How Stern showed NBA the money

Originally Published: January 22, 2004
By Darren Rovell | ESPN.com

NEW YORK -- David Stern is walking through the NBA office on the 15th floor of the Olympic Tower in midtown Manhattan when he sees the sweatshirt.

Across the front of it, in large bold letters, is the name of the manufacturer: STARTER. Below in small letters: New York Knicks. The commissioner immediately goes to Bill Marshall, the league's vice president of consumer products.

"What is this?" Marshall recalled of Stern's question. "Since when does the name of a company take precedence over our teams? Who OKs something like this?"

Silence.

Hence, the birth of the quality-control department at the NBA.

The event took place 18 years ago. Today, little has changed for Stern but much has changed for the league.

Although one man can't possibly be credited for every bit of growth over the past two decades, David Stern has single-handedly done more as commissioner of the NBA over a 20-year tenure than any other top executive in sports history. Franchise values have soared from $15 million to $300 million. Total gross revenues from licensed products have risen from $10 million to more than $3 billion. Overall league revenues have jumped from $118 million to more than $3 billion, and U.S. television rights now average $765 million annually, which is up 13,000 percent since Stern first took office on Feb. 1, 1984. That doesn't include even international broadcast rights, as games are now aired in 212 countries in 42 different languages.

"My day includes visits with large investment banks talking about sports," said Stern, who is currently speaking on several panels at the World Economic Forum in Davos, Switzerland. "Twenty years ago, they didn't have anyone tracking sports."

To some extent, the industry grew on its own -- sports marketing exploded predominantly through Nike's use of Michael Jordan. Epic battles between Magic Johnson and Larry Bird made it impossible for the networks to continue broadcasting the NBA Finals on tape delay after the 11 o'clock news. Networks then sold plenty of advertising, which led to the rights fees boom.

Fans might know Stern best for his announcements of first-round picks at the league's draft every June, and Stern -- who often deflects reflection on the past by speaking of the future -- will have you believe that things just happened to come together on their own, almost as if he didn't tweak the league like a skilled puppeteer controlling his marionette.

20 YEARS AS THE COMMISH
David Stern
THURSDAY: The Past
  • Stein: Q&A with David Stern
  • Rovell: How he showed NBA the money
  • Smith: Top 10 highs and top 10 lows
  • SportsNation: Grading the Commish


    David Stern
    FRIDAY: The Present and Future
  • Stein: Stern's tasks at hand
  • Ford: Moves GMs want to see
  • Tolbert: The player's perspective
  • But those who have worked with Stern over the years will say his absolute obsession with the everyday business minutia of the organization is what drove the league's business and continues to push it along today -- a practice that some in the biz have said makes him more challenging to work for.

    "He might get after you for something during the course of the day," said Rick Welts, who was hired to help head up the league's sponsorship department in 1982 and remained at the NBA for 17 years. "And he'll make you feel two inches tall. Then at 10 o'clock, he'll call you at home, have a 45-minute conversation and you couldn't wait to charge through the door the next day."

    One of Stern's greatest frustrations, according to his colleagues, is the fact he can't have knowledge of everything that's going on among the league's 1,000 employees. But surprisingly, Stern is active in almost every major decision.

    "Some people say that once a business gets as large as we are, you can no longer micromanage it," said NBA Entertainment president Adam Silver, who often has Stern review the language in contracts he signs. "But David has personal interest in so many projects that he still runs this business like it's a mom-and-pop. Some people might criticize him for that, but perhaps it's because those people aren't willing to work as hard as he is to make it work the way he does."

    E-mail has exposed Stern even further. The league's top executives often arrive in the morning with notes from Stern fired off at wee hours in the morning.

    "He's as about detail-oriented as you can imagine a CEO being," said Joel Litvin, the NBA's chief legal counsel. "He always knows more about what you're doing than you'd expect. And when he comes around, he always challenges you."

