If true, Donald Sterling's unbelievably racist comments that went public last week cannot be tolerated by the NBA, and the world at large. The ensuing fallout -- everyone from President Obama to Michael Jordan has condemned the L.A. Clippers owner -- has many calling for Sterling to be fired, and his team's games to be boycotted. As the league continues to investigate if the voice on the audio tape leaked by TMZ is in fact Sterling's, a few questions must be asked.
What are the Clippers' sponsors doing?
There's no point in regurgitating what the Clippers owner allegedly said. If you haven't heard the tape, TMZ has the original, and Deadspin has an extended version. While the immediate fallout will center on Sterling's fate, the companies who publicly endorse the L.A. franchise also have a major decision to make.
According to Forbes, the Clippers' biggest partners include Daimler's (NASDAQOTH:DDAIF) Mercedes-Benz, Kia Motors, State Farm, Chumash Casino Resort, and Dodge. Red Bull, CarMax (NYSE:KMX), and Virgin America also sponsor the team. At the time of this writing, the latter three, and Kia have officially ended their relationship with the Clippers, and State Farm announced it is "taking a pause."
A permanent loss of State Farm would be particularly damaging. The insurance behemoth has created a series of effective "Born to Assist" ads with Clippers star Chris Paul, a campaign that's generated quite a bit of social media interest. Even though the company says it will maintain its relationship with Paul, any references to his team will likely be removed from future ads, at least as long as Sterling remains the team's owner.
It's unknown exactly how much money the Clippers generate from sponsorships each year, but if Forbes' estimates are close, the figure could be over $60 million. In terms of brand value, that's less than league leaders like the L.A. Lakers ($254 million) and Chicago Bulls ($132 million), but above the likes of the Charlotte Bobcats ($29 million) and Memphis Grizzlies ($32 million). In the wake of its new PR nightmare, it's possible the Clippers are now less marketable than even the NBA's laggards.
Will they come back?
This may be the most important question. If Sterling leaves the team -- whether it's voluntary or not -- how long will it take for sponsors to rejoin? I chatted with two experts to find out.
John Ivey, of Altus Marketing & Management, told me, "Clipper sponsorship has grown dramatically and in direct relationship to the success curve of the team over the past few years." After finishing 29-53 just four years ago, the Clippers went 57-25 this season, a franchise best. Ivey adds, "But as the events of the last few days have shown, the team's new image, no matter how hard-earned by the players – was as fragile as it could possibly be."
However if Sterling resumes control in any respect, I would expect a wholesale riot at the returns counter as sponsors line up to terminate their agreements. Staples Center will rival the Olympics or an NCAA tournament site as a sponsor-free venue.
Are there any precedents?
The owner's racism has been documented before, most notably in 2006 when ESPN published an exposé detailing his alleged refusal to allow people of color to rent his apartments. But are there any precedents to Sterling?
Al Campanis, who served as VP of player personnel for the L.A. Dodgers between 1968 and 1987, is one, at least in terms of backlash. While on ABC's Nightline in '87, Campanis made racially insensitive comments when talking about African-Americans' managerial experience. He was forced to resign shortly after, though there's no evidence the fallout caused the team to lose any sponsors. Jimmy Snyder, a sports personality with CBS in the '80s, is another example. While on the network, Snyder insinuated African-Americans were better athletes due to the history of slavery -- he, too, was fired soon after.
In the broader history of recent sports PR disasters, Brett Favre's allegedly inappropriate text messages to a Jets staffer in 2010, LeBron James' "The Decision" fiasco before he signed with the Miami Heat, and the MLB's various steroid-infused revelations all captured their fair share of media attention. But none were related to race, and didn't generate the type of sponsorship loss Sterling's comments have.
Only Tiger Woods' sex scandal of 2009, which caused the golfer to lose deals with Tag Heuer, Gatorade, Accenture, AT&T, Gillette, Golf Digest, and eventually, Electronic Arts, affected athletic endorsements to a similar degree.
The bottom line
Still even at his peak, Tiger never surpassed the $128 million in annual revenue the Clippers made last year. In terms of sheer size, Sterling's comments have created the worst PR disaster in sports history. In a league that's over 75% African-American, the Clippers saga is arguably the most egregious as well.
If its owner doesn't leave soon, the team's sponsors may never return. And if that happens, it will undoubtedly cost the Clippers millions of dollars in lost revenue. But that's not all. If coach Doc Rivers and superstars like Chris Paul and Blake Griffin eventually leave Los Angeles, Sterling will have cost the Clippers a chance at an NBA championship too.
Jake Mann has no position in any stocks mentioned. The Motley Fool recommends CarMax. The Motley Fool owns shares of CarMax. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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