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The $2 Billion LA Clippers Sale: Will We Be Paying for Another Billionaire’s Pet Project?

LA WATCHDOG-The Clipper Nation is ecstatic that Steve Ballmer is buying the Los Angeles Clippers, ridding the team of its longtime controversial owner, the meddlesome and litigious Donald Sterling who is more interested in the cash than winning. 

Even when Sterling hired Doc Rivers as Head Coach and Senior Vice President of Basketball Operations, he still tried to control decisions over personnel until Rivers threatened to quit in the middle of the season over the contract of sharp shooting guard, JJ Redick. 

Even better, Ballmer is a very competitive person whose goal is to win the NBA title - regardless of the cost. 

Of course, this will make for a great local rivalry as the upstart Clippers and its youthful superstars take on the glamorous Lakers, the aging hometown favorites whose prospects are burdened by a high payroll (Kobe’s $30 million) and a lack of draft choices and trade bait. 

Laker management is also in flux now that the second generation of the Buss family is running the show that is anything but Showtime. 

While the Clippers prospects are bright, the headline grabber is that Ballmer is paying $2 billion cash for the Clippers, by far and away the highest price ever paid for an NBA franchise.  It also equals the price Guggenheim Partners paid for the Dodgers, but at least the Dodgers own their stadium and the luxury boxes and, for $150 million more, 50% of the surrounding land. 

Even though Ballmer, the former Chief Executive Officer of Microsoft, has a net worth of an estimated $20 billion, how does he expect to earn even a modest rate of return on his $2 billion investment? 

First and foremost, the Clippers need to be winners, both in the regular season and deep into the playoffs.  LA’s sports crazy fan will flock to Staples, allowing the Clippers to raises ticket prices and continue its streak of sellouts.    

While higher ticket prices and more playoff money will increase current revenues of $128 million by an estimated $25 million, the real money is in increased fees for the team’s media rights, just as it is for the Dodgers. 

In the season that begins in 2016, the Clippers will benefit from a new NBA national television contract.  This will result in a substantial bump from the current level of $30 million that is being paid by ESPN and TNT. 

Closer to home, we can expect the local television contract to increase dramatically, although not to the same levels as the Dodgers and Lakers.  According to various press accounts, the Clippers’ local TV revenue is expected to increase from $20 million to $60 to $70 million, a far cry from the Lakers 20 year $3 billion contract that averages $150 million a year. 

Needless to say, this increase in local TV revenue will come out of our hide through increases in our basic cable rates of $1.50 to $2 a month, or $20 to $25 a year. 

This hit may even be higher if the Clippers’ new ownership is able to leverage its winning record and the precipitous decline in the Lakers’ TV ratings into a richer contract with Fox Sports or Time Warner Cable.  

Over the last several years, we have been subject to significant increases in our cable bills, in large part because of the massive increases in sports programming for ESPN, the Lakers, and now the Dodgers.  

But Los Angeles area cable operators are pushing back against higher programming costs for sports broadcasting rights as evidenced by the unwillingness of cable operators covering 70% of the Dodgers market to pay Time Warner Cable’s asking price that would add $100 a year to our basic cable rates. 

This raises an interesting question.  Will Los Angeles become the battleground for unbundling our basic cable rates so that 80% of the cable customers who are not interested in sports programming are not stuck with paying for sports channels that represent 50% of the programming costs?  

On the other hand, are Angelenos willing to pay $4 billion to get rid of two of the most vilified people in Los Angeles, Frank McCourt and Donald Sterling? 

In any case, we will be footing the bill for buying out these two bums and supporting the pet projects of billionaires. 

 

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee,  The Ratepayer Advocate for the Greater Wilshire Neighborhood Council, and a Neighborhood Council Budget Advocate. Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at:  lajack@gmail.com. Hear Jack every Tuesday morning at 6:20 on McIntyre in the Morning, KABC Radio 790.) 
-cw

 

 

 

CityWatch

Vol 12 Issue 45

Pub: June 3, 2014