How the Donald Sterling Saga Could Add Value to the Clippers
Lucy Nicholson for Reuters/Newscom
After he was banned for life from the NBA and faced the likelihood of being forced by the league to sell his Clippers, Donald Sterling reportedly said he would fight to hold on to the franchise.
But it's a strange saga: The racist outburst attributed to Sterling targeted one of the few people in town who wanted an NBA team and has the wherewithal, with the backing of his Guggenheim Partners asset management partners, to buy it: Earvin "Magic" Johnson. And yes, he's reportedly interested.
What's notable about the situation is this:
It could have, at least until now, added value to the Clippers. Here's how. Those sponsors who have cut ties with the team completely over Sterling's remarks include Virgin America, Mercedes, Chumash Casino Resorts and CarMax.
Because the Clippers haven't really had a decent season until the last few years, the abandonment could indirectly allow the team to reset its sponsorship deals and obtain much more lucrative deals under new ownership.
"Sponsors who signed on in the pre-playoff years, now the Clippers can say they have a chance to renegotiate because they're a playoff team now," says Kenneth Shropshire, director of the Wharton Sports Business Initiative at the University of Pennsylvania. "It's always so advantageous to say, 'Ah-ha, you couldn't find anything better,' and you can charge more."
In other words, sponsors who were on-board with a discount might soon have to pay full price to be with the Clips following a winning season, a decent postseason and the kind of ownership - Magic? - that would get this town (or perhaps another) wholly behind the team again.
"One could argue the Clippers could be a much more valued franchise with a new owner who has a more serious view toward winning and human relations," said Marc Edelman, a sports business scholar at the City University of New York.
We're not endorsing any conspiracy theories here but, the truth is, this saga could allow the team to negotiate better terms with lucrative sponsors. That is, if Sterling doesn't drag this through the courts, which is possible, thus likely devaluing the franchise along the way.
As it stands the Clippers were said by Forbes to be worth $575 million in January. Now talk is of a possible $1 billion value.
But Edelman of the City University of New York argues that this episode will have left such a bad taste in fans' mouths that it would behoove any new owner to repackage the team.
"If I were advising someone looking to purchase, I would look to give up the name and colors altogether," he said. "They have very serious negative brand equity associated with them. On the other hand, L.A. is very valuable territory, even when shared with the Lakers, for a creative entrepreneur who wants to create a new identity."
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