Skip to main content

ESPN's Simmons on NBA contraction: "Welcome to the No Benjamins Association"

In a piece cleverly headlined Welcome to the No Benjamins Association, ESPN columnist Bill Simmons points to the parlous economic future faced by the National Basketball Association (NBA).

He notes that, at previous All-Star Games, the topics were various:
This season? We talked about money. Constantly. We didn't even know about the line of credit on the horizon; that didn't leak until the Monday after the All-Star Game. (On Thursday, we learned that 12 teams will accept the league's offer to borrow $200 million from JPMorgan Chase and Bank of America, with between $13 million and $20 million available to each team...) We knew about layoffs of employees within the league and various franchises. We knew various local and national sponsors were bailing, most notably car companies and major banks (two staples for the NBA). We knew certain franchises were losing significant wads of money and reacting accordingly.

Attendance down

Simmons points to the common dodge in which attendance means tickets distributed, not gate count, and the fewer attendees, the lower the ancillary income:
How did we get here? The economy turned in August, well after deposits had been sent in for season tickets, courtside seats and luxury suites. The league would love for you to believe that attendance hasn't been affected, but the NBA's official tally counts only total "customers," counted as paid tickets, comps (seats given to celebrities, sponsors, friends of the team or whomever, a number that can be fudged any way you want), discounted tickets and no-shows. The numbers don't reflect any falloffs with parking money, concessions, merchandise and restaurant/bar revenue around arenas... They definitely don't reflect aggressive giveaways like Chicago's recent buy-one-get-one-free promotion or Memphis' Pepsi Family Plan Pack (four tickets, four Pepsis and four hot dogs for $48)... So, yeah, attendance is "up" 1.9 percent, as this recent Sports Business Daily story would lead you to believe. But not really. Especially when you include Seattle's move to a sold-out arena in Hijack City and how it skewed the overall numbers.

Hijack City? That's Oklahoma City, a location Simmons cannot bear to pronounce.

Suites lost?

The financial upside in the Nets' move from East Rutherford to Brooklyn would come significantly via naming rights/sponsorships and luxury suites, but Simmons has a warning about the latter:
Here's a little game to play during your next NBA outing: Look around for how many suites are dark. (You'll notice them specifically in the corners or behind the baskets.) A dark suite means either that nobody bought it or that somebody did buy it for the season, then made the decision, "Screw it, let's save the $1,200 [or whatever the number is] on food and drink and not give tonight's suite tickets to anyone." (Note: Only a handful of NBA teams control the concessions in their arenas.) That makes the less desirable suites somewhat of a sunk cost -- those companies can't get the money back for the season, but at the very least, they won't lose more money on that purchase. What will happen next season? They just won't buy the suite.


Home court disadvantage

Simmons cites a phenemonon I noticed in December when I saw New York Knicks fans dominate the crowd in the Izod Center:
That has been a recurring theme in general: Fans of popular visiting teams (Boston, New York, Cleveland, the Lakers) overpowering home arenas of unpopular teams. Flick around on any busy NBA night, and you'll see a staggering number of empty seats between the baskets in the first 15 rows in Miami, Memphis, New Jersey, Charlotte, Indiana. … I mean, we're a few weeks away from the NBA adopting Vegas' current policy of closing off as much of the blackjack area as possible so the open tables seem crowded.

Which teams will move?

Simmons counts the Nets among the teams most likely to move:
Franchise Hot Potato hinges on five factors in all, although only three need to be in play. You need a team with a dwindling fan base and/or bailing sponsors and suite/courtside customers. (I count 11: Indiana, Memphis, Milwaukee, Sacramento, New Jersey, New Orleans, Miami, Orlando, Minnesota, Charlotte and Philly.) You need a team trapped in an aging stadium that can't drum up local money for a new one. (I count three: Sacramento, Jersey and Milwaukee.) You need an owner who purchased his team because he was worth a ton of money ON PAPER … only now, he's worth significantly less and might even be worth $10 for all we know. (Consensus candidates for this list: Phoenix, Hijack City, Jersey, Memphis, Indiana, Atlanta, Milwaukee, Charlotte … and, surprisingly, Sacramento and Cleveland.) You need cities with NBA-ready, modern arenas either finished or about to be finished that would love nothing more than stealing a team. (Definitely Kansas City, Anaheim, San Jose, Louisville, Tulsa and Pittsburgh; possibly Columbus, St. Louis; and just for fun, let's throw in Montreal and London.) And you need a struggling team that can actually extricate itself from its lease.

