Betting scandal forces NBA into damage control

Industry execs look to Stern to repair credibility with an already skeptical fan base

By John Lombardo
The Sports Business Journal
July 30, 2007

When the NBA’s top league and team executives met over dinner last week at New York’s Waldorf-Astoria hotel, they were supposed to be marking the end of one successful season and planning for the next. Instead, they found their appetites spoiled by a betting scandal that has left the league reeling.


Major media outlets have heavily reported on sports scandals.

Now, as the NBA awaits completion of the FBI’s investigation targeting former referee Tim Donaghy for placing bets on NBA games, those inside and outside the league are left wondering how to repair credibility from the latest — and most damaging — incident that has plagued the NBA in recent years.

“The integrity of the game has been shaken and whatever they do has to be big, bold and convincing,” said Ed O’Hara, senior partner and chief creative officer at sports branding agency SME. “Whatever [NBA Commissioner] David Stern does has to be gigantic. He’s got a skeptical fan base right now and they have to alleviate all the doubts.”

The NBA isn’t planning to bring in any crisis consultants to deal with the betting scandal that Stern called “the most serious situation and worst situation I have ever experienced,” but one he believes is isolated to Donaghy. It is that belief that hinges on how deeply and critically the NBA will be damaged. At press time, Donaghy had not been charged.

“It was one person who decided to go his own way, and it’s difficult to control one man going haywire,” said Cleveland Cavaliers owner Dan Gilbert. “It is difficult for the league to have 100 percent control there, but certainly we are looking for ways to prevent this from happening again. And from what I’ve seen thus far, the league is doing a great job there.”

The FBI called the league offices in New York on June 20 saying it would like to meet with the league about an investigation of a referee alleged to be gambling on games, and the league met with those officials the next day.

Stern began dealing with the scandal by calling every team as the story broke. So highly charged is the controversy that some executives contacted by SportsBusiness Journal refused to speak on the subject.

“He was devastated,” said a source. “The league’s image is taking a hit, but we don’t know much past what had been said. We will deal with it and move on. David is taking a stand to make people feel safe about the NBA.”

After informing each of the 30 teams, Stern then dialed league sponsorship and television partners. His direct approach helped keep the confidence between the league and its business partners who spend hundreds of millions of dollars annually on the NBA.

“It is the worst thing that could happen to the game in light of all the conspiracy theories,” said another source. “The expectation by those people about it potentially coming true is one of the biggest black eyes the sport has faced. But the NBA has done the right thing. Very few people are equipped to steer the boat through this situation, but David is the right guy to do it.”

After informing league insiders, Stern somberly stood for 70 minutes in front of a nationally televised press conference on Tuesday telling all he could about the scandal while trying to begin repairing the damage.

“This has hit David hard and knocked the wind out of him,” said Bill Sutton, a former NBA marketing executive who now runs his own sports marketing consultant firm. “But the way he spoke to the public was very sincere. … If this is an isolated incident, then the NBA can recover. If not, there is trouble, and if there is another referee involved, it is a conspiracy.”

But Stern’s ability to control the scandal is limited by the FBI’s investigation of Donaghy. The league has known of the investigation for weeks but could not act immediately in order to allow the ongoing investigation to continue.

The NBA continues to be restrained in discussing the scandal, restricting its ability to rebuild what Stern calls “the sacred trust” between the league and its fans.

“I can’t see them doing anything more than they are doing right now,” said Tom Fox, former sports marketing chief for Gatorade who now works for the Wasserman Media Group. “This is unfortunate and tragic, but I have great confidence in the NBA to deal with the problem and make changes. This isn’t an indictment of the game, it’s an indictment of human greed and the frailty of people.”

Stern ponders a question during his press conference in a hotel ballroom in New York City.

It is the league’s inability to control the information due to the investigation that one crisis consultant said can add to the damage.

“Stern and his inner circle are leaning more toward the legal side than from a brand perspective,” said Mike Paul, president of MGP & Associates, a crisis and management consultant company that has worked with athletes and sports leagues, including the NBA. “When there is a void of information, the void is replaced by rumor and innuendo. Stern is basically saying that there is one bad apple, but I am saying that Stern’s message should be, ‘I don’t know how many bad apples there are, but we are going to find out.’”

Donaghy is expected to surrender to authorities, pushing the scandal forward and potentially causing more damage.

“It’s premature to speculate on the damage to the brand,” said Tony Schiller, executive vice president of Paragon Marketing. “When you aggregate numerous variables such as the competition for viewership and consumer dollars across all forms of entertainment, then factor in the off-the-court issues that have plagued the NBA and the perceived disconnect between the overall fan base with the players, this is just one more element in that foundation.”

Just weeks after signing a new eight-year television agreement, the league’s television partners defended their new deal in light of the scandal.

“We believe the NBA acted in good faith, and that the league will do everything in its power to address this situation appropriately and forcefully,” said John Skipper, executive vice president of content for ESPN. “We don’t expect this will have a material impact on our agreement over the course of the next eight years.”

Turner Sports echoed Skipper’s support. “We believe the NBA will vigorously take all necessary steps in dealing with this incident,” said a Turner spokesman.

Randy Freer, president of FSN Regional Networks, which holds local rights to several NBA teams, solidly backed Stern. “We don’t think the actions of one person changes the long-term value of the league at all,” he said.

But other television experts are waiting to hear just how deep the gambling scandal will go before agreeing with the optimistic assessment from the league’s television partners.

“If [the gambling scandal] goes deeper, it could undermine the underpinnings of the sport,” said Larry Novenstern, executive vice president for media buying agency Optimedia. “The NBA has got to see where it stops and if it stops where they think it stops, they can regroup, do some public image campaign and that will be that. The NBA has always been good programming, but the concern is if this involves one individual or if this is the tip of the iceberg.”

Mike Trager, a television industry consultant and former chairman of Clear Channel Entertainment’s television division, said that the league must act as quickly as it can to minimize the damage.

“I look at this as a serious thump, but not a long-term thump,” he said. “From a public relations standpoint, they have been honest. If it is one guy doing something wrong, then it isn’t going to impact television or viewing.”

Billy Hunter, executive director of the National Basketball Players Association, was traveling out of the country last week and was unavailable for comment. But one prominent player agent believes the NBA is taking the right steps.

“The league is doing what they can do,” said Mark Bartelstein, CEO and founder of the Chicago-based Priority Sports & Entertainment agency. “We live in a society where people make bad decisions in all walks of life. When you take a deep breath and digest it, I don’t think it will have a long-term effect.”

The league vows to review its already extensive policies in place as part of its efforts to restore confidence in the NBA. But any new policies can’t minimize what Stern calls the most serious crisis he has dealt with during his 23-year tenure as commissioner.

“What is so damaging is that something like this happens with no one knowing, even though there were cautions in place,” said Sonny Vaccaro, former senior director of grassroots basketball for Reebok. “David may be the emperor, and I have had my issues with him in the past, but he also stands up and takes the hits. If this is more than one person, it will be tremendously damaging. It is the worst of all sins.”

Staff writers Terry Lefton and John Ourand contributed to this report.