Category Archives: NBA

From A Chicago Bulls Ball Boy To Top Sports Apparel Designer: The Story Of Sportiqe

Everyone remembers their first date.

Not everyone is driven to their first date by NBA legend, Scottie Pippen, though.

From a young age, Sportiqe founder, Jason Franklin, has lived a life less ordinary than most. It is that life less ordinary, though, that has allowed Franklin to become one of the NBA’s most-popular apparel providers.

At 15 years old, Franklin found himself like many other boys growing up in America: A lover of sports, but someone whose talents weren’t going to allow him to turn pro. What Franklin had that most others didn’t, though, was an intense drive to find a way to keep his passion for sports alive in spite of his athletic talent. Little did he know, a bike ride he took through Chicago as a teenager would pave the way to his future career.

“The Bulls’ practice facility was in my hometown. I rode my bike to the front door and knocked on it, asking if they needed a ball boy. Someone came to the door and said it was the middle of the season and that they’d send me an application for the following season. They did and I along with 1,000 other kids applied. Five were interviewed, two got a job and one of them was me,” Franklin reminisced.

Becoming a ball boy for the Bulls in the 1990s was the equivalent of hitting the lottery for a teenager growing up in Chicago. The job not only meant later bedtimes on game nights, but unimaginable access to some of the world’s biggest sports stars in their natural environment.

“Michael Jordan came back and the Bulls won three championships. The highlight of my experience had to be being in the locker room for the celebrations of those championships. Being a high school kid and getting a chance to be around and witness that first hand is dream come true type of stuff,” Franklin said.

Spending time in the Bulls’ locker room not only allowed Franklin to rub elbows with the players, but to be mentored by them. Pippen took a liking to the young Franklin, and when Franklin came into the locker room talking about asking his first girl on a date, Pippen not only offered Franklin advice, but a ride — in his Ferrari.

Along with the rides and advice on girls, Pippen, Jordan and the Bulls offered Franklin important lessons about what it takes to win on and off of the court. “The strongest thing I took away from my experience was watching how those guys handled themselves off of the court. Watching their interaction with people during my formative years of 15-18 really helped shape how I handle myself as a professional. The way people wanted to be around them and the types of people they were off of the court allowed people to gravitate towards them. Through them, I saw the type of person you could be regardless of whether you were famous, and how the kindness you extend to people can become infectious,” Franklin explained.

With those lessons instilled in him, Franklin launched Sportiqe, a lifestyle licensed apparel brand, who lists the NBA as a partner. The brand’s stylish and comfortable t-shirts and hats are frequently worn by some of the world’s top athletes and celebrities, including Jay-Z, Beyonce and Justin Bieber. For Franklin, finding his way into the apparel industry was much like his becoming the Bulls’ ball boy: A natural fit.

“Growing up, I loved sports. I’d go to every single sporting event I could. When I realized I wasn’t going to be good enough to play professionally I realized I still wanted to be involved in sports in a way that I was passionate about. My grandma and great-grandmother were clothing designers. My earliest memories were sitting on my grandma’s lap in her knit shop and her showing me different yarns and fabrics. That got my brain working in terms of always looking for fabrics and colors and blending them,” Franklin said.

At the tender age of 10, Franklin became a third generation fashion designer when he began designing hats that would later be worn by the likes of Tupac and 50 Cent. “Apparel was something that was in my blood,” he remarked. Yet, the quick success he achieved as a child designer was only the beginning of what would become a life-long career.

“I’m a firm believer that if you find exactly what it is you’re destined to do, then you have the opportunity to do great things. I was very fortunate at a young age to be around a guy like Michael Jordan and a team that won three championships to see that they found what they were passionate about and worked as hard as they possibly could at it. At a young age, I realized I could blend two of my loves, fashion apparel and sports,” Franklin noted.

As NBA teams install Sportiqe-specific fixtures into their team stores and more celebrities and athletes turn to the brand, given Franklin’s background it is perhaps no surprise that he remains humble. For Franklin, Sportiqe’s growing success all boils down to an important lesson he learned as a teenager in an NBA locker room.

“People want to be around people with infectious personalities. Learning this in the Bulls’ locker room helped me grow Sportiqe as a brand. The more chances I get to be in front of people and meet them, the more they not only want to be around myself, but the brand. Sportiqe has grown by word of mouth, and it’s really been about one person telling another person about the brand. When people get a chance to be around Sportiqe, they gravitate towards it and that’s one of the things that I took away from hanging out with the Bulls at a very young age,” Franklin said.

Leave a comment

Filed under NBA, Sports Fashion, Sports Licensing

The NBA And Its Teams Provide Solid Strategies For Teams Looking To Go Green

With over 1.3 million viewers tuning in to watch its regular season games, the NBA has a unique platform to facilitate social change. Last week, the NBA utilized that platform to educate its teams and fans about ways to reduce their collective environmental footprint. NBA Green Week presented by Sprint allowed the NBA and its teams to encourage environmental responsibility throughout their communities.

When asked why the NBA dedicates a week of its season to NBA Green Week, NBA senior vice president of social responsibility, Todd Jacobson, said, “Social responsibility is part of our league’s DNA. Through the NBA’s reach and the profile of our players, we have the ability to address important social issues, such as environmental awareness. In partnership with the Green Sports Alliance, the NBA, its teams and players are committed to taking steps to promote environmental stewardship and encourage our fans to join us. NBA Green Week presented by Sprint is our chance to highlight some of the great work taking place around the league, while promoting environmental awareness and encouraging our fans to think about their effect on the environment.”

Notably, NBA Green Week is the only week-long initiative hosted by any professional sports league that is entirely focused upon educating fans about environmental stewardship. One example of the week’s events is the NBA’s commitment to plant a tree with the Arbor Day Foundation every time that #NBAGreen was posted on social media or three trees every time a three-pointer is scored during the week’s games. Beyond tree planting, the NBA also partnered with Sprint to host phone recycling events and has also purchased renewable energy certificates in conjunction with Bonneville Environmental Foundation to cover the energy used during the week’s games.

Highlighted throughout the NBA Green Week agenda was the NBA and its teams’ partnership with the Green Sports Alliance. Founded in 2010 to inspire teams, fans, leagues and venues to embrace sustainability, the Green Sports Alliance counts numerous NBA teams and their venues as members.