    When Litvin first sat across from Stern 16 years ago for a job interview, he expected the typical CEO meet-and-greet with a prospective applicant. But it didn't take long for Litvin to realize Stern wasn't your garden-variety chief executive. "David wanted to know about this paper I had written in law school about the right of clerics and religious leaders to wear garb in the courtroom," Litvin said.

    "He has this unworldly demand for information," said Dick Ebersol, the chairman of NBC Sports & Olympics who began working with Stern in 1989 while negotiating NBC's first contract with the NBA. "And he's extremely competitive, more competitive than any player in his league today."

    Three months ago, Stern himself called Ebersol to help him find better rooms for NBA players who'll represent the U.S. at the 2004 Olympics this summer in Athens. "I doubt (former Major League Baseball commissioner Kenesaw Mountain) Landis would be making that call," Ebersol said.

    The perfect product placement

    Stern's rise from outside counsel to commissioner took 18 years, but throughout that time, he went from the complete lawyer to the consummate businessman.

    "He came in as a good lawyer and became someone with a great expertise in marketing," said Jerry Colangelo, managing partner of the Phoenix Suns and chairman of the league's Board of Governors, who have been in the NBA since he became the league's youngest general manager in 1968. "He became articulate with all the buzz words and how he has been able to accomplish that is nothing short of amazing."

    In 1981, as the executive vice president for business and legal affairs, Stern thought of putting videotape recorders in every NBA arena and ordered that tapes of every game arrive back at the league office within 24 hours after the final buzzer. The project's $90,000 cost at the time might have seemed like a lot -- especially considering that 13 of the league's 23 teams weren't profitable -- but the move paid off as the archives now serve as a massive library to the league's entertainment arm.

    David Stern
    Ten years into his tenure, David Stern had plenty to smile about in 1994.
    Later that year, Stern had the idea to get more involved in the backboard business, so he encouraged a licensing deal with a backboard company and subsequently had the NBA logos placed on backboards in the teams' arenas.

    "I thought it was kind of a stupid idea," said Scotty Stirling, the vice president of league operations at the time and now the director of scouting for the Sacramento Kings. "I was a traditionalist and thought it hurt some of the purity of the game."

    Within 10 years of striking the deal, backboard sales increased 10 fold.

    Before Stern took office, the marketing directors of the NBA's teams rarely shared ideas. As commissioner, Stern immediately encouraged the exchange in the best interest of the league's business and created a team services department. Today, the league is known as a leader in assisting its teams and sponsors with research data that will make their sales pitch to fans and sponsors more effective.

    In 1983, the NBA had only three sponsors with Budweiser prepared to back out of its deal. By 1990, the number of official sponsors rose to 20 largely because of Stern, who came up with a new way of treating companies that wished to be aligned with the league.

    "The model before David came had been that leagues would sign the TV rights deal, then go out and try to sign up a few sponsors and get whatever money they can from them for being the official whatever," said deputy commissioner Russ Granik, who joined the league in 1976 and has been by Stern's side throughout his entire tenure. "David didn't care about trying to get an extra few bucks from the sponsor. Mostly what he wanted to do was get a commitment from the sponsor to buy on the network."

    "David was one of the first to recognize that a profitable TV carrier was ultimately good for the sport," said Neal Pilson, who, as head of business affairs with CBS Sports, was talked out of canceling the network's package of six regular-season games and tape-delayed NBA Finals coverage by Stern in 1979.

    Sponsors who were previously given nosebleed seats at events like the 1982 All-Star Game in New Jersey were all of a sudden sitting courtside under Stern's orders.

    Stern also realized that the NBA would benefit from partnering up with the world's leading brands. In 1986, Coca-Cola became an official partner and, following five years of negotiations, McDonald's became a partner in 1990.

    "The most important thing you do is you demonstrate that you really care about the product that you're involved with and that means the way it's produced, the way it's packaged, the way it's represented," Stern said. "You let people know that because all the great companies are the same way. We're all very difficult to deal with but we get along because we're all worried about the same thing -- protecting our brands."

    Stern understandably isn't as active as he once was on the sponsorship front, but he still knows when to pick his spots and sit down at a meeting.

