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NY Post: Nets/arena losses $50M-$100M in current fiscal year; CNBC quotes NBA rival: "marketing truly superseded substance.”

The playoffs sure would've helped, since sellout playoff games would've brought more revenue to both the Brooklyn Nets and the Barclays Center operating company.

 The New York Post's Josh Kosman and Brian Lewis reported 4/30/22, based on anonymous sources rather than publicly available documents, that the arena and team were losing "between $50 million and $100 million combined in the 2021-22 season." 

That's a pretty wide range. But it's certainly plausible, especially since the arena alone lost--counting the need for bond payments--some $42 million (my math) in FY 2021, requiring Joe Tsai, the billionaire owner of the team and the arena operating company, to put up $52 million to backstop arena operations. 

That fiscal year was before the 2021-22 season and fiscal year. Last November, ratings agency Moody's said the arena had "strong recovery prospects," but was "exposed to rebuilding its forward events calendar." 

And, reported the Post, "there are projected to be just 147 Barclays Center events for the year ending in June, compared to 194 in the last pre-pandemic year."

Indeed, as I separately reported today, the $18 million in cash receipts (not profits) in the first quarter of calendar year 2022 (Q3 of FY 2022), is way behind the $50.8 billion in the first quarter of calendar year 2022. 

But consider that the value of Tsai's investment has increased over what he paid, according to Sportico's assessment last December, and an expansion to add two NBA teams, plus a new media deal, should further boost the value of the team.

From the Post

In Nets, Barclays Center’s losses are costing Joe Tsai millions, the Post keyed its report to the departure of arena/team CEO John Abbamondi, who was to leave at the end of the season.

Beyond the arena's challenges in filling dates, Tsai has the second-largest payroll in the NBA, which means "roughly $100 million in luxury tax" around the league.

From the Post:

Though the Nets set records for attendance, ticket revenue and sponsorships under Abbamondi, Tsai’s huge investment led him to believe a good showing should have been great. The Taiwan-born billionaire felt Abbamondi was not innovative or data-driven enough, sources close to the situation told The Post.
That means a huge payday for a jersey patch, a reported $30 million from sponsor WeBull, but not--so far--any renegotiation of arena naming rights.

Attendance and revenue

Though the Nets earned an average of $2.1 million per game, fourth in the league, according to the Post, that was more than double the last pre-pandemic season, though the Knicks--with higher prices and more capacity--clocked $3 million per game.

This passage is striking: "The Nets, after giveaways, sold about 15,000 tickets a game, a 26 percent improvement over 2018-19." 

Note that, according to ESPN attendance figures, which cover tickets distributed (not sold), nor gate count, the Nets this past season averaged 17,354 fans, or 97.9% capacity, which is 17,732 (though standing-room tickets pushed the total to 18,169, according to NetsDaily).

Remember, as I wrote last October, the first eight Nets home games each featured 1,000 free tickets, thanks to jersey patch sponsor Webull. And there were obviously other giveaways.

Of course, the Nets had their well-described struggles, including the unvaccinated Kyrie Irving's inability to play home games (and, until the Nets relented, away games), Kevin Durant's injuries, James Harden's dissatisfaction, and the trade for star Ben Simmons, who never suited up.

What else went wrong?

From the Post:
It’s all up to interpretation, a source who works closely with the Nets said, on whether Abbamondi did well under the circumstances or is to blame for the team’s financial performance not living up to very high expectations.

That means the Nets should've increased revenue even more--really?--and held more non-Nets events, which is of course subject to pandemic restrictions and health challenges/concerns from performers. And, of course, there's a new competing arena for the Islanders at Belmont Park.

Staff departures

The Post reports that, to "get the Nets more data-driven," the team tracked those who opened emails, which then generated sales calls. Then "Abbamondi pushed out 18 longtime Nets salespeople," given that more people  bought tickets online.

But new technology allowed managers to listen in on sales calls--common in lower-level sales, right?--which one former executive called "big micromanaging.”

Impact of team dysfunction

In a separate article 4/28/22, CNBC's Jabari Young reported Brooklyn Nets’ playoff flops have created business concerns for the heavily hyped NBA franchise, citing the search for its third CEO in three years, which lead "rival" executives to call the organization “dysfunctional.”

Then again, another executive said the team had enough stars to add more business partners, though no one mentioned a new arena deal.

"This year, the Nets should also recover from a $25 million decline in revenue due to the pandemic," Young reported, though revenue does not mean profit, especially given a $90 million luxury tax that could increase next year.

Another tough blind quote about the team's disappointments:
“We all got mesmerized by it,” one NBA executive said of the Nets. “And we were incorrect in assessing those guys as a real threat to the title. It’s the perfect example where marketing truly superseded substance.”
The article also cited the "power vacuum" indicated by Irving's post-playoffs quote that he'd work with with fellow star Durant, GM Sean Marks, and Tsai to rebuild the team, ignoring Coach Steve Nash and the future CEO.

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