Ownership restructuring gives Spurs solid foundation as rebuild continues
Despite the strain of the pandemic, three consecutive losing seasons and decreased attendance, it will still be business as usual in San Antonio.
The unrest induced by the San Antonio Spurs’ request in front of Bexar County commissioners in May to move two home games to Austin in each of the next two seasons was understandable. After all, nobody wants to see their partner of 50 years appearing to flirt with the younger, Tesla-driving NFT collector, even if it was simply an effort in good faith to spice up the marriage at home.
There is an inherent dread shared by fans in most small markets (particularly by those of teams that aren’t currently winning) that ownership groups will eventually be consumed by the cash-printing business of professional sports, leave their old homes and start a new life elsewhere, cradled in the velvety, deep pockets capitalism. When it comes to money, trust can often be a fleeting thing.
And it’s not necessarily an unfounded dread, as the NBA has seen three relocations (four, if you count the Nets’ move from New Jersey to Brooklyn) since the turn of the millennium. But unless things go terribly wrong at some point over the course of the next decade, the Spurs aren’t going anywhere. With the influx of new shareholders in the last year and the elevation of Peter J. Holt — who penned a letter to the city — to managing partner, they’ve only strengthened their foothold and potential for growth in San Antonio and the surrounding region.
A source close to the situation said when the small group of minority owners decided to sell shares during the early stages of the pandemic, part of the sales agreements in place stipulated there would be no effort to relocate the team following the transactions. CEO of Dell Technologies Michael Dell, Sixth Street Partners, and Airbnb co-founder Joe Gebbia all bought in, expressing their commitments to Holt, to keeping the Spurs in town, and to further growing the franchise’s reach. “Deals were made to be broken” is a phrase that can sometimes ring all too true in corporate America, but at the very least there is evidence of the shareholders’ intentions in writing.
The elevation of Holt to managing partner is also important. Multiple individual suitors inquired about the availability of the majority share in the Spurs during the process, but when told there was none, quickly turned away. With Holt at the helm there remains a strong tie to the city at the very top, and the significant financial backing at the minority level of ownership has re-established real stability going forward. And these are not your typical shareholders, especially in the case of Sixth Street.
Private equity has invaded the professional-sports landscape, and as franchise valuations have skyrocketed over the years, firms are jumping off the top rope with the kind of buy-ins potential individual investors are increasingly unable or unwilling to pay. The NBA opened its ownership gates to institutional investment last year, and San Antonio is one of just five franchises to take the early plunge (though plenty more will soon fall in line).
Sixth Street — a firm with investments in other ancillary companies — offers the Spurs another level of available resources they don’t necessarily get with individual stakeholders. With their connections in tech and software, for example, they have access to deep pockets and liquid funds if there’s ever a need for a cash call. They can assist with anything from managing debt and services to securing sponsorships and partnerships, not to mention upgrades to (and perhaps the building of) facilities and arenas. Where there’s money to be made by improving upon their investment, they’ll be right there to help.
Another added element in the restructuring is the newfound quietness in the ownership hierarchy, as Sixth Street, Dell and Gebbia now combine to own north of 30 percent of the team alongside the Holt family’s majority share. On top of that, private-equity firms that have entered into this world are not allowed to hold a seat on the board of their respective teams, so they’re largely passive investors in place to provide growth capital with the expectation of a long-term return on investment, collecting revenue along the way until they’re ready to sell down the line.
From a basketball perspective, this allows the Spurs to continue to operate as they always have. While winning, teams don’t have to worry about the gate, concessions, merchandise sales, or any saturation point when it comes to ticket sales, and playoff revenue provides a major boost to the bottom line. Payroll certainly factors in significantly for small markets, but for the most part it all just kind of rolls along relatively smoothly with on-court success.
But losing can create a different storyline. We heard the phrase “playoff mandate” used this season to describe the expectations of ownership in both New Orleans and Sacramento (a common theme for the Kings), but there will be no such thing in San Antonio, and there will be no added pressure to go out and pay big money in free agency if the player and timing just aren’t right.
The Spurs’ front office will operate freely, as it always has during the Gregg Popovich era, with the ultimate objective being the construction of a title contender. Even considering the strain caused by Covid-19, three consecutive losing seasons and decreased attendance, it will be business as usual. No playoff mandates are coming anytime soon.
“We have not changed. Our goal and spending discipline have not changed,” a source said. “The pandemic does not figure in, and championship teams are still the goal.”
As the Spurs work through their rebuilding stage on the court in an effort to get back to real winning, the franchise’s business side will put its unique approach to the test. A couple of games in Austin and one in Mexico is a very small price for the home town to pay if the exercise contributes to the growth of the fan base. But it’s only a first step. Finding creative ways to get those fans to San Antonio at a reasonable cost would have to come next.
There are plans to build around rideshare services to and from Austin for people who want to attend Spurs games; and while the franchise and countless others would be in favor of the construction of a rail system between the two cities, this would have to do for now. (After all, this is Texas. Why improve our public-transportation system and provide more efficient means of intrastate travel while saving time and money in the long run when we can just build double-decker highways?)
On an international level, the Spurs have already partnered with Viva Aerobus, a Mexico-based airline. The cross-promotional element of this is clear, but perhaps future travel packages to San Antonio from Mexican cities like Monterrey and Mexico City would be an attractive option for fans of the team. Both trips are about as easy as it comes relative to most international flights.
But I’m just spit-balling here. In the end, it all comes down to sustained winning. If they’re able to recapture that magic, much of the rest will take care of itself — especially if the ever-growing region between San Antonio and Austin eventually becomes one large television market.
The Spurs have positioned themselves well to take advantage of growth opportunities while allowing the front office to maintain autonomy in improving the on-court product. There is a long road ahead from a basketball perspective, to be sure, but San Antonio has the time and resources to continue on its preferred team-building path — constructing a sustained winner, not a pop-up playoff contender.
Only time will tell if ownership and the front office will be able to accomplish their respective goals in the coming years, and in corporate America, you can never say “never.” You can’t fully know what the future has in store when it comes to big money.
But as it stands today, tomorrow and for the foreseeable future, the organizational foundation is in place to give the Spurs the space and freedom to operate.
Now we can talk about basketball.