps
even at the top. But Jackson said he had not spoken with Fisher, and would not
until Fishers playoff run concludes.
Id like to have a prior relationship with a coach, so that we know that weve gone t
hrough some kinds of issues together, Jackson said, adding, Weve had conflicts, and
weve had disagreements, and we know how to work things out.
Jackson also said that he had not contacted Brian Shaw, the coach of the Denver
Nuggets. Shaw played for and coached under Jackson with the Los Angeles Lakers,
but he is under contract and has pledged to stay with Denver. Besides, Jackson s
aid, he would be reluctant to deal with the Nuggets after the Knicks sent them f
our players and three draft picks as part of the 2011 trade for Anthony.
Denver has everything that we owned for the last few years, Jackson said, deadpan,
so theres nothing else I want to give them.
Jackson, who has had health issues in recent years, was again asked if he had co
mpletely ruled out coaching. He prefaced his response with a long pause.
Im going to be interested in coaching, he said. Its whether I can do it or not, and I
have to understand my physical capabilities. And at this point, I dont see how u
nless the Lord heals me in the next week or two, I wouldnt see myself being physi
cally prepared to take on the grind of coaching a basketball team right now.
Jackson said he had kept in regular contact with Anthony, who has one year and $
23.5 million remaining on his current contract but can opt out through a player
option. While Jackson said he was not losing any sleep over the real possibility t
hat Anthony would enter free agency, he did acknowledge that it was a concern.
We recognize his talent and his skill is the kind of skill and talent that gets y
ou through playoff games where things get dicey, Jackson said. Hes one of the few p
layers who can do that.
Jackson said it could help the team negotiate salary-cap limitations if Anthony
were to remain in his current contract for another season.
We have an opportunity in the next couple of years to get back in the hunt for fr
ee agents that are headline players, Jackson said. Can we get two instead of just
one? Yeah, thats a possibility. The reality of how to do that involves Carmelos co
mpliance.
A version of this article appears in print on May 31, 2014, on page D3 of the Ne
w York edition with the headline: Jackson Is Still Seeking a Coach for the Knick
s and a Way to Retain Anthony.