Bill Would Raise Franchise Value of Sports Teams
August 2, 2004
Bill Would Raise Franchise Value of Sports Teams
By DUFF WILSON
The New York Times
Published: August 2, 2004
Owners of professional sports teams stand to gain tens of millions of dollars in the values of their franchises because of a single sentence buried deep in a sprawling piece of export-tax legislation now before Congress.
The benefit to sports franchises is contained in a small part of an enormous bill introduced originally to settle a trade dispute with the European Union. But the legislation has since become laden with add-ons for interests ranging from tobacco farmers to Oldsmobile dealers.
The bill, which has been approved by both houses, is expected to go before a conference committee to resolve the differences. The final version is expected to be put before both houses in September, when Congress returns from vacation.
The proposed change affecting sports team owners, which has been passed without hearings or debate, would allow the owners to write off the full value of their franchises over 15 years. Existing law generally limits teams to writing off only the value of player contracts over three to five years. The biggest items subject to the expanded write-offs would be television and radio contracts.
The benefits would apply to newly acquired assets, so current owners would not actually pocket more money, but they could command higher prices when they sell.
Two directors at Lehman Brothers, the investment bank, who specialize in sports banking and tax policy said the change could add 5 percent to sports franchise values. If so, it would represent a $2 billion windfall to franchise values, which totaled $41 billion in 2002, according to Forbes magazine.
“They’re doing very well in this,” said Robert Willens, a managing director at Lehman Brothers.
The Jets, who were sold for $635 million in 2000, might be worth an additional $55 million under the proposal, Willens estimated. Robert Caparole, chairman of Game Plan, a Boston investment bank, which has been an adviser on the sale of many professional sports teams, agreed that the change could boost purchase prices.
The proposed change appeared in separate export-tax measures in the Senate in October and in the House of Representatives in March. The two bodies recently passed markedly different versions of the bill, which grew to 960 pages, but each version has the identical language that is of special interest to owners of professional teams.
The prime sponsors, Senator Charles E. Grassley, Republican of Iowa, and Representative William M. Thomas, Republican of California, did not return telephone and e-mail requests for comment last week.
Willens predicted the bill would become law in October.
Benefits for Larger Teams
Write-offs like those proposed for franchise owners sometimes reduce taxes not only on sports teams but also, in some cases, on owner’s other earnings. For example, if Donald Trump bought the Yankees for $1.5 billion, he could deduct about $100 million per year for 15 years on profits not only from the Yankees but from his other companies that made a profit.
The precise effects of the measure cannot be calculated without knowing each team’s financial details and each owner’s tax situation. But in general, according to nine professional sport bankers, accountants and lawyers interviewed last week, the new law would be of greatest benefit to sports teams with higher values, longer-term ownership plans, and larger broadcast contracts.
“The benefits are going to vary depending on how long you’re going to hold the team and the size of the deal,” said Michael E. Rapkoch, president of Sports Value Consulting in Dallas.
Shawn McCarthy, director of the League of Fans, a program of the Center for Study of Responsive Law, which was founded by Ralph Nader, said, “Naturally I’m skeptical when professional sports leagues are lobbying Congress for changes that benefit them financially, especially considering all of the taxpayer handouts these leagues have received over the past 15 or so years.”
A report by the Congressional Joint Committee on Taxation says the measure would actually increase taxes for sports owners by $381 million over 10 years. Mark Prater, chief tax counsel for the Senate Finance Committee, said in an e-mail message that the change would also end disputes over allowable write-offs between the teams and the Internal Revenue Service.
“There’s nothing nefarious about it,” Prater wrote.
Rob Vandenheuvel, a spokesman for the House Ways and Means Committee, said the proposal had popped up twice before in other bills “as a revenue raiser.”
Lower Taxes for Owners
But most of the sports bankers and accountants interviewed said they did not believe sports owners in the long run would pay more taxes under the proposal.
Major League Baseball actively lobbied for the change and the National Football League supported it. The National Basketball Association and the National Hockey League were neutral. Willens said he was mystified by the Congressional claim that the measure would raise taxes on sports owners. Robert E. Leib, former lead tax partner in the professional sports industry group at Arthur Andersen, said that claim was misleading. Leib said the proposal would generally lower taxes and raise the capital values of sports franchises, especially in the N.F.L.
“The effect will differ franchise to franchise and league to league,” added Leib, a lawyer and accountant who founded The Leib Group in Wisconsin. He also represented the Boston developer Frank McCourt in his $430 million purchase of the Los Angeles Dodgers this year.
Leib warned, however, that minor leagues of professional sports may find the new tax rule “very disadvantageous.” He said that the minors had virtually no media contracts to figure into the proposed new accounting and that they probably would pay more taxes.
Owners of professional sports team have been trying for years to persuade the I.R.S. to allow them to amortize their increasingly lucrative media deals, but the I.R.S. has ruled that those are continuing assets, and nondeductible under special tax rules established in 1993 for professional sports.
The Canadian Press, a news service, has estimated that the average N.F.L. team received $77 million a year from national broadcast rights in 2002. The average in the N.B.A. was $26 million, according to the agency, Major League Baseball teams averaged $12 million and N.H.L. teams averaged $5 million. The bill under consideration would allow them to write off the value of those broadcast rights from their income, while stretching out the write-off on player contracts.
Values Up by 5 Percent
“At the end of the day, this should add to the current value of franchises,” said Aaron Barman, a sports investment banker with the public finance department at Raymond James & Associates.
Allen R. Sanderson, associate chairman of the economics department at the University of Chicago, who teaches and writes about sports economics, agreed.
“This is clearly something that would benefit them,” Sanderson said.
Willens said the change would add about 5 percent to major league franchise values “across the board.”
Sal Galatioto, the managing director in charge of Lehman Brothers’ sports advisory and finance group, said that the change would lower taxes for most franchises, depending on their size and other factors, and that it would add up to 5 percent in value.
“But personally, I don’t think it’s going to be enough to change someone’s determination on whether or not they want to buy one of these things,” Galatioto added. He is an adviser on the pending sale of the Nets this month and said that the deal should not wait for a possible tax law change in October.
“Deals that are done are going to have to close now,” Galatioto said.
An Expensive Disagreement
The change also means that owners are certain to save millions of dollars on the teams of lawyers and accountants they have had to hire to battle the I.R.S. in the continuing argument over franchise write-offs.
When Bud Selig, now commissioner of Major League Baseball, bought a bankrupt Seattle team and moved it to Milwaukee in 1970, he assigned $10.2 million of the $10.8 million price to player contracts and wrote off the salaries. The I.R.S. challenged the move. Selig won the dispute in court, but in 1976 Congress limited player contracts to 50 percent of franchise values.
In 1993, Congress set a simple 15-year rule for most businesses to write off intangible assets, but it carved out a special exclusion for sports franchises that allows them to more quickly write off player contracts.
In 1997, the I.R.S. set up a team of specialists based in Florida to scrutinize a wide range of professional sports’ tax claims, especially the write-offs. Audits, appeals and litigation followed.
An I.R.S. spokesman, Anthony Burke, declined to comment last week on the proposal before Congress.
“If it’s pending legislation, we don’t discuss it,” he said.
Congress’s stated reason for changing the sports tax law now, in addition to raising taxes, is to end argument between owners and the I.R.S. “The committee believes expending taxpayer and government resources disputing these items is an unproductive use of economic resources,” the House report on the legislation says.
The Senate version of the bill passed by a vote of 92-5 on May 11. The House version, called the American Jobs Creation Act of 2004, passed by a vote of 251-178 on June 17, but not before a raucous debate on other special-interest items in the bill.
