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CNBC: When a basketball flop affects bottom line ... Are Nets seen as ‘dysfunctional’ business?

Philadelphia 76ers v Brooklyn Nets Photo by Matteo Marchi/Getty Images

On Thursday, Ramona Shelburne went on ESPN’s NBA Today, to discuss the Nets, telling Richard Jefferson and Brian Windhorst that the team wants to revert to their old “blue collar” culture and end the two years of drama that’s hurt the on-court product.

“People I spoke to in Brooklyn have a pretty resounding message,” she told Richard Jefferson and Brian Windhorst. “We need to get back to the Brooklyn Nets culture, We need to get back to this blue collar, ‘We’re from Brooklyn’ ... this is how they built that team in the first place. ‘We can’t have drama, No like we’ve had this year.’ There can be no situations like they got themselves in this year, really the last two years, but this year especially. They want to reset the culture. Easier said than done.

“How do you do that? That is an organizational decision of ‘this is what we want to do’. But how they enact it going forward is going to be fascinating to watch.”

No details, but as any fan knows, drama and its distractions have become a big part of the Nets reality. Kyrie Irving’s refusal to get vaccinated, James Harden’s mini-strike and Ben Simmons uncertain mental health issues have dominated the headlines almost as much as the wins and losses. And not long before Shelburne’s comments, it appeared that Irving and Stephen A. Smith of ESPN were getting into it ... again.

Now, reports Jabari Young of CNBC.com, those issues and disappointment, confusion and even anger at the team’s failings among fans has also gotten the attention of the ownership ... and bean counters. Young, who covers the business of sports for CNBC, suggested that the team is getting a reputation for being, in the words of rival executives, “dysfunctional.”

Since committing over $300 million to former NBA champions Kevin Durant and Kyrie Irving in 2019, the team hasn’t advanced past the second round of the playoffs. Earlier this week, they were swept out of the postseason by the Boston Celtics. Another of their highest-paid players, Ben Simmons, hasn’t played since the Nets traded away superstar and former league MVP James Harden for him. (Harden and the Philadelphia 76ers are still alive in the playoffs.)

The team is also searching for its third CEO in three years under owner Joseph Tsai. Rival NBA executives describe the $3 billion organization as “dysfunctional.”

It’s not so much that the team is losing money — that’s often a fact of life among NBA contenders — but that the lack of success and surfeit of drama can affect future endorsements and sponsorships, a big part of any NBA team’s bottom line.

Sponsors don’t like to be associated with franchises that fail to live up to the hype, said longtime sports marketing executive Tony Ponturo.

“It’s not good for the image of the team – subsequently, it’s not good for a sponsor,” said Ponturo, the former vice president of global sports and entertainment marketing at Anheuser-Busch. “You want everything to be positive and winning, and you certainly don’t want a team with high potential to fall flat on their face in the playoffs.”

In short, sponsors don’t like losers. Young also quoted an anonymous NBA executive who thinks while the Nets succeeded in marketing their “Clean Sweep” and “Big Three,” the promise was never fulfilled on the court.

“We all got mesmerized by it,” the executive told Young. “And we were incorrect in assessing those guys as a real threat to the title. It’s the perfect example where marketing truly superseded substance.”

Another executive described the Nets to Young as “besieged by noise – the distractions, controversy, miscommunication” particularly around Irving’s absence.

The executive also pointed to the January 2021 trade for Harden as a turning point, saying “They bought the penny stock. They didn’t do the fundamentals, swung big, and it blew up.”

So what’s the bottom line, as they often say at CNBC? How will all of this negativity affect the team?

Executives questioned how long Tsai, the billionaire co-founder of Chinese e-commerce giant Alibaba, would pay to chase what could be more early playoff exits.

“At some point, an owner looks at payroll and says, ‘This is unattainable.’ And that money isn’t going to a charity. That money is being dispersed to your opponents. Does he double-down and fund [the roster], even at a loss? And if you don’t produce the result – a championship – at some point, will it cost Sean?” an executive said, referring to Nets general manager Sean Marks.

Marks didn’t respond to Young’s queries, the reporter wrote. And Tsai has said all the right things about spending. At the beginning of the season, he told NetsDaily that he was committed to paying the luxury tax — and specifically the more onerous repeater tax — to win a championship. Moreover, with a new TV package coming down the road in two years, franchise valuations will skyrocket.

The other big business question, reported Young, is who will replace John Abbamondi as CEO of BSE Global, Tsai’s holding company, a decision which may be imminent. Young wrote, “two league sources told CNBC the Nets already identified a candidate to replace Abbamondi.” Young writes. After hiring and firing two CEOs since he bought the Nets, the decision will be examined closely. There’s another issue as well, Young writes.

The departures created a sense of confusion about who is running the club and led to other pressure-packed questions. The franchise, for instance, will be scrutinized over whether it will hire a Black CEO.

Young notes that Adam Silver has pushed his Board of Governors to make their front offices as diverse as the NBA rosters and fanbases. It will no doubt be as critical a decision for the organization as is this off-season. Marks has fended off previous CEOs’ attempts to have more of a say in basketball operations. After all the sturm und drang of the last several years, will that change when the new guys comes aboard? Watch this space.