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Becker Business
Tanking in Professional Sports with David Pivnick of McGuireWoods LLP 2-12-26
00:15:34
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- [00:01]
A
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- [00:30]
B
This is Scott Becker with the Becker Business and the Becker Private Equity Podcast. We're here today visiting with David Pivnick. David's going to talk to us about sports and business. David happens to be about the brightest person that I know. Both valedictorian from his law school class. He also is a lead partner at McGuire woods, typically in the litigation area, often false claims litigation, and work for private equity funds. But David's also multifaceted and today we're going to talk about sports and business. He's one of the smartest, well rounded sports fans that I know. David, the first topic I wanted to touch on was what's called tanking and tanking in the NBA where it seems to be the most prevalent is teams try and lose as many games as they can towards the end of the season to get a higher draft pick. The league has rules against this. They often issue fines, but it's hard to enforce. Can you talk to us about this tanking? Is it sort of fast? Because as a, as a business, as a team, you're trying to lose a lot of games so you can get a high draft pick and have a better chance next year. But how did this become such a thing in the NBA? Can you, can you take a moment and talk to us about that?
- [01:44]
C
Yeah, absolutely. Scott, appreciate you having me on and truly appreciate the very kind words, you know, in terms of tanking. The reason it's, it's most prevalent in the NBA and the reason frankly it's important to teams in the NBA is basketball and the NBA in particular more than any other major sport, is highly dependent. The team success is highly dependent on whether or not they have a true superstar and ideally two or three superstars or at least an elite superstar and two or three other star players more than any other sport. Like you can build an elite hockey team, football, you could build a great defense that might overcome weaknesses at other positions. Although clearly having a great QB is important. Baseball, having an ace pitcher is, is massive. But you know, there's nine hitters in the lineup and pitchers only pitch every few days. So in basketball, where, you know, you could go out there every day and have the best player, best two or three players on the floor, you're going to have a massive advantage. And so it's most prevalent in basketball because the best way to get a superstar is to have a high draft pick. The best way to have a high draft pick is to have the most lottery balls, best odds of the lottery. And if you don't get those things that you're not going to likely get a superstar. There are exceptions like Giannis and Shake Elders, Alexander, who are, you know, late lottery draft picks. But generally speaking, getting those high picks is important. And so that's why it's so important in terms of how it's a problem. But I think there's, you know, people talk about it in terms of ethical tanking versus unethical tanking. And I think when you have a team like Utah last week had a game where they were winning through three quarters and then benched their three best players in the fourth quarter of a game where those players were healthy, weren't in foul trouble, and the team was winning, and they turned a win into a loss. And I think that's pretty blatantly unethical taking. It's just a team going out there intentionally trying to lose. I think there's more subtle forms of that, like the Washington Wizards trading for a guy like Anthony Davis, who they know won't play for them this year, but they're hoping will help them in the future. And in the meantime, by trading active players for a guy who's going to sit out, they're building their chances. But at least the fans know what they're getting into. Anybody who's buying a ticket to see the Wizards at home or on the road knows that Anthony Davis isn't playing. And then there's others where it's a little bit more subtle. But, you know, you have folks taking games off or coaches using different lineups or a team that just struggles. So I think there's different variations on tanking. I think when teams are benching healthy players and deliberately losing games, it clearly impacts the integrity of the league. It's also not fair to teams that are trying to compete. But mostly I think it's unfair to the fans, and I think, you know, it cuts both ways. If, you know, a guy like Steph Curry or Giannis and the Bucks and Warriors are teams that really haven't tanked historically, at least not in recent years. But, you know, fans only get to see those. If they're playing the other conflict, they only get to see those guys once a year. So if they sit out on a road game, you've got people who saved up to buy tickets and go watch these, these players play and don't get to see them. And if they sit out when they're at home, you're punishing your own season ticket holders in your own fan base who doesn't get to see the best players. So I think it's a big problem from a competitive balance standpoint. And I think it also just undercuts the credibility of the league where you've got fans paying. It's not like they discount the tickets for a tanking game. You've got fans paying the same amount for the product and not seeing a legitimate performance that you know, truly, which I think is disappointing.
- [05:24]
B
Thank you very, very much. And talk about something like the Chicago Bulls. You and I both follow the Chicago Bulls. They literally seem to unload all of their talent at one point right before the trade deadline. What does that mean for the future? I mean, they were sort of stuck in a middling spot. They don't want to say that they're rebuilding, but clearly they had to do something because they're just sort of stuck in the middle. How do you look at that and analyze that when a team just dumps all their talent at one time?
