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Malcolm Gladwell says owners shouldn’t expect to make money

Aug 23, 2011, 8:09 AM EDT

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Is owning a sports franchise a business or a toy?

Right now, the NBA owners are telling you the NBA is a business, and a bad one at that. One that needs to be fixed. Even if it means costing an NBA season.

But you look at owners like Mark Cuban and you see him treat it like a toy — he has said the Mavericks have lost money every year. He has been sued over it. He can kind of erase that on the books because he also owns American Airlines Center and he has said he will cover the debt. But he treats this as a toy and bought himself a title. (Go ahead and say the Heat are trying to buy a title, but the Mavericks paid $20 million more last year in salary and in the last decade only the Knicks have paid more.) Of course, Cuban has made his money on franchise valuation, that has flattened out a lot for owners who bought recently.

In an interesting piece over at Grantland, social commentator Malcolm Gladwell — he of Blink and Outliers and TED — says that NBA owners shouldn’t expect to make financial profit off a team. He notes that owners get a “psychic benefit,” an emotional benefit from owning the team that is what makes owning a sports team different than owning a car repair shop.

The rationale for the NBA lockout, from the owner’s perspective, goes something like this. Basketball is a business. Businesses are supposed to make money. And when profits are falling, as they are now for basketball teams, a business is obliged to cut costs — which in this case means the amount of money paid to players. In response, the players’ association has said two things. First, basketball teams actually do make money. And second, if they don’t, it’s not the players’ fault. When the two sides get together, this is what they fight about. But both arguments miss the point. The issue isn’t how much money the business of basketball makes. The issue is that basketball isn’t a business in the first place — and for things that aren’t businesses how much money is, or isn’t, made is largely irrelevant….

The Financial Times recently interviewed Diego Della Valle, the chief executive of the Italian luxury goods manufacturer Tod’s. Della Valle owns the celebrated Italian football club Fiorentina. “I ask if the decision to buy the club was made from the heart, or for business reasons,” the Financial Times interviewer writes. Della Valle replies: “With football, business reasons don’t exist.” Exactly.

The question to me has become, “has that attitude changed among owners?” I would say Gladwell’s perspective was true 20 years ago, it has shifted some now. The guys who form a partnership and spend hundreds of millions to get a team — guys who are leveraged — get their psychic benefit but do not let that get in the way of the bottom line. They are the hardliners pushing for change.

But should they feel that way? Or should they enjoy the psychic benefits (and the profits they will make when the team is sold) and stop treating their toy like a business? Not sure there is one simple answer to those questions.

  1. Nadeem - Aug 23, 2011 at 12:35 PM

    If basketball is not a business, then the players should also not look at it as a business and treat it as a hobby while pursuing another career on the side. Which means lower salaries and more affordable ticket prices.

  2. chargerdillon - Aug 23, 2011 at 12:53 PM

    The biggest problem with everything related to sports franchise ownership is that now all owners and business markets have equal shares.

    Take for example Donald Sterling and Mark Cuban. Mark Cuban and Donald Sterling are both excessively wealthy, so much so they can afford to own NBA teams. The biggest difference between them however is that Mark Cuban actually likes basketball and likes watching successful competitive basketball which he spends his own money going overboard to do so to bring a championship to Dallas. On the opposite end of that spectrum is a guy like Donald Sterling who has no interest in ever putting a winning product on the court just as long as he’s selling enough tickets to break even so that he can feel like he’s elite living in LA owning a sports franchise.

    Because you can have 2 owners with 2 completely different interests one of which has nothing to do with successfull basketball, how can you expect players not to be the same way. Players who go to Cubans team know they are expected to win. Players who go to Sterlings team know that their NBA career just got screwed until they can jump to a new team or retire.

    This same example I described exists in Football (see Bengals and Browns), in Soccer (see every team not in the Champions League), in Baseball (see the Padres and Pirates)…..

    I can go on but that’s the reality. Until owners are forced to treat their sports franchise like a business, you will have those who spend their money with little regard and those who dont spend any money at all

    • philliphernandez - Aug 24, 2011 at 12:07 AM

      I agree completely that there are completely different motivations for example with Cuban and Sterling [spit]. Cuban can be annoying, but I respect the fact that he is willing to pay money to field a competitive team, and I would be a happy fan if I lived in Dallas. Cuban is putting a good product on the market so that paying fans want to step up and pay those ticket prices, buy merchandise and pay sponsorship money. Winning the Championship last year will pay dividends for the franchise for years to come if the lockout doesn’t screw it up.

      The problem is that Sterling [spit] has no incentive to put out a decent team. Besides being bad enough to win the lottery and draft Griffin I don’t have any reason to ever watch a Clipper game let alone purchase a ticket. Sterling [spit] even had an opportunity to move to Anaheim when the Anaheim Pond opened [now the Honda Center]. He was offered free rent for 10 years. He didn’t want to move because none of his friends from LA would come to the games. The Clippers are Sterling’s [spit] toys not a business. Not the way he runs that franchise.

      • craigblast - Aug 25, 2011 at 3:43 AM

        HILAIRIOUS {SPIT} LMAO.

  3. goforthanddie - Aug 23, 2011 at 8:00 PM

    It would be better for the various leagues if they sought new owners who could afford to treat franchises as serious toys. Larry Ellison wants an NBA franchise, why isn’t Herr Stern hooking him up? Cuban wanted the Cubs, is Selig busting his ass trying to get Cuban a team?
    I can understand earning back the initial purchase price and covering all expenses, but I’ve never really thought about a pro team as a typical for-profit business. Break even, have bragging rights, be happy.

  4. 1historian - Aug 25, 2011 at 7:19 AM

    A few questions if you will

    1) Can anyone define the term ‘social commentator’?
    2) Who is Malcolm Gladwell
    3) Who is going to pay me for the 2 minutes of my life I wasted reading this drivel?

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