How A 1976 Merger Affected Modern-Day NBA Media Rights
| January 4, 2018
Prior to joining Tiffany & Bosco in 2015, Michael A. Wrapp penned an article in the Willamette Sports Law Journal, analyzing the 1976 NBA-ABA merger and explaining how what seemed like an insignificant decision more than 40 years ago has had a significant impact today. You may read the legal journal article in its entirety, or read the summary below.
The 1976 NBA-ABA merger was not smooth. Amid the transition, Spirits of St. Louis owners Dan and Ozzie Silna resisted an easy NBA buyout of their ABA franchise. Likely resisting out of a personal desire to be part of the NBA, the Silna brothers negotiated a deal that has since highlighted the importance of media rights in modern sports contracts.
Sports media rights were not nearly as sophisticated or valuable in 1976 as they are today. The Spirits of St. Louis settlement affected the evolution of NBA media rights by highlighting their importance in future contract negotiations.
The Spirits Franchise Before the Merger
When they purchased the Spirits of St. Louis with the hope of eventually owning an NBA team, Dan and Ozzie Silna expected that the NBA would soon merge with the ABA. Hence, the team was never intended to be more than a tool to facilitate the brothers’ entry into the NBA.
Despite its talented players, immaturity and internal strife plagued the team. Ultimately, the Spirits of St. Louis never found a rhythm. It was a good team on paper. The reality was vastly different, and the team consistently lost money. Of course, this was not unusual for ABA teams – in the nine years leading up to 1976, 28 ABA teams racked up $50 million in losses.
The Spirits of St. Louis had potential, but failed to achieve anything of note.
The NBA-ABA Merger
Since at least 1970, whispers of merger were floating around the courts of the NBA and the ABA. Players largely opposed a merger because they believed it would reduce their bargaining power. Oscar Robertson and 13 other players representing each of the NBA’s teams sued in the early 1970s to block a merger on the grounds that doing so would create a monopoly league.
Opposition continued…for a time.
However, by1976, both the New York Nets and the Denver Nuggets had applied for membership in the NBA. Gradually, the remaining ABA teams decided that they had better merge or dissolve, and merger talks began. The NBA was taking over.
Media Rights Since the Merger
At a time when the media was still a minor player in the NBA/ABA world, media rights would become a quiet focal point of negotiations. At the time, neither the ABA nor the NBA received much media attention. Experts predicted a gloomy media outlook for the leagues.
The Silna brothers’ insistence on receiving NBA media rights as part of a buyout package for the Spirits of St. Louis franchise seemed odd. John Brown, the owner of the Kentucky Colonels, had already accepted a buyout of his franchise for $3.3 million. Agreeing to receive a smaller buyout amount and ostensibly insignificant media rights seemed like a terrible deal for the Silnas.
Having bought an ABA franchise with the intent to eventually become part of the NBA, only to have that dream yanked away during the NBA-ABA merger, the Silna brothers were after far more than a big payout. They were trying to remain connected to the NBA, and the media rights they demanded gave them that connection.
How the Merger Has Affected Owners
The merger of the ABA and NBA and the resulting battle started by the Silna brothers has altered the landscape of media rights tied to professional basketball franchises. Their lawyer, Donald Schupak, is largely responsible for making a deal which, at the time, was decried as a big “hold–up” and “unethical.” The deal?
The brothers and their lawyer were granted a one-seventh share of the visual media rights of the four shunted ABA teams. At the time, this deal seemed paltry – today, the brothers have received hundreds of millions of dollars from the deal.
More importantly, the deal helped usher in an era in which anyone in the sports industry must have a lawyer who understands the importance of media rights in contract negotiations. The right media deal can mean far more than just an open door.
Michael A. Wrapp is an attorney with Tiffany & Bosco, practicing law in the areas of banking, civil litigation, construction law, finance, Indian law, and general real estate. Read more on his bio.