In 2015, teams are continuing to identify standards of best practice for developing sustainability plans that they can not only adopt, but will also motivate their fans to engage in green practices. Several initiatives engaged in by some NBA Green Sports Alliance members serve as great examples of how teams can incorporate sustainability into their business model and positively impact the environment. These initiatives can easily be replicated by other teams, both inside and outside of the NBA.

Portland Trailblazers


The initiative: Inaugural members of the Green Sports Alliance, the Portland Trail Blazers and their arena, the Moda Center, are sports leaders in the green arena. Recently, the team launched the Threes for Trees campaign. In partnership with Daimler Trucks, the Trailblazers plant three trees for every three pointer scored during the season. 3,000 trees will be planted this spring in Portland’s Sandy River delta.

Ideas for other teams:  Other teams should consider ways that they can utilize particular areas of team success to drive sustainability.  Additionally, the lesson from the Trail Blazers, is that corporate sponsors are willing to come on board to support these endeavors.  Thus, teams’ corporate sponsorship teams should be creating activations centering around sustainability and pushing those to sponsors.

Miami Heat


The initiative: After the first NBA Green Week in 2008, the Miami Heat realized it could attain LEED certification for its arena, the AmericanAirlines Arena. In 2009, AmericanAirlines Arena received LEED Gold certification. In 2015, AmericanAirlines Arena became the first sports and entertainment venue in the world to achieve LEED Gold recertification status. “From becoming certified to recertification, we were focused on keeping up and managing our own standards. We want to keep leading the industry in terms of sustainability, because in sports, there are still very few stadiums that are LEED certified,” said the Heat’s operations and sustainability coordinator, Jackie Ventura.

Ideas for other teams: One thing that allowed the AmericanAirlines Arena to obtain LEED Gold recertification, was the Heat’s adoption of unique strategies to reduce arena waste. In this regard, it launched the Re-Heat program, which saves over 5,000 pounds of concessionaire’s food from the trash can, and instead, redirects it to local homeless shelters. Other teams can follow the Heat’s lead by identifying unique ways to reduce arena waste that also benefit their communities.

Golden State Warriors


The initiative: The Golden State Warriors pride themselves on the sustainability and green initiatives adopted not only at the team’s arena, but its headquarters and practice facilities as well. One recent initiative has focused upon recycling water bottles at the team’s headquarters. There, over 67,000 water bottles annually avoid the landfill through recycling initiatives.

Ideas for other teams: Water bottles continue to be one of the greatest causes of landfill waste. Other teams should follow the Warriors’ lead and institute sound recycling policies for their employees’ water bottles. Alternatively, teams can distribute reusable water bottles to their employees and provide water filling stations in their offices. Teams can also host giveaway nights where they distribute free reusable water bottles to fans to educate them on the waste issues that arise with disposable water bottles.

Houston Rockets


The initiative: Recognizing the presence the team holds in the Houston community, the Rockets hold an annual electronics recycling drive annually. The drive gives local Houston citizens an opportunity to turn in televisions, computers and other electronic components to have them safely and properly recycled. This initiative not only keeps these items out of landfills, but ensures the possibility of their proper re-use.

Ideas for other teams: Many teams host similar e-cycle events, but the key is to allow for the event to actively engage fans with the team. Thus, teams should consider including green giveaways in their events or ensure that there are educational materials on hand for fans to pick up about how they can make their home more sustainable. Furthermore, teams should engage employees to become involved in the recycling events by providing incentives to the employees who bring in the greatest number of electronics to be recycled.

Phoenix Suns


The initiative: In 2012, 966 solar panels were installed at the Phoenix Suns’ home, the U.S. Airways Center. The project, a joint effort between the Suns and APS with an estimated cost of $1.26 million, has some serious environmental impacts. The solar panels create 378,000 kWh of solar energy per year, which amounts to 20 Suns’ games worth of clean energy.

Ideas for other teams: A handful of other NBA teams have installed solar panels on their arenas. Given the steep price of these, though, teams should seek to involve corporate sponsors to partner in the initiative. Furthermore, teams can utilize the solar panels as a way to engage their communities. For instance, teams can host elementary and middle school aged children on field trips to visit and learn about solar electricity.

Leave a comment

Filed under NBA

How Adidas Signed The Best NBA Rookies To Its Brand

Last weekend may have been the most fashionable weekend in New York history.

In the midst of Fashion Week’s (or, is it really fashion month?!) kicking off, the NBA’s top stars descended upon New York City for the 2015 NBA All-Star Game. This year, for the first time ever, the NBA incorporated a number of fashion elements into the weekend’s festivities.

One such element is the presentation of the NBA’s first fashion show. Airing Saturday night, the fashion featured eight NBA players taking the runway in a three-round show, featuring boardroom, game day and night out apparel.
The official apparel provider of the NBA, adidas, also found its way onto the runway during All-Star Weekend. Over the weekend, Kanye West hosted the adidas Originals x Kanye West YEEZY SEASON 1 fashion show to mark the launch of his new sneaker with the brand.

Over the last year, adidas has intensified its push to dominate the market share of hip-hop and NBA enthusiasts. The YEEZY SEASON 1 launch marks part of a growing initiative by adidas to secure the biggest names in entertainment and sports to market its brand.

At the start of the NBA season, adidas made waves when the brand announced the signing of four of the top-six rookies drafted in the 2014 NBA Draft. Signing the number-one overall draft pick, Andrew Wiggins, along with Joel Embiid, Dante Exum and Marcus Smart marked a successful execution of company strategy for adidas.

“We’ve been targeting this class for a couple of years. As we look at our long-term strategy within basketball, athletes play a critically important part of how we plan to grow our business and brand. It’s the best way to connect with fans and kids. At the end of the day, the kids buying sneakers are the ones looking up to the best players in the game. We’ve always had a focus in partnering with the best athletes in the game, going back to Kareem, Allen Iverson and more recently, Derrick Rose. In this draft class, we saw an opportunity to reinvest in our portfolio of players,” said adidas’ head of basketball, Chris Grancio.