    "He's not the day-to-day guy, but he seems to be aware of everything that goes on," said John Lewicki, director of sports marketing for McDonald's.

    "When it's important to talk future strategy, David is always present," said Reebok chief executive Paul Fireman, who signed a 10-year deal to be the league's official apparel supplier in 2001.

    Making calls 24/7

    Like any good leader, Stern has helped select a great support structure -- though complete delegation has never been part of Stern's deal.

    In 1980, as the league's executive vice president, Stern hired Bill Marshall, a retail buyer for Jordan Marsh stores in Boston. In the fall of 1979, Marshall had helped create a major buzz around Bird with jersey T-shirts of the then-rookie phenom. The Bird shirts alone accounted for roughly 10 percent of the NBA's licensed products sales at the time.

    "I know what you are doing in Boston, but can you do this type of thing in Utah?" Stern asked Marshall.

    THE DAVID STERN FILE
  • Unanimously elected as the NBA's fourth commissioner and began his tenure on Feb. 1, 1984.
  • Began his association with the NBA in 1966 as outside counsel, joined the NBA in 1978 as general counsel and became the league's executive vice president in 1980.
  • Also currently serves as chairman of the board of trustees at Columbia University and serves or has served on the boards of Beth Israel Medical Center, the Rutgers University Foundation, the National Association for the Advancement of Colored People, the Martin Luther King Jr. Federal Holiday Commission, the Thurgood Marshall Scholarship Fund, the Museum of Television and Radio, Jazz At Lincoln Center and The Advertising Council.
  • Graduated from Rutgers University in 1963 and Columbia Law School in 1966.
  • Married to Dianne Bock Stern and has two adult sons.
  • Born Sept. 22, 1942 in Chelsea, N.Y.
  • Two years later, the NBA had local merchandise in major department stores in 18 of the 23 cities and rolled out a 60-page product catalogue. Today, the league has the NBA Store -- two huge floors filled with NBA-branded products on Fifth Avenue in Manhattan.

    Sometimes, Stern is so used to pitching the virtues of the league that it's hard to keep him away from all the salesman talk.

    "With movies like Batman you have the licensing and promotions that go with it, and then those movies go away," Stern said. "And then there's the Olympics that comes around every four years and for 17 days that's nice, too -- they've got the rings. But if you like to be nine months a year around the clock every day every year with a sport that's increasingly global, there's the NBA."

    According to those he works with, Stern struggles to shut off his micromanaging mode outside the office. Ask drivers who have taken him around town and some of them will tell you that he likes to suggest the best route of travel. Or ask the pilot of the private plane who flew executives back from the NBA Finals last year. The pilot announced that he couldn't land at the airport because the weather wasn't good enough. But according to one executive on the flight, Stern peeked his head into the cockpit, talked to the pilot about the conditions, the visibility and the radar. Minutes later, the pilot agreed to land at the airport.

    Over the past 20 years, it's easy to see how Stern has made himself a public figure. As an ambassador of the game, he's the career record holder among commissioners in handshakes and conversations. Less obvious but just as important to the growth of the NBA business is his level of involvement in the league's offices that now span around the world.

    Stern reportedly makes about $8 million per year, but "if you break it down by the hour, it's less than minimum wage," says Welts, now the Suns' chief operating officer.

    Welts should know. After the Suns defeated Portland last Sunday night, Welts received an e-mail marked 12:21 a.m. ET from Stern. The commissioner congratulated Welts on Phoenix's third straight win -- and then asked why there were 3,000 empty seats at America West Arena.

    On another night, Adam Silver got a call at his apartment from Stern at 12:30 a.m. Evidently, Stern doesn't like the way the graphics look on a particular NBA TV program and wants to know whom they can call in the studio to talk about it.

    Stern's genius is that he can find a Starter sweatshirt to fix, day or night. It's great for business but bad for sleep.

    Darren Rovell, who covers sports business for ESPN.com, can be reached at darren.rovell@espn3.com.

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    ESPN.com Sports Business reporter