What happens when a sports franchise’s owner dies?

On Monday, October 15th, 2018, Paul Allen, the co-founder of Microsoft and owner of the Seattle Seahawks and Portland Trail Blazers, lost his battle with non-Hodgkin’s lymphoma, a disease he battled since 1982.

Allen is survived only by his sister, Jody Allen, as he was not married and had no children, so questions are swirling as to what will happen with the ownership of his sports franchises. The NFL requires all owners to have a succession plan on file with the league office and to keep it updated in the event an owner should pass away. The NBA has no such plan requirement, however, given the status of his health, there is a strong presumption that such a plan is in place.

In the interim, it is being reported that the CEOs of the Seahawks and Trail Blazers, Chuck Arnold and Chris McGowan respectively, will oversee the day-to-day operations of the franchises. There are also conflicting reports that Jody Allen might be interested in succeeding her brother as owner of the Seahawks, but most agree she has no interest in being an NBA owner. Sales of both franchises are expected in the near future, likely in their respective off-seasons.

As most people might suspect, owners of professional sports teams are typically not the “direct” owner. They maintain ownership through a very specific corporate structure with multiple layers of liability protection. This structuring helps to protect themselves personally, the teams, and their respective leagues. This means that the teams will function normally until a decision is made on when to place the team for sale.

For example, Allen does not own the Trail Blazers directly. They are owned by his holding company, Vulcan, Inc. This is a company with a board of directors or governors with several layers of managers. Business will continue as usual. John Canzano of The Oregonian theorizes that, while Allen was known to be liberal about spending money to make the Trail Blazers a successful NBA franchise, Vulcan, without Allen’s direction, will take a much more business-like approach to spending on player contracts risking being able to bring quality talent and believes the on-court product could suffer.

With the Seahawks, the operating entity is Football Northwest, LLC and Allen is just 1 of 19 governors on the board. So, although Allen was the owner of the team, legal mechanisms are in place to ensure the Seahawks are not left without leadership and direction, from a business perspective. The remaining 18 governors on the board will be leading the organization and will likely be working with Allen’s estate to organize a sale of the franchise.

While both teams are expected to be sold, neither is expected to move. The Trail Blazers have an extremely strong fan base and are the 16th most valuable franchise in the NBA, coming in at just over a billion dollars. The team also is the only “Big-4” professional team in the market and does not have to compete with the NFL, MLB, or NHL. The team also has a lease with their stadium through the 2025 season and relocation fees and penalties would likely make a contemplated move not practical.

The Seahawks are also ranked as the 16th most valuable franchise in the NFL. The chances of them moving are also extremely low. The Seahawks have demonstrated success in Seattle and are the only regional team in the northwest of the continental United States. The next closest teams are over 800 miles away in California. The NFL is not going to want to leave such a large area of the country without a team. Fellow NFL owners Jim Irsay and Jerry Jones have already gone on record stating it is the expectation of the NFL and other owners that whoever purchases the Seahawks will keep the team in Seattle.

Jones has apparently even decided on who he wants to purchase the team. At the fall league meetings, Jerry Jones said he would “piggyback” Jeff Bezos to get him to purchase the Seahawks. Bezos, a fellow Seattle resident of Allen, is the Amazon CEO and the richest man in the world, with his net worth being valued at $167 billion. He certainly would be a safe owner to invite into the exclusive NFL club, financially speaking.

As it appears the sale of both teams is just a matter of time, owners in both the NBA and NFL will eagerly await the final selling price of each.

 

Photo Courtesy: Isaiah J. Downing – USA TODAY Sports

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