The Mind of Dorf

SoulEater linked to a video showing Reinsdorf talking about being from Brooklyn and making oodles of money.  There's a small discussion going on at that fanshot, but I think there's more to this, as looking at things from Reinsdorf's perspective gives logical reasons for the ostensibly dumb decisions Bulls management has made.  Thus, this.

First, a couple quotes from the video stuck out to me:

I came to Chicago to go to law school.  After I graduated, I stayed in Chicago and worked as an attorney, then I became a tax lawyer at a private practice, then I got involved in making real estate investments for clients, and after that sport.  I had a lot of luck along the way. I had a company that I built up and then sold, and then two years later the real estate business went south.  So I'm glad I sold it when I did, I wouldn't have gotten nearly as much money as I did, so there's the luck of it.

Kenny Williams' job is to identify talent and evaluate talent.  My job is to make sure he doesn't spend too much money on it.

It's easy to look at Reinsdorf as the idiot cheapskate who hired VDN (ha!), blew the D'Antoni signing (haha!) and lost Gordon (Haaaaaaa!) for nothing.  But in reality, this guy's brilliant.  According to his wikipedia, he wasn't born into money, but he got into GW undergrad, Northwestern Law, then after a few different jobs, he started a company he sold nine years later for $102 million.  He bought the White Sox a year earlier for $19 million, then got a controlling interest in the Bulls by paying $9.2 million.  Fast forward 25 years, and those teams are worth nearly $1 billion combined.  Damn.  And you know what that means...

We've got a self-made billionaire in charge!!  And in most cases, that's a good thing!  Except there's another quote from his wikipedia:

A life-long baseball fan who grew up in the shadows of Ebbets Field, Reinsdorf was in the stands the day Jackie Robinson debuted for the Brooklyn Dodgers, breaking the color barrier which prevented black players from serving on Major League teams.

Oops.  Our self-made billionaire is a baseball fan.  Remember him saying he'd trade all six of his Bulls championships for one White Sox championship?  Years later, I think he meant it.


Forbes has ranked the most valuable NBA franchises each of the past five years, and notes their profit from the past season.  And granted, Jerry has a huge metropolitan area all to himself, and having MJ's banner in the stadium helps mightily.  But other franchises are in big markets too, and some have current superstars on their team.  And even though the Bulls were mediocre last year and terrible over the past decade, Jerry pocketed $55 million last year.  That's #1 in the NBA, ahead of the Lakers and well ahead of the Magic and Spurs and Celtics.  10 teams lost money last year.  Not Jerry.  Show 'em the stats!

$55 million profit in 2008 (#1 in NBA)
$59 million profit 
in 2007 (#1 in NBA)
$48 million profit 
in 2006 (#1 in NBA)
$35 million profit in 2005 (#3 in NBA)
$37 million profit in 2004 (#1 in NBA)

Who else can say THREEPEAT!??!

Huge profits, few wins.  Reinsdorf is running the team like an investor.  And when you view his transactions from that perspective more things start to make sense.


Take the contract Gordon signed with Detroit: 5 years, $66 million.  Seems like fair value for an efficient 20ppg scorer, right?  Let's take the perspective of a financial investment.

First off, the payout side.  Gordon's scheduled to make $10 million this year, but if you replace Pargo's salary with Gordon's, the puts our payroll at $77 million, or $8 million into the luxury tax.  Add in the $3 million or so of luxury tax revenues we'd forfeit by leaping into the tax, and Gordon would've cost Jerry $10+$8+$3= $21 million this year, and at least $77 million over the five year contract.

Now for what Gordon brings in this year.  If I'm reading the following linked article correctly, NBA teams already share TV and Merchandise revenue.  Any extra jersey sales or TNT games that Gordon would bring in (admittedly relatively little) wouldn't factor into Reinsdorf's bank account.  Therefore, the financial benefit of Gordon comes from:

(1) Increased Regular Season Ticket Sales ...except the Bulls lead the league in ticket sales this year, and have sold out most of the last ten years.  Granted, there have been some 300-level discounts this year, but that likely wouldn't have changed with Gordon aboard.

(2) Playoff Home Games ... Each extra game brings in a packed house!  Except, how much would Gordon actually add?  On SoulEater's fanshot, I said that on July 1st, I would've guessed the Bulls could've expected 2.5 home playoff games this season without Gordon.  We figured we'd be a #5/#6 seed, and probably lose 4-1, 4-2, or 4-3.  That's between 2 and 3 home games.  With Gordon, what would've been our expectations?  3 playoff home games?  3.5?

And playoff per game revenue might not be as high as you think.  Here's a quote from a relevant article I found about the Jazz:

For years, it's been rumored that NBA teams pocket about $1 million for each home playoff game. But that figure, Rigby said, is high. For one thing, the NBA takes a 45-percent cut of each home gate during the playoffs (up from just 6 percent per home game during the regular season) to cover its annual expenses.

Even at $1 million per home game, having Gordon on board would only net an expected $1 million extra.  Even with the crappiness of our current team, adding Gordon likely adds just $2-3 million.

I'm not an expert at this, and there's a chance I'm leaving something out.  But from what I see, combine those two, and having Gordon this year probably adds just a small fraction of that $21 million to Jerry's bottom line.  And yes, Gordon gives you a better chance at a superstar via sign and trade, providing what would be a long-term increase in revenue.  But that's risky, and besides, there's a chance you could sign a superstar outright.   Also, it's true Gordon can provide more regular season wins and playoff home games over the course of 5 years.  But at a $77 million cost, that's a looooot of extra wins he'd need to provide, making it pretty damn improbable.


Add in the immediate breakup of the dynasty, the cheap coaches, the trading of Brand and Artest before extension talks, the trading of Chandler for expirings, the trading of Curry for cheaper rookies, the loss of Gordon and probably Tyrus for nothing before their extensions, and it makes sense.  Like sheep, Bulls fans (me included) continue to pack the stadium regardless of the product, giving Reinsdorf zero incentive to pay more than he has to to keep the media (which it seems like he has a hand in again (see: KC Johnson, ESPN radio, Comcast commentators who rarely say a bad word about him)) off his back.

That said, I don't think any of this makes him anything besides a good businessman.  I as a fan couldn't give a crap about Reinsdorf the person, I just want him to spend his own money for my benefit.  So why should he give a crap about me?  He is what he is, and by nature he operates to earn.

If there's any good news, it's that I trust Jerry when he says he'll go into the luxury tax if he feels that would make the Bulls a final four team, because it makes financial sense.  Take a team to the Finals, and season tickets and premium suites sell like hotcakes.  The good advertising and branding alone is worth millions, the sponsorship deals tens of millions more.  The problem is getting to that point.

And the solution, of course, is simple: empty seats.

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