Representative Pete Stark, Democrat of California, called the bill “a Christmas tree of special interest giveaways.”
Some Call It Pork
Representative Tammy Baldwin, Democrat of Wisconsin, complained, “Instead of creating jobs, it creates tax cuts for cruise-ship operators, foreign dog-race gamblers, Nascar track owners, whaling tribes, bow-and-arrow makers, Chinese ceiling-fan manufacturers, Oldsmobile dealers, and beer and liquor wholesalers.”
Republicans disagreed. Representative Thomas, chairman of the Ways and Means Committee, said the measure would primarily create jobs and incidentally fix some unfair or out-of-date tax laws.
“People deserve a day at least once every 20 years,” Thomas said in floor debate, “to try to correct the horrible, horrible condition of many areas of our economy under our current tax code.”
Nowhere in the hours of debate in the House or the Senate was a word uttered about professional sports franchises.
Greg Aiello, N.F.L. vice president for public relations, said the sports write-off proposal was not controversial because the government said it would collect more taxes and the I.R.S. and owners would spend less money fighting each other.
“It was agreed it makes sense to simplify the code and eliminate all the hassles,” Aiello said.
The N.B.A. remained neutral on the bill, said league spokesman Mike Bass, because some N.B.A. owners would benefit from the change, but others would not, because they had larger ratios of player contracts already being written off.
William H. Schweitzer, a managing partner of the Washington law firm of Baker & Hostetler, promoted the tax change on Capitol Hill for Major League Baseball. Schweitzer said the change would have a slightly positive impact, varying from club to club, by eliminating I.R.S. disputes, without significantly changing taxes. He said baseball had not specifically evaluated how the new tax law would affect franchise values.
The Deal Life: The Sporting Club
March 21, 2005
The deal life: The sporting club
by Douglas McCollam
Published: March 21, 2005
Gulfstream gassed up in a hanger at Teterborough? Check. Triplex apartment with Central Park views? Right. Standing invites to Davos and Renaissance Weekend? Been there, done that.
Dealmaking success opens lifestyle options that didn’t exist when you spent weekends crunching numbers. But with all the status that comes from scoring that architectural gem in Sagaponack or building a state-of-the-art wine cellar, comes a challenge: How do you do engage in these new high-end pursuits as shrewdly as you built your career? How do you juggle consultants, buyers and other experts who swarm as you enter the auction house, check out the yacht, the watch, the Jasper Johns? To provide a guide to these new, often challenging, worlds, we offer a new monthly column, The Deal Life.
We begin with sports franchises ? sports being the second language of finance. Sports may not be as esoteric as, say, art, but for all the fantasies of that championship ring, it’s full of perils. With the Rotisserie baseball draft upon us and National Football League free agency in full swing, what fan hasn’t pulled apart and reassembled rosters? Indeed, that sense of sports infallibility may be the would-be owners’ greatest peril.
Because it’s not easy. What does it take to go from club level seating to the owner’s box? Start with a call to Sal Galatioto, a specialist in buying and selling sports franchises. Galatioto recently left Lehman Brothers Inc., where he was a managing director and head of the sports advisory and finance group, to form his own shop, Galatioto Sports Partners.
Galatioto says the first question is, naturally, which sport? The price of admission varies greatly. “If it’s the NFL, you’re talking about the Rolls Royce of sports leagues.” For the league to even consider you for a majority-ownership position, Galatioto says, you probably need to be worth $100 million or more. NFL franchises are highly valued because of the league’s lucrative television contract and generous profit sharing among big and small market teams. The league also has a hard salary cap and doesn’t give players guaranteed contracts, keeping labor costs predictable and under control (unlike the shuttered National Hockey League). Consequently, even small-market teams fetch huge prices. The recent bid by Arizona businessman Reggie Fowler for the Minnesota Vikings came in around $625 million. Current Vikings owner Red McCombs bought the team in 1998 for $245 million.
While NFL franchises run above half a billion dollars, the buy-in for other leagues can be much lower. Galatioto advised Walt Disney Co. on its sale of baseball’s Anaheim Angels for $180 million in 2003. Last year The Mouse also dumped its NHL team, The Mighty Ducks of Anaheim, for $75 million. Galatioto also advised Robert Johnson, founder of Black Entertainment Television, in his $300 million purchase of a new National Basketball Association franchise in Charlotte, N.C., in 2002.
Steve Greenberg, a managing director at Allen & Co., also specializes in sports deals. He says finding investors is as much art as science. When he was retained to help sell the Milwaukee Brewers, he received calls from more than 50 investors interested in bidding, many of whom he knew from past deals. But the winner turned out to be unfamiliar, Los Angeles businessman Mark Attanasio. “That’s why I always return calls,” Greenberg says. “You never know who’s going to jump in.”
Greenberg says the stereotype of the owner as a dilettante has given way to a new generation focused on bringing sophisticated management to teams. While most bidders start with a passion for their sport, they still expect a solid return. Major League Baseball purchased the Montreal Expos three years ago for $125 million and, after moving them to Washington, will probably sell them for more than $300 million. “That’s a pretty good return,” he says. Franchise investments, however, are illiquid. “You can’t risk capital that you might need to pay the mortgage,” he says.
If buying a majority stake in a team is too dear, investors can look to join as minority partners. Take heed. New York Yankees’ owner George Steinbrenner once remarked there was nothing more limited than a limited partner in a sports franchise.
“Actually, George never said that,” says Marvin Goldklang, a Yankee limited partner who attributes the remark to another Yankee LP. He admits his investment doesn’t give him much say, but says it has “high psychic income.” He and his kids have ridden in every Yankee championship parade. “Not many people, regardless of social or business standing, have had an experience like that,” he says.
Not all partnerships are as autocratic as the Yankees. Bob Caparole, chairman of Game Plan LLC, a Boston-based investment bank specializing in sports, helped assemble a group to buy the Boston Celtics in 2002.
The deal featured a multilevel structure. Four investors who put in $25 million or more became “managing members” which involved direct participation in running the team. Those on the lower tier got ownership perks, such as premium seating, the right to attend some practices and occasional travel with the team.
Of course, if you really want to run the franchise, there’s always the minor leagues. That’s how Goldklang got into baseball. In the early ’80s he was a Cahill, Gordon & Reindel LLP partner and invested a few thousand dollars in a client’s team. Though he got back “10 cents on the dollar” in that investment, he now owns three minor league teams.
These days buying a healthy Class A minor league baseball team will set you back at least several million dollars, says Sherrie Myers, co-owner of Professional Sports Marketing, which owns the Lansing Lugnuts and Montgomery Biscuits. Add another million or so for capital improvements, marketing and lease payments, if your team doesn’t have its own facility. A good double-A ball club goes for close to $10 million. A triple-A franchise in a big market can fetch $20 million.
While this is a rough guide, Goldklang notes franchise value has more to do with the health of the market and its facility deal than baseball skills. The market for minor league franchises has generally exploded, in part because minor league baseball teams are actually profitable (unlike many of their major league affiliates). On the downside, minor league owners don’t get to sign prospects or manage personnel ? the parent club supplies and pays for players and managers. On the upside, you don’t have to meet that payroll. Teams manage facilities, sell tickets and concessions, handle marketing and merchandising. In fact, while corporations have been dumping major league franchises, minor league baseball has attracted corporate buyers, such as Mandalay Sports Entertainment, which owns five minor league teams, and cabler Comcast Corp., which owns three, plus a team in the American Hockey League.