Note that Brooklyn's not on the list, because the arena doesn't exist yet. Simmons predicts that several NBA franchises (guesses ranged from three to eight) will move cities, get sold or be taken over by the league.

He reflects on the Oklahoma City move:
The other 29 NBA cities learned an ominous lesson from SonicsGate: If you don't heed every arena-related wish of your team, no matter how insane or unrealistic those wishes are, then it might move and the commissioner's office will not protect you. As long as we have cities like K.C. and Anaheim waiting with open arms, teams will keep moving. And they will.

NHL troubles, and Newark

Other sports have it much worse, Simmons suggested, including baseball and hockey; in fact, one executive predicted "fifteen NHL teams would go under within the next two years (and was dead serious)."

What if the New Jersey Devils are in trouble? Surely the city of Newark, which wants those rent payments at the Prudential Center, would want to ensure that the Devils thrive, and that another team joins them to fill open dates.

Attendance promotions

Simmons takes a lighthearted view toward ticket promotions, with his top example from the Yormark twins:
When I write that NBA teams are unleashing aggressive promotions on their fans to boost attendance numbers, I'm not exaggerating. My favorites from this season: Snowbird Ticket Exchange (Nets): New Jersey season-ticket holders can swap their tickets for a pair of tickets for the NHL's Panthers if they're ever in Florida, and vice versa. No, really.

Will Nets be sold?

On NetsDaily, NetIncome (aka Bobbo) observes that the players will lose out if they resist owners' attempts to control costs, and teams will move.

He suggests that the Brooklyn arena has a decent chance, but if developer Bruce Ratner can't get financing, he'll sell the team.

Comments

  1. Simmons misses a big point: If luxury suites and ad signage are selling like crap, the marginal value of a new arena goes way down. So while tons of teams are losing money, yes, there's less reason to believe that moving to, say, Tulsa (?!?) will help their bottom line much, no many how luxurious the place is.

    If I had to bet, I'd say more likely is that teams start looking for bailouts from their current landlords, as the Pacers are already doing. (Despite the fact that they already pay no rent and keep all arena revenues.)

    ReplyDelete

Post a Comment

Popular posts from this blog

Barclays Center/Levy Restaurants hit with suit charging discrimination on disability, race; supervisors said to use vicious slurs, pursue retaliation

The Daily News has an article today, Barclays Center hit with $5M suit claiming discrimination against disabled, while the New York Post headlined its article Barclays Center sued over taunting disabled employees.

While that's part of the lawsuit, more prominent are claims of racial discrimination and retaliation, with black employees claiming repeated abuse by white supervisors, preferential treatment toward Hispanic colleagues, and retaliation in response to complaints.

Two individual supervisors, for example, are charged with  referring to black employees as “black motherfucker,” “dumb black bitch,” “black monkey,” “piece of shit” and “nigger.”

Two have referred to an employee blind in one eye as “cyclops,” and “the one-eyed guy,” and an employee with a nose disorder as “the nose guy.”

There's been no official response yet though arena spokesman Barry Baum told the Daily News they, but take “allegations of this kind very seriously” and have "a zero tolerance policy for…

Behind the "empty railyards": 40 years of ATURA, Baruch's plan, and the city's diffidence

To supporters of Forest City Ratner's Atlantic Yards project, it's a long-awaited plan for long-overlooked land. "The Atlantic Yards area has been available for any developer in America for over 100 years,” declared Borough President Marty Markowitz at a 5/26/05 City Council hearing.

Charles Gargano, chairman of the Empire State Development Corporation, mused on 11/15/05 to WNYC's Brian Lehrer, “Isn’t it interesting that these railyards have sat for decades and decades and decades, and no one has done a thing about them.” Forest City Ratner spokesman Joe DePlasco, in a 12/19/04 New York Times article ("In a War of Words, One Has the Power to Wound") described the railyards as "an empty scar dividing the community."

But why exactly has the Metropolitan Transportation Authority’s Vanderbilt Yard never been developed? Do public officials have some responsibility?

At a hearing yesterday of the Brooklyn Borough Board Atlantic Yards Committee, Kate Suisma…

Barclays Center event June 11 to protest plans to expand Israeli draft; questions about logistics

At right is a photo of a poster spotted in Hasidic Williamsburg right. Clearly there's an event scheduled at the Barclays Center aimed at the Haredi Jewish community (strict Orthodox Jews who reject secular culture), but the lack of English text makes it cryptic.

