The NBA

[0] By the way, I'm excited for this episode.

[1] I got this CO2 detector to tell me how many parts per million are in here when I close the door in the studio.

[2] I'm kind of scared of what it's going to get up to based on what my Peloton was the other day.

[3] That's awesome.

[4] It may be the case that I actually get dumber toward the end of episodes, which obviously is bad for a podcast that ends in grading, but I want to see if that's the case.

[5] That's amazing.

[6] Welcome to season seven episode four of Acquired, the podcast about great technology companies and the stories and playbooks behind them.

[7] I'm Ben Gilbert and I'm the co -founder of Pioneer Square Labs, a startup studio and venture firm in Seattle.

[8] And I'm David Rosenthal and I am an independent angel investor and startup advisor based in San Francisco.

[9] And we are your hosts.

[10] Today our tech focus podcast takes a turn to cover a different powerhouse business, the National Basketball Association.

[11] And whether you have been following the playoffs in the COVID bubble at Disney's wide world of sports or not, there is no better time for an absolutely exhaustive deep dive on the history and strategy of the NBA than the week of the finals.

[12] So how did David and I get here?

[13] Well, our original plan was to cover the business of the Jordan brand.

[14] And halfway in, we realized that the story of Jordan is really a part of the Nike story, and we want to cover that another time.

[15] But as we dug in, we realized that there's actually a great story in the NBA itself, and it's one that's very relevant through an acquired lens, how it built itself from very much the underdog of major American sports, started 50 years later than the others, and now it's the second most popular sport in the world globally after soccer, or as many of you call it football, and it has done so using a playbook that is very much in the acquired wheelhouse.

[16] Yeah, spoiler alert, it is quite appropriate that the NBA is playing in the Disney bubble right now because so much that we've covered about Disney on these shows over the years is going to echo here with the NBA.

[17] Indeed.

[18] So with that said, today we are bringing you a story of a business at its inflection point, making huge bets for the future compared to other major sports leagues.

[19] the average team valuation has grown a staggering 6x in the last decade, which talk about an amazing investment return just on its own.

[20] And today, we will try and understand all the factors that have made that so.

[21] Yeah, these teams used to trade for like 20 million bucks.

[22] And now I think every single NBA team is worth more than a billion dollars.

[23] Yep, all triggered by Steve Ballmer's $2 billion purchase of the Clippers, what, five -ish years ago?

[24] Yeah, as covered on, was that like episode 34 of Acquired or something like that.

[25] If you know the number, that is very impressive.

[26] But yes, quite, quite early.

[27] So as always, if you love Acquired and you want to hone your own craft of company building, you should join the community of Acquired Limited Partners.

[28] You'll get access to the LP show, the bread and butter of the LP program, where we dive deeper into the fundamentals of company building and investing, in addition to our monthly LP calls, where we talk with all of you directly, and of course, our book club and our Zoom calls with the authors.

[29] So exciting announcement on that front.

[30] Our next book club will be reading Brotopia by Emily Chang of Bloomberg TV fame.

[31] And Emily has graciously agreed to join us and all of our LPs for a discussion on the book next month.

[32] So LPs, keep an eye out in your email for the announcement on that.

[33] So if you aren't a limited partner, you can click the link in the show notes or go to Acquire .fm slash LP and all new listeners get a seven -day free trial.

[34] Okay, listeners now is a great time to thank one of our big partners here at Acquired, ServiceNow.

[35] Yes, ServiceNow is the AI platform for business transformation, helping automate processes, improve service delivery, and increase efficiency.

[36] 85 % of the Fortune 500 runs on them, and they have quickly joined the Microsofts at the NVIDias as one of the most important enterprise technology vendors in the world.

[37] And, just like them, Service Now has AI baked in everywhere in their platform.

[38] they are also a major partner of both Microsoft and Nvidia.

[39] I was at Nvidia's GTC earlier this year, and Jensen brought up ServiceNow and their partnership many times throughout the keynote.

[40] So why is ServiceNow so important to both Nvidia and Microsoft companies we've explored deeply in the last year on the show?

[41] Well, AI in the real world is only as good as the bedrock platform it's built into.

[42] So whether you're looking for AI to supercharge developers and IT, empower and streamline customer service, or enable HR to deliver better employee experiences, ServiceNow is the platform that can make it possible.

[43] Interestingly, employees can not only get answers to their questions, but they're offered actions that they can take immediately.

[44] For example, smarter self -service for changing 401K contributions directly through AI -powered chat, or developers building apps faster with AI -powered code generation, or service agents that can use AI to notify, you of a product that needs replacement before people even chat with you.

[45] With ServiceNow's platform, your business can put AI to work today.

[46] It's pretty incredible that ServiceNow built AI directly into their platform.

[47] So all the integration work to prepare for it that otherwise would have taken you years is already done.

[48] So if you want to learn more about the ServiceNow platform and how it can turbocharge the time to deploy AI for your business, go over to ServiceNow .com slash acquired.

[49] And when you get in touch, just tell them Ben and David sent you.

[50] Thanks, service now.

[51] Now into the episode on the NBA.

[52] Time, indeed.

[53] All right.

[54] So one caveat before we dive into the history facts.

[55] How a caveat, David, all the time.

[56] Oh, I know.

[57] Well, we, okay, but this is an important one.

[58] Listeners, if you have ever met Ben or me in person, it will become immediately obvious that we didn't really play basketball growing up.

[59] And we are casual fans.

[60] Did you?

[61] Really?

[62] It just wasn't pretty.

[63] Oh, yeah, like rec league.

[64] I think I scored 10 points one season.

[65] Oh, nice.

[66] Like total.

[67] Game or total?

[68] Well, actually, I had the best basketball end of my career ever.

[69] I played seventh grade JV basketball and I was a total scrub on the bench.

[70] And in the last game of the season, like the scrubs got to play at the end of the game.

[71] I was like, all right, I'm doing this.

[72] So I just like launched up a three -pointer with two hands.

[73] And it went in and switched.

[74] And I was like, done.

[75] I'm never playing basketball again.

[76] Like, I'm going out on top.

[77] That's amazing.

[78] I did in middle school transition as part of my duties as being the light and sound person for the theater shows, which flashes forward to where I am today pretty well.

[79] Part of the responsibilities there were I did run the scoreboard at basketball games in Minnesota.

[80] Oh, nice.

[81] Yeah, that's pretty experienced in basketball technicalities.

[82] Well, the point of this way too long now, caveat is that this show is not going to be about the history or analysis of the game itself.

[83] There are much, much better sources for that than acquired.

[84] But it is going to be about the business history and analysis of basketball and the NBA from, you know, one man during a snowy Massachusetts winter in 1891 to now the second largest sport in the world consumed last year by an estimated one billion people.

[85] I was kind of hoping you would only go back to the start of the league and not actually the start of basketball at all so I can like go back earlier than you.

[86] but nope any chance i have to go back to the 1800s is like fantastic all right so what are we talking about so james nath smith canadian american yep who was he well he was a canadian american in who found himself teaching at the young men's christian association training school what would become both the ymca and springfield college specifically in springfield massachusetts during the winter of 1891 and he was the fizz ed teacher there.

[87] He was trying to find ways to keep his gym class active during these cold, dark, harrowing New England winters.

[88] And so he goes through kind of all the existing, you know, like indoor games and things he can do in a gymnasium.

[89] He doesn't really like any of them.

[90] And he's like, yeah, maybe I'll just come up with my own.

[91] So he writes down some basic rules.

[92] The crux of this little game he invents is that he takes a peach basket and he nails it into an elevated track that is running around his his gymnasium there in Springfield.

[93] And he kind of invents basketball.

[94] And I say kind of because this peach basket that he nailed up to the track, first, I don't know if there were one or two.

[95] I think it might only been one.

[96] I'm not sure.

[97] But he didn't take the bottom out of it.

[98] So it's literally a basket with a bottom.

[99] So when the balls, and by balls, I mean soccer balls that they were.

[100] playing with, went into the basket.

[101] They had to stop the game and somebody to go climb up there and get the ball out of the basket.

[102] Oh, that's awesome.

[103] Is that awesome?

[104] A couple other things about this game that he invents.

[105] There's no dribbling.

[106] So it's kind of like ultimate frisbee with a soccer ball.

[107] Once you touched the ball and you had possession of it, you had to stop.

[108] You couldn't move.

[109] The only way you could move was by passing the ball.

[110] There was also no set number of players on either side.

[111] So it was just like, hey, how many kids are in class today, great.

[112] We're going to divide you up and put you into this game.

[113] And on half -court ball, that sounds like that would be a crowded space.

[114] But nonetheless, there's some magic to this little game.

[115] And people like it, and it ends up spreading like wildfire through YMCA's and other Christian organizations in the U .S. and Canada.

[116] And then very quickly internationally, too.

[117] So we're going to come back to the game in a minute.

[118] But before 1900, like only four or five years after 1891 when Ney Smith invents this, the game lands in China through the YMCA organizations there.

[119] Actually, still today, the oldest existing basketball court in the world is located in China at a former YMCA there.

[120] Which also, how crazy is that their YMCA is in China before 1900?

[121] I know.

[122] Like, got amazing.

[123] It's just like crazy to even think about that.

[124] This is like our very first playbook theme of the episode, all the way at the very front of history and facts here.

[125] What an amazing distribution channel.

[126] I mean, we talk a lot about what's more important, the product or the distribution.

[127] And this is one where the product had found product market fit for a variety of reasons, one of which was it didn't take that much equipment and it wasn't full contact.

[128] So people could easily get on board with the idea of this is good, it's healthy, but it, you know, it won't injure you.

[129] But distribution is the reason why, you know, it permeated China and permeated the whole world so quickly.

[130] That missionary zeal.

[131] Also, on the contact point, it's important to note, too, it's not just men that are playing this.

[132] So women start playing basketball right at the beginning, too.

[133] And it actually becomes just as popular with women.

[134] It Wow.

[135] Yeah, and then it's played in colleges.

[136] Unlike, you know, the other major American sports has a long history of both sexes playing.

[137] I got to give one anecdote.

[138] I wasn't going to bust this out, but this is just a great quote from an Atlantic article that we will link in the show notes.

[139] Some of the first groups that embrace basketball in China were college students, Western -minded scholars, and most importantly, members of the Communist Party who love the sport for its cohesive power.

[140] During the long march, the Red Army storied year -long retreat in the 1930s to evade the nationalist army, communist soldiers and officers played basketball to lift their spirits and solidarity.

