Financial Rumblings (Biz Case) – April 29, 2016

Ozzie Silna, former owner of the American Basketball Association (ABA) Spirits of St. Louis, passed on April 26, 2016. He is what everyone in business strives to be: visionary. Silna and his brother, Dan, dissolved the Spirits of St. Louis, according to the ESPN. News services, “when the ABA merged with the NBA after the 1975-76 season.” The brothers agreed to dissolve their team in exchange for a small percentage of the NBA’s future broadcast revenue. That amount increased with the growth of the NBA and the television market; the NBA estimated the amount to have been collected by the brothers to be about $750 million, which included a $500 million dollar payout in 2014 to the Silna’s in order for the NBA to minimize future financial exposure.

Ozzie Silna believed that in the 1970’s there was much room for growth in the NBA’s TV deal, though, he later conceded “we had no idea it would grow this much.” How could have the Silna brothers had known or anyone had known, the NBA would grow so much, especially, since the finals were still tape delayed up until 1981.

It did take NBA Commissioner David Stern’s brilliant marketing campaign of its stars, which were at first  Magic Johnson and Larry Bird, and later Michael Jordan (yes, he did play basketball and is not only brand of shoes) to raise the interest and entertainment value of the NBA.

In business it takes a long range view of the market as well as a viable product in order to succeed. The ABA had great players such as Moses Malone, Rick Barry, George Gervin, David “Skywalker” Thompson, Dan Issel, and Julius Erving (Dr. J); the league was entertaining and innovative (3 point line and Slam Dunk Competition during the All-Star game); and, they were mostly in cities where the NBA wasn’t: Baltimore, St. Louis, New Jersey, Virginia, San Diego, Minnesota, Indiana, Utah, San Antonio, Florida, and Denver. Businesses need to have the following questions answered-yes, it’s a simplistic list, but isn’t business:

  • Is your product better than anything currently available?
  • Is your product innovative?
  • Is there growth in the market your product is entering?
  • How will the other players in the market react to your new product?
  • Do you have the capital you need to sustain this business until it is profitable or until people stop believing in what you’re doing and the funding stops?
  • Is your belief in the product based on your hubris?
  • Why do you believe your product will succeed?
  • Is there someone who can manage the business better so that you can focus on the product?
  • What is your time horizon for success? Define success?
  • Would you be crushed if someone told you your product was crap?
  • Would you realize your product was crap before being told it was?
  • Your product is successful, now what?
  • Is your new product better than anything currently available?…etc., etc.

The ABA maybe a distant memory, but the Silna’s belief in professional basketball isn’t. The Silna’s viewed their product of professional men’s basketball to be one which had room for growth and that the growth of the NBA, which would include four of the ABA teams, would rise given the almost non-existence presence of the sport on TV. Obviously, they couldn’t have envisioned that NBA games would be streaming on phones, etc., but they did believe in their product’s entertainment value, and that demand would grow. Everyone should be thanking former Commissioner David Stern for his marketing skills as the NBA reached new heights under his leadership.