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How the Knicks’ Phil Jackson Hire Could Turn the Franchise Around

By Chris Brantley - Mar 17, 2014 at 10:32AM

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Phil Jackson returns to revive the Knicks. But can James Dolan, executive chair of MSG, cede power so Jackson can do his thing? The success of the franchise depends on it.

Zen masters use koans, or riddles, to defy logic, cause questioning, and hopefully trigger enlightenment. The New York Knicks possess the same puzzling qualities as a riddle – or some would say a bad joke.

New York is the NBA's highest-valued franchise. It has the second most-expensive payroll, a rabid fan base, and a billion-dollar venue in the largest sports market (19.1 million people) in the U.S.

Unfortunately, the Knicks are awful.

Seeing the light
But ... James Dolan, executive chairman of the Madison Square Garden Company ( MSGN ), which owns the Knicks, may have seen the light and made the one investment that could turn him from an idiot to a genius in the eyes of New York Knick fans.

Phil Jackson, the legendary coach and solver of koans, is about to put his mind to a doozy. If he gets it done, Dolan's $12 million-a-year investment ($15 million with incentives) could be the most enlightened thing he's ever done -- at least as far as the Knicks are concerned.

Overflowing cup
The Knicks cup is running over. The franchise is worth $1.4 billion, according to Forbes. The only other NBA teams north of a billion-dollar valuation are Jackson's former teams, the Los Angeles Lakers ($1.3 billion) and the Chicago Bulls ($1 billion).

The part of the franchise's value resulting from revenue sharing among all NBA teams is $146 million. The part of the franchise's value from its city and market size is valued at $652 million. The venue valuation, or part resulting from Madison Square Garden, is priced at $425 million, and its brand value is $191 million.

During the 2012-2013 NBA season, the team brought in revenues of $287 million and operating income of $96.3 million.

Filling the Garden
The Knicks also may have the best venue in the NBA. The company recently sunk $1 billion into the renovation of Madison Square Garden. Now the location, which dates back to 1879, is a state-of-the-art facility that Dolan said, "the world's greatest fans deserved."

The new Garden, which opened in 2011, holds 19,812 fans who pay an average ticket price of $125. Every game sells out even when the team plays as bad as it has this year. 

Wasting money
Currently, the team has the NBA's second-highest payroll at $89.2 million -- behind its chief competitor in the New York market, the Brooklyn Nets ($102.8 million) – and the 20th best record out of 30 teams. If New York misses the playoffs this year, it'll be the seventh time in the last 10 years.

Amar'e Stoudemire earns $21.6 million a year. Carmelo Anthony makes $21.3 million. Tyson Chandler gets $14.1 million and Andrea Bargnani -- whose most distinctive accomplishment so far is being named the most overpaid NBAer by Forbes -- steals $11.8 million.

Hiring the solver of the riddle
Jackson, the NBA's resident "Zen Master," has an impeccable pedigree. He's coached his teams to 11 NBA Championships (eight with the Bulls and three with the Lakers) and helped Michael Jordan, Kobe Bryant, Shaquille O'Neal, and others elevate their game and team play to another level. However, he's won zero championships or even games, as a team president. In fact, he's never served in that role, but Dolan and MSG have decided to hand him the keys to the Knicks.

Emptying the cup
Every good Zen master knows the story of the student who goes to the master seeking answers. The master offers him a cup of tea and pours until tea is running over the edges of the cup. The master then says that the student is full of his own junk and can't learn Zen until he first empties his cup.

My guess is Jackson is about to go all Zen on the  Knicks' junk -- aging stars and bloated contracts. Anthony, the Knicks' leading scorer and resident ball hog, says he will test the waters of free agency this summer. Jackson will likely welcome his departure. Jackson's triangle offense is predicated on keeping the ball moving -- passing -- something Anthony has never learned to do. 

Letting go
One questions remains and will ultimately make or break the franchise. 

Will Dolan – notorious for controlling and interfering with his management team, like Dan Snyder and Jerry Jones of the NFL -- be able to let go, and let Phil work his magic?

Even though attendance at the Garden has stood strong despite New York's terrible play, MSG network viewers have dropped off significantly. During a playoff run last year, the television audience for the Knick games leaped 71% over the previous year. However, this year the team has only averaged a 2.29 rating for the first 52 telecasts, a a 30% drop from last year.

Obviously, Dolan knows this and hired Jackson to stem the tide and put the Knicks on a winning path again. He likely has every intention to stay out the way, but the question is can he?

If he's able to put the basketball side of things in Jackson's hands -- and that's a huge if --  and leave them there, the Knicks may finally become the consistent contenders New Yorkers have always longed for. 

If not, look for the same old same old. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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