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Racist comments hit revenue of every team in NBA

With Los Angeles Clippers owner Donald Sterling in hot water following the release of racist comments that were attributed to him, it's not only the team franchise that's feeling the chill of suspended and terminated corporate sponsorships. The league-wide revenue sharing system in place means that the NBA as a whole will take an economic hit.

Each of the league's 30 teams contributes an equal percentage of its own franchise sponsorship revenue into the revenue-sharing system, which then evenly distributes the accumulated league-wide revenue pool back to the franchises.

New NBA Commissioner Adam Silver announced Tuesday afternoon that Sterling will be banned for life from the league and fined $2.5 million, the maximum amount allowed under NBA guidelines.

Donald Sterling
Getty Images
Donald Sterling

So far, major consumer companies like Daimler's Mercedes-Benz, CarMax, and Virgin America have terminated their Clippers sponsorships, and others including State Farm, Kia Motors, and Sprint have suspended sponsorships.

"These team-specific sponsorships that the Clippers lost would play into that revenue-sharing system," said Alicia Jessop, a sports law professor at the University of Miami. "Because they're gone, that means that less money goes into the revenue-sharing system, which means less money for the other 29 teams."

A spokesman for the NBA declined to comment. The league is scheduled to announce its action against Sterling on Tuesday afternoon.

Jessop said that the Clippers have been able to charge a premium for their sponsorships thanks to the power of Los Angeles' large market size. And that means that lost Clippers sponsorships have a greater relative impact on the league's revenue pool than many other franchises would.

"The Clippers are in one of the biggest media markets in the country, and sponsors are going to pay a premium to get into that market," Jessop said. "It hurts the league more because of where this franchise is located."

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David Carter, a professor of sports business at the University of Southern California, estimated the cumulative value of lost Clippers franchise sponsorships to be at least several million dollars. More important than that, however, is potential damage to the NBA and league-wide sponsorships, which are also distributed among franchises, he said.

"You've got sponsorship revenue that the teams themselves get to keep, and then you've got NBA sponsorship deals," Carter said. "If the NBA doesn't handle this properly, and Coca-Cola is an NBA league sponsor and they pull out, well that was money that was going to go out to each of the teams."

Anheuser-Busch, maker of official NBA beer Budweiser, released a statement on the scandal, saying that while it is not a sponsor of the Clippers franchise, "we fully support the NBA's efforts to investigate quickly and trust that they will take appropriate action."

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Carter said that NBA commissioner Adam Silver's treatment of the issue will be key to ensuring the continued league sponsorship of companies like Anheuser-Busch.

"Commissioner Silver has to come out and be very decisive about what the course of action will be," said Carter. "I don't want anything to affect the NBA brand or the brand of basketball, and the Clippers story is clearly doing that right now."

—By CNBC's Adam Molon. Follow him on Twitter at @CNBCMolon.

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