Two eternal words ─ “in perpetuity” ─ are fueling hushed negotiations and a court battle between two basketball-loving brothers and the NBA, which is seeking to escape a decades-old pact called "the best sports-business deal ever" that has netted the brothers hundreds of millions of dollars over the years.
Each year, the National Basketball Association has been contractually obligated to pay, for a lifetime, a cut of its ever-sweeter TV profits to Daniel and Ozzie Silna, two men with no team, no player salaries to meet, no arena rent to pay.
This season, the Silnas would collect a reported $19 million ─ pushing their total NBA TV take to about $300 million ─ under a bargain they hashed with league honchos in heat and haste, before “Magic” and Michael, and before anyone realized the global value of pro basketball.
Not surprisingly, the NBA wants to end the endless deal. On Jan. 7, the league announced a "conditional agreement" with the brothers that would, if finalized, settle a federal lawsuit in which the Silnas sought even more: a slice of NBA TV ─ the league's cable channel ─ and a piece of the league's foreign broadcast profits. But the pending agreement says the Silnas still will reap some chunk of the NBA's annual TV money. The league has not revealed how much, and nobody from either side is talking publicly.
DAMIAN DOVARGANES / AP, file
Ozzie Silna at his home in Malibu, Calif. in May 2006.
"They were brilliantly lucky years ago," said Daniel H. Forer, director of the ESPN documentary "Free Spirits," exploring the quick, quirky span of the Spirits of St. Louis, an American Basketball Association team co-owned by the Silnas before four other ABA franchises joined the NBA. According to Forer, the brothers’ original pact was rooted not in greed but love ─ the Silnas’ deep affection for the NBA.
“More than money, what they held was hope ─ the hope that someday they would be able to convert this deal as a way to get into the NBA,” Forer said. “If the league ever expanded, they would give up this deal and get a team.”
The brothers’ attorney, Donald Schupak, did not respond to multiple requests from NBC News to interview the brothers.
“I've heard some say, 'They really pulled a fast one,'” recalled Michael Goldberg, former ABA general counsel, present in 1976 when Schupak and NBA lawyers inked an 11th-hour contract cooked by August temperatures and the seasonal calendar. “No. You have to put everything into the context of what was happening then.”
“It was the equivalent of having 1,000 acres of desert land and somebody says they want drilling rights there in perpetuity and you say: 'Take it.' That was a struggling NBA.”
Despite a roster peppered with zany characters and deep talent, the Spirits sagged to sixth place in the ABA's final season. The NBA, weary of bidding wars over players, agreed in June 1976 to take in four ABA franchises: the Denver Nuggets, Indiana Pacers, New York (now Brooklyn) Nets and San Antonio Spurs. The NBA also paid the ABA’s Kentucky Colonels $3.3 million to fold. But the Silnas wanted something else.
During an August 1976 meeting to finalize the merger, Schupak gathered for a long day in a stifling, Manhattan room with representatives of the surviving ABA teams and NBA lawyers. The NBA was anxious to complete the paper work before the upcoming season. Schupak's counteroffer was simple: the Silnas would collect one-seventh of the annual TV money generated by the four ex-ABA teams. (That fraction was based on the fact that the ABA had seven teams when it folded).
Schupack had one more demand: The payments would be made "in perpetuity."
“It was the equivalent of having 1,000 acres of desert land and somebody says they want drilling rights there in perpetuity and you say: 'Take it.' That was a struggling NBA,” Goldberg said.
“There were no significant television revenues in those days," Goldberg said. At the end of that day (the NBA finally said): ‘Let's get the hell out of here because what's in perpetuity worth anyway?’"
The Silnas, meanwhile, held hoop dreams that the league would trade that perennial pact back to them for an NBA franchise. Building talented rosters was in their DNA. That offer, however, never came.
What did arrive, in 1979, was fresh energy in the form of Larry Bird and Earvin “Magic” Johnson. Next came cable television and then, in 1984, Michael Jordan, who further jolted the NBA’s product.
The NBA’s media-rights agreements with ESPN/ABC and Turner Sports expire in 2016, and some experts project the league could double its $930 million annual broadcast revenue as it negotiates with current or new partners. That logic is based on American viewing habits: As more people rely on DVRs and downloads for their entertainment fix, live sports increasingly hold the communal clout once found in the small screen's golden age. From Labor Day through late December, 30 of the 31 most-watched programs were NFL games, according to ratings tracker Zap2it.com.
“A bubble in sports rights fees doesn’t appear to be anywhere on the horizon. Fans remain voracious consumers of sports content,” said David Carter, founder of the Sports Business Group, a sports-marketing service in Southern California. “The NBA deal will be one worth watching.”
And a spike in NBA TV fees would mean, barring the finalizing of the settlement, the Silnas would pocket a richer payday. When their attorney argued with NBA lawyers in Manhattan federal court during September 2012 –─ intending to fatten their deal ─ Federal Judge Loretta A. Preska signaled she likely would side with the Silnas in a ruling, the New York Times reported.
“The real shame of it,” Forer said, “is that if they’d been able to resolve this years ago by making the Silnas the owners of an NBA team, the league would have been happy and the Silnas would have been happy.”
Still, Carter contends their perpetual contract “does rank as one of the all-time deals in business, and not just sports business."
Some acquaintances speculate the Silnas ─ Daniel is 69, Ozzie is 81 ─ are no longer interested in NBA ownership. But according to ex-ABA lawyer Goldberg, the brothers still own leverage, “and to give that up, something has to entice them ─ maybe estate or family issues.”
“Even though the deal is in perpetuity,” Goldberg said, “all of those who were in the room, we’re not in perpetuity.”
First published February 17 2014, 6:15 AM