With the world on lockdown, many sports fans presume millionaire and billionaire sports-team owners can handle the financial strain of a suspended season. But this is not always the case. Some owners, like Houston Rockets owner Tilman Fertitta, may eventually have to sell the team to survive.
How do you lose money as an NBA team owner?
An owner’s ability to survive this financial collapse will largely depend on how they make money and how they prepared for financial hardships. Those secure in their finances likely have plans in place to help ease the strain. Others, however, need revenue to stay functional, as the New York Times explains.
Ownership shares are not always cut and dry. Sometimes, a single person owns a team outright. They bankroll the team and take in all the revenue to stay afloat. More often than not, however, a team is owned by a group of deep-pocketed individuals, where the leading shareholder has the most say, explains Investopedia.
Depending on the size of the group, this person may not be as rich as their ownership title suggests. This can complicate the finances of a given situation. Those whose money also depends on other investments, like restaurants or hospitality businesses, are not making money on either side.
So, some owners have already taken drastic measures due to the looming threat of financial ruin. Could it be time for some of these owners to sell their team if they want to remain in their role?
Looming danger for the Rockets owner?
Most teams are affected by the suspension of their teams, but others appear to be in further danger. The Sacramento Kings, whose ownership group is complicated, have furloughed more than a third of their employees as they struggle to get through this. In a small market like Sacramento, the suspension hits especially hard.
Over in Houston, the most high-profile case of an owner bleeding money, ownership may be forced to make a tough decision. Fertitta, who is currently paying Russell Westbrook and James Harden nearly $80 million a year on their current contracts, was worth over $5 billion at one point.
The billionaire owns all the Rockets’ ownership stakes after buying the team for $2.2 billion. His worth has taken a hit, however, with the last estimate stating that it dropped to $3.2 billion.
If ever there were a candidate for somebody who would be forced to sell, it would be Fertitta. He has furloughed more than 40,000 employees worldwide in various hospitality businesses. Furthermore, he recently talked to President Donald Trump about his need for some financial assistance. In one way or another, one must wonder if Fertitta can afford to keep his team.
What happens when you can’t afford a team?
The NBA has experience with bailing out teams who can no longer pay the bills. In 2010, New Orleans Hornets owner George Shinn and minority owner Gary Chouest were forced to sell after failing to reach a deal with another buyer and struggling to pay even the minimum amount required to run an NBA team.
The NBA agreed to purchase the team for around $300 million and owned the team for several months after. Desperate times call for desperate measures, and if somebody cannot pay for the product they put out on the floor, something will need to change.
Fertitta is the likeliest candidate, but this can happen to anyone. If the suspension lasts in further months, don’t be surprised if owners begin selling off to keep the personal finances stable. Until then, the hardships will persist.