Yahoo Finance Why the Golden State Warriors’ COVID-Reopening Plan Isn’t So Nuts
Last week the City of San Francisco, home of the Golden State Warriors, rejected a plan from the team to seat fans when the COVID-marred 72-game NBA season kicks off on Dec. 22. If you’re inclined to regard sports owners and the billionaire class at large with some degree of cynicism, you probably read this sentence and thought: Why were the Warriors trying to turn their indoor arena into a COVID breeding ground?
The truth about Warriors owner Joe Lacob’s plan to sit 9,000 fans in an arena for a two-and-a-half-hour basketball game is more reasonable than that, a fascinating test case case in how private businesses small and large have tried to balance staying afloat while keeping coronavirus at bay in a country that has drifted about with absolutely no plan aside from “wait for a vaccine and hope people don’t hang out with their friends and family.”
New Jersey-based epidemiologist Sarah Perramant told me that she was “...expecting to see something I was going to be smacking my head about, but I really think the plan that is laid out in that article seems prudent and careful.” She was particularly impressed by the Warriors’ intention to use rapid PCR testing, which analyzes the genetic material of the virus to determine if someone is a carrier, as opposed to antigen testing, which is better suited for determining if coronavirus is the cause of an ongoing acute illness. (The White House employed rapid antigen testing before their various superspreader events.)
Rapid PCR testing is a fairly new development that has been used to keep movie production and fanless sports going—the NBA’s Florida “Bubble,” one of the few coronavirus-control victory stories we have, used rapid PCR testing extensively—and production is ramping up to the point where it will probably be a standard approach when events start to resume after a vaccine establishes some degree of control over the unchecked spread of the virus. Rapid PCR testing en masse would be drastically expensive, but Warriors’ ownership, at least, has said that they are willing to incur the costs if it gets some butts back in seats sooner rather than later.
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“I think that this plan seems like it has a lot of really good measures in place, probably about the best you could do aside from not having fans altogether. The best options we have with the tools we have in our toolbox right now,” argues Perramant. “From a public health perspective, this checks a lot of boxes of the kind of questions I’d be asking, and I’m pleased with that, as opposed to, ‘Just bring in some people and we’ll keep them far apart, and whatever, we’ll see what happens.’”
But she acknowledges that it’s still a big ask in the current environment. “Someone’s gotta be the first one to kind of kick it off and make an effort, and it seems like this has been pretty well thought-out. So if they manage to work out the kinks, good for them. But I also think if I was a local public health person in California, or working for the health department, or the governor, do you want this venue to be the guinea pig? What if it does turn out to be some sort of superspreader situation? Nobody really wants that. But at some point we’re going to have to start taking these steps to return to a more normal life.” (We spoke prior to San Francisco’s Department of Public Health shutting the Warriors’ proposal down.)
With cases surging all over the country, including a record 15,000 cases in California on Saturday leading L.A. County to pause in-person dining for three weeks, I mentioned a vaccine as a potential starting point to start thinking about all of this. Perramant said that the vaccine would take a long time to distribute, all while people who worked for the team would remain sidelined by the virus, waiting for a point when it’s 100 percent safe. She believes plans like the Warriors’—self serving, but ultimately based on rigorous science (Lacob has a Master’s in Public Health) that takes the disease seriously—are going to be necessary to do anything at all. Because there’s no silver bullet; until COVID is eradicated—if it can truly be eradicated—there’s just myriad interlocking plans, guiding us along as best they can.
In ESPN reporter Ramona Shelburne’s write-up about the Warriors’ plan, Lacob takes a moment to despair about the difficulties facing the league over the next few years. “You cannot sustain this league with no fans. You can do it for a year. We’ll all get by for a year. But suppose we’re in this situation next year. Now we’re talking some serious, serious financial damage to a lot of people.”
When I first read this, I thought Lacob was being a billionaire drama queen. After all, the NBA is in the middle of a massive national TV deal netting approximately $2.6 billion per year, and the league still pulls in a king’s ransom from various licensing deals. But, even in an age when everything but love and human compassion is available over a screen, Commissioner Adam Silver claims that the NBA pulls in 40 percent of its revenue from live games. No fans in the arena represents a massive hit for the league and its teams, as well as the tens of thousands of people it employs.
I asked Larry Coon, a computer scientist and general manager of the Sports Business Classroom, if the loss of in-arena profits represents a true existential threat to team operations. “It’s a team-by-team thing,” he said. Some teams have ownership that are rich beyond all rational imagination—Steve Ballmer’s Clippers, the Portland Trailblazers, currently floating along on Paul Allen’s trust, the Orlando Magic, guided by some of the worst people on the planet. Others might not be holding onto obscene personal wealth but they operate in venture capital, which will probably get out of this particular pickle, for better or worse. Lacob and his partners in Golden State fall into this category.
