Greatest Sports Business Deal of all time may be ending – by Jordan Kobritz

KobritzsmIt’s been called the “Greatest Sports Business Deal” of all time, with good reason.  But an investment of $1 million in 1973 that has returned almost $300 million to date may be nearing an end.

The brothers Silna – Ozzie and Daniel – were huge basketball fans.  After they struck it rich marketing a new material, polyester, they went in search of their own team.  The Silnas ended up purchasing the Carolina Cougars in the American Basketball Association (ABA) and promptly moved them to St. Louis, renaming them the Spirits.  In 1976 the NBA decided to end years of lawsuits with the upstart ABA by absorbing four ABA teams and buying out the remaining two – the Kentucky Colonels and the Spirits – with an offer no one thought would be refused:  $2 million.

John Y. Brown, Jr. was the owner of the Colonels, although he was better known as the former owner of KFC, husband of Miss America and TV personality Phyllis George and later governor of Kentucky.  Brown elected to take the deal.  But the Silnas resisted.  After four hours of intense negotiations, the Silnas agreed to accept $2.2 million in cash (Brown’s payout was increased to $3.3 million) and 4/7 of an NBA team’s share of national television money in perpetuity.

The road to that percentage is a story unto itself.  When the NBA and ABA first began discussing a merger, the expectation was that six of the seven remaining ABA teams would be absorbed into the NBA.  The Silnas thought St. Louis would be one of the six and that the Virginia Squires, who folded just prior to the merger agreement, would be left out.  In fairness to the Squires’ owners, the Silnas said the team should receive a 1/7 share of any merger payment.  When they found themselves on the outside looking in, the Silnas decided to turn the tables and ask for a 1/7 share of the TV revenue times four, the number of ABA teams admitted to the NBA.

The Silnas never anticipated the good fortune that ensued.  At the time of the merger – the pre-Bird, Magic and Jordan eras – the NBA was struggling.  The league’s championship series was shown on tape delay and the national TV deal generated a mere $300,000 per year, compared to $930 million today.  For the 2012-13 season, the Silnas share totaled $19 million, split 90% to the brothers and 10% to the attorney who negotiated the original deal for them.  In an effort to be fair to a partner, the brothers became very, very rich.

On several occasions during the past four decades the NBA has attempted to renegotiate its way out of the agreement with the Silnas, to no avail.  In the early ‘90’s the NBA proposed paying the Silnas $5 million over eight years.  The Silnas countered with $8 million over five years.  If the NBA had agreed to the Silnas proposal they could have saved themselves more than $200 million – and counting.

Recently, the Silnas successfully sued the NBA for a share of all broadcast revenues beyond TV, including those from cable, international and internet sources.  The league’s television deals are set to expire after the 2015-16 season which means only one thing:  The Silnas are in line for even more riches.

Not all deals turn out this well, not even for the Silnas.  They were among the investors in Bernie Madoff’s Ponzi scheme and while they haven’t said how much they lost, the trustee in the Madoff bankruptcy case sued them for $24 million in fictitious profits.

The NBA has recently opened up another round of negotiations with the Silnas designed to dissolve the deal once and for all.  There may be additional motivation on both sides beyond dollars and cents to reach a final resolution.  NBA commissioner David Stern, who was outside counsel to the league in 1976 when the agreement with the Silnas was reached, is retiring in February.   The deal has long been a thorn in Stern’s side.

Ozzie Silna is 80 and Daniel is 69.  Their advancing years suggest this may be the time to end the arrangement with the NBA, for a hefty price of course.  Whenever the arrangement ends, one thing is certain.  Nothing will top it as the “Greatest Sports Business Deal” in history.

Jordan Kobritz is a former attorney, CPA, and Minor League Baseball team owner.  He is a Professor in the Sport Management Department at SUNY Cortland and is a contributing author to the Business of Sports Network and maintains the blog: http://sportsbeyondthelines.com  Jordan can be reached at jordan.kobritz@cortland.edu.

© Copyright 2013 Tanna K, All rights Reserved. Written For: Tinytown Unleashed
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