Could it be that
Reports swirled Friday morning that Sterling was ready to concede defeat to the National Basketball Assn. and sell the L.A.
Sterling is a lawyer, and he's seen the
But there are three additional, powerful reasons for Sterling to sell now, and given his track record as a businessman, he must certainly recognize them.
First, as his crosstown rivals demonstrated this year, good teams can go bad in a hurry. And when they do, all sorts of support systems for the team's brand -- partnerships with large national advertisers, appearances on national TV, prominent placement of team jerseys in sporting goods stores -- evaporate. Whatever the opposite of cha-ching is, that's the sound an owner hears on the elevator ride down into Lotteryville.
And there's no surer path to the bottom than chasing off marquee players and coaches. For all but the last few years of his tenure as owner, Sterling trapped the Clippers in an aspic of failure by refusing to pay the dollars necessary to keep young stars or attract free agents who could, you know, play. His unexpected willingness to open the vault for
In other words, the team's personnel and its performance have peaked, at least as long as the Sterlings are parking in the owner's spaces at Staples Center. And so, perhaps, has the value of major-league sports franchises. That's the second factor.
The crazy increase in franchise value has been driven by the skyrocketing fees for broadcasting a team's games. The main force behind those fees has been cable operators, who've been paying princely sums for the exclusive deals that have wrested pro teams from their longtime partners in local TV. But the Dodgers and
Their $8.35-billion multi-year contract was predicated on the assumption that Time Warner Cable could persuade all the pay-TV operators in the region (including
The Dodgers have an exceptionally large and loyal fan base, so the SportsNet LA setback is a chilling one for franchise owners everywhere. It suggests that pay-TV operators have squeezed as much as they can out of their basic-tier customers, and the days of dropping expensive new regional sports channels into that tier are over.
The Clippers' last TV contract was in 2009, and though it nearly doubled the franchise's annual take (from $12.5 million a year to about $20 million, according to The Times and Forbes), it's nowhere close to the $180 million the
In sum, Sterling is holding an asset at its peak value, with his own involvement among the factors threatening to lower it. Now here's the kicker: There's a growing sentiment on Capitol Hill to overhaul the tax code to broaden the base and lower rates. That effort threatens the considerable tax break in current law for capital gains, which are taxed at about half the rate of ordinary income. And considering that Sterling paid only $12.5 million in 1981 for a team he could sell for upward of $750 million, he's looking at a whopping capital gain.