Business

Clippers advertisers flee in midst of Sterling scandal

The statements could cause tens of millions of dollars in damage to the Clippers and the NBA, experts say
Fans and even an NBA coach are calling for boycotts of games and merchandise
It could take months for the financial fallout to become apparent

Major advertisers of the Los Angeles Clippers are fleeing in droves as they rush to distance themselves from comments about blacks attributed to team owner Donald Sterling.

A growing list of more than a dozen sponsors, including Virgin America, Kia and State Farm, are canceling or suspending their deals with the basketball team after a celebrity gossip site released a recording in which a man it identified as Sterling chides a female friend for "associating with black people."

The statements could cause tens of millions of dollars in damage to the Clippers and the NBA, experts say.

Fans and even an NBA coach are calling for boycotts of games and merchandise. Free agent players may steer clear of the team, hurting future ticket sales and other income. Companies once loyal to the Clippers may reserve corporate boxes at Lakers games instead.

"This casts a pall over the entire Clippers franchise and would affect their ability to do business in the present tense, but also possibly going forward," said Robert Boland, a professor of sports business at New York University's Tisch Center. "It's very serious. And what makes it more serious is there's no easy solution."

The timing couldn't have been worse. With the help of popular players Chris Paul and Blake Griffin, the historically lackluster team has bettered the Lakers in home-game attendance for the third year in a row, ranking seventh out of 30 NBA teams. The Clippers have sold out 137 home games in a row.

Television viewership is also strong. The team had its third-highest-rated season on Prime Ticket, a regional sports network owned by Fox. And it was the 10th-most popular NBA team in merchandise sales, according to the NBA.

All that has helped the Clippers' value skyrocket in recent years, to as much as $700 million, according to analysts.

On Friday night, TMZ released an audio recording in which a person it identified as the Clippers owner lambastes a woman identified as  V. Stiviano for posting a photo of herself with Lakers legend Earvin "Magic" Johnson on Instagram. "It bothers me a lot that you want to broadcast that you're associating with black people," the man's voice says.

In rapid succession Monday, Clippers sponsors began dropping from the team's advertising roster.

Kia Motors America, which features forward Griffin in several commercials, called the taped comments "offensive and reprehensible" and said it was suspending its advertising and sponsorship.

Red Bull, Virgin America, Yokohama Tire, Sprint, Burger King, Samsung and State Farm also withdrew advertising. Local companies LoanMart, the Southern California Ford Dealers group, Commerce Hotel & Casino and the Santa Ynez Band of Chumash Indians did so as well.

Used car company CarMax, which sponsored the Clippers for nine years, said it was severing its relationship with the team entirely because the views "directly conflict with CarMax's culture of respect for all individuals."

Although the Clippers will struggle to replace lost sponsors, the team probably won't collapse financially, analysts said. Sterling runs the squad as a so-called renters team — unburdened by the debt associated with owning a stadium.

Staples Center said in a statement that it is "deeply troubled" by the remarks but did not respond to questions about whether Staples would alter or cancel the Clippers' lease agreement.

The best scenario for the NBA and the Clippers would be for the league and Sterling to agree on his punishment, Boland said. The worst would be if Sterling rejects any punishment and sues the league. Under the NBA constitution, the league has the authority to indefinitely suspend a team owner for "conduct prejudicial or detrimental to the association" — a clause that legal experts believe could include a loss of advertising revenue from sponsors.

It could take months for the financial fallout to become apparent. The Clippers pull in $128 million a year in revenue, with less than a third coming from ticket sales, according to Forbes.

Some fans may keep buying tickets in support of players.

The Clippers play the Golden State Warriors at Staples Center on Tuesday in Game 5 of the playoff series. The average ticket price is up nearly 8%, or $20, to $273.38 since Saturday morning, according to ticket aggregator TiqIQ. The current average price for the entire first-round series featuring the two teams is $308.38 — the most expensive of this year's playoffs

The cheapest ticket for Tuesday's game is now $70 — up 22.8% in three days. The most expensive seat is listed at $2,800, according to TiqIQ.

"The die is already cast in terms of the dollars that will flow to the franchise in the short term," said Kenneth L. Shropshire, a professor at the University of Pennsylvania's Wharton School. "That money's in already, and that's the case with a lot of the pieces of this situation."

tiffany.hsu@latimes.com

andrea.chang@latimes.com

Twitter: @tiffhsulatimes, @byandreachang

Times staff writer Stuart Pfeifer contributed to this report.

Copyright © 2014, Los Angeles Times
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