The website Matzav.com explains, Protest Against Israeli Draft of Bnei Yeshiva Rescheduled for Barclays Center:
A large asifa to protest the drafting of bnei yeshiva in Eretz Yisroel into the Israeli army that had been set to take place this month will instead be held on Sunday, 17 Sivan/June 11, at the Barclays Center in Downtown Brooklyn, NY. So attendees at a big gathering will protest an apparent change of policy that will make it much more difficult for traditional Orthodox Jewish students--both Hasidic (who follow a rebbe) and non-Hasidic (who don't)--to get deferments from the draft. Comments on the Yeshiva World website explain some of the debate.

The logistical questions

What's unclear is how large the ev…

Atlanta's Atlantic Yards moves ahead

First mentioned in April, the Atlantic Yards project in Atlanta is moving ahead--and has the potential to nudge Atlantic Yards in Brooklyn further down in Google searches.

According to a 5/30/17 press release, Hines and Invesco Real Estate Announce T3 West Midtown and Atlantic Yards:
Hines, the international real estate firm, and Invesco Real Estate, a global real estate investment manager, today announced a joint venture on behalf of one of Invesco Real Estate’s institutional clients to develop two progressive office projects in Atlanta totalling 700,000 square feet. T3 West Midtown will be a 200,000-square-foot heavy timber office development and Atlantic Yards will consist of 500,000 square feet of progressive office space in two buildings. Both projects are located on sites within Atlantic Station in the flourishing Midtown submarket.
Hines will work with Hartshorne Plunkard Architecture (HPA) as the design architect for both T3 West Midtown and Atlantic Yards. DLR Group will be t…

Forest City acknowledges unspecified delays in Pacific Park, cites $300 million "impairment" in project value; what about affordable housing pledge?

Updated Monday Nov. 7 am: Note follow-up coverage of stock price drop and investor conference call and pending questions.

Pacific Park Brooklyn is seriously delayed, Forest City Realty Trust said yesterday in a news release, which further acknowledged that the project has caused a $300 million impairment, or write-down of the asset, as the expected revenues no longer exceed the carrying cost.

The Cleveland-based developer, parent of Brooklyn-based Forest City Ratner, which is a 30% investor in Pacific Park along with 70% partner/overseer Greenland USA, blamed the "significant impairment" on an oversupply of market-rate apartments, the uncertain fate of the 421-a tax break, and a continued increase in construction costs.

While the delay essentially confirms the obvious, given that two major buildings have not launched despite plans to do so, it raises significant questions about the future of the project, including:
if market-rate construction is delayed, will the affordable h…

Not quite the pattern: Greenland selling development sites, not completed condos

Real Estate Weekly, reporting on trends in Chinese investment in New York City, on 11/18/15 quoted Jim Costello, a senior vice president at research firm Real Capital Analytics:
“They’re typically building high-end condos, build it and sell it. Capital return is in a few years. That’s something that is ingrained in the companies that have been coming here because that’s how they’ve grown in the last 35 years. It’s always been a development game for them. So they’re just repeating their business model here,” he said. When I read that last November, I didn't think it necessarily applied to Atlantic Yards/Pacific Park, now 70% owned (outside of the Barclays Center and B2 modular apartment tower), by the Greenland Group, owned significantly by the Shanghai government.
A majority of the buildings will be rentals, some 100% market, some 100% affordable, and several--the last several built--are supposed to be 50% market/50% subsidized. (See tentative timetable below.)

Selling development …

For Atlantic Yards Quality of Life meeting Sept. 19, another bare-bones agenda (green wall?)

A message from Empire State Development (ESD) reminds us that the next Atlantic Yards/Pacific Park Quality of Life Meeting--which aims to update community members on construction and other issues--will be held:
Tuesday, September 19, 2017 @ 6 pm
Shirley Chisholm State Office Building
55 Hanson Place
1st Floor Conference Room
Brooklyn, NY 11217 The typically bare-bones, agenda, below, tells us nothing about the content of the presentation. One thing to look for is any hint of plans to start a new building on the southeast block of the project by the end of the year.

If not, ESD is supposed to re-evaluate a longstanding request from project neighbors to move back a giant wall encroaching on part of Dean Street between Carlton and Vanderbilt avenues. It's said to enclose construction activity, but, in recent months, has significantly served to protect worker parking.

Also, by the way, if you search for Atlantic Yards on Google or the ESD website, it leads to this page for the Atlantic Ya…