Controversy won’t sink Clippers’ finances

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donald sterling_clippers_webNEW YORK– The racist statements attributed to Los Angeles Clippers owner Donald Sterling have caused team sponsors to flee. Fans are threatening to boycott games.

And NBA Commissioner Adam Silver appears poised to take action against Sterling on Tuesday.

But all of this will likely mean relatively little for the finances of the team and Sterling himself, at least for now.

First, while a dozen sponsors have ended or suspended sponsorship deals, it’s not clear how many have stopped making payments to the team.

Sports marketing consultant Marc Ganis said it’s likely most of the contracts do not allow sponsors to stop paying out solely because of comments by Sterling or similar controversies.

“They don’t want to be connected with a brand as reviled as the Clippers brand is at the moment,” said Ganis. “But they still may be required to make payments by the existing contracts.”

And some sponsors may return to the team if the NBA suspends Sterling, Ganis said.

Second, even if the Clippers take a revenue hit, the team is well positioned to stay profitable.

The team already turns a healthy profit on relatively low revenue, according to sports business experts.

According to the most recent estimates by Forbes, a leading source of data on the finances of professional sports teams, the Clippers brought in $128 million in annual revenue. That places the team’s revenue near the bottom among the NBA’s 30 teams. But the Clippers still turned a $15 million profit, Forbes estimates.

“This is a team that historically had low revenue and low attendance, and made money in spite of that,” said Ganis.

And its finances and attendance have improved considerably since the team moved into the Staples Center in 1999. The team has been profitable every year since, according to Forbes.

Before the move, the Clippers typically had the worst attendance in the league, averaging just over 10,000 fans a game.

Since Staples opened, attendance has averaged 17,162, even though the Clippers had only four winning seasons in 15 years.

And as the team became a winner the past three years, its average attendance reached 19,200 a game.

Even if some fans boycott the team next year, continued on court success could keep most of the seats filled.

And if Sterling is suspended, it’s likely that many angry fans will again embrace the team.

A spokesman for the Clippers did not respond to a request for comment.

As far as Sterling’s own finances go, a suspension wouldn’t deprive him of his share of the team’s profits.

It’s not clear that Sterling will be forced to sell the team — the most drastic step the NBA could pursue. Such a move requires the support of 22 of the other 29 owners. Many of them might be nervous about setting such a precedent.

But if Sterling does sell, either through his own decision or league mandate, he’ll likely pocket a very nice profit. Forbes estimates the team is worth $575 million, up from the $12 million Sterling reportedly paid in 1981. That valuation would mean a 12% annual gain for the team.

The most recent NBA team to change hands was the Milwaukee Bucks. It sold for $550 million — 35% more than the team’s estimated worth.

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