[141] It goes on to say that the party continued to support the sport after it took power in 1949.

[142] During the Cultural Revolution, Mao declared war against almost all Western bourgeois affections from classical music to novels, but he never wavered in his support of basketball.

[143] So it's just so crazy to me that, like, in China, amidst this revolution, you know, for the 50 years after this, that basketball sort of thrived, even though the freaking NBA hadn't even been started yet.

[144] Well, hey, who's the number one ambassador to North Korea these days, Dennis Rodman?

[145] But no, we're going to talk much more about basketball in China later in the episode.

[146] Yeah, it really is this amazing story of product market fit plus distribution.

[147] And on the on the product market fit, they do.

[148] eventually, within the first 10 years or so of the game, most of the kinks, the basic kinks get worked out of the game.

[149] So in the late 1890s, some Yale students, of course, those, you know, plucky Yale students, there's a loophole in the rules.

[150] They decide, they think they can advance the ball themselves by passing it to themselves, and thus the dribble is born.

[151] It's shocking that the Ivy League students thought that they could, you know, find a loophole in the rules that they could exploit to advantage themselves.

[152] And then the number of players, the five players on each team, gets standardized because American football was the big collegiate sport at the time.

[153] And at the time, American football was played with 10 players.

[154] And so football teams in the winter, once it got too cold to play football outside, they just come in and play basketball and so you just divide the team in half.

[155] And boom, there you go.

[156] Five on five.

[157] That's how it happened.

[158] Well, speaking of, do you know what James Naismith is also credited with inventing?

[159] Ooh, I don't know that.

[160] Am I actually going to get one that David Rosenthal has not?

[161] I think you are.

[162] We'll see.

[163] We'll see.

[164] He is also the inventor of the football helmet.

[165] No way.

[166] Yep.

[167] Dude, what a guy.

[168] Quite the gym teacher.

[169] Man, wow.

[170] What an illustrious career.

[171] So basketball ends up really taking off around the world pretty quickly, as we've said, and in America, especially in high schools and colleges, becomes the winter sport in the American.

[172] collegiate sports landscape.

[173] But interestingly, certainly unlike baseball, and football had its fits and starts with professional leagues, but certainly started much earlier than professional basketball leagues.

[174] Professional basketball leagues don't really take hold, but what does is professional basketball teams.

[175] I didn't know this until starting the research, but the Celtics, the original Celtics, actually started as a barnstorming squad in Boston.

[176] What does that even mean?

[177] So it was like a traveling team.

[178] They travel around the country and play other teams in kind of exhibition games around the country.

[179] And of course, two other teams that start right around the same time.

[180] We're in like the 20s, 30s here are the Harlem Globetrotters who actually are from Chicago.

[181] They don't move to Harlem itself until the 60s.

[182] Yeah, it was like a branding thing.

[183] Huh.

[184] I did know that they predated the NBA and that they were not originally started as this like goofy exhibition team, but like.

[185] No, they were probably the best professional team.

[186] in America, and they were legit and played legit, like, real games.

[187] And then a team that actually was from Harlem was the New York Renaissance 5 or the Wrens.

[188] So both the Globetrotters and the Wrens were all black teams and were wildly popular.

[189] I mean, both of them would play like 200 games a year across the country and then eventually around the world, just exhibiting, you know, great professional basketball.

[190] Hmm.

[191] And no league.

[192] Like, we made it all the way through two.

[193] World Wars in America before we had the semblance of a professional basketball league.

[194] Yeah.

[195] I mean, that's that's kind of how things were until right after World War II, in fact, exactly two years to the day after D -Day on June 6th, 1946, the Basketball Association of America is founded in New York City by drum roll.

[196] He's the inauspicious beginnings here.

[197] the owners of a bunch of ice hockey arenas in the northeastern and Midwestern United States and Canada who wanted to make more money from their arenas on the nights when there weren't hockey games happening?

[198] This is just an amazing full circle thing where now the ice hockey owners are trying to get sort of the off nights of the NBA owners arenas so that they can make a little bit of money for the ice hockey teams that are playing.

[199] And of course that sports getting more and more popular now.

[200] go Seattle Cracken.

[201] But like, what an incredible reversal that that's why they started the NBA.

[202] Let's monetize these off nights for the hockey teams.

[203] I didn't even think about this growing up.

[204] You know, I think now more so these teams have their hockey and basketball teams.

[205] Sometimes they share an arena.

[206] Sometimes they often have their own arenas.

[207] But growing up, of course, all like hockey and basketball team shared an arena.

[208] I never thought about it.

[209] That's why basketball and what would become the NBA was like a subsidiary of, you know, what would become the NHL.

[210] But I am certain that any basketball arena that was around when you were a child was more built to be a basketball arena than a hockey.

[211] Yeah, probably.

[212] Oh, man, the Spectrum in Philly.

[213] That place was a dump.

[214] Back when arenas had real names.

[215] Yeah.

[216] This is a pretty big deal, though, because there had been some other early attempts at professional basketball leagues, but none of them worked.

[217] And one of the big reasons that none of them worked is none of them had good venues, either in terms of the city.

[218] that the teams would play in, but more importantly, like the arenas, like there weren't, they didn't have access to big enough arenas where they could attract large enough fan bases to support economically the teams and, and the league.

[219] The American Hockey League was the league that founded this.

[220] They take the current commissioner of the AHL, Maurice Podaloff, and they say, hey man, we're going to give you some extra job responsibilities.

[221] So like, go set this thing up, you know, make us some money on the off nights.

[222] And this is really, you know, we're going to talk about this here and amazing how much, wonderful, how much things have changed.

[223] They also were like, hey, make sure that no black people play in this league.

[224] You know, this is 1946 when this was set up.

[225] Jackie Robinson wouldn't break the color barrier in baseball until the next year in 1947.

[226] I mean, A, full stop, that's like awful, terrible, racist, wrong, all of these things.

[227] But two, it's just like stupid because the globe trout.

[228] in the Wrens, like here you've got these examples of professional basketball teams that have the best talent that make the most money and are by far the most exciting, you know, brand of basketball available anywhere.

[229] Right.

[230] And these guys are letting racism get in the way of good business sense.

[231] Yeah.

[232] They're like, nah, we don't want any of that.

[233] Just crazy.

[234] Crazy.

[235] Ridiculous.

[236] So nonetheless, on the next year, actually, no, that same year, the first professional basketball game in what would become the NBA takes place in Canada, appropriately, given Naismith's origins, in Toronto, where the Toronto Huskies hosted the New York Knickerbockers at Maple Leaf Gardens and what would become the first NBA game in history on November 1st, 1946.

[237] And one of these teams has a storied franchise afterwards, and the other one makes it, what, a year?

[238] Yeah.

[239] I think the Huskies were a one or a two -season team.

[240] Yeah, I don't think they lasted very long.

[241] And in fact, the whole league is, you know, kind of doing okay.

[242] It's this promotional side thing for the hockey league.

[243] So a couple of years later in 1949, they decide they need to, they need some more cities, they need some more teams.

[244] They merge with a rival league called the National Basketball League, the NBL.

[245] And together, they changed the name of this merge league to the National Basketball Association.

[246] And thus the NBA is officially christened in August.

[247] 1949.

[248] And in a more typical boneheaded owner fashion in this time, it takes them five years to come up with the idea for a shot clock.

[249] So like unlike the Globetrotters and the Wrens where they're playing real basketball in the NBA at this time, whatever team was leading in the fourth quarter would just like sit there and hold onto the ball as long as possible.

[250] Whereas now it's like, why even watch it until the fourth quarter?

[251] And that's when the game really starts.

[252] It's like crazy to think about the strategy being try and be, you know, the one in the lead by the time there's 12 minutes remaining so you can run the clock.

[253] So they take some five years to come up with that idea.

[254] Then another three years to test it and actually implement it and decide it's a good idea across the league.

[255] And then as I said, in 1947, Jackie Robinson breaks the color line in baseball and wins the first rookie of the year award that year.

[256] And clearly this is a great thing.

[257] and lots of black players come into the Major League Baseball, but it takes the NBA owners another three years after that to even sign the first black player in 1950, which was Harold Hunter with the Washington Capitals, and the Capitals cut him in training camp that year.

[258] Several other black players didn't end up joining the league and playing that year, but like, come on.

[259] Not off to a great start.

[260] No, not off to a great start.

[261] Do you know who the first, non -white player in the league was.

[262] It was actually not a black person.

[263] Yes, I don't have his name written down, but it was a Japanese -American player, I think, right?

[264] Yeah, Wataru Misaka in 1947 -48, so a couple years before that.

[265] Yeah, crazy.

[266] Another crazy thing that'll be a flash forward to today is in the first couple years of the league, in the mid -1940s, the league created a salary cap for the first time in sort of a hopes to create a little bit of a fair playing field among their very small number of teams.

[267] I think maybe maximum eight teams at this point, they just kept it for a single year because whoever, I assume the Knickerbockers, but whoever the teams were in the largest GEOs basically said, uh -uh, we're not doing this thing.

[268] Couldn't help themselves from violating.

[269] Yeah, and it didn't come back until the 1984 -85 season, so that we went like 40 years with no salary cap.

[270] Branch child of one David Stern.

[271] So anyway, The league bumps along for another few years, and then in 1957, the big moment happens.

[272] The Celtics draft Bill Russell, and he becomes the first – there have been other, like, superstars in the NBA before that, white superstars, but he becomes the first black superstar and the first, like, real modern.

[273] I mean, Bill Russell is a legend across so many dimensions of the game, a player in the NBA, and then the floodgates open after that.

[274] So Red Auerbach was the legendary coach.

[275] of the Celtics, Red retired, I think, during the, like, 66 NBA finals and named, this is back when coaches still had, like, way more power within the organizations than they do now.

[276] He named Russell the coach of the Celtics while retiring during the finals.

[277] So Russell becomes, he's a player coach of the Celtics from 66 to 69.

[278] He becomes the first black head coach of any North American professional sports team and the first to win a championship later.

[279] in his tenure, just an amazing guy.

[280] He would, I think President Obama would give him the Presidential Medal of Freedom later in life.

[281] Did you know also he lives on Mercer Island these days in Washington?

[282] What?

[283] Yeah, crazy.

[284] Two miles from my house.

[285] Things you can learn on Wikipedia.

[286] That's wild.

