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Did you know: brothers Ozzie and Daniel Silna earned more than 800 million USD from the NBA without needing to own any NBA basketball team!
This is considered one of the largest business deals in sports history.
FYI: National Basketball Association (NBA), also known as the American Professional Basketball League, is one of the major professional basketball leagues in the US and Canada, and is considered the top basketball league in the world.
The massive but uniquely strange contract at the time made this sports business story a classic historical example of smart and patient business strategy. Viet Hustler will recount this story in the weekend regular feature with readers.
Brothers Ozzie and Daniel Silna and the dream of owning an NBA team
Starting from the polyester business
Ozzie and Daniel Silna were born into an immigrant family from Latvia. They started the polyester manufacturing business in the 1960s and quickly achieved large revenues thanks to skyrocketing polyester prices.
Desire to own an NBA team
Thanks to the booming business, the Silna brothers began aspiring to own an NBA basketball team.
In 1974, they offered to buy the Detroit Pistons,
…however, this offer was not approved.
The journey to the historic 800 million USD agreement
Overview of the two top basketball leagues and the collapse of the ABA
American Professional Basketball League NBA (National Basketball Association) was established in 1946.
In 1967, a new basketball league was born: ABA (American Basketball Association) competing with the NBA.
The ABA implemented some notable changes compared to the NBA, such as adding the 3-point line or using the distinctive red, white, and blue basketball.
The collapse of the ABA - Silna brothers buy 1 ABA team
The ABA was extremely loved by fans at the time, however, the league faced financial difficulties due to lack of TV contracts.
2 years before the ABA ended: Ozzie and Daniel Silna managed to buy the Carolina Cougars team in 1974 for 1 million USD.
However, in the early stage, the situation was quite bleak for the Silna brothers after buying Carolina Cougars
…because both this team and the ABA league were facing financial difficulties.
→ However, this was still the first step for the Silna brothers' acquisition agreement to become the greatest sports business deal in history.
Decision to merge ABA and NBA
Tired of the endless war for players and fans between the two leagues, the NBA finally decided to merge with the ABA 2 years later.
In its final stage, the ABA only had 7 teams left, including the Carolina Cougars.
The NBA at that time wanted to completely crush the competitors, so they arranged to buy 4 out of 7 ABA basketball teams — hoping the remaining 3 would disband.
To catch the NBA's eye, the Silna brothers decided to move the Cougars to Saint Louis and rename it to Saint Louis Spirits
This is the largest city without an NBA team.
But even so, the Silna brothers' team was not initially selected
At that time, the NBA only agreed to merge 4/7 ABA teams including:
New York Nets
Denver Nuggets
Indiana Pacers
San Antonio Spurs
Virginia Squires went bankrupt before the merger.
Found a “gold mine” in ownership rights
But then, NBA offered to buy back the remaining 2 teams: Kentucky Colonels & Saint Louis Spirits for 3 million USD to dissolve them.
Kentucky Colonels accepted the compensation, but Saint Louis Spirits the Silna brothers did not!
=> They negotiated a completely different deal:
Receive 2 million USD cash upfront, plus 1/7 of NBA's annual television broadcast revenue.
And importantly: This contract is effective in perpetuity, as long as the league operates!
At that time, TV revenue was negligible (playoffs weren't even broadcast on TV).
→ Therefore NBA accepted the deal to completely eliminate the ABA teams and focus on the league.
NBA TV viewership exploded
In the 1980s-1990s when ABA had just merged with NBA, no one predicted the subsequent increase in NBA's TV popularity.
Thus initially, this deal only paid the two brothers about 200,000 USD/year.
However, NBA gradually became a popular basketball league. TV contracts also increased significantly, causing the Silna brothers' compensation to skyrocket.
In fact, even Ozzie and Daniel Silna could not predict the explosion in NBA's lucrative TV contracts later.
The Silna brothers' massive profits:
From 1976 to 2014, they collected a total of ~300 million USD thanks to sharing in TV broadcast revenue!
Final buyout - Complete termination contract
In 2014, the two Silna brothers sued NBA to demand a share of international broadcast revenues and some other revenues.
…these revenues didn't even exist in the 1970s — but were still included in the original TV revenue agreement.
Finally, NBA decided to settle the “endless” obligation with the Silna brothers: pay a lump sum 500 million USD to end the old contract.
…bringing the total income for the Silna brothers to ~800 million USD!
And that's how the Silna brothers achieved the biggest deal in professional sports history by making money from NBA teams without owning any team!
Besides Ozzie and Daniel Silna profiting from this deal, their lawyer Donald Schupak also earned 10% from the 45-year-old agreement, equivalent to ~80 million USD.
Conclusion
The story of Ozzie and Daniel Silna is clear proof that it's not always possible to predict how the business will evolve and change, or where profits will come from. If 50 years ago the Silna brothers had agreed to the 3 million USD compensation, they would have missed the chance to get compensated up to 800 million USD!
There are many practical lessons from this historic deal:
Recognizing the importance and hidden value of intangible assets and franchise deals is extremely important.
However, this is not at all simple, because the value of these assets often changes with the development and changes of society. NBA did not recognize the future value of television revenue, while the Silnas brothers discovered a golden opportunity.
The Silna brothers realized that buying back an ABA team could create a big opportunity, because NBA would need to negotiate with them if it wanted to merge with ABA.
The prescient insight of the two brothers was refusing the cash buyback offer at that time — which gave them the potential to receive a long-term cash flow with explosive growth in the future, thanks to the development of television revenue.
Refusing the initial 3 million USD brought worthy results!
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