- [05:52]
C
Yeah, I think the Bulls to me fit in the category of sort of, you know, what I refer to as ethical tanking. Like at the end of the day, the Chicago Bulls, as they were constituted prior to the trade deadline, they were simply not a competitive team. They weren't going to be a competitive team. That was a team that might have potentially made a playing game, but they weren't going any further than that. And they were spending a lot of money on guys like Nicola Vuchevic, etc. That weren't going to lead them to wins. And what they did, I mean, I think they would have been better served with a you hire draft picks, etc. But I presume that wasn't available. And instead what they did is they brought in young players who could contribute and hope that they develop better with the Bulls, a bunch of secondary picks and then subtly increased their lottery odds. So I think what they did was prudent. I don't think the Bulls have the brightest future right now in the league. I think there are other teams with better young assets and more young assets. But I think what the Bulls did was smart. They took flyers, they on recent High draft picks that haven't worked out. Like Rob Dillingham was an eighth overall pick a couple of years ago, 2024. I think he's got a very bright future. I thought he was great in college. I mean, he's only there for one year, but he was great, has a lot of potential and they got him for a relatively low price. Although I'm a huge IO Dasumu fan who they traded. But he wasn't going to be a long term fit in Chicago. He has a better chance to win now in Minnesota and the Bulls are able to move forward with the guy in Dillingham who's very young, didn't have an opportunity in Minnesota and could contribute. They got a guy like Jaden Ivey from, you know, I think drafted three years ago, fifth overall pick, hasn't worked out as expected, but has a lot of potential. So they, they basically traded out of a mediocre season to what will now be a bad season. But they've increased their draft lottery chances this year and they've also brought in a couple of young players that I think have a chance to develop into something better than what the Bulls ultimately traded out. Long term. And for a fan, you know, I think Bulls fans can look at it and at least they know what they're getting. If you go to the United center to watch a game, you're going to see a lot of young talent. You're going to see young guys making some mistakes and figuring it out, but you know, that's what you're signing up for. You know, that's what you're paying for. And hopefully those guys develop. But there's not a surprise you're not showing up at the arena. Only that the tickets you bought three months ago, you know, are worthless now because the best players aren't playing. I mean, frankly, I don't think a lot of people bought tickets a few months ago to go see the 500 bowls and are going to be disappointed to now see the slightly less than 500 bulls with younger talent. If anything, it might be more exciting at this point to watch some of these young guys develop.
- [08:45]
B
No, it's actually fascinating. So aside from basketball and tanking, when a team tanks, do fan stop showing up? Does it have any impact on their revenues that year or is there just a huge incentive to tank? It doesn't have that much effect on revenues and maybe gives them a chance to be relevant again in the future. What does that look like from a business standpoint?
- [09:08]
C
From a financial standpoint, the biggest impact is actually on existing ticket holders. You know, the, the Bucks are a great example of this where they're a market that is heavily dependent on Giannis and Giannis playing and carrying the team. And so when he is out, it's harder for the team to sell tickets. And the secondary market for tickets that season ticket holders bought plummets. I mean, tickets right now for Bucks games are selling consistently well below face value in every section. And the Bucks periodically drop the face value of tickets that remain unsold as the games approach in order to try and sell those tickets leading up to game time. So the team is definitely losing revenue, but most of these teams are making the bulk of their ticket revenue through season ticket sales. So those tickets are already sold well in advance. They've already got their money. And particularly if they're, you know, trading out expensive players, they might save money on the expense side, but regardless, most of their revenue is hand, I think is in hand. Where it really hurts is they're not going to sell as many of the additional tickets for single game sales as the year progresses. But again, I don't think that's the crux of the revenue for a lot of teams. And I think the bigger hit is on season ticket holders reselling. And so I think that the challenge for these teams to is convincing those season ticket holders to renew for future years. And that's where they have to sell the tank as a strategic pathway rather than just a negative. And the pitch becomes, yeah, this year was disappointing, but next year we're going to have the shiny new toy, the top five draft pick, the superstar to be. We're going to go out in free agency, whatever the pitch might be. So you want to renew so you can be part of the exciting new era. And I think the Blackhawks were sort of a great example of that where coming off the cup runs different sport, but coming off the cup runs from 2020, 2010 to 2015, the building was sold out every night. The ticket prices went up massively year after year and the Blackhawks really capitalized on it. And then as they rebuilt and were bad for years and they've still been bad sids, but ticket sales became harder and harder to come by until they got the draft rights to Connor Bedard. As soon as they won that lottery and people knew they were going to get Bedard, ticket sales went through the roof, myself included, by the way, getting season tickets. And so they, they were really able to capitalize and now we're. It's year three and Connor Bedard Looks absolutely electric. He's terrific. But the other pieces are still coming together and slowly. The team's gonna have to figure out what they do to sell tickets and sell fans on the next couple of years where I'm bullish but other people might not be. And so I think that's the challenge is, is managing the season ticket holders. And as compared to the revenue in this season, it's definitely going to be harder for the Bulls to sell tickets the rest of this year based on what they did at the trade deadline. But I don't think they were going to sell that many tickets for the rest of the year regardless, such that the impact is not as pronounced as it would otherwise be.