[287] Here's another thing, like right during this era, speaking of the Celtics that I sort of realized while I was digging through this, they were possibly the biggest dynasty in the history of sports.

[288] In that 12 -year run from 1957 to 69, the Celtics only had two years where they were not the NBA champion and only one year where they weren't in the finals.

[289] There's a lot of talk about the Patriots in the NFL from 2000 to today, but they only played in half the Super Bowls those years.

[290] And I think the only comparable dynasty in major U .S. sports is probably the Yankees in like the mid -30s to mid -50s, but still not nearly as dominant as the Celtics were in that era.

[291] And it sounds like I think you said in 66 the coaching transition happen.

[292] So, you know, still reigned champion through multiple coaches.

[293] Well, then immediately after that would be the beginning of the Celtics Lakers rivalry.

[294] Will Chamberlain wouldn't go to the Lakers until 68, I believe.

[295] But in 1959, he was drafted and joined the league with the then -Philadelphia warriors who moved to San Francisco a couple years into Will's tenure there.

[296] And that just like, Like, any listener who knows anything about Will Chamberlain knows, like, there's so many crazy stories about Wilts, and he was a character, uh, extraordinary.

[297] If you don't know about Will Chamberlain, like, pause this episode.

[298] Go Google him now.

[299] Uh, still the only player to ever score 100 points, right?

[300] Scored 100 points in a game, uh, had over 50 rebounds.

[301] I think multiple times.

[302] I think he also, at least once, if not multiple times in his career averaged over 50 points a game for the entire season.

[303] Oh, my God.

[304] I mean, so many stories.

[305] My favorite one, though, is so Will played college ball at the University of Kansas, but he wasn't super happy there, and he wanted to leave and start playing professional early, but the NBA didn't allow it at the time.

[306] So he left after his junior year, joined the Globetrotters, and played for a year for the Globetrotters.

[307] Did you know this?

[308] No. This is amazing.

[309] And so during the— And what were the Globetrotters at that point?

[310] They were still really big at this point.

[311] And were they doing, like, what they do today?

[312] they sell tickets, they come to town.

[313] Yeah, it was more of a show than it was like an actual game.

[314] And this is amazing.

[315] So during that season in 1958, when Wilts with the Globetrotters, they do a sold -out tour of the Soviet Union.

[316] This is like the height of the Cold War.

[317] They travel to the Soviet Union.

[318] They end up playing in front of Nikita Khrushchev in Moscow.

[319] And Wilter, like, it's this, you know, crazy Harlem Globetrotters, like zany stuff.

[320] there's this part in their stick at the time where I forget the name of the captain of the team he would pretend to like faint and pass out on the floor and then Wilt was like so big and strong that he would go up and pretend like he was going to help him up and instead like literally throw him into the air like wrestling style so they did this for Nikita Khrushchev in Moscow like crazy.

[321] Unbelievable.

[322] What a global sport.

[323] Oh my God, amazing.

[324] And just to paint a picture too of like when when Wilt came into the league So I think that was like late 50s, but let's just rewind a couple of years.

[325] The league, I think it was the 53 -54 season, was only eight teams.

[326] And it's worth walking through the eight just to sort of like know where they ended up today.

[327] Because as we know today, the NBA is 30 teams and should be 31 with Seattle.

[328] When is that expansion going to happen, by the way?

[329] It's been a couple of years out for many years now.

[330] So they've got the New York Knicks, the Boston Celtics, the Philadelphia Warriors, which as you said would go to be the San Francisco Warriors before.

[331] First the San Francisco, then the Oakland Warriors, then now back to the San Francisco Warriors.

[332] Yes.

[333] The Minneapolis Lakers, which is where the name Lake comes from, like L .A. is not known for its lake.

[334] Minneapolis is.

[335] There are a thousand lakes.

[336] The Rochester Royals, who would then go on to become, I think, the Sacramento Royals and then finally the Sacramento Kings, the Fort Wayne Pistons, which, as you can, as you know, became the Detroit Pistons.

[337] But I always thought like, oh, of course Detroit is the Pistons.

[338] because Detroit is the, you know, that's where they make all the cars.

[339] Yeah, totally.

[340] When I found that in the research, too, I was like, why the pistons in Fort Wayne?

[341] Fort Wayne, Indiana.

[342] Yeah.

[343] I mean, it must have been that there were also, you know, car factories there.

[344] The Tri -Cities Blackhawks, who are now the Atlanta Hawks, but the Tri -Cities were in Illinois.

[345] I think they were originally the Buffalo Bisons in Buffalo, New York, and then went to Illinois, where they were the Tri -City Blackhawks.

[346] And then eventually, after sort of moving around a bunch, I think Milwaukee, St. Louis are now the Atlanta Hawks.

[347] But they've had quite the traveling journey.

[348] And finally, the Syracuse Nationals, which do you know who that is today?

[349] Ooh, is that?

[350] No, I don't know.

[351] That is the Philadelphia 76ers.

[352] No, I should know that.

[353] Yeah, so they were, I think they stayed the Nats, yeah, when they moved to Philly, but then eventually changed their name to the 76ers.

[354] Nice.

[355] Interesting.

[356] It's so funny.

[357] I mean, like, these teams that we now think of, like, they're all billion dollar plus franchises.

[358] We think of them as so established.

[359] But like, it was the Wild West back in these days.

[360] Totally.

[361] And there were only eight of them.

[362] I mean, and when you talk about the numerical, just to like paint some order of magnitude stuff for people, even in like the 80s, I think like 1983, the salary cap for a team was something like three and a half million dollars.

[363] 3 .6 million.

[364] Yep.

[365] So like, we're still 25 years, 30 years before that.

[366] There's eight teams.

[367] You probably, you know, make more money cleaning your local gym than you do being the player.

[368] This is a labor of love.

[369] Will and Russell are in the league.

[370] We're now in the 60s.

[371] You brought up economics.

[372] They're these big personalities.

[373] They'd had great college careers.

[374] People love watching them.

[375] The NBA does start to gain some in popularity.

[376] I mean, it's still very much the underdog.

[377] football, American football and baseball, way, way, way bigger than professional basketball at this point in time.

[378] But they do during the 60s, early 60s, land a landmark five -year, four -million dollar TV rights deal with ABC.

[379] And who at ABC gets put in charge of...

[380] Wait, wait, wait, wait.

[381] What year is this?

[382] This is in the 60s.

[383] So Iger is probably still in high school at this point in time.

[384] Who's the legendary wide world of sports producer that Iger ended up working for?

[385] Rune Arlidge.

[386] It's him.

[387] Rune, the legend, Rune Arlidge, gets put in charge at ABC of like, hey, take this sport and do something interesting with it.

[388] And of course, Rune had the wide world of sports, Monday night football, the Olympics coverage.

[389] He was a genius.

[390] And also, nightline, I believe, like not just sports, but he innovated so much.

[391] the evening kind of magazine news shows that he brought to TV.

[392] And we're still a decade before ESPN's even founded.

[393] Yeah, not till 79.

[394] This is great.

[395] So Bill Simmons in his basketball book quotes David Halberstam in his basketball book.

[396] And Simmons is like, I know you can't believe I'm quoting Halberstam here, but I have to do it.

[397] So this is Halberstam.

[398] He says, what ABC has to prove to a disbelieving national public, our alleged believed, was that this was not simply a bunch of tall, awkward goons, throwing a ball through a hoop.

[399] but a game of grace and power played at a fever of intensity.

[400] He was artist enough to understand and catch the artistry of the game.

[401] He used replays endlessly to show the ballet and to catch the intensity of the matchups.

[402] The athletes themselves were self -evidently proud, and they liked nothing better than to beat their opponents, particularly on national television.

[403] They were in those days obviously motivated more by pride than money, obviously, and the cameras readily caught their pride.

[404] Even with all the money floating around today, there are many, many NBA players that are still motivated much more by pride than money.

[405] Especially because, as we'll get into, while they make astronomical sums and salary from playing more than any other sport in the world, the best of them make at least as much from all of their business outside of the court than they do on the court.

[406] So all that is huge for the NBA, but still by the kind of like mid -60s, end of the 60s, it's still about 10x smaller.

[407] baseball.

[408] And ABC is only broadcasting the NBA once per week on Saturdays, I think.

[409] David, let me come in here and say, just to catch folks up on the teams at this point, we were eight teams.

[410] The ninth team then came in in 61.

[411] That's the Washington Wizards, but at the time was the Chicago Packers, which seems like it has an overlapping name with a city that is, I don't know, pretty close to there and a decent rival.

[412] So the history of that's got to be an interesting one.

[413] Then, of course, the Chicago Bulls come in.

[414] I think 66 to 68 is when they really went crazy and did like an expansion of five teams all at once.

[415] So the Bulls, the Supersonics, which are now the Oklahoma City Thunder, the San Diego Rockets, who obviously became the Houston Rockets, the Milwaukee Bucks, and the Phoenix Suns.

[416] So that's sort of what the NBA is looking like at this point toward the end of the decade of the 60s.

[417] Yeah, and they were expanding rapidly to compete with the upstart ABA, which we'll get to in one sec, but before the ABA, and actually like super, super seminal and important event happens in the NBA in 1964, which I think really sets the stage for so much of what comes later and the modern business and game today.

[418] So like we said, ABC and Roon Arledge, we're starting to popularize the league, but the players were making nothing, you know, in these days.

[419] And baseball was still the national pastime.

[420] It was about 10x bigger than basketball at this point in terms of the reach of the professional leagues.

[421] And in 1964, during the All -Star game, these players kind of led by Chamberlain and Russell, they're not super happy with how they're being treated.

[422] They really want a pension plan from the league for the players after they retire.

[423] It tells you so much about the time.

[424] The top priority was like, we need a pension plan.

[425] We need a pension.

[426] Yeah, because you can't played this that long.

[427] They're not making that much money.

[428] And, like, them, what are they going to do?

[429] So literally two hours before the broadcast of the All -Star Game is supposed to start.

[430] And this is a big deal, like, early in this ABC contract, Rune Arla, just putting on this big, you know, national television event, the NBA All -Star Game, they threatened to walk out and not play the All -Star game unless Commissioner Walter Kennedy at the time acquiesces to their demands and puts a pension agreement in place.

[431] So it becomes this year.

[432] huge showdown, like literally two hours before the event, ABC and Roon gets super pissed off.

[433] And they tell the NBA, like, look, if you leave us hanging here, like, we're done.

