MARCH 2007 :: INTERVIEW

Time Out, With David Stern
NBA Commissioner Talks About Fighting, Foreign Markets and the Ball

By Russell Adams and Adam Thompson
Staff Reporters of The Wall Street Journal

As NBA commissioner for 23 years, David Stern has earned wide admiration for turning a once-fringe league into a global brand. Lately, though, he is getting some second-guessing. The most recent example was the league’s decision—since reversed—to switch to a new synthetic basketball without consulting players. And regular-season and playoff viewership has trended downward since 1998, when Michael Jordan won his last championship and labor troubles shut down the league for three months.

In an interview with The Wall Street Journal, Mr. Stern spoke about everything from the NBA’s overseas expansion to revenue sharing. Excerpts:

WSJ: It’s often been said that when brawls break out on the court in the NBA, everybody makes a big deal out of it, even though other sports frequently have fights among players. Why?

MR. STERN: My own take is the burden of the fans being so close to the court. Because of the spectacular view of our game from courtside—which is the closest to the action of any game, and it’s replicated by a camera, and increasingly by high-def, the prospect of players crossing the barrier between them and the fans—that’s a problem that we have and no one else has.

WSJ: Do you believe it also might have something to do with racial attitudes in this country, that the NBA is judged more harshly for that reason?

MR. STERN: Well, I choose not to dwell on it, but you may be on to something. We were the first sport to be identified as black. And, despite the fact that the starters in other sports like football could be equally, percentage-wise, black, our guys are [visible] out there. We can see them. They don’t come encumbered by hat, helmet, long sleeves and pants. You just touched on the global conversation, which is the role of race, and certainly, I would not be fully honest if I didn’t say it’s always there, in some shape or form.

WSJ:You’re in a sport that heavily markets individual players. Doesn’t that make you more vulnerable if these players act out?

MR. STERN: You know, I guess I can take either credit or blame for that, but it doesn’t really happen that way. ... ABC and ESPN study their audiences, and they know that you get a bigger rise if you say, “Watch Steve Nash and Dirk Nowitzki, former teammates, reunite.” We don’t tell Nike to spend hundreds of millions of dollars using our athletes—and we like that, by the way—to sell their shoes.

WSJ: You’ve been more aggressive than any other league marketing the NBA internationally, particularly in China. Do you envision involvement in a Chinese league?

MR. STERN: Yes. It’s our plan to address China with a separate enterprise called NBA China. We’ll have some investors that may be outside of the NBA that may be strategic investors and that will have the right to start a league in China.

WSJ: What’s the next international market after China?

MR. STERN: It’s a problem because the answer is everyplace. We sent a large contingent to India that had 70 meetings. The Indian Basketball Federation is looking for support to grow the game, and it’s finding itself overwhelmed with kids being interested. It’s not that we’re going to go start a league there, but there’s the same kind of work to be done in India that we began doing in China in 1990.

WSJ: Back home, when you look at additional ways to generate revenue, what are your plans with streaming video over the Internet?

MR. STERN: I would say we’ve elected to idle rather than accelerate because we have to work a little bit harder for our TV deals. We have [about $4 billion] worth of television deals currently in place, and it’s actually $6 billion total when you include the regional sports networks. Our network revenue, and our over-the-air revenue, is so important to us that we’ve moved a little bit more slowly with respect to alternate distribution technologies because we are never quite sure of the impact on existing revenue streams.

WSJ: In most leagues, including the NBA, cable is now broadcasting more games than the networks. Are we going to reach the point soon where you won’t see any NBA games on network TV?

MR. STERN: The networks may be down to a 46% share or a 45% share, and cable has done a good job of saying, OK, we’re at 53% and they’re at 45%, but [individual] cable networks themselves, their ratings and viewership are lower. So if you want to get to large audiences with your advertising messages, the networks will still be delivering big events of some type.

WSJ: Is there a lesson from the ball incident?

MR. STERN: The management lesson of that is listen to your employees. Our players have played with a composite ball in high school, college and international leagues. Maybe it wasn’t sold as well as it could’ve been. The public has spoken. We have misstepped. We didn’t listen to our employees and we have owned up to our own failures.

WSJ: In September, eight NBA owners wrote you a letter in which they advocated more revenue to be transferred from large-market teams to small-market teams. What was your reaction?

MR. STERN: Their concerns are valid and are being dealt with. We have additional revenue assistance based upon a committee’s report. Our franchise valuations are going through the roof. So the capital markets don’t agree with the very owners who are saying that. And by the way, those very owners don’t agree with it either based upon what they either just paid for their franchises or they’re trying to sell them for.

WSJ: How many NBA teams are profitable?

MR. STERN: We have lots of teams that aren’t profitable. And the last one just sold for $350 million. ... In 1979, the Dallas Mavericks expansion club went for $12 million and in 2003, the Charlotte Bobcats sold for $300 million cash. Of course, then its owner promptly signed the [September] letter. Think about that.

WSJ: Teams like New Orleans and Memphis have struggled to justify themselves as NBA cities. Do you think those teams will stay put?

MR. STERN: If you ask me that as the mayor of Memphis, the answer is absolutely. You’ve committed to us, you built a building, the city is supporting us and we’re going to support you. ... New Orleans is a bit more problematic. It’s got five years to run out its lease. We’re supporting it in sales so that we can make it into a commercial success. We’ve got our own people working with the team, but it’s a tough place. We had an owner who says “New Orleans it is. You can’t even buy me out. I’m going there.” And we had a group of his partners who said, “OK, partner, New Orleans it is.” So New Orleans it was. So now we’ve got five years to go on a lease in New Orleans and we’re going back to fulfill our obligations, hopefully be there forever.