If football is your game, check out the Arena Football League. Franchises cost between $15 million and $20 million, and the AFL has a national television contract with NBC. “We think the AFL has a chance to break out,” says Greenberg, who has advised several AFL franchises.
Still, the primary motivation is rarely about making money. “It’s more of vanity purchase,” says Michael Rapkoch, whose Dallas-based firm, Sports Value Consulting LLC, worked on the buy side of several team sales. Galatioto agrees: “I don’t see buying a franchise if you don’t love the game. It will probably appreciate, but it’s still more about the psychic rewards.”
Copyright 2005, The Deal, LLC. All Rights Reserved
Owning Lightning Isn’t About Profits
August 10, 2007
Owning Lightning Isn’t About Profits
By MICHAEL SASSO
The Tampa Tribune
Published: Aug 10, 2007
TAMPA – Two-hundred million bucks for a perennial money-loser?
This week, accountants and ordinary sports fans alike must be scratching their heads at the buyout of the Tampa Bay Lightning. The exact sale price hasn’t been disclosed, but Lightning President Ron Campbell suggested Thursday that $200 million, the figure often cited in news reports, is at least in the ballpark.
For that princely sum, the new owners get a team that, the Lightning have said, has lost more than $60 million since the current owners, Detroit-based Palace Sports & Entertainment, bought the team eight years ago.
Although the price doesn’t appear to make financial sense, investment bankers who help sell sports teams said money-losing teams actually are pretty good long-term investments. Professional sports teams are so few and far between, they have good “scarcity value,” said Sal Galatioto, the New York-based investment
banker who worked on the Lightning deal. That helps drive up their value, particularly among millionaires who want a little prestige.
Meanwhile, losing money on a sports team can help a businessman offset profits from other businesses, reducing his taxes, said Richard Powers, an assistant dean at the University of Toronto’s school of management.
In the end, owning a team like the Lightning may be less about profits and more about limiting your losses until you can sell it for a windfall. On Tuesday, a group called Absolute Hockey Enterprises announced they are buying the Lightning, although the deal still needs approval from the National Hockey League. The group, which has said it plans to keep the franchise in Tampa, also would gain several benefits beyond
the team itself.
The Lightning, which are among the leaders in the NHL in home attendance, also have a lease agreement to use St. Pete Times Forum without paying rent. The new ownership group also would be entitled to the revenues from concerts and other events at the Forum. In addition, it would pick up 5.5 acres of land on each side of the arena, assessed for tax purposes at $17.5 million.
Also, the Lightning have won several enviable concessions from Hillsborough County over the years, including being exempt from property taxes and being reimbursed by the county for up to $35million in improvements to the Forum.
With all its advantages, though, the Lightning still manage to lose millions of dollars each year. The team lost about $13 million in its 2007 fiscal year, Campbell estimated. Revenues from Lightning tickets and music concerts, arena concessions, and TV and radio broadcasts came to about $88 million, but expenses hit about $102 million, he said.
In paying about $200 million, the new owners are doubling the $100 million that current owner Palace Sports paid for the team in 1999.
Is the team really worth it?
The Tribune was unable to reach two of Absolute Hockey’s partners, real estate investor Jeff Sherrin and
Hollywood producer Oren Koules, on Thursday. Earlier this week, however, Sherrin said he and the group’s
third partner, Doug MacLean, were watching the Stanley Cup on television together in Columbus, Ohio, when the idea of purchasing a team together suddenly dawned on them.
They may also be thinking of the potential returns that even a money-losing team can mean in the long run.
Craig Leopold, owner of the Nashville Predators professional hockey team, paid an expansion fee of $80
million in 1997 to found the team. The city of Nashville, Tenn., picked up $25million of that cost. Recently, he was able to sell the club to a group of businessmen for $193 million – even though he said he lost $70 million running the team over the years.
The returns can be even greater in the National Football League, which is on far better financial footing
than the NHL.
Michael Rapkoch, a Dallas-based consultant who helps sports teams with their valuations, said the most
extreme case might be that of Billy Joe “Red” McCombs. The Texas businessman bought the Minnesota Vikings football team for about $250 million in 1998, and sold it seven years later for more than $600
Rapkoch said hockey has its flaws, including the lack of a valuable television contract. Still, the sport may be on the upswing. After the NHL lockout during the 2004-05 season, which canceled the season, the players and team owners created a new salary cap that should keep player salaries from spiraling out of
control, Rapkoch said. The salary cap for the upcoming season is $50.3 million for each team.
“I think the key in hockey is buy it smart, don’t overpay, be smart in what you pay your players, and you
have a really good chance to make a return,” Rapkoch said.
Curveball for Cubs bidders
October 8, 2007
Curveball for Cubs bidders
By Gregory Meyer
Published: Oct. 08, 2007
The effort to sell the Chicago Cubs has slowed to a crawl as the team’s owner brainstorms ways to reap maximum cash from its pinstriped asset.
Despite Tribune Co.’s official line that the Cubs will be sold in the fourth quarter, the team looks likely to stay in Tribune hands well into next year — possibly through opening day. That means a new owner will have to manage a team with a roster assembled by corporate brass long maligned, but recently cheered, for payroll decisions.
The slowdown has mystified bidders, who months ago submitted applications required by Major League Baseball, but since have heard little. “It’s maddening,” says an adviser to one bidding group who, like most involved with the sale, requested anonymity. Offering documents won’t be ready for weeks, a source familiar with Tribune’s planning says.
But Tribune is in no hurry as it decides whether to sell the team, Wrigley Field and other assets in one piece or individually.
“There’s no hard deadline, and I don’t think that the interest in this asset is going to dwindle,” says the person familiar with the planning.
“The groups that you’ve heard publicly that are interested in this deal, none of them have said, nor do I expect they will say, ‘If I can’t own it by April 1, 2008, I’m taking my money and I’m going home.’ ”
If offering documents don’t go out until next month, it’s unlikely the team will be sold until spring, says Michael Rapkoch, president of Sports Value Consulting LLC in Dallas, who is not involved in the sale.
Tribune is going private in an $8.2-billion buyout led by Chicago billionaire Sam Zell. The deal — announced April 2, the Cubs’ 2007 opening day — hinges on the sale of the Cubs and Tribune’s 25% stake in cable channel Comcast SportsNet Chicago. A Tribune spokesman says the fourth-quarter Cubs sale date hasn’t changed.
The team, the cable stake, and Wrigley Field and affiliated real estate could be shopped separately, the person familiar with the planning says. Such a move could lure new bidders daunted by the price tag for the whole package, estimated at $600 million to $1 billion.
For instance, Comcast SportsNet might attract buyers who don’t want to own a baseball team. The regional cable network is co-owned by Tribune, the Chicago Blackhawks, the Chicago Bulls, the Chicago White Sox and Philadelphia-based Comcast Corp. The other partners would have first dibs if Tribune relinquishes its stake, but regional sports networks elsewhere have attracted interest from outside the sports world.
The person familiar with the planning projects the sum of the parts could yield a 20% to 50% premium over selling the assets together. “It changes the calculus,” this person says.
“I’m not sure how you’re going to get 20% to 50% more,” Mr. Rapkoch says. “Potentially, you can get more value if you split up the regional sports network and kept the team and stadium together.”
Splitting the Cubs and Wrigley is unwise, an investment banker not involved in the sale says.
“It’s a much more attractive asset if the stadium is with the team,” says Jeff Phillips, managing director at Stout Risius Ross Inc. in Virginia.
Still, splitting up the assets could create new competition for bidding groups thought to have the upper hand, including one led by Chicago private-equity executive John Canning Jr., a friend of MLB Commissioner Bud Selig. Mr. Canning didn’t return calls.