[434] This contract is over.

[435] Like, good luck ever being on national television again.

[436] So under this pressure, the league buckles, they agree to the pension deal.

[437] The All -Star game gets played.

[438] But this is the first example in any sport of players really kind of, you know, the forerunner of what would become the players union, unionizing, organizing, and, you know, making demands of owners.

[439] And I think sets the stage for what the, now the NBA Players Association, you know, all the force that it would become today.

[440] And really starting to be an early precursor to sort of tilting the balance of power and the economics to that of a fair one, which is closer to where we are today, where the players are able to actually shine and benefit from being the ones that are actually attracting all the attention.

[441] I mean, to this point, and obviously we can argue about whether that's true enough today, but to this point, it really hadn't been the players who were economically benefiting at all from this rising popular sport.

[442] No, totally.

[443] We'll get much more into the economics, modern economics, today.

[444] But after this, this is pretty incredible.

[445] The top players, like Wilt and Russell, start negotiating much harder for better contracts and more pay.

[446] And in, In 1968, when Wiltz signs with the Lakers, he signs a landmark five -year deal for 250 grand per year, which is a lot of money in 1968.

[447] I mean, I think inflation adjusted, it's like $2 million or so, so nowhere near the deals today.

[448] But here's the crazy part.

[449] So the top paid Major League Baseball player at the time was Willie Mays, who made $125 ,000.

[450] So Will is getting twice as much money as the top baseball player in the world, even though the NBA is still 10x smaller than Major League Baseball.

[451] Pretty incredible.

[452] I mean, also just goes to show how much the baseball owners were screwing the players at the time.

[453] And how did that work out?

[454] Is it because the Lakers owners had a bunch of money, or why were they willing to spend so much more on a player when their viewership was way small?

[455] Well, probably it worked out economically.

[456] A, there was no salary cap, no revenue sharing, and Wilt was such a, like, cultural icon.

[457] Like, I'm sure that the Lakers, in terms of, you know, ad sales, ticket sales, local TV deals, I think were starting at this point in time, they were able to monetize that at probably equal, if not more, than what they were paying, Wilt.

[458] Yeah, makes sense.

[459] The other part of the reason, though, why I think.

[460] the Lakers were willing to pay him so much, and other people would start making so much was, as we alluded to, in 1967, a new rival league gets formed to the NBA, the American Basketball Association, the ABA.

[461] And this is pretty awesome.

[462] The NFL had merged a couple years before with the AFL, I think it was.

[463] And I think that became effectively the conferences, the AFC and the NFC.

[464] I think that's right.

[465] Yep.

[466] And so these kind of plucky entrepreneurial guys you start the ABA, they go around to a bunch of people in a bunch of cities and say, hey, our business plan is we're going to start a rival league to the NBA, do what the AFL did and force them to buy us and merge with us.

[467] And we're just going to go into all these cities that they're not in.

[468] I love that their pitch was an arbitrage.

[469] It was like, yeah, hey, they haven't expanded to all the cities where they should have.

[470] We're going to beat them to it.

[471] And you're basically buying in for the pop.

[472] we get acquired.

[473] And the timing was totally right because the 1967 draft, it was either 67 or 68, but I think it was 67 when this was all starting.

[474] There was this incredible once -in -a -generation prospect coming out of UCLA.

[475] The doctor.

[476] Lou Alcindor.

[477] Oh, Lou, okay.

[478] Correct me if I'm wrong, but doesn't Dr. Jay play a huge role?

[479] Dr. J ends up playing a huge role in this, but this is, of course, Lou, Alcindor, known soon as Karim Abdul -Jabbar, he ends up playing both leagues off of each other.

[480] He tells the ABA, I think the Nets in the ABA had the first draft pick in the ABA and the Bucks had the first draft pick in the NBA.

[481] They both draft him first.

[482] And he tells each team, I'm going to take one offer from each year.

[483] It's got to be best and final.

[484] That's it.

[485] I'm taking it.

[486] The Bucks come in with a $1 .4 million deal, the nets were lower, I think maybe like 1 .2 or something.

[487] So he signs with the bucks.

[488] And then the nets are like, wait, wait, wait, you actually meant that?

[489] That it was like best and final.

[490] Like, we'll do, how about they offer him $3 .6 million for a longer term contract.

[491] Remember, it was just like that same year that that Wilk got a $250 ,000 a year deal, which was crazy.

[492] Damn, this is like Uber fundraising.

[493] This is like six months later, like a 10x valuation increase.

[494] I know.

[495] Like literally, same day, and Kareem is like, no, I meant it, man, like only one offer.

[496] And so he signs with the bucks, he goes to the NBA, still the largest contract at the time, but the ABA signs Dr. Jay.

[497] So, like, we're in the middle of, there's been sort of like three chapters of modern basketball history undergoing, like, great eras of transformation.

[498] We're, like, deep in the first one right now in sort of this NBA versus ABA battle.

[499] And, we're going to get to classifying the type of power that the NBA has later.

[500] But this incredible example of counter positioning is happening with the ABA.

[501] Because the ABA, of course, it's almost think about it like the XFL, but they're not being like exhibitionist about it.

[502] Their pitch really is like the NBA should be bigger and it's not and they're slow.

[503] So we're going to go eat their lunch first so they have to buy us.

[504] And they're willing to do a few things like the XFL and change a few rules so that they can get more popular more quickly.

[505] And one of the counter positioning things that they do is their rules, let them sign college undergrads, which is actually how they get Dr. Jay or Julius Irving and get him in the ABA because they just go get him sooner than the NBA's rules allow for.

[506] It's not that their rules let them sign college undergrads.

[507] They just don't have any rules.

[508] So they actually start going after high school players too.

[509] And this is the origin of high school players go into the NBA or the ABA first.

[510] The other things the ABA does, remember, like you said, Ben, they're trying to get bought, but they're also, like, so they're trying to be flashy, but they're also trying to really innovate in the game and do interesting things.

[511] The NBA, up until this point, it was like a big man center dominated game, you know, Bill Russell, Will Chamberlain, Kareem in his own way, although he was, you know, part of a more modern era.

[512] But that was like, it was big, it was bruising.

[513] That's what the NBA was about.

[514] But it wasn't fast.

[515] Like, it's big and bruising today, but it's fast.

[516] Like, the NBA is like, you know, think about it, like, the tree style of like, I'm going to stand and I'm going to move my arms around and I'm going to block your shots, but I'm not driving the lane muscling through and knocking guys over.

[517] Yep.

[518] So the ABA is actually the league that first invents and implements the three point line and the perimeter shooting and fast breaks.

[519] Well, fast break has always been part of the game, but a much more finesse and skill.

[520] oriented game.

[521] And of course, Dr. Jay is like perfectly suited to this.

[522] The other thing that the ABA does is they basically invent what would become All -Star Weekend, which is now such a huge thing for the NBA.

[523] So they invent the slam dunk contest, which Dr. Jay wins the inaugural dunk contest with a dunk from the foul line that like, you know, sends every, but like, Roon Arledge is loving every minute of this.

[524] Right.

[525] Yeah.

[526] He wanted a television spectacle that he could put in slowmo.

[527] There is nothing better than slam dunk footage for that.

[528] Totally.

[529] And that, it wasn't until after the merger, I think that the three point contest would be added in some of the other stuff around All Star Weekend.

[530] But that was so innovative because it was the first sports entertainment content that wasn't a game.

[531] It was ancillary content to the game.

[532] But it was just as if not more exciting and hype building.

[533] and televisable.

[534] Yeah.

[535] And you could build hype for weeks before and weeks after.

[536] I mean, there's just like, there's so much you can talk about leading up to the dunk competition.

[537] And flashing forward to today, the NBA has tried to replicate the success of the slam dunk contest with like a bunch of different other types.

[538] And I think.

[539] Oh, yeah, there's the skills thing.

[540] The skills challenge.

[541] There was two ball with the, with the WNBA.

[542] And they even changed the way that the game itself works in the last couple of years.

[543] And just like nothing.

[544] that they have never been able to replicate the success of that thing that the ABA invented way back when, which is just this amazing perfect spectacle of a slam dunk competition.

[545] It was amazing.

[546] And so like 1970s, too.

[547] So actually, before the dunk contest in 1971, the NBA waves the white flag says, all right, fine, we give up.

[548] Let's just merge and do this thing.

[549] And they'd both basically been gunning for the same cities at this point.

[550] The ABA had taken some sort of strange fringe towns like they had the Virginia Squires which was actually a regional team which is where Dr. Jay played but then the NBA saw this sort of coming and went crazy and I think in 1970 they went and got Portland and Cleveland and the Buffalo Braves which is another Buffalo team that moved that's now the LA Clippers oh we covered that on our clips episode yep yep which oh my gosh listening to that early episode but this is really when there's sort of a tremendous amount of franchises that were added really on both sides.

[551] So after four years, they declare truth.

[552] They stopped the war.

[553] But remember the NBA Players Association and the power of the players and the union and that they had gotten in a surprise move, they sue to block the merger on antitrust grounds.

[554] Because, of course, as players, like, they're making out great they got the able.

[555] and the NBA bidding against each other, players are shifting back and forth between leagues, getting these crazy contracts.

[556] They sue to block the merger.

[557] It ends up going to the Supreme Court, like the U .S. Supreme Court, and eventually settles, but it takes five years to settle.

[558] That's when the ABA just starts going crazy with all these innovations in the dunk contest and things that they're doing.

[559] And that lawsuit really makes you think, like, they were right.

[560] Like, there was a competitive market for their talent.

[561] And it really makes you sort of of think today, like, well, how is it that the NBA has a monopoly on professional basketball in the United States, and that's legal?

[562] It raises some interesting questions there as to what is the NBA, and is it a company in itself?

[563] Or I'll spoil it a little bit and say, it's not really clear whether it is in itself a single entity or a joint venture or just a contract between a bunch of privately owned organizations that sort of has a constitution and a bunch of bylaws, but they have been a different thing in different legal contexts, in different courts around the country over the years to kind of fit into whatever they need to be for that particular scenario.

[564] Of course, what are you talking about, Ben?

[565] They're in association.

[566] It's obvious.

[567] Not obvious.

[568] When they finally settle in 76 and the merger goes through, the players, though, what drives them to settle is they get a major concession.

[569] The NBA agrees to abolish the reserve clause in contracts, which the reserve clause said that any player whose contract was expiring, and this was true across all professional sports in the U .S. at the time, that the team that the player was playing for kept that player's rights for an extra year after their contract expires.

