Los Angeles Times B2B Publishing turned to esteemed trial attorney, Pierce O'Donnell, for his perspective on the state of the entertainment and sports industry in 2023. Pierce discussed the obstacles that the industry is facing, how the business of sports in Southern California compares to that of other parts of the country, the impact of NCAA athletes being compensated for the name, image, and likeness, the selling prices of major professional sports teams, and more.

Q: As a trusted advisor to entertainment and/or sports businesses, what do you consider to be the most challenging obstacles facing the industry in 2023?

O'Donnell: The NFL, NHL, and NBA have hard team total salary (wage) caps that appear to promote healthy competition. Baseball, however, has no restriction on total team salaries in a given year. One of the most vexing issues facing MLB is creating and preserving balanced and fair competition - so-called “parity” - among its large, middle, and small market teams. While they have a luxury tax if a team’s wages exceed a certain level, Major League teams have resisted a salary cap. Sadly, professional baseball seems to be a waning sport in terms of fan interest. While making the MLB more competitive with salary caps is no panacea, it is worth the effort. Doing nothing is not an option. In the meantime, I tell small market teams that the road to the playoffs and a World Series ring goes through a lot of money spent on players.

Q: How is the business of sports different in Southern California than in other parts of the country?

O’Donnell: Based on sheer critical mass, no other part of the country compares to California in general or Southern California in particular when it comes to sports at all levels. California is to pro sports what Paris is to fine dining restaurants. California has 18 men’s major professional sports franchises, far more than any other U.S. state. Not surprisingly, California is number one in the nation when it comes to the business of pro sports. For example, the first multi-billion-dollar team sales were the Dodgers and Clippers. The estimated value of all professional teams in the state is well north of $43 billion. Indeed, five Los Angeles teams alone are worth at least $20 billion. In a nutshell, I believe that the business of sports here is ubiquitous, intense, and lucrative. No other region in America is so defined.

Q: What are some of the pros and cons of the social media age in terms of how social media affects sports and entertainment?

O’Donnell: Social media is both the friend and foe of sports. Many benefits include promoting fan engagement with ready, free, and instantaneous availability of original content from leagues, teams, players, coaches, and analysts. Social media promote events, thereby increasing revenues. On the other hand, athletes’ mental and emotional states can be adversely affected by abusive social media postings. And the fan element of surprise at game outcomes has been largely lost. A thoughtful article in Bleacher Report by Nick Dimengo lays out ten ways that social media have ruined sports and I agree with his opening observation: “Social media has done wonders for sports fans, giving us up-to-the-second coverage of news and trends to keep us all in the loop of what’s going on while providing an outlet for us all to voice our opinions.”

Q: With the revolutionary demise of NCAA restrictions on college athletes being paid for endorsements, what has been the impact?

O’Donnell: In the past few years, the NCAA’s longstanding prohibition of college athletes being paid for anything has been torn to shreds by federal courts, and California legislation in 2021 allows players to be compensated for their name, image, and likeness. These rulings now allow collegiates to endorse products - and they are just getting started. According to an article published by NBC News, the average college athlete is estimated to bring in about $10,000-$30,000 a year collectively through social media and brand sponsorships. While not every player will cash in, the marquee players as social influencers are uniquely positioned to make the big bucks. Right now, the whole NIL business for collegiates is embryonic and evolving. But one thing is for certain look for amateur athletes to sponsor everything from local car dealers, restaurants, and coffee shops to major brands of athletic shoes, clothing, and soft drinks.

Q: Why are the prices of major professional sports teams skyrocketing?

O’Donnell: The past decade has witnessed a tectonic shift in the selling prices of teams in the NBA, NFL, MLB, and NHL. The Dodgers’ sale for $2 billion in 2012 followed by the purchase of the Clippers for $2 billion by Steve Ballmer in 2014 (my law firm and I represented the seller) kicked off the madcap price escalation. The highest price for an NBA team was the Milwaukee Bucks sale for $550 million earlier in 2014. The Clippers’ sale for nearly four times more was mindboggling. Since then, the Denver Broncos have sold for $4.65 billion, while the Phoenix Suns fetched $4 billion. What lies behind such staggering prices? It is not just a limited supply of products or satisfying the bragging rights of billionaires owning these trophy assets but also a coveted investment that is resistant to economic downturns that stall other industries. It will not be long before we see a professional sports team sell for $10 billion – the GDP of Rwanda.

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