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Thursday, December 23, 2010
The NBA's Hornets tactics

By Henry Abbott

There are a lot of wrinkles to the NBA's taking over the Hornets.

Why, for instance, did they take over the Hornets, and not the Bobcats who were in similar dire straits before Michael Jordan took over?

A simple answer is that -- the Warriors aside -- prices for NBA teams have been weak of late. Bruce Ratner had taken a hit in selling the Nets. Bob Johnson lost his shirt owning the Bobcats. Adding a fire sale of the Hornets to that list could have hurt the values of every NBA team. There may well have been a mood, by now, just to shore up values.

Another aspect is that in the case of the Hornets, there's hope that the NBA might be able to negotiate for help from the state of Louisiana in a way that the previous owners could not.

The Saints got a very attractive deal to stay, and perhaps the Hornets could, too.

In this, the NBA has skills and leverage the previous owners, including George Shinn, did not. Shinn had already moved the team once and had spoken boldly of his attachment to New Orleans. In addition, the wrangling that comes with moving a team is expensive -- probably too expensive for somebody struggling to keep the Hornets afloat. The NBA, however, can make credible threats to move the team again if they don't get a great deal. They know all the ins and outs of arena deals, and they know all the key players in every potential NBA market. Essentially, they make the rules about which teams move where, and Seattle, Las Vegas and other markets are out there and in touch.

The NBA can also at least threaten to close the Hornets down (remember that scary David Stern talk of contraction?). Yes, it's a long shot. But consider this: The NBA has been clear that there will be robust revenue sharing among owners in time with the new collective bargaining agreement. That means poor teams are going to start costing rich teams a lot. In a world like that, eliminating one or two of the worst performing teams makes the whole league financially stronger.

Who knows how the revenue sharing will work, but you could imagine a formula where the worst performing team would draw a huge chunk of the shared revenues. (In baseball, we have learned that the Marlins took in nearly $100 million in revenue sharing one season.) If you shuttered a big NBA money-loser --  the barely solvent Hornets might top the list -- you could meaningfully strengthen several other teams.

That same threat could be effective with the Players Association. You want players to have big contracts? Okey-dokey the NBA can argue to the players, but it's going to cost you a dozen-plus jobs as we'll have to shutter this team.

Which they can do incredibly easily, now, without needing to get a local owner to buy into the plan.

Again, talk of closing teams is far-fetched, but if you follow the money, realize that the NBA and its 29 owners at least have a case to make when dealing with the governor of Louisiana. They need a good deal.

Will either of the threats -- to move or close the team -- have an impact? Something is. Since the NBA took over, they certainly seem to have the governor's attention.

Jimmy Smith of the Times-Picayune quotes a Governor Bobby Jindal who sounds incredibly ready to help make the Hornets profitable:
“As a state, we’ve been talking for several months now about some modest facility upgrades that would allow them to earn more revenues,” Jindal said, offering no specifics. “We’ve talked to them about the All-Star Game. But these conversations have been going on for several months. The NBA hasn’t proposed any (requests). They’ve said it’s too early. But we made it very clear to them. We’re interested. We want to keep the Hornets here. We’ll be creative. We’ll work with them as a partner to make them successful."

“Ultimately the goal is to make sure they can earn the revenues they need to be competitive and successful."