[570] So it basically prevented free agency from happening of like you'd get to the end of your contract and you couldn't go negotiate with other teams because your team held your rates for a year.

[571] So if you wanted to go play for somebody else, you either had to demand a trade or sit out for a year.

[572] And there was actually during the interim when the merger was being disputed, there was a player Rick Berry who jumped leagues.

[573] He was one of the first players to jump from the NBA to the ABA.

[574] And he thought that he would be able to dispute this reserve clause and be able to start playing right away, it ended up being held up and he had to spend the first season as he played for Oakland as Oakland's TV announcer before he could actually start playing in the games.

[575] So when the Ennye agrees as part of the settlement to get rid of this, this is huge.

[576] So like now free agency is opened up and this really begins the modern era in baseball.

[577] The reserve clause would end up being abolished by a lawsuit from.

[578] Kurt Flood.

[579] And I think that would happen later.

[580] I think that was 1980, maybe I want to say.

[581] Could be wrong on that.

[582] But once again, the NBA is kind of leading the way here.

[583] It's effectively like a non -compete.

[584] Look, you were a professional basketball player.

[585] For me, you can't compete with me by being on another professional basketball team.

[586] Like, we're separate organizations, therefore, and this is where it's that like thing, where the NBA, when they want the teams to be separate organizations they are and when they want it to be one single entity that can sign a collective bargaining agreement, they also do that.

[587] Yep.

[588] Yep.

[589] So the merger happens.

[590] Four ABA teams end up getting absorbed into the NBA.

[591] Yeah.

[592] So this, this to me, is the really fascinating thing where between when the NBA waves the white flag in 71 and when they actually end up merging four years later, the leverage shifts entirely to the NBA.

[593] Like what the Players Association did by creating that lawsuit, it was like the ABA had so much momentum and so much cleverness and so much creativity.

[594] And it seems like they never really had a long -term plan, and they sort of started to fatigue.

[595] There was, like, deal fatigue that happened.

[596] And by the end of it, there's ABA teams folding.

[597] There's ABA teams not making payroll.

[598] There's ABA teams realizing that the strategy of, like, moving between three different cities in Virginia as a regional team is just a terrible strategy for a professional sports team, and their costs are way too expensive.

[599] And so there's basically only four left with Denver, the Indiana Pacers, the New York Nets, and the San Antonio.

[600] of the O Spurs that are really able to make it through in this merger.

[601] Yeah.

[602] And most of the other teams fold, well, including, but except for St. Louis.

[603] Did you find out about this, Ben?

[604] This is amazing.

[605] I don't know.

[606] So St. Louis had a team in the ABA.

[607] The owners strike this deal where instead of, you know, they were in dire financial straits like some of these other ABA teams, instead of having to pony up more money to keep the team afloat and join the NBA, they fold the franchise in exchange for a...

[608] Oh, is this the draft?

[609] No, no, even better.

[610] So a $2 .2 million upfront payment from the NBA.

[611] And in perpetuity, a one -seventh share of the TV money from the other four ABA teams that get pulled into the NBA in perpetuity.

[612] So this is crazy.

[613] So the ownership group of this St. Louis team, they get $2 .2 million up front, and then they get a cut of the TV contracts, I think the local TV contracts of these other four teams forever.

[614] So through 2009, they signed a perpetuity contract?

[615] Yeah, through 2009, they had been paid over $150 million from this settlement, which is just crazy.

[616] Oh, my God.

[617] So what, in 2009, finally, the NBA.

[618] was like, okay, we have to renegotiate this and like, doesn't matter how much we have to pay about.

[619] The only reason through 2009 is Bill Simmons writes about this in his book and it was published in 2009.

[620] That is so insane.

[621] Oh my God.

[622] Also, that is some, it's like the owner of St. Louis like saw the writing on the wall and was like, you know what?

[623] I'm going to cut and run and sign a crazy deal for myself instead.

[624] This is like we covered on the clips episode, the Donald Sterling's estranged wife when bomber bought the Clippers got something crazy, like 20 court side seats, six parking spots, and like, I think the rights to have two championship rings if the Clippers ever win the championship in perpetuity forever.

[625] It's crazy.

[626] It's like I want all this stuff because my husband was a crazy racist and Steve Ballmer really wants to overpay for this team so I can ask for basically anything I want.

[627] I mean, did he overpay?

[628] We'll get to that later.

[629] Yeah, it's a good point.

[630] A couple other points I want to make on this merger, because it was crazy by the time it actually closed how much leverage the NBA had.

[631] So the first biggest one was that it's not treated as a merger.

[632] So these new teams arriving, they actually have to pay the NBA for permission to enter the league.

[633] They have to pay $3 .2 million.

[634] Pay us to enter now.

[635] This is not like we're recognizing enterprise value that you have.

[636] Now you're just anyone with a team on the street who wants to join our league.

[637] This is just rude.

[638] Like, this is not the way it happened in the NFL.

[639] But they decided at the NBA, we are not going to recognize any ABA records.

[640] So, like, any of the history that you guys created, sorry, like, that's, those never happened.

[641] It's not valid history and facts.

[642] Yeah.

[643] Another crazy thing is the New York Nets, you might notice.

[644] I was wondering if you could say this.

[645] Yep.

[646] Yeah.

[647] The Nets have to pay the New York NICs 4 .8 million in indemnity as compensation for invading their territory.

[648] Like, you guys as a whole have to pay $3 .2 million, but you specifically have to pay one of our teams almost $5 million, $1976 for the privilege and compensate them for what you're about to do to them.

[649] On top of all this, the ABA team receive no television money at all during their first three seasons, and as we'll get to, that's an enormous NBA source of revenue.

[650] It's a huge component of it, probably half, but we'll get there.

[651] And those four ABA teams also got no votes related to the distribution of basically ticket sales or the alignment of those NBA divisions.

[652] So, like, they're just pulling all their control provisions and saying, yeah, yeah, we're going to vote on stuff as a league.

[653] You don't really get to vote.

[654] And so they're instantly brought in as these, like, crazy second class citizens that I think the Nets owner had this quote that said something like, the merger agreement killed the Nets as an NBA franchise.

[655] the merger agreement got us into the NBA, but it forced me to destroy the team by selling Irving to pay the bill.

[656] And that's the crazy thing is they actually trade Dr. Jay for the net.

[657] They sell him to the Sixers for cash to be able to pay off these debts that they owe.

[658] It's just brutal.

[659] It's like everyone basically sold their soul for the privilege to play in the NBA.

[660] It's kind of amazing.

[661] If listeners like this, we'll have to do an episode on the Spurs someday because It's kind of amazing that the Spurs overcome this decades later it takes, but to be able to build the dynasty that they have.

[662] The Nets, frankly, never really recovered.

[663] And it's not like these other teams went on to become amazing dynasties.

[664] Like, Indiana, of course, when Bird coached them and they had Reggie Miller, like they had some great years in there.

[665] But you're right, other than the Spurs, it's not like we're looking at the Lakers or something like that.

[666] Yeah, totally.

[667] So at the end of all that, as the dust says, settles.

[668] Right when the merge is officially happening just after is 1979, which is a momentous year for two reasons.

[669] One, because that's the year that Bird and Magic into the league.

[670] And two, of course, that's the year ESPN launches.

[671] Yeah.

[672] This is all the cherry on top of this sort of first incredible chapter of the NBA, where we finally have all the teams we know and love.

[673] We finally have the biggest rivalry, you know, the biggest like two superstar players coming in, And on top of the ESPN thing, this is the first year they actually add the three -pointer.

[674] That's right.

[675] That's right.

[676] That was NBA, in these days, took forever to implement any good idea.

[677] So, yeah, they finally add the three -pointer, bird and magic.

[678] And with ESPN, that means two things.

[679] One, there's more just like real estate for showing, televising more NBA games nationally.

[680] And two, you know, ESPN launches with Sports Center.

[681] You know, Sports Center covers all sports, of course, and, like, all sports.

[682] have highlights and whatnot.

[683] But what sport is more tailor made for two -minute highlights with enthusiastic anchors on SportsCenter than the NBA.

[684] It's just perfect storm.

[685] Totally.

[686] And it's one of my favorite things from our ESPN episode is like, I don't think I realized that SportsCenter was the very first thing that aired on ESPN.

[687] Their most famous and perfect product is the thing that they started with from day one.

[688] And the NBA would produce the perfect.

[689] components to be a part of them.

[690] It's so interesting doing this now, having done that ESPN episode a few years ago, because I don't think we had that context that it was only just within those few years before then that the NBA at least finally became a product that would do so well on this cable channel.

[691] I mean, they would have been fine, you know, with football and baseball and highlights and everything else.

[692] But like, especially during the winter, you know, those months when there is no football and baseball, the NBA is really what carried Sports Center in ESPN.

[693] So all that sets the stage for what is the second major chapter in the history of the modern MBA.

[694] And that is the year 1984.

[695] Great year, of course, because that's the year I was born.

[696] So it makes sense that it would be pivotal year.

[697] Even the Macintosh.

[698] That's right.

[699] That's right.

[700] Major year.

[701] But two things, really two people happen in 1984.

[702] I think you can argue.

[703] I mean, we'll try and make the argument here.

[704] you could argue maybe it's a it's hard but I think they're both of kind of equal importance to the MBA and both of these two people are maybe the most impactful people individual people on sports and sports business ever it's a big claim it is big claim so first in February of 1984 the NBA finally after 40 almost 40 years at this point gets its first more than not totally incompetent leader in David Stern, becomes commissioner of the NBA, and we'll get into everything that Stern does, but, you know, good and bad, but mostly incredibly good.

[705] He ends up becoming the longest serving commissioner of any professional sports league ever.

[706] He serves for 30 years until 2014, which is just incredible and presides over so much that happens in the NBA.

[707] But then, of course, this is going to be the hard argument to make that he's as important, but we'll make it as the other person that joins the NBA in 1984, which is, of course, with the, I had forgotten this, even from the last dance until doing the research, with the third pick of the 1984 draft.

[708] The third pick, like, are you serious?

[709] And is he, Jordan's still miffed about that, right?

[710] I think he's still pretty pissed.

[711] Well, because, okay, so the Rockets had the first pick in the 84 draft and they draft Olajuwon, which you know, obviously that's a bad decision but like they needed a center the NBA was still like centers were still a big part of the game and all that like okay and he's hit him Olajuwon like fine with the second pick the Trailblazers draft Sam Bowie.

