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Aba Contract in Perpetuity

Under the parameters of the deal, they would get that share of NBA television revenue in the long run, which amounted to about $300 million, a whole deal for two owners of a team that hasn`t been around for nearly four decades. Although the Silna brothers were shut out of the NBA, they still managed to make it one of the biggest contracts in the history of professional sports. [10] [11] [12] Of the seven teams that finished the last ABA season, the NBA would accept only 4 in the merger. The Virginia Squires parted ways shortly after the season. [13] The Colonels negotiated a $3.3 million buyout of the remaining ABA teams. [14] [13] However, the Spirits held firm,[15] and in June 1976, the owners of the four merged ABA teams, the Denver Nuggets, indiana pacers, New York Nets, and San Antonio Spurs, agreed to build the St. Louis owns $2.2 million in cash in advance and an additional 1/7 share of the television revenues of the four remaining teams “as long as the NBA or its successors continue to exist,” in exchange for the closure of the Spirits. [13] [3] [11] [16] This was based on the principle that the remaining seven ABA franchises should receive an equal share of the television revenues of the merged teams. [13] [14] Thus, the Silnas would receive annual checks from the NBA, which is a 4/7 share of television money that would normally go to any NBA franchise, or about two percent of the league`s total television money. [3] [17] In addition, the Silnas inserted a clause in the contract stating that their share could not fall below the amount generated by a league of 28 teams.

[۱۳] With the expansion of the NBA to 30 teams, each of the former aba teams had to pay the Silnas a 1/196 (1/7 of 1/28) share of the league`s total tv revenue, instead of 1/210 (1/7 of 1/30), which gave the Silnas a 1/49 share. The contract defined broadcast revenue very broadly, so their lawyer during the merger negotiations, Donald Schupak, said it “cannot be circumvented or made obsolete.” [18] The Silnas brothers wanted to join the NBA and originally hoped to turn the deal into their own NBA franchise. [15] [14] “Something went wrong somewhere,” Pacers owner Herb Simon told Forbes magazine in 2011. “The intention of the agreement was not to have it permanently. It should compensate them for the loss of their deductible. In Manhattan federal court, lawyers for the Silna brothers and the League argued Thursday over whether the men owed money beyond what they receive from N.B.A. national cable television and broadcast contracts. They want to tap into the money the league receives from international shows, NBA TV, the league`s cable network, and other lucrative deals you couldn`t imagine in the 1976 three-network tv universe. By taking over the merger agreement, they did not have a headache with the management of a professional franchise, including negotiating player contracts and building new arenas. Overall, they made a great return on their initial $1 million investment in the Carolina Cougars.

The Silna brothers suggested that the four teams that go to the NBA pay them one-seventh of their money from national television – permanently. Your smart proposal paid off when the NBA`s television contracts skyrocketed. This year, the brothers` catch is estimated at $20 million. By 2014, NBA owners had long since passed the point of finding a way to force the brothers out of the contract negotiated in 1976. But they were also starting discussions with their network partners about the next round of rights royalties, which would be their largest gold mine to date. With more profitable broadcast contracts to renegotiate, the NBA finally decided to settle its never-ending commitment with the Silna brothers. In 2014, the two brothers left with a $500 million buyout, bringing their total revenue to $800 million (source). From 1977 to 2014, the NBA received about $15 billion in money from national television through increasingly lucrative contracts with the networks. Under their agreement with the NBA, they brought the Silnas $300 million. Even Ozzie and Daniel Silna could not have predicted the explosion of lucrative television contracts that the NBA would experience in the 1980s and 1990s. With payments that resulted in about 2% of the league`s total broadcast revenue, the Silna brothers collected $300,000 in annual checks to get started. As the NBA grew in popularity, so did the checks, with the Silna brothers raising about $20 million a year through 2014.

In total, they raised a total of $300 million from 1976 to 2014 (source). Their coin was only a fraction of the modest amount paid by CBS to N.B.A. at the time. But if the share was small at the time, a certain duration of the arrangement was attractive: the owners, Ozzie and Daniel Silna, would receive the money each year on a permanent basis or as long as the N.B.A. existed. Anonymous: These are good questions. My classroom presentation was scheduled for five minutes, so the article did not necessarily delve into issues that were not related to the contractual clause relevant to the class discussion. Here are the answers to your questions:1) The team did not make the required payment to the league and, as a result, the team ceased operations. The Squires ran out of money for years, so they traded future Hall of Famers Rick Barry, Julius Erving and George Gervin.2) As mentioned in my article, the original proposal was based on the seven-team league. The deal worked pretty well for the Silnas and Schupaks.3) The Silnas lost an undisclosed sum to Bernie Madoff. In addition, as the Silna brothers grew older, there could have been estate planning issues if they had not reached an agreement. Finally, in addition to the lump sum payment, the Silnas are still entitled to certain media revenues unless the owners execute a buyback clause, so the Silnas (or their heirs) will earn more than $500 million in one way or another, on top of the money the Silnas have been receiving for decades.

An interesting footnote is that the Silnas` dream has always been to own an NBA team. .

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