With almost $13 billion in debt after going private, Tribune will be under pressure to sell. But the first payment on its buyout debt doesn’t come due until December 2008. Last week, it announced the receipt of $286 million in a tax settlement, money that could lessen the load.
In the meantime, Tribune is exploring ways to create new revenue streams to help fund the Cubs’ player payroll, which was a team record $110 million this year.
“We want to raise revenue so we can continue to put a winning product on the field and do everything we can to enhance Wrigley Field and to make a long-term commitment to this ballpark,” Cubs President John McDonough said in a recent interview. He declines to discuss the sale.
©2007 by Crain Communications Inc.
Loonie Economics in the N.H.L.
January 27, 2008
Loonie Economics in the N.H.L.
By JEFF Z. KLEIN and LEW SERVISS
The New York Times
Published: January 27, 2008
A decade ago, the N.H.L.’s Canadian franchises were the league’s economic weak links, with two teams leaving for the United States and at least half the remaining six close to insolvency.
Now the skate is on the other foot. The Canadian clubs are worth more on average than the league’s American clubs, according to estimates by Forbes magazine. And two Canadian teams are being sought for purchase by billionaires — not to move them to the American Sun Belt, but because they are so lucrative where they are in Canada.
The turnaround is largely because of the weakened United States dollar, which was worth about $1.50 Canadian throughout the 1990s and well into the 2000s, but is now at par. The increased relative value of the loonie, and the salary cap instituted in 2005 after the N.H.L. lockout, effectively increased the values of Canadian teams by nearly half.
The rank of the average Canadian team in Forbes’s annual N.H.L. franchise valuation estimates was 21st
among the league’s 30 teams in 2001. It was 13th last year, and is 11th this year.
“The exchange rate and the salary cap have both kept down costs for Canadian teams, because salaries are
paid in U.S. dollars,” said Drew Dorweiler of the Montreal valuation and accounting firm Wise, Blackman.
“That has led to a big and relatively sudden boost for Canadian teams.”
According to Michael Rapkoch, the president of Sports Value Consulting, a Dallas company that advises
professional franchises, “In Canada, the fan base will always fill the arenas and get you big television ratings.” That level of interest, he said, enables Vancouver, Calgary, Edmonton and Ottawa to draw large audiences on club-owned pay-per-view channels and even for special showings in movie theaters.
All this has led to big purchase bids. The Russian-Canadian steel magnate Alex Shnaider offered a reported
$1.75 billion to buy the Toronto Maple Leafs and their properties earlier this month. Also this month, Daryl Katz, the chairman of one of North America’s largest drugstore chains, offered $188 million to buy his hometown Edmonton Oilers, a team that 10 years ago was hours from moving to Houston.
The new financial strength of Canadian teams is a far cry from the days when the Quebec Nordiques moved
to Colorado and the Winnipeg Jets to Phoenix, and the N.H.L. instituted subsidies to Canadian teams to
make up for currency differences.
Last year, the Nashville Predators came close to moving to Hamilton, Ontario. Dorweiler said that the next
time an American Sun Belt team is in financial trouble, the talk may not be of a move to Kansas City or
Seattle. “A place like Hamilton or Winnipeg is now a very viable option,” he said.
A Neely in Training
Milan Lucic, the Boston Bruins’ punishing rookie left wing, was 8 when Cam Neely, the Bruins’ punishing
right wing, played his last game for Boston in 1996.
Lucic, now a 6-foot-4, 220-pound 19-year-old, has enough offensive flair to go with his crash-and-bang instincts to remind many of a young Neely.
“He thinks about being physical first and foremost,” said Neely, a Hall of Famer and now a Bruins vice president, “and that’s the path that I had when I played.”
Lucic, the Vancouver-born son of Serbian immigrants, is third among rookies in hits (the Rangers’ Brandon Dubinsky leads) and has gotten into nine fights. He has only five goals and six assists, but Lucic (pronounced LOO-cheech) has shown enough potential to be chosen for the Young Stars game during the All-Star weekend.
He has also had the luxury of participating in a power-forward master class on the ice with Neely. They have worked on “coming down the wall, protecting the puck, driving to the net,” Lucic said, adding, “He’s been good with getting me to relax and play my game.”
No Crosby, Extra Malkin
It is a Pittsburgh Penguins tradition — when a star goes down, another steps forward.
A decade ago, it was Jaromir Jagr picking it up for Mario Lemieux. These days, it is Evgeni Malkin holding the fort while Sidney Crosby takes six to eight weeks to recover from a high ankle sprain.
At 21, Malkin is a year older than Crosby and has a Calder Trophy as rookie of the year, an honor that eluded Crosby. The Penguins had won 9 of 10 games before Crosby was injured Jan. 18 and had climbed the Atlantic Division standings to challenge the Devils for first place.
In the first two games after Crosby was sidelined, Malkin had an empty-net goal in a 2-0 victory over Montreal and two goals and an assist in a 6-5 shootout loss to the Washington Capitals
The Capitals star Alex Ovechkin, who eclipsed Crosby for the Calder in the 2005-6 season, also had two goals and an assist. But he was the one left sprawled on the ice when he tried to put a hit on Malkin behind the Washington net.
Penguins Coach Michel Therrien said that Malkin was the team’s leader offensively and that “he wants to bring his teammates to another level with the loss of Sid.”
Clash of Philosophies
Last week’s biggest showdown in the N.H.L. was on Wednesday in Anaheim, where the defending Stanley Cup champion Ducks played host to the team that is currently in first place over all, the Detroit Red Wings.
It was a clash of two big rivals — the Ducks were the league’s second-hottest team over the previous month, after Detroit, and of course they beat the Wings in last season’s playoff semifinal, four games to two.
But it was also a clash of philosophies. The Ducks, whose roster is overwhelmingly Canadian and American, lead the league in fights this season and did so last season. Detroit, most of its key players European, has had the fewest fights over the last two seasons.
On Wednesday, the Red Wings jumped to a 2-0 lead on goals by Brian Rafalski and Valtteri Filppula, then held on to win, 2-1. They even fought the Ducks twice.
“It’s like you want to show who’s the bigger, better team,” Detroit forward Johan Franzen said afterward. “We stood up good. It was a lot of fun.”
Enthusiasm Cools for Hockey’s Foray Into the South
February 10, 2008
Enthusiasm Cools for Hockey’s Foray Into the South
By JEFF Z. KLEIN and LEW SERVISS
The New York Times
Published: February 10, 2008
Almost 20 years ago, the N.H.L. embarked on a master plan to expand into the Sun Belt. The idea was to add teams in nontraditional hockey markets and, in the jargon of the day, increase the N.H.L.’s television footprint and make it popular across the United States.
But today many of the league’s Sun Belt teams are enduring attendance problems, plummeting local television ratings and talk of franchise shifts. With N.H.L. clubs thriving in Canada and in traditional hockey cities in the northern United States, the league’s longstanding Southern strategy may have run its course.
“It was a noble experiment,” said Drew Dorweiler of the Montreal valuation and accounting firm Wise, Blackman. “But five years from now, I can see quite a few Sun Belt teams relocating. At the least, the league will be short a couple.”
Evidence that Southern teams are struggling abounds. Local TV viewership for the Atlanta Thrashers in the first half of the season was down 50 percent from last year and in Dallas, Tampa Bay and Phoenix it has dropped by 29 to 35 percent. (It rose by 50 to 114 percent in Detroit, St. Louis and Minnesota.)
The Nashville Predators came close to leaving town recently after missing several attendance benchmarks associated with their arena lease. And according to Forbes magazine, four of the league’s five least valuable
franchises are in southerly locales: Nashville, Washington, Phoenix and Atlanta.
