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The Silver Standard

NBA commissioner Adam Silver on billion-dollar teams, global expansion and how much power basketball’s chief executive really has

Photo By Peter Yang / August
Adam Silver is an unintentional basketball lifer. Leaving a partner-track job at white-shoe law firm Cravath, Swaine & Moore in 1992, he joined the NBA as a special assistant to then commissioner David Stern. Working on projects such as the creation of the WNBA and the NBA’s online presence, Silver rose in influence and reputation. Though little known to the public, he was a natural to take the top job when Stern retired in 2014.
Worth met with Silver in January at the NBA’s offices on Madison Avenue. The commissioner is quiet, dryly funny and unobtrusively smart—not the kind of man who feels the need to impress others with the size of his personality. He may not look like he has much in common with the athletes whose careers he fosters, but he speaks about basketball’s bright future with a command of the game.

Worth: We’re talking a couple of weeks before the All-Star Game in Toronto. What’s your take on the state of the NBA?

AS: The NBA is in fantastic shape. As you said, we’re approaching our All-Star Game, the first time we’ll have held it outside the United States. Although we’re not crossing the ocean, that is significant in its own way. I’m constantly reminding my colleagues that the U.S. is less than 5 percent of the global population, and that, along with soccer, we have one of the two global sports.

How do you explain basketball’s popularity worldwide?

As people are moving to cities, not just in the United States but everywhere, there’s increasingly less space to participate in athletics. At the same time, there’s increased focus on fitness and athletics. And there’s a reason that basketball is being embraced by governments around the world—China, India, countries throughout Africa. They realize that this is a sport that can be played in small areas. It can be played equally by boys and girls. It’s a nonviolent sport, which is important in a lot of cultures. And maybe even more important, the values of this game are consistent with developing strong citizens. It requires teamwork, respect, discipline, character, hard work. And so the growth of basketball is consistent with social trends we’re seeing around the world.

Last year you said that a number of NBA teams are not successful, an assertion disputed by the players union and one that runs contrary to the general perception of the league’s health. Tell me about the financial picture of the NBA.

I didn’t necessarily say that there are a significant number of teams that aren’t successful. I said that, at the moment, they aren’t profitable.

OK. So what’s driving new revenue?

One, we’re seeing asset value growth. Much of the valuation of teams is based on future prospects, and there’s a strong belief that the best years in this league are ahead of us.
Number two, beginning next year, we’re entering two new long-term television arrangements in the U.S. with Disney and Time Warner. That deal will change the financial profile for a significant number of our teams.
We’re also seeing strong growth in digital media. Last year we entered into a new relationship in China with [Chinese internet giant] Tencent that will make a huge difference in our business there. Our teams are ultimately 1/30th owners of all our future prospects outside of the United States, so that increases their financial profile as well.

Do you worry that the NBA’s digital initiatives in streaming and virtual reality will hurt attendance?

No. There is still enormous hunger for that communal experience, and our teams are doing a fantastic job stepping up by reinvesting in their arenas, building new arenas, improving the fan experience through better food, better amenities, better entertainment in between the game action. So we’re seeing growth in in-arena revenues. And that strong arena experience is also necessary to create a great media experience, because those really engaged audiences make for better television pictures.

Most fans got their first real exposure to you in early 2014 when, right after you became commissioner, you forced owner Donald Sterling to sell the Los Angeles Clippers because of racist remarks he made. But beyond that, fans probably don’t know what exactly you do. What are the powers of the NBA commissioner?

Often the fans know that I give out the [championship] rings and shake hands on draft night. They also know that there’s a regulatory aspect—discipline of those members of the NBA family who misstep. But from the inside, the commissioner feels more like a traditional CEO than people might expect. You have a set of shareholders, the team owners. You have well-compensated talent, our players. And you have a diverse workforce that, when you include our team and arena staff, plus the league office, comes close to 50,000 people.

