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Steve Ballmer is only the latest tech titan to gobble up an NBA team

(AP Photo/Elaine Thompson, File)

(AP Photo/Elaine Thompson, File)

With the news that Steve Ballmer has submitted the winning bid for the Los Angeles Clippers, a trend is emerging with new NBA ownership. Owners who made their money in the tech sector are gobbling up teams. Recent sales of the Sacramento Kings, Golden State Warriors, Memphis Grizzlies, and now the Clippers have new majority owners with tech industry backgrounds.

Joe Lacob (purchased the Warriors in 2010) made his fortune at Kleiner Perkins Caulfield & Byers, a venture capital firm focused on funding tech firms such as Google and Amazon. Robert Pera (purchased the Grizzlies in 2012) started at Apple and made his money when Ubiquiti Networks went public. Vivek Ranadive (purchased the Kings in 2013) is CEO of TIBCO Software. And Ballmer made his billions at Microsoft.

That is four of the eight NBA teams with majority ownership changes since 2010. Three others sold to hedge fund managers (Pistons, 76ers and Bucks) and one to a Russian oligarch (Nets). The question begs: Why are folks with similar industry backgrounds buying?

The immediate answer is easy: money. The tech industry has some of the wealthiest billionaires in the country. These owners had the income (or financial backing through partners and lenders) to pay the hefty price tag. However, there are other reasons.

The tech industry has been historically volatile. Since most of these tech owners have money tied up in the stock market, or in Lacob’s case small tech companies, the NBA is a relatively safe investment because of the capital appreciation of franchises and relatively consistent cashflows. Expenses (salary cap on players) are predictable and capital investments aren’t crippling, especially when local governments subsidize new stadiums. Revenue and income are moving toward consistency with league-wide revenue sharing and the new NBA TV deal. Owning a team is an investment that diversifies previous holdings.

Owning a professional team is also a status symbol. Tech billionaires are always competing. Which company is innovating the best? What company has the biggest market share? Who has the biggest yacht? Who runs the largest non-profit? What team do you own? These guys made their money by being competitive in every facet of their lives. Teams are just another way to show everyone they’ve won.

Larry Ellison has lost two bids to obtain a NBA team (the Warriors and reportedly the Clippers). Ballmer lost bids for the Kings and Bucks. Think that didn’t play into his bid this time? Two billion dollars could have been a sign he wasn’t about to lose a third.

Changes in ownership from older money to tech magnates could also contribute to recent changes in the NBA. It is not a coincidence that Mark Cuban (made his money in tech) loves utilizing new technologies and advanced statistics with the Dallas Mavericks. Tech CEOs (and hedge fund managers, for that matter) also could bring a distinct management style. Could they be more involved with their teams? Will they want instant results? Will GMs and coaches be on shorter leashes? All of these questions could be answered in the coming years.

Owners who made their money in tech are not a new phenomenon. Paul Allen (Seahawks and Trail Blazers) has been around. Cuban has owned the Mavericks for more than 10 years. We might not wait long for Mark Zuckerberg, Elon Musk and Sergey Brin to start looking at professional teams.

Michael Colangelo is Assistant Director at the USC Sports Business Institute.

 

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