For NBA players, signing with an apparel company provides an opportunity to collaborate on the types and designs of sneakers they’ll wear on the court. As players’ fashion brands off the court continue to grow, with many having their own fashion lines, this is a critical opportunity for apparel companies to present NBA stars. “The relationship becomes more collaborative the more time that we have to work with the players. We are working on some custom player edition products for our rookies for the tail end of the season and the playoffs. We showed them designs and got feedback, so they’ll have input on their first player editions,” Grancio explained.

Launching a player edition sneaker is not only an honor for the player involved, but provides players with a critical opportunity in an age of fashion forward NBA players: Choice. “Guys are different when it comes to how many different pairs of shoes they wear during a season. Ricky Rubio only wants to wear three or four pairs a season. He likes to stay in the same product. We have other guys who will wear a new pair every single night. Guys like Damian Lillard will wear a different model five nights in a row. The guys who are sneakerheads, like Jeremy Lin, are emailing almost daily about the products they see at retail,” Grancio noted.

Sneakerheads who don’t have an NBA contract should cheer on those that do. The more that players like Lin and Lillard push the needle on sneaker style, the more likely it is that fans will see new, fashion forward products arrive in stores. Further, with the competition to sign top-level NBA talent heating up, sneakerheads are also likely to benefit, as apparel brands work to out maneuver each other in terms of creating the most stylish and trendsetting sneakers.

Leave a comment

Filed under NBA

NBA Fans And Corporate Sponsors Hold The Greatest Power To Punish Donald Sterling

Yesterday, TMZ disseminated a recording</a> that allegedly contained Los Angeles Clippers owner, Donald Sterling, making racist comments about African-Americans. In the wake of the recording’s dissemination, NBA players, civil rights leaders and President Barack Obama have shared their disgust over the recording’s comments and have called for the NBA to take action against Sterling. In response to the recording, NBA commissioner Adam Silver held a press conference and indicated that an investigation into the recording is ongoing and that all sides will be afforded due process. While the NBA holds power to levy serious sanctions against Sterling should its investigation reveal the voice on the recording is his, for the time being, fans and corporate sponsors hold the greatest power to punish Sterling.

As noted above, the NBA has power to sanction Sterling should the voice on the recording belong to him. This ability is held in the commissioner’s “best interest of the game” power. Utilizing that power, Silver can institute investigations and subsequently levy sanctions into matters that affect the best interests of the game. However, it is unlikely that this power would be utilized to directly remove Sterling from his position as an NBA owner. That is because other documents, specifically the NBA franchise agreement, constitution and bylaws, govern that ability. While those documents are confidential, the league can reportedly only remove</a> an owner from his post if the team is embroiled in serious financial difficulties.

Thus, if the NBA’s investigation reveals that the voice on the recording is Sterling’s, it is likely that Silver will issue a combination of a fine and a suspension against Sterling. While Silver could issue a lengthy enough suspension to effectively motivate the 81-year-old Sterling to sell the team, doing so could invoke a legal challenge by Sterling. This legal challenge would likely arise, because Sterling would assert that because he has never been suspended by the NBA before, a suspension exceeding one season would be arbitrary and capricious.

Along with calling for the NBA to remove Sterling as an owner, others have called for the Clippers to refuse to play. While Clippers head coach Doc Rivers has indicated that the team has decided not to do this, the question remains whether the team legally could. Arguably, sitting out from a game would amount to a strike by Clippers players, as they would be boycotting their working conditions under Sterling. However, under the collective bargaining agreement the National Basketball Players Association signed with the NBA in 2011, strikes during the term of the collective bargaining agreement are not allowed. Thus, sitting out a game would violate the terms of the collective bargaining agreement and could open up the players to a labor law claim and also a breach of contract lawsuit.

Yet, another body of law arguably paves a way for the players to legally sit out from play. That is Title VII of the Civil Rights Act. Title VII grants employees the right to sit out from work to boycott an employer’s discriminatory practices. Arguably, Sterling’s conduct and a subsequent refusal to work by Clippers players would fall within the realm of Title VII. However, due to the collective bargaining and contractual issues discussed above, Sterling would likely wage a legal battle should players sit out of a game. Thus, it would be up to a court to decide whether players were within their legal right to not play. Given the legal intricacies of players sitting out from play, it is not a path they are likely to choose.

Given the legal issues limiting the message the NBA and its players can send to Sterling regarding his alleged racist comments, fans hold the greatest power in sending him a strong enough message that such speech will not be tolerated.  Forbes valued the Clippers</a> at $575 million in 2014. That valuation came after Sterling purchased the team for a mere $12 million some 33-years earlier. Thus, the Clippers are a team that fans, corporate sponsors and television broadcast network partners have built into a financial success through their ticket and merchandise purchases, partnership contracts and lucrative television broadcast contracts.

To send the greatest message to Sterling, fans should take a page out of the playbook of the 1960s Civil Rights Movement, which organized boycotts of companies that engaged in discriminatory behavior. The thought behind such movements is to hurt the companies’ bottom line so that they are pushed into adopting acceptable race relations practices. While sitting at home for the remainder of the playoffs will likely not be a strong enough move for fans to hit Sterling and the Clippers’ bottom line, over time, fans’ refusal to attend Clippers games will hurt the team’s bottom line. Additionally, the Clippers’ corporate sponsors should consider pulling their money from the team after reviewing their contracts, which likely include a morals clause. Finally, the team’s television broadcasting networks should consider similar action.

When news of Sterling’s alleged comments arose yesterday, many people cried out and said the comments were part of a pattern of behavior that has been ongoing for decades. Perhaps now is the time to end that behavior. If the NBA and its players are limited in how they can end the behavior, the power lies in the people and corporate entities who have helped line Sterling’s pockets. These individuals and corporations must pull back their monetary support of the team until Sterling not only issues an apology, but demonstrates that he has completely changed his beliefs and feelings towards people of races other than his.

Leave a comment

Filed under NBA, NBPA

The NBA Rule That May Make Dwyane Wade’s Free Agency More Interesting Than LeBron’s

LeBron, LeBron, LeBron.

With the 2013-14 NBA season in its infancy, it seems as though the biggest topic of conversation is whether LeBron James is going to opt out of his contract with the Miami Heat two years prior to its expiration and sign a new mega deal.  As pundits weigh in and teams’ salary cap experts scramble to figure out how they might be able to get their hands on the greatest player of this basketball generation, Dwyane Wade’s potential free agency looms quietly in the background.

