A Defunct Team And The Greatest Sports Deal Ever
50 years ago this month, the upstart American Basketball Association (ABA) played its first championship series. A colorful and dynamic league, the ABA was launched in 1967 and within ten years succeeded in forcing a merger with its rival, the NBA.
While some of the ABA teams were absorbed into the newly-expanded organization, others were simply dissolved.
But one of the entities tossed into the heap of basketball history, the Spirits of Saint Louis, ended up generating a jackpot return that would even light up Wall Street.
Branding a flashy and wide-open style of play, the ABA managed to recruit stand-out athletes like Julius Irving (Dr. “J”), Moses Malone, Billy Cunningham and George Gervin, all of whom would go on to become NBA Hall of Famers.
The ABA was popular with fans but struggled financially due to lack of TV contracts. Investors were able to pick up a squad at half the cost of an NBA franchise with hopes that a merger would raise the value of their assets.
In 1974, brothers Ozzie and Dan Silna, flush with cash from the sale of their textile business, bought the ABA’s failing Carolina Cougars for $1 million and moved them to Saint Louis.
Earlier, the two had tried but failed to purchase the Detroit Pistons. When the merger was later announced, the Spirits were also shut out from the expanded league. But as fortune had it, the Silnas would avenge their frustration and anger with the sports deal of a lifetime.
Exhausted from waging bidding wars for players and fans, the NBA finally relented to a merger in 1976. Of the seven ABA clubs still competing, only four were allowed in: New York Nets, Denver Nuggets, Indiana Pacers, and San Antonio Spurs.
One team, the Virginia Squires, had recently folded and the other two, the Kentucky Colonels and Saint Louis Spirits, were offered buyouts to disband. The owner of the Colonels accepted a $3 million takeout, but the Silnas held out for more.
The Spirits had accumulated a talent pool that leveraged their bargaining power. On the court, they employed All-Stars like Moses Malone, Marvin Barnes and Maurice Lucas. Their local play-by-play announcer was the young Bob Costas.
Since only 4 of 7 ABA franchises were accepted, the Silnas negotiated $2 million up front, plus a portion of TV broadcast revenues equal to 1/7 of the amount received by those 4 selected teams.
The kicker? The tenor of the contract would be “for as long as the NBA or its successors continues in its existence”- basically, in perpetuity.
Since TV earnings were insignificant at the time and all the relevant parties were anxious to launch the new league, the agreement was signed off in heat and haste.
But nobody, including Ozzie and Dan Silna, expected the NBA to explode as it did in the 1980’s and 1990’s, ushering in the modern era of lucrative TV contracts.
With the NBA growing to 30 teams, the 4/7 formula resulted in payments equivalent to 2% of the entire league’s broadcasting rights (4/7 x 1/30). The old owners of the Spirits were now collecting windfalls for a phantom team that had no payroll and no operating expenses.
Nearly four decades later, the cumulative amount paid out was estimated at $300 million. With more profitable broadcasting contracts set to be renegotiated, the NBA finally decided to settle out of their endless Silna obligation.
In 2014, the two brothers walked away with a conditional $500 million buyout, bringing their overall take from a defunct basketball team to $800 million.
The “greatest sports deal ever” would become as much a legacy of the ABA as its teams and players.
AUTO RACING May 24, 2009 Brazil’s Helio Castroneves wins the 93rd edition of the Indianapolis 500, becoming the first foreign-born driver to claim the famed chase three times (2001, 2002). Starting out from pole position in car #3, Castroneves clocked the 200-lap race in 3:19:35. Placing 2nd at the 500 in 2003, 2014 and 2017, Castrovenes is regarded as the best driver who never won an IndyCar Series championship.
RUNNING May 18, 1999 American running champion Betty Robinson dies at the age of 87. The Riverdale, Illinois native was the first female to win gold at the 100m sprint when the race was introduced to women at the 1928 Olympics in Amsterdam. She went on to claim gold again in the 4 x 100m relay at the 1936 Olympics in Berlin after the heavily favored Germans, who were leading, dropped the baton.
HORSE RACING May 20, 1989 Pat Valenzuela wins the Preakness Stakes aboard Sunday Silence, crossing the finish line in a time of 1:538 and edging out rival Easy Goer by just a nose. Both jockey and horse had won the Kentucky Derby earlier, but would miss out on a Triple Crown three weeks later at the Belmont Stakes after trailing Easy Goer by eight lengths.
BASEBALL May 16, 1979 The NL approves the sale of the Houston Astros by the Ford Motor Company (Credit) to John McMullen. The team would sign up pitcher Nolan Ryan, baseball’s first $1 million contract, and go on to reach the playoffs the following year for the first time in franchise history. Founded as the Houston Colt .45’s, the Astros were renamed in 1965 as a reference to the nation’s space center.