In describing how you came to the decision regarding Donald Sterling, you’ve said that you asked people for advice, and the best advice you got was to reflect upon your life experience and go with your gut. But you were trained as a lawyer at the University of Chicago, and lawyers don’t usually feel comfortable going with their gut. Was that difficult for you?

It felt natural once I did it, although it wasn’t intuitive in that I needed to be told it by other people. In a world that is increasingly data-driven and a sport increasingly focused on analytics, it was helpful to be reminded that judgment, instinct and intuition are equally important.

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Given what you were saying about the health of various teams, how do you feel about foreign ownership? I’m thinking of the Nets, whose fans perceive Russian owner Mikhail Prokhorov as a sort of absentee landlord, with the team in chaos as a result. Does that concern you?

Doesn’t concern me. I don’t even like the word “foreign,” frankly. I’ll say “international ownership” or “owners born outside the United States.” I think it’s less a question of their proximity than their engagement.

So the issue is really absentee ownership.

But absentee is measured as a state of mind rather than a physical location. And I’ve learned through my years at the league that “absentee” has more to do with what else is on a particular owner’s plate than where he is located. So I welcome international ownership.

Have you seen the typical owner profile change in recent years? I’m thinking specifically of the idea that there are more and more owners who think of their teams as investment properties to be flipped rather than legacies to be preserved.

I do not see more owners who look at these team assets as investment properties. This new generation of owners who’ve come into the league in the last decade are universally passionate basketball fans as well as people who have a very long-term view of their investment in these assets. They make enormous investments in these organizations through billion-dollar arenas, practice facilities, marketing and other resources. And no matter how wealthy you are, the average team value is now over a billion dollars, which represents a much higher proportion of an owner’s portfolio than it once did. So purely from a financial standpoint, the team commands more of that owner’s attention.

The NBA recently aired a PSA in which four players decried gun violence. Why get the NBA involved in a high-profile, hot-button issue like guns?

That came about through both a personal and professional relationship I have with [ESPN president] John Skipper. John had had a conversation with Spike Lee about Spike’s desire to produce—and for ESPN to air—a gun violence PSA. John called me and said, “Would the league be interested in doing this with ESPN and Spike?” My response was: There is a history in this league of advocating for gun safety and against gun violence. Beginning during my tenure, with [owner] Abe Pollin’s decision roughly 20 years ago to change the name of the Washington Bullets to the Washington Wizards. In addition, this league has had a long history of working with community organizations to find safe places in otherwise dangerous areas for young people to spend their time. So to me, being involved in this PSA was consistent with the values of this league and positions we had taken historically.

What’s your reaction when you hear about something like the recent incident involving New York Knick Cleanthony Early, in which he was robbed and shot after leaving a strip club in Queens, or Derrick Williams, another New York Knick, who was robbed of more than $600,000 worth of jewelry by two women he picked up at a nightclub?

My reaction as the chief executive is, first of all, what can we do to prevent future incidents like that? And number two, that our players live incredibly complex and difficult lives. They are targets for criminal behavior. They are often victims in ways that outsiders would never understand, and maybe also understandably not be sympathetic about. Many of our players are from cultures where they have a degree of paranoia. They’re distrustful of authority and therefore believe they need to be self-reliant when it comes to protecting themselves. What we did in response [to these and other incidents] was to work with our Players Association to increase the education of our players. Because no matter how much we do to protect our players, the majority of their time is going to be spent outside the team structure.

Players are robbed not just by people with guns, but by people to whom they’ve entrusted their finances. Recently there’s been a boom of interest in financial managers wanting to connect with athletes. But they find doing so difficult because of the paranoia or skepticism you mentioned, the difficulty of cutting through an entourage, the challenge of dealing with agents. Does the league get involved in facilitating high-level financial education and relationships?

We do, and we have programs both at the league level and the team level to educate our players about sophisticated financial matters. Because almost by definition, because they play in the league they are wealthy. I’ll add that, back to your question about the new generation of owners, we have a strong cadre of owners who come from the financial world, whether private equity or hedge fund managers, and many of them have made the point to me that there must be more we can do to help these players protect the wealth they’re accumulating.

