NBA To Pay $500 Million To Get Out Of The Worst Deal Ever Signed

Let me tell you a story about two geniuses.

Ozzie and Daniel Silna owned the ABA's Spirits of St. Louis, but when the NBA merged with the ABA in 1976, the Spirits were one of two teams the owners didn't want to join. The owner of the other team, the Kentucky Colonels, took a $3 million payment. But the Silnas negotiated something a little different. They took just $2.2 million, plus one-seventh of all future TV revenue for the four ABA teams joining the NBA. Basketball blew up not long after, and that small fraction of TV royalties has netted the Silnas $300 million so far, with payments set to continue on forever.

The NBA has long tried to get out of the infamous arrangement, which paid out a reported $19 million last season alone. In recent years, it has threatened to become even more onerous—the Silnas filed suit for a share of revenue streams that didn't exist in 1976, like international TV deals and online streaming. Now, says the New York Times, they're close to a buyout.

It's not cheap. The NBA will give the Silnas a reported $500 million dollars up front to drop their lawsuit. The Silnas will retain an unknown but smaller share of TV revenues, but the NBA will have a future option to buy them out.

When it's all said and done, shortsightedness will cost the NBA near a billion dollars. But consider it a hedge. The alternate reality, where the payouts to the Silnas remained small, was a world in which the NBA didn't become big enough to sign $7.4 billion TV contracts.

Payout May Come for an A.B.A. Team That Is Long Gone [NY Times]