Editor's note: This is a guest post from Olugbenga Ajilore, an economist at the University of Toledo and a die-hard fan of the Los Angeles Clippers.
This past weekend, an audio recording surfaced, allegedly of Los Angeles Clippers’ owner Donald Sterling making disparaging remarks about African Americans and other ethnic groups. For most longtime Clippers fans, like me, this fits what we’ve known about Sterling and his history of racist actions. The rest of the sports world has quickly gotten up to speed: Columnists and angry fans have called for boycotts and for the players to make a stand in hopes that public pressure will make some sort of change, and Sterling will sell the team.
That pressure won’t affect Sterling at all.
Basic economics suggest only his fellow NBA owners can force Sterling out.
Sports ownership is a unique animal. Team owners are like chief executives of any business that has day-to-day operations and seeks to maximize profits: There are employees and the “firm” puts out a product for consumers. Beyond that, though, the sports world diverges from the business world. There are a lot of “psychic” benefits that many times outweigh the financial benefits of owning a team (though, to be fair, there are significant financial benefits). The value of owning a team exceeds profits. It also includes sitting courtside with Jay-Z, Billy Crystal and Woody Allen. At a recent Clippers’ game, Paul McCartney attended and even danced on the Jumbotron to a Beatles song.
So what would make Sterling voluntarily give up ownership of the Clippers and those added benefits? Corporations have already started pulling their sponsorship deals with the team. This tactic worked recently in the case of Mozilla CEO Brendan Eich, who resigned after coming under fire for supporting an anti-gay-marriage ballot measure, and in Hollywood, where the production of the film "Midnight Rider" was halted due to the death of production assistant Sarah Jones.
But it won’t work with Sterling.
The NBA, like most of professional sports, is an oligopoly. Oligopolies – leagues, in this case – form so that the member “firms” can act in monopolistic fashion and garner the maximum amount of profit possible. But league formation also insulates owners from public pressure. That is why the Washington Redskins, Cleveland Indians or the Atlanta Braves don’t have to change their logos even when they face boycotts and public pressure. That is why Major League Baseball could enforce the “reserve” clause for nearly 80 years, yoking players to one team. When football players in 1987 went on strike, the NFL used replacement players and fans continued to watch and root for their teams.
As long as Sterling is an owner of a team in the NBA, he can behave however he wants without repercussion (and has for the last 30 years). Only the league’s owners – the fellow member “firms” – can effectively deal with Sterling, something they failed to do when he was sued for housing discrimination, employment discrimination and sexual harassment.
This is an unfortunate black eye for the NBA during one of its best playoffs ever. However, Sterling is a black eye that has been allowed by this same NBA to benefit for far too long.