In 2010, Wade signed a six-year, $110.1 million contract with the Miami Heat.  The contract provides Wade with the option to opt out in 2014 and 2015.  The purpose of opting out for any player is to secure a more lucrative deal than the one he currently has.  However, for Wade, his decision to opt out should be guided largely by his age.  Similarly, teams seeking to sign Wade must also be cognizant of his age as his free agency approaches.

When it comes to Wade’s age, on the surface, the biggest question is how many playing years he has left.  However, below the surface and crouched in the 2011 NBA collective bargaining agreement lies another issue:  the Over 36 Rule.

The NBA’s Over 36 Rule exists to recognize the reality that even though NBA players may be signing contracts that will not expire until after they are 36-years-old, the likelihood of them playing until that age is slim.  The Over 36 Rule applies when a player signs, extends or renegotiates a contract that is four-years or more in length, and the player will be 36-years-old or older when at least one of those seasons begins.  If the Over 36 Rule applies to a player’s contract, a portion of his salary may be reallocated towards the calculation of the salary cap in other years.

When it comes to Wade, who turns 32-years-old in January 2014, the Over 36 Rule and its operation is something his representatives and teams alike must be aware of.  In a perfect negotiation setting, Wade’s agent will secure him a five-year contract taking him into the twilight of his career.  If Wade’s representation seeks a five-year contract, the point at which Wade opts out of his current contract plays a considerable role in how the Over 36 Rule impacts the salary cap of the team signing him.

The Over 36 Rule is concerned with the age of a player as of the date of the start of the NBA season, which the collective bargaining agreement defines as October 1.  If Wade opts out of his contract in 2014 and signs a five-year contract that summer, he will be the following ages at the start of the proceeding five NBA seasons:

NBA Season Dwyane Wade’s Age
2014-15 32
2015-16 33
2016-17 34
2017-18 35
2018-19 36

When it comes to the Over 36 Rule, for teams wanting to sign Wade to a five-year contract, it may be in their best interest if he opts out in 2014.  The reason for this, is that it is in this time frame that the Over 36 Rule arguably has the least impact on a team’s salary cap.  With respect to a five-year contract signed by Wade in 2014-15, the Over 36 Rule would operate in one of two ways.

First, assume that Wade unexpectedly retires before this new five-year contract expires.  If that is the case, the portion of his salary he is due for 2018-19, when he is 36-years-old, would be distributed in a pro rata basis and added to his team’s salary cap for the 2014-15 through 2017-18 seasons.  For teams like the Miami Heat who are expected to face salary cap crunches as they attempt to re-sign James, this could pose a problem.


In contrast, assume that Wade clears waivers and plays all five years under the new contract.  In that case, the Over 36 Rule would not impact his team’s salary cap until 2016-17.  Under the Over 36 Rule, at that point, the salaries remaining on his contract will be aggregated and attributed to the three years remaining on his contract.  In simpler terms, what this means is that if Wade is still playing in 2016-17, his salary in that year will be higher than what is negotiated because of the Over 36 Rule.  This again has salary cap implications for the team who signs him.  However, these implications aren’t as large as those discussed in the hypothetical above where Wade is no longer playing in the fifth year of his contract.

For the Miami Heat, it would arguably be in the team’s best interest salary cap wise if Wade does not opt out of his contract either in 2014 or 2015.  First, there is the obvious point that the team may be able to secure Wade for less money in 2016 when he is 34-years-old than they will be able to in 2014 when he is 32-years-old.  However, the less discussed issue is that it is in 2016 that the Over 36 Rule has the least impact on the Miami Heat’s salary cap.  One provision of the Over 36 Rule provides that if a 33-or-34-year-old enters into a five-year contract with his prior team that triggers the Over 36 Rule, only his fifth year salary is distributed pro rata.

Why is this a benefit to the Heat?  First, it’s important to understand Wade’s age at each point of a five-year contract entered into in 2016:

NBA Season Dwyane Wade’s Age
2016-17 34
2017-18 35
2018-19 36
2019-20 37
2020-21 38

Teams looking to sign Wade to a five-year contract in 2016 other than the Heat will be subject to the Over 36 Rule beginning in the fourth year of the contract.  This means that those teams would have to distribute the salary he is owed in years four and five of the contract on a pro rata basis in 2016-17, 2017-18 and 2018-19.  The Heat, however, since they are Wade’s prior team, wouldn’t be subject to the Over 36 Rule until the fifth year of the contract.  This means that the Heat would feel less of a burden on their salary cap, as they would only have to reallocate one year’s salary over the course of four years, as opposed to two year’s worth of salaries over three years.

The big take-away here, is that just as in 2010, if Wade wants to remain with the Heat or move to another competitive team, he will likely have to compromise.  And while most pundits pinpoint that compromise being about salary or years on a contract, perhaps the biggest compromise Wade will make is what year he will opt out of his current contract.

Leave a comment

Filed under NBA

Entrepreneurship for Athletes: The Magic Formula

By:  Todd Burach, Ruling Sports Contributor (Twitter:  @ToddBurach)

For many reasons, a vast majority of professional athletes struggle to manage the lucrative financial rewards of their playing careers. One major well-documented cause is what is called the ‘lure of tangible investment’[1], essentially an athlete’s desire to pursue entrepreneurship. It is a sexy, seemingly financially attractive means to invest one’s time and money. The appeal of entrepreneurship to athletes is powerfully apparent, particularly post career when the bright lights have turned elsewhere. There is a competitive aspect that syncs with an athlete’s psyche. There is the potential for big payouts and the fulfillment of a desire for attention that players often miss once they retire. You will never hear about a former player’s stock and bond portfolio; you will read about their promotional companies, their restaurants, their real estate or their car washes. There is even an MBA course offered at George Washington University specifically focused on entrepreneurship for professional athletes. “Called STAR, an acronym for Special Talent, Access, and Responsibility, the program treats entrepreneurial inclinations…as a weapon to be honed and deployed.”[2]

To certify the appeal of entrepreneurship, there is the business resume of Magic Johnson – an eye opening, former athlete’s entrepreneurial success story. Today, the former orchestrator of the Showtime Lakers is known more for his business accomplishments than his basketball prowess, a lofty feat considering his Hall of Fame playing career. The umbrella conglomerate of Magic Johnson Enterprises is reportedly worth near $1 billion[3]. He has stakes in movie theaters, sports franchises, a promotional company, a movie studio, food service operations, among other ventures. And, considering his major playing contract was the infamous 25 year $25 million deal brokered by the late Jerry Buss in 1981[4], a billion dollar figure is a staggering number.