“If an owner is way in the black with some of his businesses, he can survive being in the red with an NBA team for a while,” offered Coon. This is not a universal proposition among owners at present. Tilman Fertitta, the billion-dollar buyer of the Houston Rockets, who took out a massive loan to acquire the team, is mostly sitting on a portfolio full of restaurants and casinos. Micky Arison, who shepherds the NBA Finals’ Miami Heat, one of the league’s model organizations, is a cruise line magnate. The Los Angeles Lakers are owned by the Buss Family, whose primary source of wealth is… the Los Angeles Lakers.
In the NBA, players are entitled to 51 percent of the league’s total revenue in a given year. In a year where revenues will inevitably be driven down by mass non-attendance, the league and the players’ union cut a deal whereby any contracted money a player has signed for that ends up exceeding total gross for the 2020-21 season will be held in escrow and doled out at a later time. The league’s teams already surrendered a heap of box office to the bubble, and they will have to keep losing that cash for the foreseeable future. COVID-19, and the monumental incompetence of the United States’ halfhearted attempts to curb the spread of the disease, have thrown these teams into a cyclone, trying anything they can to stop the financial bleeding for a few years.
I initially suspected that Lacob’s motivation was his team’s new stadium, whose opening year was marred by both catastrophic injuries and a pandemic, continuing to sit empty in an insanely valuable plot of San Francisco real estate.
But when Lacob told Shelburne that he hoped his plan would represent a model that other teams could implement, the pieces began to fall into place. Owning an NBA team isn’t really like owning a normal business. By dint of its association with the NBA, one of those 30 teams almost certainly cannot “go out of business” in any conventional sense. An ownership group can lose a ton of money on the court or off and get pinned into selling the team to another rich guy, but no one is going to mournfully hang an “out of business” sign on the door of the Lakers’ practice facility.
The arrangement binds these teams' fates together. Because if a ton of teams end up crashing out due to the massive economic downturn coronavirus has left in its wake, a bunch of teams will sell, and that could represent two problems for Lacob: that the new sales, occurring in the middle of what seems will be a brutal recession, will be tinged by the ongoing mess and drive team prices down, representing a loss of equity on his end, and that new owners will represent a form of uncertainty for the league at large—the specter of a new pair of incompetent hands shrinking the pile of money everyone in the league feeds on.
Golden State Warriors owner Joe Lacob before their game against the LA Clippers at Chase Center on October 24, 2019, in San Francisco, California.
A while back, Rand Paul, a United States senator who is named after a racist writer, suggested that restaurants hire COVID-19 survivors en masse to serve in their restaurants. This idea is terrible. As a senator, he has the power to alleviate the misery of the thousands of businesses and their suppliers who are getting demolished by coronavirus by giving them money to support them when they can’t support themselves. In a world where people are receiving absolutely no support, the only alternative is to try weird little plans to snake around the virus as much as possible.
Lacob’s conundrum is just a blown-up, expensive version of the same thing that every other public-facing business is trying. Concert venues, restaurants, bars and small movie theaters are currently bending their way through bike racks to make the books work in a political climate whose primary response to their troubles is a giant shrug. Absent of any more support from the government, they are forced to plan. Takeout schemes, dancing with delivery apps, masked dining that really doesn’t feel terribly safe, fundraising campaigns to pay the rent while concerts are silenced. In the absence of support, their only option is to hustle.
NBA owners are not in nearly as dire a situation, of course. Their industry is undergirded by television contracts and the obscene wealth of their owners. But seeing Lacob go out of his way to propose a very expensive, complicated, good-faith effort to salvage the part of their business that is taking a whooping reminds us that there are millions of significantly more vulnerable people fighting against the twin currents of disease and government apathy with far less at hand, all while blowhard senators suggest that they innovate while stingily denying them the basic help they need to weather this crisis.
Lacob and his team have genuinely innovated here, crafting a plan that will likely support the reintroduction of people into arenas and events across the country when the second wave crests and America is ready to get back to socializing en masse. It’s a solid plan, albeit one that is simply unworkable at present. But all of Lacob’s good-faith planning won’t provide him or his industry with any significant immediate relief from the financial hit live events are taking, much like takeout windows or antibody-infused megawaiters or live streams from an empty venue won’t provide the relief millions of other businesses need. It’s long past time for the government to step up and protect its people.
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