Tuesday, December 7, 2010

The Sale of the New Orleans Hornets (and Subsequent Effects on the Possibility of a Lock Out)

The Historic Sale of the Hornets to the NBA

The sale of the New Orleans Hornets to minority owner Gary Choust has recently fallen apart.

In order to keep the team in New Orleans, the current owner George Shinn has reached out to the NBA to buy the team.

If the NBA were to buy the Hornets, this would represent an unprecedented move in league history.

The current value of the New Orleans Hornets is $267 million, according to Forbes. The NBA will be responsible to personally finance 30% of this cost ($80.1 million, although this figure is, of course, not exact, as a team’s value is truly only the value that can be agreed upon by the seller and the buyer) because of league rules regarding financing.

Unfortunately, the sale of the New Orleans Hornets to the NBA may lead credence to the possibility of a lock out, something I considered impossible a short time ago (recently, I wrote you an article, “NBA Lock Out, Expansion or Contraction?” which considered the possibility of a lock out next year.)

While the move will ultimately benefit the NBA financially in the long-term, it should tie up a lot of revenue in the short-term because the NBA is basically “holding” the team to find a proper New Orleans buyer and it will hurt league revenues because of the negative effect the move will cause on the Hornets’ attendance.

Owner Shiin Attempted to Combine Fiscal Responsibility with Building a Winning Team

Owner Shinn has done an admirable job building a quality team while attempting to help his bottom line.

During the 2008-2009 season, the Hornets posted -$0.1 million operating loss, while also posting, from 2007-2008, 56, 49, 37 wins despite their franchise player, Chris Paul, being injured for a great deal of time during the latter two seasons.

Clearly, the attempt here was to build the best possible team without threatening the financial viability of the owner. This attempt, hopefully, is something that the New Orleans fans appreciate, which should dampen the impact of the sale of the Hornets to the NBA, and subsequently the uncertain future of the Hornets remaining in New Orleans, will have on fan attendance.

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