Let’s talk about basketball and gambling. You’ve said in the past that, since sports betting is obviously happening on a massive scale, it’s better to legalize and regulate it than try to ban it. However, several state attorneys general consider fantasy sport websites such as FanDuel, in which the NBA has an equity stake, illegal gambling. How can the NBA be a partner in a business that some law authorities consider illegal?

As I’ve said many times, I think fantasy sports are a healthy form of entertainment, but they do need to be regulated. What I believe will ultimately come from the attorneys general points of view is a legislative framework for both legalized sports betting and legalized fantasy games. My preference would be for federal legislation so there would be a consistent framework from state to state, but if it needs to be state by state, we will work with every jurisdiction.

Doesn’t the fact that the NBA partners with FanDuel cloud your message, though? It looks like the NBA has a financial stake in fantasy sports that poses a conflict of interest.

Our financial stake in FanDuel is de minimis. Purely from a business standpoint, what’s most important to us is fan engagement. We wanted to have a seat at the table. To the extent that we are inside the room with these companies and helping design the games, understanding how they are played, understanding how they are marketed….We thought that was a better position to be in than to be completely on the outside.

Your biggest overseas market is China, where 300 million Chinese people reportedly play basketball. What’s the NBA presence there?

I travel extensively in China. Everywhere you go, you see the game played—in Guangzhou, Shanghai, Beijing, there are basketball courts everywhere. Even when you’re driving outside the major cities, increasingly you see basketball hoops.

So it’s all about urbanization?

In addition to two other very important factors. One, of course, is [Chinese national and former NBA star] Yao Ming. Yao Ming is a giant of a man in every way. Coming into this league at 7’6”… For a lot of Westerners, he redefined the image of a Chinese male. The government was very aware of that and made a concerted effort to ensure that imagery of Yao Ming was seen on a global basis. And we are fortunate that, in addition to being an outstanding future Hall of Fame basketball player, he is a person of outstanding character who is devoted to working in China to develop sport and fitness.
Connected to that, the Chinese government made a decision to endorse the game of basketball. Along with building hundreds of thousands of basketball courts throughout the country, it decided to highlight basketball on China Central Television and to work with the NBA on education programs in schools. All those factors have come together to make it very clear, when you’re in China, that basketball is a popular and growing sport.

So how do you monetize that popularity?

We work with great partners. Tencent is one of them, CCTV another, Alibaba yet another. We also are working directly with the Chinese Basketball Authority, which both oversees their national teams and also runs their Chinese league, the CBA. Yao Ming also happens to be an owner in that league—he owns the Shanghai Sharks. So we are working directly with Yao and the CBA on how to build that league and how to encourage more young people to play the sport.

About 20 years ago, you were one of the architects of the WNBA, which has chronically struggled both financially and in terms of attracting an audience. Last September you said that you were surprised it hasn’t “broken through” more. Why hasn’t it?

As someone who had worked on the original business plan of the WNBA, my expectation 20 years ago was that we would be further along by now. But my response is to double down on the WNBA. While I’m disappointed where it stands as a business, the league has exceeded my expectations in terms of play on the court. I am realizing that it will require more effort on my part and more effort on the part of the league. For example, I’ve had conversations with John Skipper at ESPN and [CEO] Mark Parker at Nike about what it is that we can collectively do to grow the WNBA, and their response has been the same as mine—both of those companies have said that they will double down with me in working to grow the game.

What’s your five-year agenda?

One, we need to get a new collective bargaining agreement. We’re negotiating with our Players Association—a high priority. But that will get done. Most important is to continue to build this game and ensure that we develop the next generation of great players, boys and girls, who are steeped in the fundamentals of the game.

Are you having fun?

This article originally appeared in the February/March 2016 issue of Worth.

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