[712] Like what?

[713] So ESPN has labeled - My shoes do not have that guy's outline on them.

[714] Oh my gosh.

[715] ESPN has labeled this literally the worst draft pick in sports history globally and for all time.

[716] Also, besides Jordan, of course, which is who we're talking about, Charles Barkley and John Stockton are also in this same draft and the Blazers pick Sam Bowie.

[717] Okay.

[718] All right.

[719] So we're going to come back to MJ, which of course the Bulls drafted third in June of 1984.

[720] But okay, so first Stern.

[721] So how did Stern become the commissioner of the NBA?

[722] Well, he had been a lawyer in New York who originally did a lot of work with the NBA and a lot of work through the merger with the ABA in the 70s.

[723] And then he went in -house and he was in -house counsel at the NBA.

[724] And in March of 83...

[725] By the way, this story so far, his background is identical to the Major League Baseball Commissioner.

[726] He was outside counsel, worked at a law firm, eventually went in -house counsel with the MLB and rose up.

[727] Oh, no way.

[728] I didn't know that.

[729] I think this is actually a pretty, you know, standard path to commish.

[730] Didn't, um, silver, well, silver, of course, was Stern's deputy, but I think he also started as a lawyer before joining the NBA.

[731] I mean, mostly need to do lawyer stuff.

[732] So makes a lot of sense.

[733] Makes sense.

[734] So Stern's in -house.

[735] And then in March of 83, while he's general counsel, the league signs a new collective bargaining agreement with the Players Association.

[736] And this is a landmark, totally landmark deal.

[737] Like we said, we're kind of going to come back to the economics of the NBA that sets the stage for today.

[738] In this agreement, the NBA agrees to that in aggregate, it will pay the players in any given year, 53 % of the total gross revenue, revenue, not profit, that the league makes in exchange for they finally, as you said, Ben, earlier, they get the salary cap back.

[739] They're worried about competitive parity between the big market and the small market teams.

[740] They want a salary cap.

[741] They also want to keep expenses from ballooning out of control.

[742] And this deal is like a major landmark because remember the players have been getting so much influence.

[743] Now they're really, they're still the players.

[744] They're still the labor in the league.

[745] But they're an actual like partner.

[746] Like they are contractually going to get in aggregate.

[747] over half of the revenue of the league.

[748] So the owners still own the teams and they take the profits of each individual team.

[749] But they're really partners.

[750] Like the players are essentially equity partners now in the league.

[751] Yeah, it's, it's fascinating.

[752] This trade, no matter which side you are, it's interesting because it's not an obvious deal that you should take for either side, which is how you know it's a good deal for both sides.

[753] Because from the league's perspective, it's it's not that we can pay up to 53%.

[754] Our cogs now are 53%.

[755] 53 % just for the players.

[756] Just for the play.

[757] Minimum.

[758] You know, staff, everything.

[759] We are now committing that we have the Spotify business model rather than the Netflix business model where no matter how many dollars we take in, we are paying out, you know, 53 cents on the dollar for every single dollar.

[760] So that's scary.

[761] Like that massively.

[762] The Spotify music business model.

[763] Correct.

[764] Not the Spotify podcasting business model.

[765] Right.

[766] And that's scary because it caps the potential upside on your business.

[767] or unless you, quote, unquote, make it up on volume.

[768] That's a foreshadow to today.

[769] But if you're on the player's side, you know, you're agreeing to this salary cap where, sure, it's going to bring parity and it'll make the game better.

[770] But gosh, like, if I'm the LeBron of the era, like, why would I want there to be a salary cap?

[771] Right.

[772] I tried to stay away.

[773] I guess I don't want to directly say LeBron of the era equals MJ because I don't want to make that comparison or have us quoted.

[774] We already said in our caveat that we're.

[775] We're not talking about the game here.

[776] We're talking about the business.

[777] Right, right, right.

[778] We won't wait into that debate.

[779] But yeah, it's just this fascinating deal.

[780] And like you said, David, it really, even though they're not equity partners, it effectively, because the future cash flows are so intrinsically tied and scale together, it feels a lot like being true equity partners in the business.

[781] Yep.

[782] And it's based on revenue, not profits.

[783] So, like, the owners can't hide.

[784] It's not like they can, you know, make up a bunch of, you know, accounting stuff and costs and expense and whatnot.

[785] Revenue is a fact.

[786] Profits and opinion.

[787] Exactly.

[788] Exactly.

[789] You need to get John Malone in here.

[790] And this is kind of incredible.

[791] When you said this earlier in the episode, Ben, so this salary cap is $3 .6 million per team.

[792] And that's 53 % of the average gross league revenues.

[793] So if you do the math, that means that the average team in 83 was making $6 .8 million dollars in revenue.

[794] So there were 23 teams in the league at that point.

[795] That meant the league as a whole was making about 150 million in total revenue.

[796] So, okay, so keep that in mind.

[797] So Stern negotiates this deal.

[798] And then in February of 84, he gets promoted.

[799] He becomes the commissioner of the league.

[800] So let's just contextualize like the 150 million in revenue against like some startups.

[801] So it's making basically what like a pre -IPO, startup is making in revenue, except the NBA is actually profitable and not losing money.

[802] So, like, that's the type of...

[803] Debatable.

[804] I think some teams are profitable.

[805] Some teams are losing money.

[806] But, yeah.

[807] Okay.

[808] So they're likely better than a break -even business on the whole, but call it a break -even business that effectively, revenue -wise, looks like a late -stage startup.

[809] Yep.

[810] So also in 1983, right before Stern took over, they had negotiated a new TV deal with ABC that I believe was about 20 million a year in terms of payments for national broadcast rates to the NBA as a whole.

[811] So now, five years later, in December 1989, so five years after Stern takes over, now granted, he had MJ to market as like a pretty good product to market.

[812] That deal expires.

[813] And he and the NBA negotiate a new, two actually new four -year TV deals with NB.

[814] And B .C. and with Turner for $875 million.

[815] So that's over $200 million a year.

[816] Literally 10x the deal that had been negotiated the year before Stern took over.

[817] And not only 10x on the TV deal, if you just take that revenue, ignore all other revenue sources in the MBA, you know, concessions, ticket sales, merchandise sales, everything else, advertising just the TV deal alone is 50 % more.

[818] annual revenue than the entire revenue of the league in 1983 when Stern took over.

[819] Wow.

[820] So that's, do you say, 200 million a year in TV revenue?

[821] Yep, I think it's like 220 -ish a million in TV revenue.

[822] Players getting 120 million a year in revenue that they otherwise wouldn't have.

[823] Like, Commissioner was a great thing for the players.

[824] Totally.

[825] Great thing for the business, which ended up being a great thing for the players.

[826] So that was the first thing, Stern does is he just like massively up -levels the business and the TV deals that the MBA is doing.

[827] The second thing, you could argue whether this is good for the players or not.

[828] I mean, ultimately this is good for the players.

[829] So the 80s, the NBA, just like most of the rest of American society, had a huge drug problem.

[830] And this has been cataloged many other places in NBA history.

[831] The saddest and the worst example of this was, of course, Len Bias, the hugely, hugely talented college basketball player drafted in the first pick of the 86 draft, I believe, by the Boston Celtics.

[832] And two weeks after being drafted, he dies of a cocaine overdose.

[833] It was tragic and terrible.

[834] But endemic of what was happening in the league at this time, like cocaine had just totally infiltrated the league.

[835] and many other spikes too.

[836] I mean, Michael talks so much about this in the documentary.

[837] When he showed up in 84 in Chicago, he was like, what the hell of like all these veterans, these drugged out dudes like who are loafing around the court and like, that is not MJ's style as, as everyone knows.

[838] So Stern, this is a big problem.

[839] So Stern puts in place a drug testing policy and a three strikes and you're out policy.

[840] So literally, you know, first offense, you get.

[841] rehab and a warning.

[842] Second offense, you get a big fine.

[843] You do, you get caught a third time with any kind of drugs in your system.

[844] You are literally lifetime ban from the NBA.

[845] So a few players actually do get lifetime bans.

[846] A combination of this and Jordan and everything really revitalizes and turns this around for the NBA.

[847] The third huge, huge thing that Stern does.

[848] And by all accounts, this is really his vision, is he internationalizes the game.

[849] So, like, of course, remember, the game had been international and huge in China from back in the Naismith days, but he internationalizes the Naismith days.

[850] The Naismith days.

[851] Stern internationalizes not just basketball, but the NBA.

[852] So obviously, you know, anybody who was alive at the time and probably most people who don't are going to remember the 92 dream team in the Olympics, that was Stern.

[853] So, like, I didn't realize this until doing the research.

[854] you know, it was a lot of people that made that happen.

[855] But Stern was the one, he was like, there's a big opportunity for the NBA to go global, you know, not just in terms of recruiting players and developing talent, but also for consumers of the product.

[856] Had the Olympics before had just college players or like second rate pros?

[857] So FIBA, the international governing body for basketball, had only a allowed amateur players to play an international competition.

[858] So that, of course, barred all the NBA players.

[859] So what a Stern have to lobby them?

[860] Hey, this is going to be really good for the sport.

[861] You should let us do this.

[862] Totally.

[863] And it was great for the sport.

[864] And like that 92 dream team, I mean, it was a big focus of the last dance and big part of Michael's career and everybody involved.

[865] I mean, that was huge.

[866] Man, I remember watching that until it was like the biggest event of 1992 was professional players finally being allowed to play in the Olympics.

[867] And like this greatest team ever assembled.

[868] That was all stern.

[869] On the back of that, the MBA opened up offices in I think 14 countries around the world to start essentially two functions.

[870] One, talent development and recruitment.

[871] And of course, we would see that.

[872] We'll talk much more about that in a minute with the modern MBA and international players, but also just selling the product.

[873] And that's when the NBA itself and not just basketball really starts to become a global phenomenon.

[874] The fourth thing that Stern does is after the next Olympics in 96, the women had a big Olympics year led by, I think, Rebecca Lobo at the time.

[875] And there had been talk around the NBA and some plans on the back burner for launching a women's league.

[876] After the 96 Olympics, Stern really champions, no, we need to make this happen.

[877] And so he pushes through launching the WMBA in, I believe it was 97, I think, when it launched And I didn't realize this either for the first eight years of the WMBA's life.

