Wednesday, November 25, 2009

Monarchs Watch: Day 6

The only good news is that Sacramento 's newspapers are expressing their pain at losing the Monarchs and keeping the Monarchs demise on the table, as it were. (If the Dream were folded, you'd never get an editorial out of the AJC - you might get a brief article or an "I told you so" opinion piece that the AJC runs instead of news.) Ailene Voisin writes that "The Monarchs demise leaves bitterness, memories" and an editorial at the Sacramento Bee states Fallen Monarchs Won't Be Forgotten".

According to the WNBA's front page, the W is still involved with talks. I wonder if that blurb will quietly disappear over the Thanksgiving holiday?

In the meantime, I was thinking about something that might have been able to help the Monarchs but which is completely taboo in sports. This is the idea of public ownership.

A better term would be public financing. As they say, "the devil is in the details". What this would mean is that instead of the Sacramento Monarchs having one owner, they would have had several owners. Since the most famous example of public ownership is the Green Bay Packers, let's use the Packers model as a hypothetical attempt to save the Monarchs.

Assume that the Monarchs went to the public ownership model of the Packers. Monarchs fans would have been given the chance to purchase "Sacramento Monarchs Stock". Anyone who has been charged with fraud in litigation, who has been convicted of a felony or who participates in sports gambling would probably be denied purchase rights. The shares would sold to the general public at some named price: the price doesn't matter because you could probably by as much stock as you wanted, up to some predetermined limit, say, you would not be allowed to hold more than 25 percent of all available shares.

Before you think of retiring by shoving the stock in your mattress, the stock would have some heavy restrictions. The stock would state, in bold enough letters, that it would never pay dividends. Any profits earned from the operation of "Sacramento Monarchs LLC" would be invested back into the company. Furthermore, the stock could not be transferred to other people and could be cashed in only under very specific circumstances. The papers would read that the stock is an extremely poor investment and should be considered a vanity purchase only, suitable for framing but not much else - however, it does make you a shareholder and grants you specific voting rights.

The shareholders would then elect seven members of the board of the directors: a president and six other officers, with the president the only officer receiving a salary, serving in the role that the owner formerly served. The other six officers serve in an unpaid advisory capacity. (Whether any such person wanted to serve the club in a non-salaried role, would be up to the board - for example, an officer could be the head of a Sacramento accounting firm, which might volunteer accounting services to the club.) If the fans want, diversity clauses could be enforced, namely that the officers must represent a cross section of age, gender, race, religion and sexual orientation of fans in the Sacramento area.

The roles of the shareholders would be limited to electing the board of directors and, like the Packers, probably meeting en masse once a year at ARCO to decide on specific matters as directed by the board. (The joy of such shareholder meetings is that shareholders have the right to speak at public meetings, even if they own only one share of stock.) The general rule of stock ownership is, "one share, one vote", meaning that if you had 250 shares of stock and your pal had 5 shares, you would have 250 votes compared to her five votes. The real power would rest in a clause that stated that if the shareholders decided to sell the club, the money would go to some local charity and not to the WNBA.

The latter clause would ensure that the club would, in effect, never be sold.

"Okay. But WNBA clubs don't turn a profit, in general. What will the stockholders do when the club runs out of money?" Either more shares of stock will have to be sold to raise enough money to run the club for another year, or the company will have to be dissolved or the club sold.

Could such a model actually *work* in the WNBA? You might not be able to find one person willing to lose the $1.5 million-$2 million a year which is the estimated net loss of running a WNBA club. However, you might be able to find 2000 people in Sacramento willing to spend $1,000 a year to keep the club alive. You might not be able to find one big philanthropist that will own the club - but you might find 2,000 little philanthropists that will. I think the odds of that are pretty high, speaking frankly.

It is certainly a model worth attempting. Why not give public ownership an opportunity, when it seems to be working elsewhere in the world? It worked for the Packers when the NFL was as weak as the WNBA (the Packers have made four such offerings of stock). It has worked for AAA baseball, it works for soccer teams in Europe . Really, what does the WNBA have to lose by trying this?

The primary objection will be "what if the shareholders can't raise the capital?" Well then, I guess we know that a team can't survive in Sacramento. But...what if they can raise the capital?

Public ownership - or public financing - is something the sports world doesn't want to talk about. It is so reluctant to talk about it that finding the actual operating details of financing schemes is almost impossible to find on the internet. The only mention of how models are working or could work are hidden in academic and legal journals, all behind pay-walls. It's as if the entire matter has been buried and all discussion about such schemes fall into two categories - the category of "weird historical aberration" and the category of "this thing that can never work".

The big three leagues - the NFL, the NBA and Major League Baseball - have explicitly banned public financing in their operating laws. The only exception is Green Bay, and Green Bay was grandfathered in to the NFL by-laws. There will never be another system like the Green Bay system in the NFL, not if the NFL has anything to say about it.

Why do sports teams not wish to pursue public financing? There are many reasons. First, the league doesn't like it. Companies that are not private businesses but owned by several individuals have to open their books - at some level, the public has to know what is going on behind the curtain. The WNBA is probably one of the most conservative leagues around, in terms of sharing virtually zero information with its fanbase. Most likely, the WNBA doesn't want anyone to know what goes on financially, not even at the franchise level.

Second, WNBA franchises aren't worth much now - but they might be worth something someday. If/when WNBA franchises have value, like anything that has value, the withdrawal of that value also means something. The hope that WNBA owners have is that ten, twenty, maybe fifty years from now they, too, can shake down cities for public money for facility improvement by threatening relocation. The WNBA would rather not have any surviving public financing models around if that day ever comes.

Why? Because of the third reason - it is very likely that a publicly-owned Monarchs team is going to be very parsimonious. There might be no halftime dancers, no smoke machine, no nothing - just basketball. (They might make players bring their own H20 to games.) The WNBA would like to say to prospective owners and to cities "it costs X to operate a team". A publicly owned Monarchs team might show that it only costs 25 percent of X. Furthermore, if Sacramento can run the Monarchs on the cheap, it would be much harder for future owners to plead poverty with the managers of their arenas - which are usually publicly owned.

Fourth, it smacks of the eeeeeeeeeevil socialism! No, seriously. A capitalist society casts a suspicious eye toward community-operated ventures. Because if a community-owned Monarchs can succeed but a privately-owned (team X) fails, then it becomes an indictment of private ownership. Owners are more sensitive about that than you think. Which leads to Reason 4a - a community-operated Monarchs would set a "bad example" for the other more major leagues.

(* * *)

So here's the point: it seems that the WNBA would like to save the Monarchs - but not if it means public financing. They won't even consider public financing. They won't even take the concept seriously. It's not even on the table.

For all I know, the WNBA might not even be an independent entity. Theoretically the WNBA exists apart from the NBA, but I don't know what the truth is. Does the NBA "own" the WNBA in any sense? Is the WNBA an official NBA side project? What is the actual truth?

Furthermore, the NBA owners that currently own WNBA teams - Indiana, Phoenix , New York , Minnesota , Washington, and maybe "part" of Tulsa - will never allow a community based model for the WNBA. Which means that the threat of a publicly financed team is almost dead in the cradle because the WNBA Board of Directors will never approve it.

Yes, the WNBA will be encouraged to find alternate sources of revenue, alternate ways of financing, new and bigger philanthropists, and will even be allowed to put company names on jerseys. But community financing? You'll never see that happen. They'll close the WNBA down before it gets to that.

1 comment:

Anonymous said...

Yes, the wnba is a NBA brand. It owns the name and the logo. The tv rights are negotiated and and owned by the NBA. Sponsorships and sales are handled by the NBA.