Berger: Jordan Hamilton the Sixers First Choice? Jonny Flynn Offered for Andre Iguodala?

…help the selling price if the buyer knows the first thing about owning a basketball team.

There is a perception that the new owner is this corporate raider who is going to slash to the bone. The problem is, you can’t really do that to a basketball team.

The “strip and flip” strategy that very often happens in corporate takeovers makes sense if you have a property-intensive business where the tangible property itself is undervalued. You sell off the undervalued assets at their actual value, and let the company fail. Obviously, that’s not the goal here. If he wanted to strip-and-flip, he would have made sure the stadium was in the deal.

The problem with the “slash to the bone” strategy (which does assume that you want the business to continue) is that it only works effectively if you have a pretty much guaranteed revenue stream. If this were baseball, where there was revenue sharing, slashing to the bone would make sense. This explains teams like the Royals, who never seem to get good, but never seem to go out of business. It’s because they’re being funded by the Yankees. But there is no revenue-sharing agreement in the NBA. Each team is on its own to generate its own revenue. And in this situation, while radical cost-cutting might have made a certain amount of business sense for Comcast, because they have the revenue streams from the stadium and the TV broadcasts, etc., it doesn’t make as much sense for a new owner who doesn’t have those peripheral income streams.

The one thing that stands out here, is that you have to put a competitive product on the floor to make revenues as a basketball team without peripheral revenues. Trading Dre for nothing is the exact opposite of that. I don’t think anyone is going to want to support another 27-win Eddie Jordan masterpiece. And replacing Dre with a rookie (and doing nothing to address the horrific frontcourt), while saving money, would probably make the team really, really suck again.

Ah! But you say, if we lose Dre’s contract now, we’ll have money in 2013 to chase Dwight Howard! That assumes a very risky supposition that Dwight Howard will want to come to a 25-win team because they can pay him. He’s not going to come to Philly to play with a couple of slightly-above-average players (Holiday, and I assume Turner by then) and not much else, in a non-marquee market (yeah, it’s big, but there ain’t nothing glamourous about Philly). And every other team in the league is getting ready to make a play for Howard. Just because we try, does not assume we succeed. It’s a huge risk that a smart businessperson would likely not make.

To sum this rant up before it reaches LeQuan-like proportions, straight-up salary-dumping Dre’s contract is going to make the team less attractive to someone who has to mind both sides of the profit equation, not more.

I’m not a sports journalist, but I do work with guys like the new owner all the time. They are anything but stupid. It’s all about value with these guys. And they never sell for less than something is worth.

I hear lots of rumors about picks. Us sending Iguodala and #16 to GSW for Monta Ellis. Us sending Iguodala and #16 to LAC for Kaman. Etc.