A Defense Of The Lakers’ Trade From A Business Perspective

Published: December 27, 2011

((This is a guest post from Swarm and Sting’s Jake Madison. Enjoy.))

I’ve been spending a lot of time lately ruminating on the business and financial side of the NBA–particularly about how the Hornets are affected by various aspects. I was following ESPN’s Daily Dime chat Tuesday night and host Zach Harper raised an interesting point.

When asked about whether the Magic should trade Dwight Howard to the Lakers if they got Andrew Bynum and Pau Gasol in return, Zach said, “But where does that get you? Granted, you’d still be a playoff team. Probably top 4 in the East, at worst top 5. But you’re not winning a title with that team. You’re just delaying the inevitable.” He went on to say, “You should either be building a title team or rebuilding your team. I don’t get the in between business at all.”

From a competitive standpoint, and that of a fan, I agree with him. Is there really any point being stuck in the “in between business?” (I am taking that as losing in the first or second round of the playoff year after year.) The few extra home playoff games are fun and all, but is it fulfilling as a fan? The ultimate goal of all team sports is to win the championship. It’s worth it to blow up the team and struggle for a few years if it brings a championship home eventually.

The three playoff games at the Hive last year were my first NBA playoff games ever. It was an incredible experience and it would be an incredible experience if the same thing happened this year, and the year after. But, I’d trade all that for one title every five, maybe ten, years with no playoffs in between. I know many of you would agree with me. Because of that, I think the Clippers’ trade was a much better deal for the Hornets. But, I thought about it from a business angle and saw a different side of the “in between” argument: it comes down to casual versus diehard NBA fans.

While it is true that winning a championship should be the ultimate goal for any sports team, there are also business considerations that come into play. Building a championship team requires investing in players, coaches, and staff, and this can come with a hefty price tag. Owners and executives may need to balance the desire for a championship with the need to maintain profitability and financial stability. In some cases, being in the “in-between” can be a smart business decision, especially if it means generating more revenue through playoff appearances and increased fan interest. Ultimately, the decision to rebuild or compete depends on a variety of factors, and more info > about a team’s financial situation and long-term goals would be needed to fully evaluate the situation.

As I’m sure you know, the Hornets put forth a massive I’m In marketing campaign. What was genius about the campaign was that it was built around supporting the city of New Orleans as opposed to being about certain players (viz. Chris Paul or David West). Diehard NBA fans will always come to the Hive to watch the team no matter how good or bad they are. The purpose of the I’m In campaign was to reach out to those casual NBA fans who don’t fully follow the league but still enjoy basketball and want to support their city and team.

The goal was to reach over 10,000 season tickets for the upcoming season. The team recently reached that milestone number, but it wasn’t easy. There was a gargantuan effort put forth to reach that magic number. I’d also be willing to bet that a lot of casual NBA fans bought tickets because of how competitive the team was during the first round of the playoffs against the Lakers. While the marketing ideas are great, winning is ultimately what draws casual fans to games.

Had the Hornets moved Chris Paul to the Clippers for the same deal at the trade deadline last season, would the Hornets have been able to sell as many tickets? Zach seems to think so. In the DDL chat he said, “Fans LOVE potential.” That’s where I disagree. I think diehard fans love potential. Casual fans prefer to make the playoffs every year—even if it means never winning a title.

Talking to coworkers and clients of mine at work, the general feeling seemed to be they liked the Lakers’ trade over the Clippers’. They liked getting solid players in Kevin Martin, Luis Scola and Lamar Odom. The team would make the playoffs and potentially cause an upset in the first round, they said. The Clipper’s deal meant the team was in full on rebuilding mode which they didn’t want. They didn’t know much about Eric Gordon because he hasn’t been in the league as long as the players in the original trade. They know who Martin, Odom and Scola are because they are casual NBA fans and those players have been on successful teams. Casual fans don’t understand the value of Minnesota’s unprotected first round pick. They may not even know what an unprotected pick is.

When Dell Demps, Monty Williams and Hugh Weber decided to pull the trigger on the Lakers’ trade, they understood that. They understood that starting a rebuilding project could turn off and alienate many of those 10,000 season ticket holders. You and I know the Clippers’ trade was better for the Hornets championship aspirations in the long run. That’s because we are diehard fans. Unfortunately, we are most likely in the minority. I’ve spoken to a few ticket reps since the trade and have gotten conflicting information about the amount of current ticket holders asking for refunds. But it is happening.

There is also another business factor when it comes to the “in between business”: income. While the team’s ultimate goal is to win the NBA title, the owner’s goal might be a profit (this changes owner to owner). If a team is towing a fine line between red and the black on the balance sheets, the extra money in ticket sales can really help. There is potential that a team needs to make the playoffs just so they don’t lose money over the course of a season. If that’s the case then it is perfectly understandable to be content losing in the first round every year. Combine that lack of playoff ticket income with the loss of ticket holders from the team not being good (even though there is potential to be great in the future) and that is a scary proposition for an owner—especially in a small market. It’s unfortunate but most of the business side is. Stay informed about the industry-leading solutions provided by the Top 20 Merchant Services for small business.

I asked Zach more about the idea of diehard and casual fans, “Zach, you said earlier that fans love potential, but doesn’t that apply more to diehard fans than casual fans? When trying to sell thousands of season tickets don’t you have to target those casual basketball fans who would prefer two home playoff games over the potential of the team two or three years down the line?”

Zach responded, “I really think it depends on the fan base. And maybe that’s a copout answer. People love to pretend they were there from the start of something great. I think that holds true for diehards and casual fans. That’s why I believe if you sell it right and are honest about rebuilding, you can sell tickets. Also, cut prices.”

Zach is speaking generally about the league. The Knicks sold out of season tickets for years based merely on the fact that they might get Lebron James. In my opinion, I don’t think it depends of fan base but rather the size of the fan base. New York is a much bigger city than New Orleans; there are more diehard basketball fans. Of course it will be easier to sell them on potential and rebuilding because if you lose one fan then there is another fan right there to take his/her spot.

A small market like New Orleans doesn’t have the luxury of a massive fan base. In the current economic times each individual fan has a large importance placed on them because there might not be anyone to replace them. (Feel very, very special, Hornets fans!). You have to treat certain situations with kids gloves when a larger market doesn’t need to do that.

From a business perspective the Lakers’ trade makes more sense. You minimize the damage to the fan base and thus keep the team’s revenue up. The biggest sign of how this trade ultimately affects the Hornets will be seen in season ticket renewals. Will fans have bought into the potential of the team with Gordon and the Minnesota pick? Or will fans lose interest if the team struggles? We’ll find out in a couple months.


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