“There have been problems with a lot of teams in nontraditional markets since the late ’90s,” Dorweiler said. “Except for brief periods when a Florida or a Carolina has a Stanley Cup run, there just isn’t enough interest
in the sport to make it work. There comes a point when the losses become too much, and teams are put on the block.”
The Dallas Stars are the only warm-weather team estimated by Forbes to be in the N.H.L.’s top quarter in terms of value.
“The Stars have done a great job of attracting people, largely because of the experience at the arena,” said Michael Rapkoch, president of Sports Value Consulting, a Dallas company that advises professional franchises. “They’ve found the right niche for hockey in Dallas. Other teams in nontraditional hockey markets have to find what fits their particular market.”
Paul Kelly, president of the N.H.L. Players’ Association, said the players want all the clubs to be financially healthy, but “if a franchise is not doing all it can do to maximize revenue, that obviously affects the players.”
“My own belief,” he said, “is that if a team from a nontraditional market has to relocate, it should go to one of
the Canadian cities, like Winnipeg, where it would have the fan support and the revenue streams to do well.”
With the N.H.L. turning increasingly to a receptive audience in Northern Europe, what happens with its efforts to “grow the sport” in America’s southern latitudes remains to be seen.
“We missed the boat 20 years, 25 years ago,” the N.H.L. great Marcel Dionne said last week, speaking on the
Toronto radio station Fan 590 of the league’s efforts to sell hockey in the South. “Keep on trying all you
want,” he added. “It ain’t happening.”
Another Sabre Departing?
The Buffalo Sabres, still reeling from the loss of last year’s co-captains Daniel Brière and Chris Drury, are on
the verge of losing another valuable player: Brian Campbell, their All-Star defenseman.
Campbell, who will be an unrestricted free agent at the end of the season, stopped contract renegotiation talks with the Sabres last month. The club faces a choice as the Feb. 26 trading deadline looms: either deal the swift-skating and clean-playing 28-year-old Campbell for top prospects now, or keep him for a playoff push.
The ninth-place Sabres — last year they won the Presidents’ Trophy for finishing first in the Eastern Conference in the regular season — are just beneath the playoff cutoff in the muddled East.
In Buffalo, the club is taking withering criticism for losing a roll call of top players to free agency — Brière,
Drury, J. P. Dumont, Jay McKee and others — without getting anything in return.
General Manager Darcy Regier said last month that he did not intend to trade Campbell, but he has since acknowledged that a trade is a possibility, and on Friday he told the Buffalo radio station WGR that Feb. 26 is
“an important threshold date that we cannot ignore.”
The Ottawa Senators, atop the Eastern Conference all season, slumped badly over the past few weeks in the absence of their injured stars Daniel Alfredsson and Dany Heatley. Things seemed dire for the Senators on Tuesday when they lost, 4-3, to Montreal, allowing the Canadiens to pull within 1 point of them.
But Heatley returned Thursday, scoring twice in a 5-4 victory over Florida. And Alfredsson — who has missed six games — was expected to return for Saturday night’s rematch with the Canadiens in Ottawa.
The Senators and the Canadiens will meet three more times before the schedule ends.
For Bragging Rights
The Beanpot tournament is one of those Boston traditions — like the tea party — that doesn’t have much practical value, but it is loaded with symbolism.
The clash of four Boston N.C.A.A. teams comes each year on the first two Mondays of February. Boston University and Boston College have dominated, but there is good news this year for the other two teams, Harvard and Northeastern. Boston University and Boston College met in the first round. B.C. won, 4-3, last Monday before a capacity crowd at TD Banknorth Garden. Attendance exceeded that at any of the three N.H.L. games of the evening, in Newark, in Denver and even a sellout in Edmonton.
Nathan Gerbe’s two goals — one that sent the game to overtime, the other that won it — stopped Boston University’s run of 11 Beanpot titles in 13 years. Boston College, ranked ninth in the nation, will play Harvard, No. 15, on Monday for the 56th Beanpot championship.
Zell pitches an August sale
May 3, 2008
By Mike Colias and Ann Saphir
Published: May 03, 2008
Sam Zell has set a fresh deadline of late August to sell the Chicago Cubs — a time frame that could strengthen his hand if the North Siders emerge as late-season playoff contenders.
The Tribune CEO told about 100 employees during an April 24 meeting that he believed the team would be sold within 120 days, according to a person who attended. That is a more-precise timeline than Mr. Zell has given publicly and implies he would unload the team at a time when many prognosticators think it will be in the thick of a pennant chase.
A viable chance to bring Cubs fans their first World Series championship in 100 years could raise the bar for would-be buyers.
“If he’s brought you 80% of the way toward getting to the World Series, you’d pay extra,” says Michael Rapkoch, president of Sports Value Consulting LLC in Dallas, who is not involved in the sale.
That could give Mr. Zell incentive to stick to his timeline. But he’s struck out on previous self-imposed deadlines, originally saying the team would be sold by the end of 2007, and then by opening day of the 2008 season.
Regardless of the standings, late summer could prove a difficult time for Mr. Zell to shed the team. His proposed sale of Wrigley Field to the state in a separate deal has put the franchise’s future on hold. (He’s expected to receive a revised proposal from state officials this week.) Even if the ballpark’s fate were sealed quickly, experts and prospective bidders believe the process would extend past the season.
A Tribune spokesman won’t confirm Mr. Zell’s 120-day target. “Could it be done in 120 days? Sure. Could it take longer? Sure,” he says. Mr. Zell is focused on resolving the state deal and will move to “sell the team as soon as possible.”
One prospective bidder, who declines to be named because of Major League Baseball’s sensitivity on the bidding process, says he would rather buy a team on the verge of a championship than a newly minted World Series victor, which he likens to buying at the peak. “If they’ve won the World Series,” he says, “whoever comes in has got nowhere to go but down.”
Jaded Cubs fans may dismiss postseason talk, but one Las Vegas sports book pegs the Cubs’ odds of winning the World Series at 13-to-2, fourth best among 30 teams.
Cuban’s Cubs ownership: not so crazy
July 27, 2008
Cuban’s Cubs ownership: not so crazy
By Mike Colias and Ann Saphir
Published: July 27, 2008
In the extra-inning saga that is the Chicago Cubs sale, Mark Cuban has been cast in the part of the feared slugger left sulking on the bench.
Pundits predicted Major League Baseball club owners would never allow the bombastic billionaire into their exclusive club. But Tribune Co. CEO Sam Zell seems determined to get Mr. Cuban in the lineup as he vies to get more than $1 billion for the storied franchise. And observers are no longer so quick to count out Mr. Cuban — especially after Mr. Zell’s decision last week to rebuff the initial bid of the perceived front-runner, Madison Dearborn Partners LLC Chairman John Canning.
“Cuban’s the lead guy now,” says one bidder.
It’s in Mr. Zell’s interest to prop up Mr. Cuban’s viability with the league if for no other reason than to force other bidders to maximize their offers for the team. Should his final offer prove to be an outsized, ego-driven bid — a possibility that has other bidding groups wringing their hands — it could leave the 29 team owners hard-pressed to turn down the brash owner of the Dallas Mavericks NBA franchise. Some media reports peg his offer at $1.3 billion, highest among remaining bidders.
“If he’s got a bid that’s a couple hundred million more than the next person, it’s hard to see how (the owners) go back to the Tribune and say, ‘We just don’t like the guy,’ ” says a Major League Baseball source.