Magic’s early business highlight reel runs something like this. In 1994, Johnson brokered a deal to create a chain of movie theaters in minority neighborhoods in the Los Angeles area. He recognized a lucrative business opportunity: the inelasticity of the African American community’s demand for movies coupled with the discounted cost per square foot to operate theaters in these neighborhoods[5]. Magic then parlayed this success into a rare partnership with Howard Schultz at Starbucks to bring the infamous coffee shops into the very same neighborhoods as his movie theaters. Magic pitched to Schultz his knowledge of the customer, that he had studied the numbers, and that he would connect Howard’s product with a market in demand. “It became clear that no one knows more about African-American spending power than Earvin. I was expecting a basketball player, but here was this businessman telling me there are 40 million African-Americans who spent over $500 billion last year.”[6]

Magic was not just some athlete selling his name and likeness. As he told Success Magazine, “A lot of athletes go out and want to start sports bars or restaurants, and they do it without a vision of what they’re going to add to their customers.”[7] Magic showed an early passion for the business process. During his playing days, when the Lakers were in Atlanta to play the Hawks, Magic would set up meetings with executives from Coke. He had a unique enthusiasm for business, recognizing early that the dedication and diligence of watching game film to study opponents was akin to what was required to study potential customers. He is a self-described control freak, awake every weekday morning at 6:30, reading the business section of the newspaper. Johnson was unafraid to leverage any opportunity or connection and relied on expert mentors with proven track records to guide him. During a regular season game in LA, he famously asked two courtside season ticket holders ‘How do I get into business?’ The two men, Peter Guber and Joe Smith, subsequently introduced Magic to CAA co-founder Michael Ovitz, who would become a pillar of Magic’s success.

Early on in his business career, Johnson had an ironically unlucky experience that put in perspective just how easily an entrepreneurial career can fail regardless of someone’s name or likeness. In one of his first business endeavors, Magic opened Magic 32, a chain of retail sporting goods stores. It made perfect sense to him on the surface; the face of the most beloved sports franchise in a city selling sporting goods to the people of that very same city. Yet Magic 32 closed its doors just a year later. When asked about the failure, Magic said, “I didn’t ask a single customer what they’d be interested in.”[8] He had not thought about the consumer’s interests, he had only thought of his own.

While Magic was able to stem the financial tide of this business failure and gainfully learn from the mistakes he had made, many athletes are not so lucky. Often times athletes choose to invest too much of their assets in one project (Google: Curt Schilling, 38 Studios) or become repeat offenders, refusing to recognize and learn from what went wrong the first time around (Google: Rocket Ismail). Athlete or not, failure is the nature of the beast in entrepreneurship. Henry Ford failed and went broke five times before founding the Ford Motor Company. Bill Gates started a business called Traf-O-Data before launching Microsoft. The probability/likelihood of failure in entrepreneurship is what ultimately increases the return and the attention when an entrepreneurial venture actually does work. Often times, many athletes (especially when funding investments with private wealth) do not afford themselves the opportunity to stay solvent if and when a venture fails.

For current pro athletes looking at Magic Johnson’s achievements as a model for themselves, these successes must be taken in context. For one, Magic’s business resume is what author Malcolm Gladwell would define as an ‘outlier’, “things or phenomena that lie outside normal experience.”[9] In other words, Magic is the exception, not the rule. Gladwell suggests that individuals with ‘outlier’ success stories are the result of two inputs, the 10,000 hour rule (i.e. a heck of a lot of practice towards achieving greatness) and access (a window to apply that greatness). Referring back to Magic, Johnson has been a diligent student of entrepreneurship since early in his career. While there is no way to verify the total aggregate hours Magic has dedicated to business, we can presume his totals reside near the tipping point required (to keep with the Gladwell theme). As for access and opportunity, Magic happened to be in a community (Los Angeles) at a time (post riots) with a viable business opportunity (movie theaters). Derrick Coleman, in contrast, the 1991 NBA Rookie of the Year, had similar entrepreneurial aspirations as Magic, investing to revitalize his hometown. However, Coleman invested in a city (Detroit) at a time of great financial duress (The Great Recession), especially for a community supported by a cyclical industry (autos). [10] A great entrepreneur and a great business model, without opportunity and access, is just that, a business model.

Magic’s experience with Magic 32 is a key teaching point for athletes clamoring for the bright lights of entrepreneurship. It is not necessarily true that if YOU build it, they will come. In entrepreneurship, your jumpshot doesn’t make you profitable. It might get you the meeting, but it certainly won’t sell your jackets. Magic failed before he succeeded. This is an important point, because the likelihood of failure far outweighs the likelihood of success in entrepreneurship. As an athlete, with the vast majority of your lifetime earnings in your rearview mirror when you retire from your sport, you HAVE to allocate accordingly when investing in a business venture. A 20-something college graduate with a job in financial services investing the bulk of his or her investable assets into a start-up is a lot different than a 33 year old professional athlete investing the bulk of his or her investable assets in a start-up. That 20 something with a finance job has a lot of years of peak earnings salary in front of them.  As an athlete, it’s almost certain that your peak earnings years are behind you. You have to be safer with your capital, and entrepreneurship, while sexy, is not safe. You simply don’t have the ability to make big mistakes.