[878] It was wholly owned by the NBA.

[879] Oh, huh.

[880] So what?

[881] There weren't like individual team owners?

[882] Each team was owned either by the MBA as a collective organization or by its MBA counterpart in the city.

[883] It was in if there was an NBA counterpart in the city.

[884] Oh, so the owner of the Cavs would have owned the Cleveland WNBA team.

[885] Yep.

[886] Like the storm was owned by the Sonics.

[887] So then after eight years, they then spin it out and get into recruit independent owners for the teams.

[888] But that all happened in his tenure.

[889] And then, of course, he would also embrace technology and launch leak pass and streaming in 95.

[890] Which was, yeah, pretty early.

[891] So Amazon was founded.

[892] Yeah.

[893] Seriously.

[894] Any one of those things would have been huge.

[895] But he did all of those things over his 30 year career, which is pretty amazing.

[896] And that's still, what, and about 15 years before he retired?

[897] Yeah, that was only in the first half of his career.

[898] Yeah, almost 20 years before he retired.

[899] So that's Stern.

[900] On the flip side of that, though, like, he's also responsible for a lot of the very highly criticized cultural.

[901] Oh, yeah, the dress code.

[902] Yeah, like that, because for listeners who don't know, at some point there was a dress code where I gave him, my spoiling the story?

[903] Yeah, yeah, yeah.

[904] We're going to get to that in a minute.

[905] Okay.

[906] He has definitely as Stern got older.

[907] like he probably should have hung it up maybe five to ten years before he did but we'll get into that so then MJ I mean we're not planning to say too much about MJ here because like Netflix did a pretty good documentary yeah Netflix and ESPN kind of told the official story what we will talk a little bit about though is like Ben what you were saying at the top of the show part of our initial inspiration for doing this was wanting to tell the Jordan brand story and realizing that that's really it's totally tied up in the Nike story and there's a better time in place for that.

[908] But Jordan, he signs the Nike deal right after he's drafted.

[909] I don't think this was talked about too much in the last dance.

[910] Which is not the deal he wanted.

[911] What was the sneaker company he wanted to sign with?

[912] I think it was Adidas that he wanted to sign with.

[913] Yeah, you're right.

[914] It was Adidas.

[915] And this is directly from the last dance.

[916] They asked him, do you have a shoe company that you wanted to go with?

[917] And he confirms that was Adidas, considering the billions of dollars that Jordan brand has produced today at Nike is crazy.

[918] This is crazy.

[919] We're going to get into it.

[920] So it was his agent, I believe, who pushed him to say, before you make a decision, talk to these guys out in Oregon, these Nike guys.

[921] Didn't they make him fly out?

[922] I don't remember.

[923] I think they were like fly out and meet Phil.

[924] Ah, that might have been.

[925] Well, we're definitely going to tell this whole story on another episode someday.

[926] this probably stands for consideration as maybe the best non -acquisition deal of all time.

[927] We should totally do at some point, like we did our top 10 acquisitions episode, we should do a top 10, like, non -acquisition deals that happened.

[928] IP deals or licensing.

[929] Deal gets done in 84.

[930] I believe it was 2 .5 million up front or something like that.

[931] And then a percentage of, I believe, the profits from the Jordan brand over.

[932] time.

[933] This is incredible.

[934] So Jordan, as of today, has made over one and a half billion dollars personally from the deal.

[935] And the Jordan brand within Nike, which obviously nobody could have seen at the time, is still going strong and last year generated over $3 billion in revenue.

[936] It's 35 years after they signed the deal.

[937] unbelievable.

[938] And so as a result of that, I'm not 100 % sure, but I think this is true.

[939] Last year, Jordan's earnings from the Nike deal, so Michael's earnings, were the single highest athlete endorsement, like single endorsement deal in the world last year and the dude retired 16 years ago.

[940] Oh my God.

[941] Isn't that incredible?

[942] Nike, it's the parent brand plus the Jordan brand.

[943] Their market share of the performance basketball market is 86%.

[944] Their market share of the lifestyle basketball market, which is most of their Jordan sales, is 96%.

[945] And 77 % of NBA players this season are sponsored by and are wearing either Nike or Jordan branded shoes.

[946] Totally crazy.

[947] So the legacy of this period, you know, in these two men...

[948] We should mention he was like a pretty good basketball player, too.

[949] It wasn't just shoes.

[950] Go watch the last dance.

[951] It's amazing.

[952] Enjoy every minute of it.

[953] By the way, it wasn't Jordan.

[954] It was a team accomplishment is what I gleaned from the documentary.

[955] It was really just, it was kind of everybody in the team, front office and players.

[956] I think that was the big takeaway.

[957] Yeah.

[958] Right.

[959] Well, it does take a village, that's for sure, but...

[960] That village is named Michael Jordan.

[961] So the legacy of these two dudes, Jordan and Stern, is that today, and we're not done with the story yet, but I think it really just comes from what these two people did, NBA players and alumni are, one, the highest paid athletes in the world as a group, which a lot of stems from that 1983 collective bargaining agreement that Stern orchestrated with the Players Union to have the largest social media followings and influence among American sports players by like a laughable, laughable margin.

[962] So soccer and soccer players, football for all of our non -American friends, is actually bigger than basketball players in terms of social following.

[963] But within the U .S., it's like it's not even close.

[964] We're going to talk a bunch more about that in a minute.

[965] But then probably most importantly, I think the last element of this is that the current and former NBA athletes have wealth at a level and have become entrepreneurs and business people at a level that just is completely eclipsed any other sport period in the world, both in their current playing careers and post -playing careers.

[966] So at the top of the list is Jordan himself.

[967] As of today, he's worth $2 .1 billion.

[968] He is the wealthiest former athlete in the world, the fourth richest black person in America.

[969] Astounding.

[970] Below him, I mean, it's a wide gap between Jordan and the next, but they're a bunch of other people too.

[971] So Kobe's estate, sadly, Kobe tragically, rest in peace.

[972] But at the time of his death and his estate is worth $600 million.

[973] much of which came from all of his business activities after his playing career.

[974] Magic and Magic Johnson Enterprises also worth $600 million.

[975] Nearly all of that came from after Magic's playing days through his business ventures and influence.

[976] And then interestingly, after that, so there's another $600 million net worth former basketball player, a guy named Junior Bridgman.

[977] What?

[978] He played for the bucks and the clip.

[979] in the 70s and 80s, and he founded Bridgman Foods after retiring, which is one of the largest I think Chili's and maybe Wendy's franchisees in America.

[980] He employs like 11 ,000 people.

[981] It's incredible.

[982] Wow.

[983] He's worth $600 million.

[984] LeBron is worth $480 million.

[985] Shack is worth $400 million and is on the board of Papa Johns, which is amazing.

[986] Had to put that in there.

[987] Amazing.

[988] And then another a $400 million net worth former player, Vinnie Johnson, who played for the Sonic Spurs and Pistons in the 80s.

[989] After he left the Pistons, he founded Piston automotive parts, which is one of the largest independent automotive parts manufacturers in America.

[990] Wow.

[991] That's a big jump.

[992] Yeah.

[993] Incredible.

[994] So these are all black owned businesses, black entrepreneurs, all a legacy of the MBA and the amount of wealth that these people were able to agenerate during their playing days, but B also just have the influence and ability to...

[995] Yeah, and invest and take those assets and build bigger empires with them.

[996] Yeah.

[997] So literally nobody else from any other major American sport, with the only exception is Roger Staubach, the Dallas Cowboys quarterback.

[998] He built a big real estate company after his playing days.

[999] So he's also worth about half a billion dollars.

[1000] But like, nobody else even comes close.

[1001] Like, I don't know if anybody else is even worth $100 billion.

[1002] I think Tiger's a billionaire.

[1003] Individual sport.

[1004] Uh, yeah.

[1005] So, uh, no other team sports.

[1006] So football, NFL, nope, except for Staubach, Major League Baseball, nope, nope, hockey, nope.

[1007] Like, basketball is the only sport, team sport that has produced these, uh, incredible, incredibly wealthy alumni.

[1008] As one more measure of incredible wealth is owning a sports team.

[1009] It's a line in billions where they say owning an NFL franchise or an NBA franchise is the closest thing we have to royalty in America.

[1010] and I was doing an analysis on the whole list of NBA owners, and they're all, I'll actually bust this stat out now because I think it's interesting.

[1011] I'll open up my spreadsheet.

[1012] The NBA owners today are basically dominated by tech, private equity, and venture capital.

[1013] So you have 16 of the 30 teams owned by tech, P .E. or V .C. And only five of them actually are family money of sort of inherited wealth.

[1014] A lot of the others are entrepreneurs of different strokes.

[1015] But there exists one player who owns a team, and that's Michael Jordan.

[1016] And he's sort of in the same wealth conversation as those, you know, I mean, I think everyone else is a billionaire.

[1017] Yep.

[1018] So, obviously, well, anybody who owns a majority of an NBA team is on paper a billionaire.

[1019] So Jordan, of course, owns, I think he owns about 80 % of the Charlotte Hornets, first former player in any league to become a majority owner.

[1020] And as of this week, Did you see the news, Ben?

[1021] No. He is also now a NASCAR team owner.

[1022] Whoa.

[1023] Interesting.

[1024] He bought the team that Bubba Wallace drives for.

[1025] Oh, fascinating.

[1026] Well, he had a nice little return here on buying the Hornets because in 2010, he bought majority control of the club, and I think it went for $175 million, and he just sold 20 % of it that valued the company at $1 .5 billion.

[1027] So he's gotten some nice appreciation over the last decade from his basketball investment and has to use that cash somewhere.

[1028] Yeah, totally.

[1029] All right.

[1030] So let's get into chapter three of building the modern day NBA after Jordan and still during the Stern era, but leading into the silver era.

[1031] So when Jordan finally retired for the second or third time with the Wizards in 2003, I think when he finally retired for good, there was definitely.

[1032] a bit of a hangover after that.

[1033] So ratings dropped.

[1034] While Jordan was in the league, TV ratings for the NBA rose every single year.

[1035] He was in the league, which also, I don't think any other professional athlete has had that happen in their career, unless they were in the league for like two years or concurrently with Jordan.

[1036] Ratings dropped and scoring dropped.

[1037] And there was this narrative, which a lot of people believed, but frankly was like really wrong and also crappy and kind of race.

