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Wednesday, August 06, 2008

The NBA's Worst Nightmare

is a two-headed monster -- the exchange rate, the huge creation of wealth in places like Russia, and the willingness of newly created (and some not-so-newly-created) billionaires to flaunt their wealth on trophy possessions.

Why is this monster a threat to the NBA? Well, take a look at the English Premiership, where a few Russian oligarchs have already flexed their muscles. Roman Abramowitch owns Chelsea, one of the crown jewels of English soccer, and he helped revive them and put them atop the Premiership. There are other Russian ownership interests as well in the Premiership (and, one of my best sources tells me that Russians own 20% of all homes in London's tony Mayfair district).

So what, you say. Well, witness a) the signing of Josh Childress to the leading Greek team and b) the signing of Carlos Arroyo to the leading Israeli team. Sure, neither is a premier NBA player, but suppose the dollar remains weak and the Russians continue to print money and get acquisitive. They'll do one of two things -- either fortify the European basketball leagues (both in Russia and abroad, as Italia and Spain have top leagues) or even purchase NBA franchises. Suppose they decide not to cross the Atlantic but decide to put big bucks in European teams. What would that mean for the NBA?

Not a total collapse, for sure. But the Russian money could keep the top European players in Europe and then lure some top American players overseas. Even LeBron James has indicated that he'd listen to European offers (because he wants to become an international brand name). Not all players would listen -- some wouldn't like the language barriers, cultural differences and lack of familiarity with U.S. themes. But others would like the lifestyle, the lack of crazy fan attention that has caused many players to take additional security precautions, and, sure, the money. Probably not everyone -- I couldn't see Allen Iverson playing for Benetton Treviso, but I could see others opting for the money and the experience.

The NBA doesn't appear concerned, at least publicly, but the league has to be concerned. Who would want to lose a LeBron James, and if a LeBron James were to bolt, how many others would consider following? No business likes to lose one of its biggest stars.

And then there's the question of what if foreign money proposes to buy NBA franchises in the U.S. It's not a huge issue, because I'm sure the league would permit the ownership so long as the potential owners meet the published ownership qualifications. That said, suppose the new ownership is loaded and wants to blow through the salary cap? Then what?

I honestly believe that big bucks from places like China, India and Russia will make their way into the U.S. sporting arena. Who knows, perhaps some oligarch would want to pay $1.5 billion for the New York Yankees should the Steinbrenner family decide to sell for estate tax reasons the way the Wrigleys had to sell the Cubs years ago? Those with new, huge bucks tend to like the hunt and the trophies that come with it. To me, it's only a matter of time before the ownership landscape for U.S. sports franchises takes an international flavor, especially because it's easier than establishing your own leagues in your own countries.

The NBA may want to go "international", but it should be wary that the international scene might want to take away markets and market share, as opposed to permitting the NBA to set up residence.

Let's see what happens out there in the marketplace.


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