The prospect of a big offer from Mr. Cuban is tantalizing to Mr. Zell, a fellow billionaire who, like Mr. Cuban, eschews neckties and loves to play the outsider.
Mr. Zell showed little regard for Chicago’s business establishment with his swift snub of Mr. Canning’s group. But pitching Mr. Cuban would test Mr. Zell’s sales skills with powerful league owners who are as accustomed to getting their way as Mr. Zell is to getting his.
The lobbying already has begun.
“There have been ongoing conversations with the league and there’s reason to believe that, as long as the structure of the transaction is sound, he would be a viable and acceptable candidate,” says a person involved in the sale.
Mr. Cuban, who turns 50 on Thursday, is among six bidders who made the first cut last week in Tribune’s auction of the Cubs and Wrigley Field, a person from one bidding group says. All remaining bids top $1 billion, this person says. Tribune also has bids to buy Wrigley separately.
WHO GETS TO SEE THE CUBS’ FINANCES?
Others cleared to get a closer look at the Cubs’ finances include Thomas Ricketts, who runs a Chicago bondtrading business and whose family founded Ameritrade; Sports Acquisition Holding Corp., a publicly traded company formed this year expressly to buy a sports team and whose board includes Hank Aaron and Jack Kemp; and Michael Tokarz, chairman of Purchase, N.Y.-based investment fund MVC Capital Inc. Tribune’s investment bankers urged Mr. Tokarz to team up with Sports Acquisition to make a single bid. Real estate exec Hersch Klaff and investor Leo Hindery also made the cut, a published report says.
Cubs Chairman Crane Kenney declines to comment on the bidding process. Messrs. Cuban and Canning also decline to comment.
Major League Baseball owners can be a fickle lot. In 2002, the Boston Red Sox sold to the third-highest bidder for $700 million (still an MLB record) in a deal critics claim was orchestrated by the league. The highest bid was $790 million. In 1980, league owners shot down real estate developer Eddie DeBartolo’s bid for the White Sox under pressure from then-MLB Commissioner Bowie Kuhn, clearing the way for current owner Jerry Reinsdorf. (Mr. Reinsdorf, who also owns the Bulls, voted against Mr. Cuban joining the ranks of NBA owners.)
But owners voting on any bidder Tribune offers up would have reason to look beyond personality. A big bid would instantly bump up the values of all pro baseball teams.
“The Cubs bid certainly can raise the value of the other franchises dramatically,” says Maury Brown, president of Portland, Ore.-based Business of Sports Network. He says Mr. Cuban has a chance to get approved, although “Canning fits the mold much better in terms of the league’s culture.”
Mr. Canning, who still could jump back in by upping his bid, had been viewed as a favorite ever since Mr. Zell signaled his intent more than a year ago to sell the Cubs. He is part owner of the Milwaukee Brewers and a friend of Major League Baseball Commissioner Bud Selig’s. His bidding group is a who’s who of Chicago’s business elite, including former Aon Corp. Chairman Patrick Ryan and McDonald’s Corp. Chairman Andrew McKenna.
In contrast, Mr. Cuban is best-known for his courtside rants against referees and opposing players. The NBA has fined him more than $1 million for infractions ranging from critical entries on his blog to running onto the court to break up a fight. He was fined $500,000 for saying of an NBA official: “I wouldn’t hire him to manage a Dairy Queen.” In a public relations stunt, Mr. Cuban later spent several hours serving Blizzards to throngs of fans at a Dairy Queen in Coppell, Texas.
Mr. Cuban, who made his fortune as a dot-com entrepreneur, has virtually no Chicago ties. A Pittsburgh native who attended Indiana University, he now lives in Dallas. If he emerges with the top bid, Mr. Zell probably will urge team owners to overlook the volatile personality in light of Mr. Cuban’s success in Dallas and popularity among fans and players.
“I’m gonna pull out all the stops” to buy the Cubs, Mr. Cuban said in a radio interview in June.
Since paying $280 million for the team in 2000, Mr. Cuban has “turned the Mavs around from league laughingstock to one of the NBA’s premier franchises,” Forbes magazine said last year. It pegs the team’s 2007 value at $461 million and Mr. Cuban’s personal wealth at $2.6 billion.
In 2006, he inked a promotion with American Airlines to hand out 20,000 free round-trip airline tickets for fan appreciation day. The Maverick’s locker rooms are the NBA’s poshest: Each player’s locker is equipped with the equivalent of a home-theater system.
His success in Dallas “will help lure Major League Baseball to say, ‘You’ve done a great job with the Mavericks and we think you’ll do a great job with the Cubs,’ ” says Michael Rapkoch, president of Sports Value Consulting LLC in Dallas, who is not involved in the sale.
“I would put my money on Cuban,” he says. “I think if he wants it, he will get it.”
©2008 by Crain Communications Inc.
How the BW Power 100 Was Put Together
October 2, 2008
How the BW Power 100 Was Put Together
Our 35 expert panelists, and the fans, considered 300 candidates
Published: October 2, 2008
Measuring individual power in a global industry as diverse as sports isn’t easy. But for the second year in a row, a panel of experts has done just that for BusinessWeek (MHP), ranking the 100 most powerful Americans in sports. This year, we also asked them to do something else: choose the industry’s 25 most influential people in sports outside the U.S.
Readers will recognize many of the anointed, such as Tiger Woods, who hopped past NFL Commissioner Roger Goodell for the top spot, or Michael Phelps, who shows up this year as No. 44. You know others by the company they keep–outfits like ESPN (DIS), Nike (NKE), Sports Illustrated, and Nascar. Others aren’t household names, but they are true power brokers in sports, such as Theodore J. Forstmann, chairman and chief executive of IMG (16), James Nash, a Bank of America (BAC) managing director (64), and Joseph S. Blatter, president of international soccer’s FIFA, who came in first in our Global 25.
Our 35 panelists (listed alphabetically to the right) include athletes, executives, marketers, writers, and academics. To get the ball rolling, we supplied the judges with 300 names and asked them for their top 20. We also gave them some guidance, suggesting they make their picks based on how each individual rates vs. his or her peers; how much money each controls, generates, or influences; and the breadth and staying power of their impact. And as we did in 2007, we turned to you, the fans, to cast votes on BusinessWeek.com. In effect, you were our final panelist.
After you’ve perused our lists, we want you to come to BusinessWeek.com and play Monday morning quarterback. What did we get wrong? What did we get right? Here’s your chance to sound off on who you think are the sports industry’s most powerful people.
The Power 100 Panelists: Erin Andrews, ESPN reporter; Brian Billick, former NFL coach; David Carter, professor of sports business, USC; Fabrizio Castellucci, assistant professor, organizational behavior, Insead; Simon Chadwick, professor of sport business strategy and marketing, Coventry University; Cris Collinsworth, retired NFL wide receiver, football analyst; Donald Dell, retired tennis player, sports agent; Landon Donovan, U.S. soccer player; Carl Edwards, Nascar driver; Janet Evans, Olympic swimming legend; George Foster, management professor, Stanford; Marc Ganis, president, SportsCorp; Darren Gough, English cricketer; Stephen Greyser, professor emeritus, Harvard Business School; Ted Gumbart,
commissioner, Atlantic Sun Conference; Mia Hamm, U.S. soccer great; Hank Haney, professional golf instructor; Rick Horrow, CEO, Horrow Sports Ventures; Jelena Jankovic, Serbian tennis player; David Martin, president, Interbrand; Paul Meulendijk, head of sponsorship, MasterCard (MA) Europe; Seamus O’Brien, CEO, World Sport Group; Neal Pilson, consultant, former president, CBS (CBS) Sports; Michael Rapkoch, founder and president, Sports Value Consulting; Scott Rosner, lecturer, University of Pennsylvania Wharton School; Darren Rovell, sports business writer, CNBC; Fire Joe Morgan blogging trio Michael Schur, Dave King, and Alan Yang; Philip Schwalb, founder and CEO, Sports Museum of America; Paul
Swangard, managing director, Warsaw Sports Marketing Center; Tom Verducci, senior writer, Sports Illustrated (TWX); Dick Vitale, basketball broadcaster, ESPN; Chris Webber, retired NBA all-star; Dan Wheldon, Indy Racing League driver; and the fans.
