NBA tries to end a deal gone wrong

http://espn.go.com/nba/story/_/id/99611 ... y-aba-deal

The Silna brothers are the former owners of an old ABA franchise known as the Spirits of St. Louis. When the ABA merged with the NBA in 1976, the Silnas agreed to dissolve their team in exchange for a small percentage of the NBA's future broadcast revenue.

At the time, it seemed like an irrelevant concession by the league. But it's become a financial windfall for the Silnas. They receive 1/7 of the television revenues of the four ABA teams that were absorbed: the Spurs, Nuggets, Nets and Pacers. The NBA currently has $7.4 billion in TV contracts with ABC/ESPN and TNT.

The kicker in the Silnas' deal is that it goes on in perpetuity.

Last season, the Silnas, who bought the Carolina Cougars for $1 million in 1973 before moving the club to St. Louis, received a reported $19 million from the NBA.

Since the deal was reached in 1976, the league has paid the Silnas $300 million in TV royalties. Recently, a judge ruled that the brothers also have rights to Internet revenue.

I don't see how this can end nicely for the league. There's no reason Silnas should give up any of the earning that they rightfully deserve.

Adam Silver's first challenge.

a contract that has long been described as "the greatest sports business deal of all time," according to sources close to the situation.

No kidding. I'm surprised they're even open to a discussion about ending the deal.

The Silnas are probably open to settlement negotiations considering the NBA could take the matter to court and drag out a long legal battle that will drain the brothers' financial resources while barely making a dent on the NBA's own resources.

Not if Silnas are people with enough power/resource to fight back. I'm thinking they probably are and have higher ground in negotiation anyway.

BTW they should have been excited when oligarchy Prok bought Nets and moved them to NY, and Pacers becoming a serious contender, SAS a powerhouse for more than a decade, Nuggets enjoying recent run.

Not if Silnas are people with enough power/resource to fight back.

If the Silnas wins and drains the resources of the NBA through a long legal battle, guess who runs out of TV money.
You don't kill the hen just to get them eggs.
Judging with the past lockout Stern/Silver seems like the kind of guys that would rather crash and burn than to concede all the way.



Seems like the deal was originally made between the ABA owners just to dissolve St. Louis and move on with the NBA merger. Someone from the NBA must had left out reading the fine print from the ABA's papers.

in 1982 the NBA offered to buy the brothers out of their contract for $5 million paid over 5 years. The Silna's rejected that offer and countered with $8 million over 8 years. The NBA declined.

Ouch.

If the Silnas wins and drains the resources of the NBA through a long legal battle, guess who runs out of TV money.
You don't kill the hen just to get them eggs.
Judging with the past lockout Stern/Silver seems like the kind of guys that would rather crash and burn than to concede all the way.

True. But I believe there're more interests involved than simple two parties, Silnas and Silver/Stern duo. If and when the league decides to take this issue to the court and starts spending resource, it will make team owners unhappy as well probably in exception of said four teams. Silnas have pretty good firm case in all of this imo. They probably won't settle for too much less.

Last edited by NovU on Wed Nov 13, 2013 4:12 pm, edited 1 time in total.

It's going to be a nice buyout.

If and when the league decides to take this issue to the court and starts spending resource, it will make team owners unhappy

Majority of NBA owners didn't mind the NBPA going to court and losing potential game revenue just so the lockout could continue then as long as they get what they want.

One question I have is, for whose interest is the league doing this? For the four teams in a deal? Prok and other owners probably bought their franchise at value minus the deal. That'd be like free money for them. Or would the league share that revenue equally or keep portion to themselves? If then who's paying for the entire process majorly? One thing we know for sure is whoever has most to gain will try hardest to drive Silnas out of NBA and whoever(league? or are there others/team(s) behind it) spends will look for big chunk of profit generated from the result. Rest? Probably don't care much as long as nothing goes out from their pocket for others' interest.

