Wednesday, August 09, 2006

The NBA's Most Profitable Franchise: The St. Louis Spirits

The LA Times has done it again with this fabulous story:
Roughly once a month, the NBA cuts 31 checks to NBA teams as revenue from its multibillion-dollar national television contract.

There are only 30 NBA franchises, so who gets the extra check?

The money goes to brothers Ozzie and Dan Silna, co-owners of the long-forgotten ABA team, the Spirits of St. Louis.

Thirty years ago, Ozzie Silna, with attorney Donald Schupak, negotiated a deal that cleared the way for the ABA to merge with the NBA. It ranks as one of the best sports deals in modern times, one that has paid the Silnas about $168 million and continues to pay off. . . .

Part of the Silnas' deal called for them to receive one-seventh of the annual TV revenue from each of the four ABA teams entering the NBA. The deal turned out to be so lucrative that several NBA teams have tried to break it, without success. . . .

The key line in the Silnas' TV contract that makes NBA executives cringe reads: "The right to receive such revenues shall continue for as long as the NBA or its successors continues in its existence."

In other words, the deal lasts as long as the NBA does.

Another key component is that Silna, anticipating the NBA expanding, capped the brothers' portion of shared television revenue at a maximum of 28 teams. The other NBA teams share their revenue among all 30 teams. . . .

In 1976 the ABA reached a merger deal with the NBA. The NBA agreed to take four of the six teams from the dismantling ABA. The Spirits and the Kentucky Colonels were not invited to join the league. However, the ABA owners needed to reach unanimous approval for the merger to take place.

John Y. Brown, owner of the Kentucky Colonels, quickly accepted a $3.3-million buyout as compensation. That deal was also offered to the Silnas.

But Ozzie Silna kept haggling for more, and he finally reached a deal in a swank Massachusetts hotel room. The Silnas would get $3 million, plus a share of the TV revenue from the four teams entering the NBA.

The story gets better.

I'd venture to guess that the "share" that the Silnas own is more profitable than some of the small-market NBA teams. The only thing the Times story doesn't address is what happens to this arrangement upon Silnas' death? Does that stream of revenue pass to their estate?

Whoever their contract attorney was, he deserves to be in the Legal Hall of Fame.

4 comments:

Anonymous said...

You didn't quote the best part:

In 1982, after several years of cashing TV checks, the Silnas came close to accepting a new buyout. The NBA offered them $5 million over eight years, but the Silnas countered with a demand of $8 million over five.

The league balked at that number, so the Silnas have kept cashing in.

Anonymous said...

Great story. I needed a chuckle today.
MM

Anonymous said...

Very interesting story:) Any business franchise information is very interesting to me.

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