The entrepreneurial success of Magic Johnson should be taken more for the lessons that it teaches rather than as the key to long run financial health for athletes.  For one, Magic invested more of his business acumen in these ventures than he did his personal capital. This is a fact he sometimes receives flack for, but should rather be rewarded.  He had a passion for business that defined him as an ‘outlier’ not just amongst athlete entrepreneurs, but entrepreneurs in general. This distinction is vital, because in the boardroom, the former pro athlete and the four year corporate veteran are all peers. “I think the problem is that for some athletes, our ego has been fed our whole life and we’re not used to people treating us as peers,” Magic recounted.[11]

Magic had a vision for his movie theaters that offered something to his end customers, not a vision for a business that offered something to himself. The latter leads to failure, which he learned the hard way from Magic 32. Importantly, Johnson was able to stomach the financial loss of his sporting good store, and live to see another day. It is wise to understand entrepreneurial investments in the construct of your broader financial picture. The bulk of lifetime earnings are likely behind you. Can you afford to lose what you’ve invested at this point in your life? Because, no matter how great that pitch sounds, it is more than likely you will fail. It is nothing to be ashamed of, most great entrepreneurs do.

1 Comment

Filed under NBA

Guest Post: A Proactive Cure for the Athlete Wealth Disease Epidemic – Part 2

By:  Todd Burach (Twitter:  @ToddBurach)

Todd Burach works in wealth management in New York City. He specializes in asset allocation and investment strategy for upper high net worth clients, including corporate executives, professional athletes and entrepreneurs.  He is a 2007 graduate of Syracuse University where he was a member of Coach Boeheim’s back-to-back Big East championship teams. In 2012, Todd completed his MBA at New York University with concentrations in Finance and Economics.

2. Facilitate and encourage the conversation.

The NFL is currently working vigorously to improve player safety as it relates to concussions. In June of 2012, 2,000 NFL players filed a unified lawsuit against the league “alleging that the NFL failed to acknowledge and address neurological risks associated with the sport and then deliberately failed to tell players about the risks they faced.”  The NFL would be wise to apply lessons learned from the concussion epidemic to its current experience with ‘Athlete Wealth Disease’. Both issues impact long-term player health and can be minimized, altered, and arguably avoided when players are armed with relevant knowledge. Further, in both cases, many of the negative outcomes are born from a pervasive culture that exists amongst players – on the playing field, it is the machismo culture of hitting, while off the field, it is the ‘baller’ lifestyle. Both the concussion and post-career financial problems that result can impede the ability of players to live normal, productive lives. What we need is for players, leagues, media outlets and fans to discuss all aspects of Athlete Wealth Disease, especially solutions, in the same manner in which we discuss concussions.

We demand that athletes be role models on and off the field, at all times. We demand that athletes do the right thing. As a result, we discuss, dissect and debate players’ offfield behavior, good or bad. However, these discussions tend to shy away from the facts that Sports Illustrated brought to light three years ago. Our heroes are going broke just as much if not more often than they are debilitated by playing injuries. (65% of NFL players retire from the league with permanent injuries). So why don’t we talk about it? ESPN’s 30 for 30 film “Broke,” directed by Billy Corben, could be seen as a step in the right direction. The film offers the usual examples of athletes who have struggled financially and certainly encourages the conversion. However, the discussion needs to shift towards solutions. And, rather than an occasional headline about a former star who has fallen or a documentary on the sexy lifestyle that carries players into bankruptcy, this must become an ongoing conversation. Embracing the discussion will force the hand of players associations, leagues, media and fans to find solutions and accountability for this epidemic – just as we have begun to do with respect to concussions.

3. Nudge

In “Nudge: Improving Decisions About Health, Wealth, and Happiness”, University of Chicago economists Richard Thaler and Cass Sunstein discuss innovative ways in which to encourage people to follow the most advantageous path. The trick is simple: start them on it. Thaler and Sunstein suggest ‘nudging’ people in the right direction with what they call ‘libertarian paternalism’. According to the libertarian paternalist, “one must not just maximize choice for others, but must set a default or no-action-required option that will cause people to make optimal choices (i.e., those widely agreed upon to make one better off, e.g., saving money for retirement)”.  In studying 401(k) retirement plans, for example, Thaler and Sunstein found that the vast majority of people never adjust the allocations of their 401(k) retirement portfolio after the initial set-up. The authors attribute this inaction to the tendency of individuals to become too overwhelmed by the decision making process, choosing instead to avoid it altogether. Therefore, when one starts a job and is required to enroll in a retirement portfolio, the libertarian paternalist recommends that the default option be set for a ‘Target Retirement Date’ fund, a portfolio that reallocates holdings automatically as retirement approaches. This ‘default option’ would help to steer those too overwhelmed with making big financial decisions to paths widely considered optimal.

Nudge-like provisions have, in fact, begun to emerge in sports. As a result of negotiations for the most recent collective bargaining agreement, the NBA Player’s Association will now default players into a league retirement plan, with the option to opt out. Those who go through the effort to opt out tend to be those well versed in personal finance, while those who do not know to opt out or do not want to deal with it have been nudged to the right path (and Thaler and Sunstein are somewhere smiling).  What the NBA has quietly done represents an important step toward preventing Athlete Wealth Disease. We need more nudges, in more forms, and next time it should not be so quiet.

For a long time we have known that professional athletes struggle with money and with the growth of sports business, we are talking big money. Occasionally, when financial market news becomes Main Street news, we will read a headline about a Mark Brunell or a Terrell Owens. Yet, when markets turn around, and Wall Street worries subside, we too quickly stop talking about a very correctable problem that still exists. The Athlete Wealth Disease epidemic is preventable. We should demand more out of the players associations whose mission is to ensure “that every conceivable measure is taken to assist players in maximizing their opportunities and achieving their goals, both on and off” the playing surface. We need to give the issue a voice – on TV, in the papers, in the blogosphere – the way we talk about and worry about concussions. Finally, leagues should follow the lead of the NBA and continue to ‘nudge’, by being more thoughtful in the structured programs used to secure the financial futures of our sports heroes.

1 Comment

Filed under NBA, NFL

Guest Post: A Proactive Cure for the Athlete Wealth Disease Epidemic – Part 1

By:  Todd Burach (Twitter:  @ToddBurach)

Todd Burach works in wealth management in New York City. He specializes in asset allocation and investment strategy for upper high net worth clients, including corporate executives, professional athletes and entrepreneurs.  He is a 2007 graduate of Syracuse University where he was a member of Coach Boeheim’s back-to-back Big East championship teams. In 2012, Todd completed his MBA at New York University with concentrations in Finance and Economics.

