A Very American Coup By Michael – Louis Ingram, Editor-in-Chief...
NBA Stars Run A New Transition Game
WASHINGTON — Two summers ago, basketball star Elton Brand and his wife, Shahara, gathered friends and advisers in their home in the hills above Los Angeles and declared that after living in the world’s film capital for three years, Brand wanted to become a movie mogul — on top of his day job as a power forward for the Los Angeles Clippers.
Brand researched the movie business, recruited investors and put up less than $1 million of his $13.1 million salary, which is all his financial advisers would allow. He co-founded Gibraltar Films, which premiered its first feature, “Rescue Dawn,” starring Christian Bale, at last month’s Toronto International Film Festival. MGM bought the rights to distribute the film, giving Brand a good shot at earning a return on his money.
“It’s a very risky investment,” said the former Duke University star. “I would definitely not recommend it for an athlete or anyone who has not really studied the field. It’s tough unless you have knowledgeable people around you.”
Gone are the days when professional athletes were content to invest only in bars and bowling alleys, or simply collect a paycheck as spokesman for a local business or a sneaker company once their playing careers ended.
Brand’s movie investment is part of a growing trend among NBA players and other highly compensated pros who are using their millions to start high-risk businesses in areas such as music, film and real estate.
Although professional athletes are advised to keep most of their assets in safe, blue-chip stocks and bonds, they also are increasingly spending money on the sexy record label or Hollywood movie, the sprawling real estate venture or even ownership in a professional sports team. It’s all being funded by ballooning sports salaries that can easily eclipse $10 million a year.
“The difference between my generation and my father’s is that we made a lot more money,” said Orlando Magic star Grant Hill, a Reston native who will earn $16.9 million this year from his NBA salary and owns Hill Ventures, a management and real estate company.
“We have a lot more opportunity to be in real estate, entertainment or whatever sector one chooses.” Hill’s father, former Dallas Cowboy Calvin Hill, earned a fraction of what his son does. Since April 1997, Calvin Hill has been a consultant for the Cowboys.
When the senior Hill retired in 1981, the average NFL salary was around $80,000. Today’s average starter earns about $2.2 million.
Athletes starting their own ventures is nothing new. Former Detroit Pistons star Dave Bing launched a successful steel company, for example. Former Denver Broncos quarterback John Elway began a string of successful car dealerships when he was still playing.
But player agents say the trend toward athletes as entrepreneurs, especially in entertainment, picked up with former Los Angeles Laker Magic Johnson.
Johnson’s extensive business interests include the Johnson Development Corporation, which develops and operates Magic Johnson Theatres, Starbucks, T.G.I Friday’s and Washington Mutual franchises in or near major U.S. cities, including Prince George’s County.
Many players and agents said athletes want to be like Johnson, building and managing businesses that will create long-term value and give players second careers after they retire.
Baron Davis of the Golden State Warriors considers Johnson a mentor for Davis’s entertainment business, which he hopes will keep him focused and earn dividends after he leaves the game.
Davis heads up Verso Entertainment, which has a documentary film in production called “The Baron Davis Project” about the daily lives of Los Angeles gangs. He also produced a film called “The Millionaire Boys Club” and has a recording label.
Verso has yet to turn a profit after nearly five years, but Davis, who earned $13.7 million last year playing for Golden State, said he is patient.
“Anything that I invest in I want long-term value and long-term returns,” said Davis, who has been around the entertainment industry since growing up in Los Angeles and attending UCLA.
And he can afford to lose the money. Verso accounts for less than 5 percent of his portfolio, which includes stocks, bonds, real estate and a 200-acre ranch in Idaho.
“I understand my financial situation and there are certain risks I allow myself to take and build and grow and learn the different businesses,” Davis said. “The money I don’t spend on jewelry and supercharged cars or vacation trips and shopping . . . that’s the money I spend on this.”
Even so, some financial advisers who represent pro athletes try to steer their clients away from high-risk ventures, concerned that they may be throwing their money away.
“Entertainment sounds sexy and exciting, but it carries great risk,” said agent Mark Bartelstein, who represents a number of NBA and NFL players. “You are getting into areas that require a great deal of capital, and if you’re doing it as a hobby, you could have a lot of problems with it. I very much discourage it.”
Kathy Lintz, a St. Louis-based financial adviser who manages money for nearly 100 athletes and consults with the NFL, said anyone who tries to create their own business should know what they are going up against.
“These are spooky, scary risks for people who have done it all their lives,” Lintz said. “I don’t know why professional athletes feel that it’s easy.”
Part of it is the glamour. Magic Johnson’s “Showtime,” as the dominant Lakers teams of the 1980s were called, drew throngs from the entertainment industry. Businessmen and performers from the entertainment world and professional sports began to socialize, which led to opportunities on both sides.
“You see more and more crossover between entertainment and sport,” said agent Todd Ramasar, who represents Davis. “You see a lot of entertainers getting involved in sports. You see [R&B singer] Usher owning equity in the Cleveland Cavaliers. You see [rapper] Jay-Z owning New Jersey Nets equity.”
Two disparate, national trends have also had an influence on the business decisions of athletes: the emergence of hip-hop music, and the near-decade-long boom in real estate.
Ron Artest of the Sacramento Kings who will earn about $6.5 million this year, said he has recouped a big chunk of the $1.5 million he has spent so far on his own record label, TruWarier.
“The first year I put about $1 million into it, and I made a million back on shows, selling mixed-tape CDs, T-shirts,” Artest said. This year, he has reduced his outlay in TruWarier to about $500,000, and he has yet to earn that back.
Although most of his money goes toward real estate, he’s betting the record label has a lot of upside. Either way, he said he can afford to lose the money.
“This music is my stock,” Artest said, who said his label may drop hip-hop because it’s so controversial.
Artest’s newest CD, “My World,” arrived at retail stores on Tuesday, opening day for the NBA regular season.
Miami Heat center Shaquille O’Neal, who will earn $20 million in NBA salary this season, has several entertainment companies, including a record label and an apparel company.
His latest venture is the O’Neal Group, a Miami-based real estate investment and development company with a portfolio of properties worth $50 million, according to Chris Handy, who helps run the real estate company for O’Neal.
O’Neal already has a project in Miami that includes two residential towers, one of which is the tallest residential tower south of New York City. The project will include a hotel, commercial space, a Shaquille O’Neal 24-hour fitness center and a Whole Foods grocery store.
O’Neal said he wants to make money in the real estate venture, but taking an active role in the company adds another dimension to his life.
“We have the capability of doing some good, offering people high quality and a better way of living,” said O’Neal, 34. “And when I’m done playing, the O’Neal Group will still be alive and kicking.”