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The Real Story Behind The Chris Paul Veto

When David Stern, as the representative of the NBA's 29 ownership groups, vetoed the three-way trade that sent Chris Paul to Los Angeles, there was an eruption of outrage. The New Orleans Hornets, Chris Paul’s team, have been collectively owned by the other NBA owners since December 2010. They are paying the salaries of the Hornets front office, coaching staff and players, and they have no interest in sending another All-NBA player to Los Angeles, especially after three All-NBA caliber players have forced their way into New York City (Amare Stoudemire, Carmelo Anthony and Tyson Chandler) and Miami.

The Knicks are for real. The Mavs are screwed.

For many, it was a replay of the emotional issue at the heart of the NBA lockout: the ability of players to freely chose where they wanted to play basketball. Many small-market owners have dreaded this free-market scenario for years, precisely because they know that the best players will all flock to the biggest cities, the same way they do in baseball and soccer.

Meanwhile, concern trolls in the media fan the flames by worrying that the NBA doesn’t have the same parity the NFL has. How will the league survive, they wonder, if only the teams from Los Angeles, New York and Chicago are competing for championships? The real humor comes when these very same people write articles bemoaning low NBA Finals TV ratings when they feature small markets like San Antonio and Cleveland.

** Is the "NBA back" because there are top-5 basketball teams in the three biggest metropolitan areas in the US (NYC, LA and Chicago)? I'll frame the issue to best support my argument and let you decide. **

While the fact that the other owners blocked the Lakers’ acquisition of Paul out of pure spite is both amazingly petty and rather humorous, especially when the trade would have actually hurt the Lakers, it’s a rather unique scenario that has little chance of ever repeating itself. The only reason the other 29 owners could block this trade at all was because they actually own the New Orleans Hornets.

The real story here is not the motivations of some of the NBA’s owners, no matter how small-minded they might be, but the fact that the league itself has had to own this franchise without a viable buyer for an entire year.

The New Orleans Hornets have never been well-run. They were originally the Charlotte Hornets, but their ownership group, led by George Shinn, so mismanaged the franchise they had to move it to New Orleans in 2002. The NBA thought so poorly of Shinn’s ownership job, that they immediately let another franchise, the Charlotte Bobcats, take over instead, confident that the problems were not with the market itself but the ownership group originally given control of it.

To compound the problem, New Orleans was hardly the most attractive target for expansion, even before Hurricane Katrina. It’s one of the smallest markets in the NBA, and any new basketball franchise would struggle to compete with the NFL’s New Orleans Saints, who not only have a long-standing regional history but are also more generously supported by the other NFL owners.

After Katrina, the Hornets had to play two entire seasons in Oklahoma City, paving the way for the Thunder. But with the population cut by nearly a third, and the tax base devastated, the last thing the city of New Orleans really needed was a basketball team it did not particularly care about.

And the majority of my city is riders / They trying to make a brand new map without us / But the tourists come down and spend too many dollars / And no matter how you change it, it will still be ours -- Lil Wayne

Stern, leery of the PR hit the league would receive for abandoning the city in the aftermath of Katrina, has been determined to find a buyer willing to keep the city in New Orleans. When he could not find one, the league bought the franchise, setting themselves up for the situation with Chris Paul they are in now.

But while the inherent conflict of interest created by owning one of their competitors is going to force the owners to sell the team to a buyer who will probably move it, Stern has good reason to avoid that scenario. When the Hornets came to New Orleans, they made a series of implicit and explicit promises to the region, and they are playing in a 100% publicly financed stadium. Abandoning the taxpayers of New Orleans and leaving them with a NBA stadium they no longer need is an immoral thing to do, and it points to the heart of the real problem with the structure of sports ownership in the United States.

In a sport like baseball, where there is more of a free-market in player acquisition (read: less collusion), it’s easier to grasp the business model of a professional sports team.

A good portion of the regional identity of New York City, for example, is tied up in the success and failure of its two professional baseball clubs, the Yankees and the Mets. Winning is so important that the people of New York were willing to spend $800 million each on state-of-the-art publicly financed stadiums in order to "keep up with the Joneses" and ensure that their franchises could make as much money as the franchises of cities across the country.

The stadium, as anyone who played Owner Mode on Madden back in the day knows, is at the heart of any good professional sports organization. The more money you can squeeze out of your stadium (by making it as "modernized" which translates roughly to "luxury boxes"), the more you can invest on your on-field product, and the better your team performs, the more fans are willing to spend on it. Two good examples of this virtuous cycle are Jacobs Field (Cleveland) and Camden Yards (Baltimore) in the 1990’s.

A moment of lost childhood innocence: when I realized all of my friends had won multiple Super Bowls on "Dynasty Mode". The game made it easy to win to pander to your ego and keep you playing. I thought I had been playing chess, when I really had been playing checkers.

But in forcing the public to pay for their stadiums, costing in the hundreds of millions of dollars, the owners have fundamentally changed the business model of professional sports. They are no longer the ones risking an investment; it’s the city itself. When they perform poorly at their job, like Orlando’s inability to build a championship-caliber roster around Dwight Howard, the whole city suffers, because the city invested $500 million on a brand-new stadium under the idea that Howard’s presence would ensure a relevant basketball team worthy of such an expensive investment.

The owners aren’t running private enterprises; they are running public trusts. This is the fundamental mismatch at the heart of the problems in professional sports in the United States today: the owners of the NBA, NFL and MLB have been allowed to profit off a public good (the stadiums they play in).

One professional sports franchise acknowledges that, but they are allowed to exist only because it would be too difficult to remove them, a relic of a forgotten past, the vestigial appendix in the beating belly of American sports in the 21rst century. The Green Bay Packers are owned by their fans and are run as a non-profit institution whose main goals are keeping the Packers competitive while remaining in Wisconsin.

They have shareholders who can hold a board of directors accountable in a way that every other franchise in professional sports does not. More importantly, because the franchise exists as a series of shares that can be bought and sold under certain conditions, it prevents a dangerous imbalance between the wealth of the owner and the overall value of the club.

To give one example, Robert Sarver, worth $400 million dollars at the time, bought the Phoenix Suns for $401 million dollars in 2005. The entirety of Sarver’s wealth is tied up in one investment, which naturally makes him very cautious about going into the red. As a result, Sarver has been one of the NBA’s most frugal owners, refusing to re-sign Joe Johnson or Amare Stoudemire and selling off most of the team’s first-round picks over the last six years.

Because of Sarver’s penny-pinching, the Suns have been unable to win a championship, drastically decreasing the value of the franchise. The San Antonio Spurs, in contrast, were worth $75 million in 1994, and now, after winning four championships, are worth $404 million. A well-capitalized owner can take a short-term hit (spending more money on players) for a long-term gain (winning a championship).

But now, the Spurs are somewhat the victims of their own success. Their owner, Peter Holt, still only has a personal fortune of around $80 million. For a business worth $400 million, a loss of $20 million in one year for a title shot might be worth the risk, but for a man worth $80 million, it’s an unacceptably high chance of personal financial loss.

On some level, it’s irresponsible for such a poorly-capitalized owner to own such a valuable asset. If the franchise was publicly traded, it would be an impossibility. That should be the end game for reforming professional sports in this country.