Curt Schilling had a storied baseball career. He accomplished feats on the field of play that most athletes can only dream of achieving. Schilling won World Series rings with the Arizona Diamondbacks and the Boston Red Sox, highlighted by his 2001 World Series MVP Award. He is one of four pitchers to amass 3,000 strikeouts and fewer than 1,000 walks over the course of a career, joining Ferguson Jenkins, Greg Maddux, and Pedro Martinez.  However, despite athletic triumph that most players will never know, Schilling recently experienced a career milestone of sorts that, regrettably, many professional athletes will more than likely achieve:  bankruptcy.

“According to Chapter 7 bankruptcy documents filed in Delaware, Mr. Schilling’s company, 38 studios, and three subsidiaries owe more than $150 million to creditors, but have assets of no more than $50 million.”

Unfortunately, this is a familiar tune for many of us who follow sports. See the below statistics from the 2009 Sports Illustrated report, “How (and Why) Athletes Go Broke” by sports writer Pablo S. Torre published in the midst of the Great Recession, and highlighted again at the start of ESPN’s 30 for 30 documentary “Broke”:

– By the time they have been retired for two years, 78% of former NFL players have gone bankrupt or are under financial stress because of joblessness or divorce. 

– Within five years of retirement, an estimated 60% of former NBA players are broke.

Torre’s article outlines several theories intended to explain how athlete after athlete can blow through so much money time after time. While the article is worth reading in its entirety, the quick synopsis of the how (for the sake of this writing) is summarized below:

1. The Lure of the Tangible – ‘chronic over-allocation to real estate and bad private equity’

2. Misplaced Trust – ‘hiring the wrong people as advisors’

3. Family Matters – ‘the divorce rate for pro athletes ranges from 60% to 80%’

Torre called attention to the epidemic of financial troubles amongst athletes at a time when financial markets were a hot topic even outside of Wall Street. Yet now, more than three years removed from the onset of the most impactful financial crisis since the Great Depression, with stock markets marking new highs, real estate prices off their bottoms, and credit markets beginning to open, professional athletes and their business ventures are still going broke. What this tells us is a very important, albeit somewhat readily apparent lesson: the epidemic of financial duress for professional athletes is not cyclical.  Athletes do not go broke only when markets go down. Athletes will go broke all the time.  That is, unless, something changes.

The fact of the matter is that we – professional athletes and those charged to support them – need to do more. We need to implement proactive solutions that address the root of the issue before an athlete ends up in the next Pablo Torre article or “Broke” documentary.

How can we influence professional athletes to make smarter decisions?

1. Demand more from Players Associations.

The NFL Players Association as a whole strives “to do whatever is necessary for the betterment of our membership,” while the NBA Players Association pledges to ensure “that every conceivable measure is taken to assist players in maximizing their opportunities and achieving their goals, both on and off the court.”  It is safe to say that the long-term financial health of players falls squarely within the confines of these stated objectives. However, of the four major sports leagues in the United States, only one players association (the NFL) has a formal Financial Advisor Program. The NFLPA Financial Advisor Program’s mission is ‘to provide an additional layer of protection – not just from poor financial advice, but from outright fraud.’  While this stated mission is certainly just and warranted, it inadequately addresses the overarching problem. As Torre explained, trusting the wrong people is just one reason that players go broke.

For more effective and meaningful financial support, players and their advocates should demand their players associations form Player Finance Divisions, tasked specifically with promoting the current and long-term financial health of its players. In addition to services similar to those offered by the current NFL Financial Advisor Program, these divisions would provide education and outreach programs, alumni initiatives, foundation management workshops, and research of potential programs. The necessity of such support has been widely recognized. Forbes contributor James Crotty wrote in his February 2012 article on Allen Iverson that “an NBA that cared more about its personnel and brand would have required that Iverson, as well as all players, pass a yearly financial planning and retirement course before they were allowed on the hardwood.”  The NBA is a corporation much the same way my employer is a corporation.  My firm offers annual educational seminars on 401(k) plans and retirement benefits and takes an interest in the health of its employees. Why? Employees who are physically, emotionally, and financially healthy are superior employees. They are more productive, more committed, and ultimately present a stronger representation of a company’s brand. 

Between the NFLPA Financial Advisor program and Rookie Transition Program, which provides business training to new players, players associations have certainly demonstrated a commitment to aiding athletes in their financial health. The documentary “Broke” includes clips of Former NFL player and coach Herm Edwards speaking at a rookie symposium highlighting this fact. “A goal without a plan is a wish,” Edwards told the players in attendance. The Financial Advisor programs and Rookie Symposiums currently in place seem to be just that. Bankruptcy statistics suggest that these programs need broader scope, new life, increased funding, more staffing, and a lot more media attention.

Visit tomorrow for Part 2 of Mr. Burach’s piece.

1 Comment

Filed under Bankruptcy, NBA, NFL

NCAA and Major Professional Sports Leagues Seek to Prevent Sports Betting in New Jersey

On Tuesday, the NCAA, NBA, NFL, NHL and MLB filed a lawsuit in the United States District Court for the District of New Jersey seeking declaratory and injunctive relief challenging the State of New Jersey’s “plan to sponsor, operate, advertise, promote, license and authorize gambling on amateur and professional sports.”  The lawsuit names New Jersey Governor Christopher Christie, the state’s Director of Gaming Endorsement and the Executive Director of the New Jersey Racing Commission as defendants.

On January 17, 2012, Governor Christie signed into law N.J.S.A. 5:12A-1, which according to the lawsuit, “purport[ed] to permit wagering at casinos and racetracks on the results of certain collegiate and professional sports or athletic events.”  According to the lawsuit, the act signed into law by Governor Christie violates federal law.  In particular, the plaintiffs assert that allowing gambling on amateur and professional sports in New Jersey violates the Professional and Amateur Sports Protection Act, and contravenes the Supremacy Clause of the United States Constitution.  The Professional and Amateur Sports Protection Act generally outlaws sports betting, save for certain exceptions, which the plaintiffs argue do not apply to New Jersey’s law.  Notably, those exceptions are:  that New Jersey conducted sports gambling activity prior to the law’s enaction in 1992, New Jersey authorized sports betting in a one-year period following the law’s 1992 enaction or the gambling relates to pari-mutuel animal racing and jai alai games.

