Bad Business, Worse Precedent: Why the NBA Taking Control of the Hornets is a Bad Idea

By Joe Kotoch

 

In 1988 the Charlotte Hornets were founded by George Shinn, a local businessman, who believed that a professional team in the Charlotte area could tap into a rabid fan base that was passionate for college basketball. For the first few seasons of existence the Hornets were awful but eventually began to turn their luck through the lottery by drafting Kendall Gill, Larry Johnson, and Alonzo Mourning in consecutive drafts. The new era consisting of a core of Gill, Johnson, Mourning, and Mugsey Bogues brought unmatched levels of success for the Hornets. Eventually Mourning was traded for Glen Rice and some other pieces and then the blunder of all blunders occurred. The Hornets traded the draft rights to Kobe Bryant (13th overall pick) for Vlade Divac. Vlade freaking Divac in exchange for a promising and athletic guard straight out of high school. All the while the Hornets had a great fan base and support but that would eventually come crashing down as Shinn was accused of sexual assault and kidnapping in 1997. Ultimately no charges were filed but the city of Charlotte and Hornets fans changed their perception of Shinn and his team. Almost instantly, Shinn became a despised figure in the NBA, if not the entire sports world.


As a result of the accusations against Shinn, fans became critical of his ownership and stayed away from the team. Attendance dropped dramatically, after annually being the top drawing team in basketball. Without the home court advantage, the Hornets play on the court regressed. Suddenly the Hornets were losing money, so goes the story, and Shinn demanded a new arena. Politics between the city of Charlotte, an influential group of local ministers, and Shinn resulted in a proposed new arena and redevelopment of the city. The city approved a new arena at no cost to the Hornets but issued a referendum to the NBA that any new arena would be built only upon Shinn selling the team. As in most major sports, the small fraternity of owners does not respond well to ultimatums, especially if it gets in the way of publically financed arena.



Shinn responded by applying to move the team to New Orleans, a smaller market than Charlotte and playing at a pre-existing arena, which was approved. To insiders around the league moving a team to a smaller market is a slap in the face of the larger market and its fans. Would the Dallas Mavericks ever move to Nashville? No, because in modern sports the larger the market the more revenue the team will derive from its local tv and radio deals, better pool for attendance, more local sponsorship opportunities, and because star players prefer to play in larger markets for the same reasons.
In the fall of 2002, the New Orleans hornets began playing basketball. Since their arrival the Hornets have routinely been among the worst drawing teams in basketball. Along the way a hurricane ravaged the city of New Orleans and prompted Oklahoma City to adopt the team temporarily. Ever since there have been whispers around the league of Shinn moving the team elsewhere to draw larger crowds and get a larger market share but nothing has transpired, due in large part to David Stern’s desire to avoid scrutiny and criticism of the league and its owners for tearing a team away from a downtrodden city. Publicly, Shinn and the NBA have maintained that the Hornets are entrenched in the city and have no intention of moving.

In an era where many of the owners in the NBA are billionaires, who regard their teams as a passion and are willing to spend freely without regard for drawing a profit, George Shinn is a millionaire that is not financially secure enough to maintain a competitive team. Coupled with all of Shinn’s baggage from Charlotte, the NBA has strongly suggested that a sale take place. Originally, Gary Chouest, a minority owner, was to purchase a controlling interest in the Hornets that would keep the team in New Orleans. Recently, Chouest announced that he would not be purchasing the Hornets. Now, with no clear billionaire owner able to deficit spend the Hornets back into contention the league is contemplating purchasing the team from Shinn and operating it until an ownership group presents itself.

What this means to the city of New Orleans, the Hornets fans, and Hornets employees and players is that there will be rampant speculation that some billionaire group from Seattle, Las Vegas, and Kansas City will be looking to swoop in and buy the team in order to relocate them, ala Clay Bennett. Unfortunately, the NBA is in a no win situation because Shinn is arguably one of the two or three most unpopular owners, not financially secure, and the city of New Orleans is still dealing with the after-effects of Hurricane Katrina. The city of New Orleans would be a more sympathetic victim than any city since the city of Cleveland lost the Browns. The NBA and Commissioner Stern will almost certainly get a PR black-eye if they allow another Oklahoma City fiasco.

