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Record-setting bid for L.A. Clippers may offer bounce for other NBA teams

May 30, 2014 at 6:37 PM EST
Former Microsoft CEO Steve Ballmer has agreed to pay a record $2 billion to buy the Los Angeles Clippers from Shelly Sterling, wife of disgraced owner Donald Sterling, who was banned from the league for making racist comments. The deal now awaits approval by the rest of the NBA owners. Hari Sreenivasan takes a closer look at the numbers with Rob Gloster of Bloomberg Businessweek.
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JUDY WOODRUFF: The Los Angeles Clippers have gone, in just a matter of weeks, from a team with a heavy cloud over its head to the most highly valued franchise in the league and one of the most valued in all of sports.

Jaws dropped last night when a potential deal was announced, one that set new records for the NBA.

Hari Sreenivasan has the story.

HARI SREENIVASAN: He’s a former CEO of Microsoft, longtime sports fan, and now, perhaps, the newest owner in the National Basketball Association. Steve Ballmer has agreed to shell out $2 billion to buy the Los Angeles Clippers, the most ever for an NBA franchise.

Shelly Sterling, wife of disgraced owner Donald Sterling, announced late last night that she’d signed a binding contract for the sale. NBA commissioner Adam Silver banned Donald Sterling from the league last month, after a recording surfaced of the billionaire making racist comments. Silver said the NBA’s board of governors would make the formal decision on stripping Sterling of the team.

ADAM SILVER, NBA Commissioner: I fully expect to get the support I need from the other NBA owners to remove him.

HARI SREENIVASAN: Just yesterday, Donald Sterling’s attorney said his client will fight to keep the franchise.

MAXWELL BLECHER, Attorney for Donald Sterling: There is something that is really wrong if somebody is talking to their girlfriend in the privacy of their home and then winds up losing his life and his property.

HARI SREENIVASAN: Despite that statement, Shelly Sterling announced the sale to Ballmer hours later.

ESPN and USA Today reported today that she won sole decision-making authority for the Sterling family trust, which owns the team, after her husband was ruled mentally unfit. As for Ballmer, he outbid at least three other groups of bidders, among them, music executive David Geffen, Oracle CEO Larry Ellison, and Oprah Winfrey. The deal now awaits approval by the rest of the NBA Owners. They’re already set to meet June 3.

A closer look now at the business piece of all of this and the questions as to whether Donald Sterling could slow it down.

Rob Gloster covers sports for Bloomberg Businessweek, joins me from San Jose. I spoke with him a short time ago.

Let’s first talk about this big picture question. A lot of NBA owners are very happy, but what in this day and age makes a team worth $2 billion?

ROB GLOSTER, Bloomberg Businessweek: Well, Hari, it’s clearly TV rights.

Every major sports team and sports league now is getting tremendous amounts of money from national and local and regional TV contracts. And in the case of the Clippers, not only is the NBA going to be renegotiating its national contracts, its national TV contracts in 2016, but the Clippers are going to have a new regional contract then.

So they can ask for a tremendous amount of money, and since they’re the second biggest market in the United States, they’re probably going to get it.

HARI SREENIVASAN: Now, I’m not a huge NBA fan, but this is the Clippers. That’s something that I have heard throughout the day. They don’t have an MVP. They don’t have a championship. They don’t — in fact, Bill Plaschke of The L.A. Times was writing that when the L.A. Clippers step out on the field to be recognized at Dodgers Stadium, they get booed. They’re not even the favorite team in their own hometown.

So, how has this valuation increased in the past couple of years?

ROB GLOSTER: Well, they’re clearly not the number one team in town. The Lakers have been for years. And the Clippers have been a pretty terrible team for pretty much the three decades that Donald Sterling owned the team.

But it’s Los Angeles. It’s the second biggest market in the United States. I mean, the most valuable team in the NBA, based on Forbes’ evaluations, is the New York Knicks, and they have been pretty bad, too. So it’s really not how good a team or the stars you have; it’s where you’re located and what the TV rights are worth.

HARI SREENIVASAN: OK. So, there are also a lot of critics saying that Steve Ballmer might have paid too much for this, that he overbid and going over the top.

What do we know about his motivations for getting this team today?

ROB GLOSTER: He’s a sports nut. He’s valued at $20 billion. So I guess he can afford the $2 billion.

And, basically, he’s wanted to own a team for a while. He tried to buy the Sacramento Kings last year. His plan was to move them back to Seattle, his hometown. The NBA said he couldn’t do that. The Kings stayed in Sacramento. So, he’s clearly wanted to be an NBA team owner for a while.

HARI SREENIVASAN: So, as a former Seattle-ite, is there any chance that we could get a team back in Seattle called the Sonics?

ROB GLOSTER: It doesn’t look it anytime soon.

It looked like the real chance was when the Sacramento Kings was up for sale. The NBA has said it would like to have a team back in Seattle. There’s a big sports and basketball culture there, but right now there don’t look to be any teams that are ready to move.

HARI SREENIVASAN: OK. There’s another big character in this. That is Donald Sterling. Is this the last that we have heard from him? This seems the kind of resolution that the NBA would like, but we’re hearing that there is the possibility that he’s going to fight back.

ROB GLOSTER: Yes.

And Donald Sterling has made it clear he’s not going to take this. He doesn’t like the way he has been treated by the NBA. He feels like he’s the victim in all this. And he’s been known over the years to be very litigious, so there’s a good chance he will go right back to the courts and try to stop this.

Whether he can or not is a good question. The NBA got what it wanted. It got a high-profile, very rich guy to take over the Clippers with a good reputation. It hopes it’s done with the Sterlings and it can put all this behind it, but I don’t — I’m not so sure Donald Sterling is going to go that easily.

HARI SREENIVASAN: So, the longer-term ramifications for the league right now is basically the NBA — have they handled this well or at least do people perceive that to be the case?

ROB GLOSTER: Yes, the NBA has handled it very well.

Adam Silver, the new commissioner, took immediate action, and it was very forceful. And he made it clear that this was the rantings, the racist rantings of one owner, of one man, and it was not the way the NBA feels.

And, in a way, this is almost a positive for the league, because the players and the owners have come together. They have had a tremendous level of cooperation on this. Silver made it very clear he wanted input from the players from the start. And the players feel happy that Adam Silver took this action. And I think it’s a net positive in the end for the NBA if they get Ballmer and they get rid of the Sterlings.

HARI SREENIVASAN: So, are there ripple effects from this that might affect other sports leagues or franchises that might be thinking about Los Angeles or just even escalate the value race in professional sports teams?

ROB GLOSTER: Absolutely.

The team owners in all the major sports leagues around North America have got to be feeling pretty good now. When $2 billion is paid for a team in a league that never had a sale of more than $550 million, that means everything is going up. And Los Angeles doesn’t have an NFL team. You have got to think that the NFL would like to have a team there and that there are plenty of owners in other cities who are saying, you know, if I move my team to Los Angeles, it could be worth a lot more than it is now in Saint Louis, or Buffalo, or someplace like that, Jacksonville.

And so it could have ripple effects throughout all of sports, this $2 billion sale.

HARI SREENIVASAN: All right, Rob Gloster from Bloomberg Businessweek, thanks so much.

ROB GLOSTER: Thank you, Hari.

JUDY WOODRUFF: Late today, shortly after Hari recorded that interview, the lawyer for Donald Sterling announced that he will sue the NBA for $1 billion. He also said Sterling is considering what his options are to stop that sale to Ballmer.