I think it just comes down to money. They'd rather not share the profits with any party who isn't actively involved with or contributing anything to the league.

Seems like the deal was originally made between the ABA owners just to dissolve St. Louis and move on with the NBA merger. Someone from the NBA must had left out reading the fine print from the ABA's papers.

If so, someone certainly wasn't doing their job. Given the offer from 1982 that you quoted though, perhaps the intention was always to buy them out later after getting the initial deal done, in which case they clearly shot themselves in the foot when the Silnas asked for an additional $3 million over three years and they turned it down. As always though, I guess hindsight is 20/20.

I also wonder if they perhaps anticipated those four clubs folding within a few years, given the financial state of the ABA at the time of the merger. I imagine that'd more or less make the arrangement null and void, since there'd be no former ABA clubs contributing to the NBA's TV revenue, thus the Silnas would be entitled to 1/7th of nothing.

I also wonder if they perhaps anticipated those four clubs folding within a few years, given the financial state of the ABA at the time of the merger. I imagine that'd more or less make the arrangement null and void, since there'd be no former ABA clubs contributing to the NBA's TV revenue, thus the Silnas would be entitled to 1/7th of nothing.

That makes more sense of the possibility why the NBA accepted the deal.

Get them ABA teams. Get their players. Those four teams fold. No problem for the NBA. Only it didn't turn out that way.



http://www.cnbc.com/id/19481083

The Nuggets, Spurs, Nets and Pacers, by the way, are actually giving more than 14.2 percent (1/7th) of their revenue to the Silnas and Schupak. This is because the math for the deal is locked in at 28 teams. So those four teams are actually giving up a greater percentage. Each of the Silna brothers gets 45 percent each and Schupak gets 10 percent of the total payday.

Nobody saw TV becoming the money machine it is now, either.

That too. From memory, a lot of big games were still airing on tape delay until Magic and Bird, and later MJ, boosted the league's popularity in the 80s.

Investment gone right for Silna bros. I guess Larry O'Brien didn't see this coming at all. It lasted entire Stern's time and Silver gets to take on the issue now, at the much bigger penalty. If Silnas are making nearly 20 mil now, one has to wonder how big a buyout would be.

While the Pelicans (former Hornets) was still in escrow, maybe the league could have offered a settlement where the Silna brothers get an ownership share of the New Orleans team to relingquish the rights to the TV shares. But since this ship has sailed, I think perpetuity deals can not be inherited. If it can be inherited, then the NBA should have used Herb Kohl (former senator, Bucks owner) to pass one. LOL

I think perpetuity deals can not be inherited.

If that's the case then Stern needs to bury more bodies before he retires.

Or just wait for the Silnas to die.

Naw. If then Silnas would have come to a deal long time ago (or dead as grin suggested).

An announcement was made Tuesday that the NBA and the teams have come to an agreement that will allow them to minimize future financial exposure with a new TV deal on the horizon. The four teams will invest in the Spirits' entity in exchange for an accelerated up-front payment.

The New York Times, which first reported the story, said the brothers will receive $500 million as part of the deal. The payment will not completely buy out the Silnas, but a source confirmed that the new terms provide for that possibility.

"My guess is that for the NBA, the upside is that in the foreseeable future there will come a time when they will not have to look at this," NBC broadcaster Bob Costas, who was the voice of the Spirits, told The Times.

The settlement results in the Silnas dropping a lawsuit they filed in federal district court against the league and the teams in hopes of collecting on new revenue streams, like NBA League Pass and foreign TV deals, which obviously were not envisioned in the original agreement.

I think the urgency to get this done is the fact that League Pass has grown from the cable-only SD version to internet & mobile streams. There's definitely a lot of money to be made on the new ways to watch League Pass

Yeah. This issue came up every once in awhile in the past but they actually came to some sort of agreement this time around mostly because of the league pass gone internet imo.

Plus it's been a thorn in Stern's side for his entire tenure.