The plaintiffs’ lawsuit comes just three weeks before the public comment period for comments on proposed regulations concerning the licensure and operation of sports gambling in New Jersey expires.  The timing is notable, because according to the lawsuit, once the regulations are in place, New Jersey casinos and racetracks will be able to allow their patrons to gamble on sporting events.

Ultimately, the plaintiffs are seeking a declaration that New Jersey’s sports gambling law and its regulations violate Professional and Amateur Sports Protection Act in that the New Jersey law allows sports gambling in contradiction to the federal law.  Additionally, the plaintiffs seek an injunction preventing the implementation of New Jersey’s sports gambling law and regulations.  The plaintiffs are also seeking costs, attorney’s fees and other relief as the court finds appropriate.

The defendants will now have to file an answer in federal court responding to the allegations in the complaint.  Given the nature of this matter, one can expect that it will not be settled out of court.  Rather, those planning on placing bets in New Jersey during the football season will more than likely have to hold onto their money, as the legal process will likely drag out to determine whether New Jersey’s sports betting initiative violates federal law.

Leave a comment

Filed under Gambling, MLB, NBA, NCAA, NFL, NHL

Which Team Will Sign Dwight Howard?

By:  Richard Braun, Ruling Sports Intern (Twitter:  @RicBraun)

When the Nets traded for Joe Johnson last night, Dwight Howard’s desire to move to Brooklyn took a major hit. As a result, if he wants to maximize his future earnings, Howard is going to need to be open-minded about his future home.

Howard’s next contract will almost certainly be for the maximum salary allowed under the NBA collective bargaining agreement, which for him starts at $15.5 million in the first year of the contract. However, under the new CBA, players who re-sign with the team who owns their Bird Rights can get a maximum of a five year deal with 7.5% annual raises. A free agent, on the other hand, can only get a four year deal with 4.5% annual raises. Any team Howard is traded to gets his Bird Rights, which is why he has such a vested interest in where Orlando trades him – wherever he gets traded to can offer him significantly more money than anyone else. By forcing Orlando to trade him where he wants to go, he is trying to have his cake and eat it too.

His dream of going to Brooklyn, however, now appears unlikely of ever becoming a reality. Even though the Nets and Magic have engaged in trade talks that would send Brook Lopez and filler to Orlando for Howard, the Magic can get better deals elsewhere. Houston, Atlanta, and both Los Angeles teams can all offer much better deals for the Magic than Brooklyn can. And given the falling out Howard has had with the Orlando front office this past year, they are unlikely to do him any favors. And because of last night’s Joe Johnson trade, New Jersey no longer has any cap flexibility going forward, and would not be able to sign Howard as a free agent for anything more than the Mid-Level Exception.

This leaves Howard with two options – play out the season in Orlando and sign elsewhere in the offseason, hoping that Orlando agrees to a sign-and-trade so he can get the 5 year deal, or agree to sign an extension with whatever team he is traded to. If he isn’t traded, he stands to lose around $40 million for the life of the contract because of the lower annual raises and the shorter term deal.

Atlanta in particular now seems to offer Howard more than he originally thought was possible. After shedding the contracts of both Joe Johnson and Marvin Williams (sent to Utah for the expiring contract of PG Devin Harris), Atlanta is now loaded with enough cap space to make a run at two big time free agents next offseason. Not only is Howard potentially a free agent next offseason, but so is Chris Paul. Atlanta doesn’t need to wait that long, however. They could offer all-star big man Al Horford in a deal, which would trump just about any deal any team can offer. Horford has five years left on a deal that pays him $12 million annually, so Orlando could build around him for the long term. Atlanta could throw in promising PG Jeff Teague in a deal as well, and likely would need too in order to make salaries match up (as a non-luxury tax paying team, if Atlanta sends out less than $19.6 million in outgoing salary, they can bring back in that amount plus $5 million). The fact that Atlanta is Howard’s hometown is just icing on the cake. A Dwight Howard-Josh Smith tandem on the court would certainly be a menace defensively, and Atlanta would then be a major player in free agency in 2013.

Houston can also make a better offer than the Nets, and they appear willing to do so despite Howard’s refusal to agree to an extension there. Houston has six first round picks from the past three years, plus PG Kyle Lowry and the expiring contract of SG Kevin Martin. It makes for a decent offer, and certainly would be a better package than what the Cavs and Raptors got in return for their exiting superstars. If Howard was unwilling to resign in Houston, however, it would result in him passing up on a 5th year in his contract and the higher annual raises. He would be dependent on Houston agreeing to a sign-and-trade that would allow him play wherever he wants to play but still get his big contract.

Dallas is another team that has reportedly been on the fabled Howard “wish list”, but like Brooklyn they can offer very little. Dallas could sit on their cap space for one more year and hope Howard signs there as a free agent next offseason, but they risk coming away with nothing in that scenario. And again, Howard would be accepting less money, short of a sign-and-trade.

A sign-and-trade next offseason for Howard, whether he stays in Orlando or is traded to a place he doesn’t want to be long term, is a tricky proposition for him. A sign-and-trade occurs when a player signs with the team that owns his Bird Rights, but he is then traded immediately to another team. The benefit to the player is that he gets a bigger contract than he may have if he had just signed with a team as a free agent. The team, meanwhile, gets something in return in the trade, which usually isn’t much more than a trade exception but is better than nothing. A team gets a trade exception (TPE) when they trade a player into another teams cap space and does not get equal salary in return. You get one year from the date of the trade to use the TPE. Cleveland and Toronto both got trade exceptions when LeBron James and Chris Bosh were sent to Miami, but neither team used them. In fact, usually teams don’t use the TPEs when they get them – the Lakers had one after trading Lamar Odom last off-season, but have yet to use it and likely won’t. What this means for Howard is that he will be at the mercy of whatever team owns his Bird Rights – they could easily decide it is not worth it for them to get the TPE, and just let Howard walk.

All of this leaves Howard in a sticky situation unless he opens his mind about his future home. By overplaying his hand and being stubborn with his demand to go to Brooklyn, he risks missing out on the max contract he can earn. By agreeing to go to Houston or Atlanta, he will be making it much easier for Orlando to trade him and will guarantee him a massive contract extension.

Leave a comment

Filed under Contracts, NBA, NBPA