[1038] that the league was just filled with thugs and this was the whole like Alan Iverson thing and is this when they had the brawl yeah the malice at the palace malice at the palace with round our test the fans that instigated it were like drunk depressed like off their rockers saying terrible racist things like and you know the whole Alan Iverson and AI thing I think this was actually my carve out maybe like a year or so ago he wrote this great piece for the players tribune two years ago, I think, that we'll link to just about his experience and what it was like being AI and being labeled as a thug.

[1039] And what we're talking about is he dressed like lots of hip hop artists and rappers did and like more what he wanted to wear and had his personality.

[1040] And a lot of the media came down super hard on him about this.

[1041] And he was like, look, like, I love the game.

[1042] Nobody played harder than me. Nobody worked harder than me, despite the practice line, you know.

[1043] I was just trying to be me. Like, I just wanted to be me. And it's kind of amazing that, like, what that's turned into, fortunately, I think, is what so many NBA players exemplified best by LeBron are today.

[1044] Like, they are them.

[1045] Like, they are their personalities and they are influencers.

[1046] But during the time, so we referred to Stern, maybe staying a little bit too long.

[1047] After the malice at the palace and dealing with.

[1048] Iverson and all of this stuff.

[1049] Before the 2005 -2006 NBA season, Stern institutes what he terms, these are his words, a liberal and easygoing dress code that mandates that players wear business casual attire when participating in team or league activities.

[1050] The code also prohibits headgear of any kind, as well as chains, pendants, or medallions worn over the players close.

[1051] And the fact that that's all specifically called out is just like...

[1052] Ridiculous.

[1053] For someone that benefited the players in so many ways, that is proof that you've now stayed too long, sir.

[1054] He just like, he didn't get it.

[1055] It's veiled racism.

[1056] The amount of distance between him and the players is just so evident by him making those comments and describing it.

[1057] It's like you just, you live in a completely different world, dude.

[1058] Yeah.

[1059] Well, I think Iverson in his quote about it at the time, I think actually says it best.

[1060] What he doesn't say that other players did say is like, yeah, this is racist, which is true.

[1061] Iverson says his quote is, they're targeting my generation, the hip -hop generation.

[1062] Like, that's what I did.

[1063] This is like a kids get off my lawn kind of thing.

[1064] Like, you know, this is just the world was changing, right?

[1065] And, you know, the NBA was, of course, at the forefront of it with these, you know, young, incredibly talented people that were playing.

[1066] How did the league recover from this to get where we are today, like being, frankly, a leader in social justice?

[1067] Well, a bunch of things happened, but specifically on the dress code, I believe it's still in effect today.

[1068] I'm not sure about that, whether it is or isn't.

[1069] It doesn't matter because the players in this, like, brilliant move completely co -opted.

[1070] And I think Dwayne Wade was really the first player to start doing this.

[1071] and then he was followed quickly by LeBron.

[1072] They embrace them.

[1073] They're like, all right, great.

[1074] You say we got to dress up.

[1075] We're going to dress to the nines.

[1076] And that's when, you know, it really transformed into this, you know, every arrival at the arenas for NBA games and post -game press conferences became this fashion show.

[1077] And they said, like, all right, great.

[1078] Like, we're not going to wear golf shirts and khakis, you know, hiked up to our navels.

[1079] We're going to, like, be fashionable.

[1080] Yeah, like you, David Stern.

[1081] We're going to be fashionable.

[1082] well, we're going to be on the cutting edge.

[1083] And, like, particularly, although this would, of course, happen later, but not that much later with the rise of social media and particularly the rise of Instagram, fashion, how they dressed, players' clothes, like, just played right into them being able to build these larger -than -life social media followings.

[1084] All right.

[1085] So bring us into Act 3 then.

[1086] Okay.

[1087] So Act 3, I think there are really three aspects to what has, become now the modern MBA and really all of them we have to give credit you know like I said a minute ago to David Stern laying the groundwork for the vision for these so one I would say I'm going to call this unique and compelling content within the NBA both on the court and off the court two is international players and the international game and fan base and three is the wholesale embrace of technology in all of its forms So what are those three pillars of a playbook remind you of?

[1088] I feel like I've heard this somewhere before.

[1089] Are you pitching me on the strategy for the NBA in the 2000s, or are you trying to tell me that you are going to take Disney into the next 20 years?

[1090] Yeah.

[1091] And right around the same time, too.

[1092] So, of course, this is the Bob Eager three -point plan for Disney when he becomes CEO in 2006.

[1093] And it's right around the same time that all these same things start happening in the NBA.

[1094] So first on international, you started in the 90s and early 2000s getting some of this happening with, of course, Tony Kukot, and some of the other great Vladivak and some of the other great European players.

[1095] Dirk Nowitzky for the Mavs, of course, becomes like huge superstar from Germany in the early 2000s.

[1096] And then Steve Nash from Canada, debatable whether that's international, but we'll give it to him.

[1097] We'll give it to him.

[1098] And then in 2002, you had literally the biggest international player.

[1099] From the most unlikely of places as a seven foot, what is he?

[1100] Seven foot six, although rewinding back to the beginning of the episode, not the most unlikely of places.

[1101] Yao Ming drafted the first pick by the Rockets in the 2002 NBA draft.

[1102] The first international player ever selected with the number one pick without first playing U .S. college basketball.

[1103] And, yeah, I mean, this was just, like, so huge.

[1104] So unfortunately, Yao's career was cut short by injuries.

[1105] He only played eight seasons in the league, but he's still in the Hall of Fame.

[1106] An incredible player.

[1107] Wow, he's already in the hall.

[1108] He's, yeah, he was like first ballot for sure.

[1109] He's already in the hall.

[1110] So he brought, of course, China to the NBA, but even more important, he brought the NBA to China.

[1111] So the Rockets, after they draft Yao, become the most.

[1112] popular sports team in China.

[1113] Like, think about that.

[1114] Like across any sport?

[1115] Yeah.

[1116] I mean, basketball is already at this point the biggest sport in China.

[1117] And the Rockets become the most popular basketball team in China.

[1118] And on the back of this, basketball becomes, as we talked about, the second most popular sport in the entire world after soccer, the Associated Press estimates that today, 300 million people in China alone play basketball.

[1119] and 600 million people watch it.

[1120] So, like, literally, there's an America's worth of people who play basketball in China and two America's worth of people who watch it.

[1121] That's insane.

[1122] It's crazy.

[1123] Regular reminder to anybody listening to this show that China is always bigger than you think it is.

[1124] It's like whenever we were doing the Tencent, Alibaba episodes, like, I would always feel like our numbers were off by an order of magnitude.

[1125] Yeah.

[1126] I mean, I had to reread those numbers, like, six times to make sure.

[1127] sure they were right.

[1128] Of course, their estimates.

[1129] But that's how big this moment was.

[1130] And today, 25 % of the players on NBA rosters are international today.

[1131] And even more important than that, probably I'd say like half, maybe more than half of the next generation of stars are international.

[1132] So, of course, there's Janus, the MVP from the past two years.

[1133] There's Joel Embed with the Sixers.

[1134] There's, there's Jamal Murray, again, Canadian, you know, maybe, maybe not.

[1135] But there's Yoakik as well on the on the nuggets.

[1136] And then, of course, there's Luca, right?

[1137] Like, I mean, we could be redoing an NBA episode in five years and talking about Luca's MJ.

[1138] Ooh, that's a, it's a bold call.

[1139] Bold call for sure.

[1140] But I can't think of a more promising young player in the league right now than.

[1141] David, you said we weren't going to make this about basketball.

[1142] don't expose that I don't know enough about players today to have an informed conversation with you here.

[1143] This actually probably a good point to tell listeners.

[1144] If we are talking about the calves from like 2005 to 2008, like I can have a very informed conversation with you about every little bit of minutia in the league.

[1145] Outside of that, I am not going to have a player -by -player conversation with you.

[1146] And of course, like, I grew up 15 minutes from where LeBron went to high school.

[1147] I got to watch him play.

[1148] It was unbelievable when the Cavs got the first pick and then we got to draft him.

[1149] Like it was, I mean, being in Cleveland at that time was just this absolutely unbelievable moment when he came back from the heat and we won a championship just absolutely.

[1150] For a Cleveland fan to get to say that we won a championship in any sport, it's just a special thing.

[1151] But I should come clean on my gameplay knowledge right now.

[1152] Good point.

[1153] We'll tone down the player talk and come back to the business.

[1154] The net of all that, though, is so Forbes estimated that during the 2017 -2018 season, there were literally one billion people around the globe who watched the NBA that season.

[1155] And obviously, the vast majority of those came from outside the U .S. You know, we're going to talk about the NBA's business and business model in a minute, but right now they still trail the NFL.

[1156] I was going to say they're the third highest revenue U .S. League.

[1157] Like, that's the crazy thing about this.

[1158] You're talking about this incredible global appeal and this explosion and all this attention from, you know, every corner of the earth.

[1159] And they don't make as much as the MLB or the NFL in the U .S. Totally.

[1160] So we're just talking about international now.

[1161] We're going to talk about technology and unique and compelling content in a minute.

[1162] But I don't see any way that five, ten years from now the MBA isn't significantly larger than any other sports league except some of the professional soccer leagues just by virtue of this.

[1163] You could debate its popularity in the U .S., but it doesn't even matter.

[1164] You know, like there's so many more people around the world who watch it than do here.

[1165] And you look at baseball and football, football especially, just has no appeal outside of the U .S. Like, that's going to be a challenging future for it.

[1166] And they're trying.

[1167] I mean, like there was a Seahawks game in London a couple of years ago, and I think they're doing these sort of one -off is very much a copycat game now of trying to figure out how to execute a global strategy as as good as the NBA.

[1168] And David, your call, I think, is right.

[1169] Like, if you want to be a part of the popular sport five, ten years from now that the world is talking about, you should invest your time in caring about basketball.

[1170] Or, you know, non -American football, but that's harder to do from the U .S. at least.

[1171] So, okay, so that's international.

[1172] Now let's talk about technology.

[1173] So, like we that in 95 -96, the NBA launched their league pass offering.

[1174] Interestingly, not in -house.

[1175] So they went a different route than baseball.

[1176] Of course, we covered the BAM.

[1177] They partnered with Turner?

[1178] So, yeah, the NBA partner with Turner.

[1179] So Turner still operates league pass for the NBA.

[1180] But this is super interesting.

[1181] And once again, like, man, the NFL is so screwed.

[1182] So league pass, the MLB.

[1183] has MLB