An often overlooked issue is the NBA’s potential operating of the Hornets and whether it comprises the leagues integrity, which was tarnished by the Tim Donaghy scandal. While the Washington Nationals were briefly run by Major League Baseball, the NBA operating the Hornets has some significant obstacles. Firstly, will the NBA pony up the resources to offer Chris Paul an extension and if not will they permit a trade of Paul, the most high-profile Hornet? Many around the league and even fans are aware that Paul through his LRMR management team would prefer to be in New York City playing with the Knicks. However, the league will be scrutinized for any transactions it makes, especially with Paul. If Paul were to be traded to the Knicks, 28 other teams may argue that trade was manipulated by the league’s desire to return the Knicks to prominence and place a marquee player in the largest market.

Looking back at the Nationals, Omar Minaya made many short-sighted deals to pad his resume and secure a GM job with another team, current Hornets GM Dell Demps would be watched closely for the same reasons and this could cause him to reconsider making deals with teams. Or what if Demps makes a sweet heart deal with the Knicks and sends Paul for an expiring deal and picks, then the season after the trade joins the Knicks as the heir-apparent to Donnie Walsh? While many New Yorkers would not see any problem with this scenario, other cities and franchises would be up in arms and leading the masses to riot. Recall just how much revolt occurred around the league when Pau Gasol was traded to the Lakers or Kevin Garnett to the Celtics. League ownership, no matter how brief, has too many draw backs and most importantly can raise questions about the integrity of the league and the game. If you don’t buy that argument, ask random basketball fans about the 1985 lottery and see how many people still to this day believe that the league rigged the lottery to get Patrick Ewing on the Knicks.

Even if the operation of the Hornets by the NBA goes smoothly, the sale to whatever ownership group will make fans in New Orleans irate. No matter what the league says there is a lack of viable owners in New Orleans, it’s a small market, and its troubles drawing crowds. Whatever group buys the Hornets for hundreds of millions of dollars, they will want to relocate the group to more viable markets with newer arenas. Currently the NBA has viable locations in Las Vegas (the Maloofs will almost assuredly move the Kings there if Sacramento does not build a new arena), Kansas City, and Seattle. Seattle, home to the Sonics until Clay Bennett moved the team has always been a rabid fan base, is a larger market, and has a proven track record around NBA circles of supporting their team, which makes Seattle the most attractive market. However, a new arena is the key. Lenny Wilkens has lent his support to the cause and should Seattle intimate that it will secure financing for a new arena they will get some team to commit to coming to Seattle. Ultimately, the Hornets might end up being that team.

Last year, Forbes estimated the Hornets value at $267 million but it seems unlikely the league would pay full price, they might assume some debt and probably buy the team for a slight discount and then will sell the hornets to a group for a nice profit. While the league may initially target ownership groups committed to keeping the team in New Orleans, once an offer for $300 million-plus comes so that the group can move the team elsewhere it will be difficult to say no. A likely compromise would be that the NBA commits to making New Orleans a regular host of the All-Star festivities and maybe even host a few preseason and regular season games for other NBA clubs as well.

At the end of the day the NBA is a business entity, comprised of mostly calculating billionaires and they will make whatever decision best rewards them in the wallet. The NBA taking control of the Hornets undermines the integrity of the NBA product and sets a bad precedent because it implies any franchise that is poorly run can be bailed out but in return for the bail out the league will be free to select the next owner of the franchise. That is what truly bad business is: cities and fan bases all around the league will be hostages to the NBA to build fully-funded public arenas or risk losing their franchises to the aforementioned cities trying to lure NBA franchises wherever a pristine arena awaits a tenant.