The sporting world's equivalent of the Churchill Falls contract

The owners of the Spirits of St. Louis, an ABA team, get a nice cut of the NBA's TV money every year - even though the Spirits and their league are long gone. Here's how they pulled it off:

Roughly once a month, the NBA cuts 31 checks to NBA teams as revenue from its multibillion-dollar national television contract.

There are only 30 NBA franchises, so who gets the extra check?

The money goes to brothers Ozzie and Dan Silna, co-owners of the long-forgotten ABA team, the Spirits of St. Louis.

Thirty years ago, Ozzie Silna, with attorney Donald Schupak, negotiated a deal that cleared the way for the ABA to merge with the NBA. It ranks as one of the best sports deals in modern times, one that has paid the Silnas about $168 million and continues to pay off.

[...]

Part of the Silnas' deal called for them to receive one-seventh of the annual TV revenue from each of the four ABA teams entering the NBA. The deal turned out to be so lucrative that several NBA teams have tried to break it, without success.

"We honor the deal," said Donnie Walsh, the Indiana Pacers' chief executive. "I can't say we haven't met and tried to settle it. But it's the greatest deal known to man. What more can you say?"

The key line in the Silnas' TV contract that makes NBA executives cringe reads: "The right to receive such revenues shall continue for as long as the NBA or its successors continues in its existence."

In other words, the deal lasts as long as the NBA does.

Another key component is that Silna, anticipating the NBA expanding, capped the brothers' portion of shared television revenue at a maximum of 28 teams. The other NBA teams share their revenue among all 30 teams.

The Silnas' contract stands ironclad, despite occasional court challenges. Harry Weltman, former general manager of the Spirits, argued to the Supreme Court in 1991 that he was entitled to a share of the revenue to no avail. [via Galley Slaves]

The Silnas could earn up to $24 million per year from the NBA's new contract with ABC and ESPN. Maybe someday an investor in the new ABA might make such a sweet deal...

Damian P.

Posted by damian at August 9, 2006 06:04 PM