SEC suit endangers Cuban’s Cubs pursuit
November 17, 2008
SEC suit endangers Cuban’s Cubs pursuit
By Ann Saphir
Published: Nov. 17, 2008
(Crain’s) — Charges that Dallas Mavericks owner Mark Cuban engaged in insider trading, allegedly using confidential information on a stock sale to avoid more than $750,000 in losses, could strike him out of the running to buy the Chicago Cubs.
The Securities and Exchange Commission filed a civil lawsuit against Mr. Cuban on Monday in federal court in Dallas. The SEC says that in June 2004, Mr. Cuban was invited to participate in a stock offering by Mamma.com Inc., terms of which he agreed to keep private.
The SEC says Mr. Cuban knew the shares would be sold below their market price and a few hours after receiving the information told his broker to sell all shares in the search-engine company.
In a statement on his blog, Mr. Cuban called the government’s claims “false” and without merit and vowed to fight them.
The accusation could hurt Mr. Cuban’s chances as bids for the Cubs approach a Nov. 26 deadline, some observers say. Mr. Cuban reportedly already faced an uphill battle for the approval he would need from two-thirds of the current Major League Baseball owners, in part because of his bombastic style.
The insider-trading complaint “could very well drive a stake into the heart of his attempts to acquire the franchise,” says Frank Murtha, a sports consultant who also teaches at Northwestern University. “It will probably give Major League Baseball owners pause, or an additional excuse or reason not to approve him in an ownership capacity.”
The complaint also could make it more difficult for Mr. Cuban to raise money from partners, who might be hesitant to back someone accused of fraud, Mr. Murtha says.
Still, at least one analyst said Mr. Cuban should not be counted out. Mr. Cuban is one of five bidders in the final round of Tribune Co.’s Cubs auction, and the media company may be loathe to eliminate him on the basis of the complaint, says Michael Rapkoch, president, of Dallas-based Sports Value Consulting.
“Just because you are accused or charged doesn’t mean you did something wrong,” Mr. Rapkoch says. “Let’s see how he responds to it. Let’s not jump on Mark too much.”
“This matter, which has been pending before the commission for nearly two years, has no merit and is a product of gross abuse of prosecutorial discretion,” Mr. Cuban said on his blog. “I am disappointed that the commission chose to bring this case based upon its enforcement staff’s win-at-any-cost ambitions. The staff’s process was result-oriented, facts be damned. The government’s claims are false and they will be proven to be so.”
Nascar’s Sponsors, Hit by Sticker Shock
December 14, 2008
Nascar’s Sponsors, Hit by Sticker Shock
By SUSANNA HAMNER
The New York Times
Published: December 14, 2008
At the Indianapolis Motor Speedway last July, the parking lot was filled with excited Nascar fans chugging beer, roasting pigs and exchanging drivers’ statistics.
But in an office inside the racetrack, the scene was far from celebratory. Executives of the Big Three Detroit automakers told Brian France, the Nascar chief executive and chairman, that they planned to cut their investments in the sport sharply in the 2009 racing season.
Since then, Chevrolet has said it is cutting back on advertising and sponsorship deals with 12 tracks. Ford is trimming Nascar spending by 20 percent, and Chrysler by 30 percent.
The economic crisis is hitting industries around the globe, and the pain is beginning to filter down into
professional sports. Many sports may face smaller crowds and shrinking player salaries, with, of course, exceptions for stars like the Yankees pitcher C. C. Sabathia.
General Motors said in September that it wouldn’t buy any advertising time for the Super Bowl in February; earlier this year, it withdrew Cadillac’s sponsorship of the Masters golf tournament. It has also terminated its $7 million-a-year endorsement deal with Tiger Woods.
The National Basketball Association and the National Football League recently announced staff layoffs, and the Dallas Cowboys and the New York Giants and Jets of the N.F.L. are still trying to find companies willing to pay to put their names on stadiums under construction. Honda said recently that it was dropping out of Formula One and selling its team.
“The economic crisis is going to hit all sports. Every team should operate under the worst-case-scenario assumption,” says Michael E. Rapkoch, founder of Sports Value Consulting, based in Dallas. “Many sponsors’ contracts that are up for renewal this year or next probably won’t be renewed. For the long-term contracts, I won’t be surprised if they try to get out of them through bankruptcy or some other way.”
Nascar, which relies on corporate sponsorships more than other sports, is particularly vulnerable. In the 2008 racing season, 400 companies put up more than $1.5 billion to sponsor races, cars and drivers. About a third of that was provided by auto companies, which are now struggling with the economic downturn, if not possible bankruptcy.
Automakers aren’t the only ones pulling out. Longtime sponsors including Kodak, Texaco and Domino’s Pizza – are abandoning Nascar. Even Craftsman, the Sears brand that has been the title sponsor of the truck series sinceit started in 1995, is cutting its ties to the truck series, though it remains Nascar’s official tools brand.
And this summer, Chip Ganassi Racing shut down the team of Dario Franchitti, the 2007 winner of the Indianapolis 500, after being unable to find a sponsor for his car following his switch to Nascar. “Many of the major sponsors pulling back have been involved in our sport for decades,” Mr. France says. “They’re making cuts, and we’re affected.”
It’s a big comedown for Nascar, which has had sizzling growth over the past decade. A multibillion-dollar TV
deal in 2001 helped propel it from a regional sport that drew most of its revenue from sales of tickets and
merchandise into a popular franchise with a national following.
Its top-level Sprint Cup series of 36 races draws an average of 7.8 million television viewers a race, making Nascar the second-most-watched sport, behind professional football. It can attract crowds — more than
200,000 for the Daytona 500 and Talladega — that exceed those for a Super Bowl, a World Series game and an N.B.A. finals game combined. Over all, Nascar sanctions more than 1,200 races at 100 tracks in the United States and abroad.
This year, revenue was approximately $3 billion, a 50 percent increase from 2001. That’s better than the N.F.L., the N.B.A. and the National Hockey League in the same period. Only Major League Baseball grew faster. “If you go back to 1998, there is no question Nascar has shown the biggest growth,” says David Broughton, research director of SportsBusiness Journal.
But the sport will not see those kinds of impressive numbers next season.
TV viewership has slipped in the past year or so, and so has attendance. The truck series’ official sponsor is now Camping World, the largest retailer of recreational vehicle equipment. Nascar gave the retailer a substantial discount: Camping World will pay approximately $2 million a year, half of what Craftsman is estimated to have paid. While it is gaining as well as losing sponsors, Nascar expects its take from title sponsorships to drop 20 percent next year, to about $150 million.
“We told them what we could afford,” says Marcus Lemonis, chief executive of Camping World. “They were very sensitive to us and offered an appropriate price for the market conditions.”
This kind of cost-cutting has forced Nascar teams and racetracks to lay off about 600 employees. Storied teams with revered family names like Dale Earnhardt Inc. and Petty Enterprises have no choice but to merge with other teams. Some teams unable to land a season’s worth of sponsors, like Doug Yates and the Wood Brothers, can afford to participate in only a handful of races.