- [12:12]
B
Thank you. And why is it, and I think you've mentioned this already, you hardly see tanking in football. You really don't see it in hockey, although there is high value in a couple of these top, top picks. But you need a few years in a row of that. Football, you don't see it. Baseball, you don't see it. Because I guess the concept that you're talking about is in the NBA, one to two players can make a massive difference out of five people on the floor. Whereas one to two out of 22, 25 players in hockey, one to two out of 22 in football. I mean you can't get a quarterback makes a difference, but you still need a lot more around that quarterback. And then the Major League Baseball too. Like right, one great player, fantastic, but you still got nine other players going or eight other players going. And if it's a pitcher, he only pitches every few days. I guess that's why taking so prevalent to the NBA and not so many other places. So we've talked about tanking in the NBA. It's top of mind right now because we're seeing so much of it right now. And there's never been a bigger, what they call race to the bottom than this year, it seems like. What other sports stories are you watching closely currently?
- [13:17]
C
Well, I'm excited about the Winter Olympics. I'm always excited when the Olympics come out, summer and winter. So I really enjoy watching speed skating. I've been watching a lot of speed skating. I'll certainly be watching the Olympic hockey, both men's and women's side. And I'm excited about that. You know, I'll have, you know, will be cured for the US but also have a very soft spot for Canadian athletes and hope they do well as well. And then I am interested in what my Cowboys are going to do this offseason, I think they're at a point where they have to try and win and they've had ownership who has consistently said they're going to spend the resources and make this sort of an all in season where they go for it but haven't made the big moves in free agency. So I'm very interested to see what the Cowboys do as the draft approaches and free agency approaches and how they leverage a bad cap situation. And then I'm interested in the NBA this year generally. Not, not on the tanky side of it, but on the successful team side where, you know, I think Oklahoma City is clearly the best team in the league and has the best talent and cohesion, great coaching depth. I mean, they really got it all. But other than them, I think if anybody, anybody could win, I think it's very, very wide open, which means it'll be tough. Ready with the catch, Oklahoma City. But I think there's a ton of other teams that probably genuinely think that they at least have a chance and if they could steal a series from Oklahoma City, could win the title. So it'll be fun to see, you know, if Jason Tatum comes back from a torn Achilles way earlier than expected, or if the Knicks can put it together in the playoffs and get to the finals, if Wemby in San Antonio can, you know, have a playoff breakout and go, or if Anthony Edwards can elevate the Minnesota team, ideally, you know, with the support of a couple of line I in IO and TJ Shannon off the bench, you know, helping him get some wins there. And then obviously I'm hoping the Raptors do well. So, I mean, this is a fun time of year for the NBA. And I think notwithstanding the teams racing to the bottom, which I think was an apt description by you, I think there's a lot of fun teams on the other side of the ledger that, you know, have ants are working hard to compete and it'll be fun to see where they land.
- [15:32]
B
Fantastic, David, fantastic to listen to you and your thoughts. I know we've got you on a webinar coming up about building elite professional careers. I can't wait for that. Again, as always, thank you for taking the time to join us on the Becker Business and the Becker Private Equity Podcast. Always brilliant. I hope our audience enjoys this. I know it's a bit of an esoteric topic, the topic of tanking and professional sports, but what a fascinating topic and what a fascinating time to discuss it. So, David, thank you so much for joining us.
- [16:01]
C
Thanks for having me, Scott. Always a pleasure.
- [16:04]
D
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