The boom years made drivers a little spoiled, with many flying in private planes and riding in luxury motor
coaches, says the longtime racer Jeff Burton. But, he added, “this is our wake-up call.”
BRIAN FRANCE, the Nascar chairman, was not born in a car, but he might as well have been. His grandfather,
Bill France Sr., known as Big Bill, founded Nascar in 1948. His father, Bill Jr., who took over in 1972, built the sport into a behemoth.
Bill Jr. took Brian to races when he was still in diapers. At 14, Brian shocked fans when he marched down the stairs of a race control tower to announce to the press that the driver Donnie Allison was the winner of that day’s race, seconds after his father had flagged Richard Petty the champion. After poring over the scorecards for several hours, officials ruled the teenager correct.
When Brian France began his first season as chairman and chief executive in February 2004, he faced many doubters inside and outside the sport. Fans viewed him as a Hollywood elitist who couldn’t relate to them, the polar opposite of his father, a “good old boy” who would hang out with drivers on the track.
But the number of skeptics dwindled after Mr. France, 46, transformed a sport once fueled by moonshine and
bravado into a technologically sophisticated entertainment juggernaut.
DirecTV and Sirius Satellite Radio have channels that allow fans to watch or hear a race from the vantage point of a single driver. Fans can follow a race on their computers through TrackPass RaceView on Nascar.com, using an advanced 3-D feature that lets them track a car or change the perspective. At the track, Sprint FanView is a next-generation scanner offering live audio and video, as well as real-time stats. And Sprint Cup Mobile lets fans listen to the radio broadcast over the phone.
In 2007, Mr. France persuaded Toyota to compete in the Nationwide Series and the Sprint Cup. The move to bring in a big-spending foreign competitor was controversial at the time, but it could help Nascar weather the economic storm now that the Detroit Big Three are pulling back so many dollars.
Perhaps Mr. France’s greatest achievement occurred, when, as executive vice president, he persuaded track
owners to consolidate their broadcast rights in 2001, striking a six-year, $2.4 billion deal with Fox and NBC. Viewers across the country could see the sport every week. In 2005, Mr. France reached a $4.48 billion, eightyear TV deal with ABC-ESPN, Fox, the Speed Channel and TNT.
Intent on keeping his sport blazing hot, he took a risk that may be contributing to the sport’s current woes. Determined to make Nascar mainstream, he promoted it in a way that may have alienated some of his core fans, industry experts say.
Rustic racetracks have been replaced with stadiums filled with skyboxes for the wealthy and corporate sponsors. The tough, good-old-boy personalities of the drivers Richard Petty and Dale Earnhardt have shifted to the cleancut, movie-star-handsome images of drivers like Jimmie Johnson and Carl Edwards. In 2003 the legendary Winston Cup Series title was bought out by Nextel, now Sprint Nextel, ending 32 years of the tobacco brand’s sponsorship.
“Brian comes across as somebody who wants to be known as a great C.E.O., like a Paul Tagliabue or a David Stern,” says David Poole, a journalist and co-author of “Nascar Essential: Everything You Need to Know to Be a Real Fan.” “He wants to talk about the sport’s marketing successes. The sport needs leadership in that area, but among those who live with grease under their fingernails, that goes over poorly.” Perhaps that’s why, this year, Nascar announced an effort to go back to its roots, including allowing drivers to express themselves.
Yet, to keep the sport growing, Mr. France needed to garner a wider audience in different demographic groups. More than half of Nascar fans earn less than $50,000 a year. As the economy worsens, many fans could have a hard time justifying plopping down $92, on average, each race weekend.
Mr. France’s most radical change to the sport — the “Car of Tomorrow” — has backfired. Concerned with safety, Mr. France in 2000 required all teams to start developing vehicles with such strict safety standards that drivers could survive crashes that would once have been fatal. He required that all teams drive such models exclusively by this year.
The move to create safer vehicles gained momentum when Dale Earnhardt, father of Dale Earnhardt Jr., was
bumped while rounding the final turn at the Daytona 500 in February, 2001; he slammed into a wall and was
The Car of Tomorrow was also intended to cut costs and level the playing field financially by requiring all teams to drive variations of the same car. But since its introduction last year, the car has pushed up costs just when revenue has been going down.
Tracks have different lengths, grades, shapes and layouts; in the past, large teams had about 20 cars that were used for varying conditions. But the gradual introduction of the new car forced teams to maintain old fleets and crews on top of new ones.
Mr. France acknowledges that costs have risen for some teams, but says that the new car should save teams
substantial money in the long run.
The worst problem, though, is that the Car of Tomorrow has made sponsors feel that their cars are indistinguishable. In the past, a Nascar Dodge did not look much like a Dodge on the street, but fans wouldn’t mistake it for a Ford Fusion. Now the cars look identical. Jimmie Johnson’s Chevy looks the same as Carl Edwards’s Ford, Kasey Kahne’s Dodge and Brian Vickers’s Toyota.
Car manufacturers say they are exploring ways to make their race cars look more like models in dealer showrooms.
WHEN the 2009 season starts in February, there are likely to be more empty seats in the stands, fewer cars on the tracks, blank spots on cars where logos used to flash, and smaller crews in the pits. Even Toyota is cutting its Nascar budget by 10 to 20 percent.
To avert a collapse of the sport, analysts say, Nascar must push through sweeping changes to its business model, like reducing sponsorship rates, cutting back the number of races and trimming the distances of some of them. For example, a handful of premier races would run the traditional 400 or 500 miles, but the rest would become 200- or 300-mile events.
Some analysts say Nascar should take cues from the N.F.L. and explore placing sponsor dollars in an official pool, with each team receiving an equal share. They also suggest a salary cap.
Mr. France has announced that there will be no preseason and in-season testing at its tracks next year, saving teams an estimated $1 million a car. He is also toying with the idea of cutting back the number of team members who can come to the races, which would save each team an additional $500,000.
In hindsight, Mr. France’s broadcast deal, which brings in about $500 million a year, may be the main thing
that saves Nascar from ruin.
“We’ve got to work hard and be willing to sacrifice,” says Jeff Burton, the driver. “We’re going to definitely struggle next year and the following.”
This article has been revised to reflect the following correction:
Correction: December 21, 2008
An article last Sunday about corporate sponsorships of Nascar racing misstated the role of Craftsman, the Sears brand. Although Craftsman is leaving Nascar’s truck series as a title sponsor in 2009, it remains Nascar’s official tools brand.
The article also referred incorrectly to layoffs in Nascar racing. Although teams and racetracks have laid off some employees, Nascar, the sanctioning body, has not.
Hockey: Balsillie is not the only Canadian in search of a team
June 23, 2009
By Vincent Brousseau-Pouliot
Published: June 23, 2009
There is not only Jim Balsillie in Canada that is attempting to buy a team of the national hockey League (NHL).
Several other Canadian millionaires currently watch books of American teams, according to a financial evaluator in the middle of professional sport.
According to Michael Rapkoch, President of the Sports Value Consulting firm ‘at least two or three Canadians’ watched NHL teams books lately. However, they did not contemplate moving a team in Canada without the endorsement of the NHL, as attempts to Jim Balsillie with the Phoenix Coyotes.
“People I know want to play under NHL rules”, said Michael Rapkoch, whose firm located in Texas has evaluated professional sports teams for 60 customers in the past 10 years. George Gillett particularly appealed to its services for the purchase of the 2001 Canadian.
Michael Rapkoch is expected to see several professional sports teams change hands within two years.
“The market will be very active in the next two years, he says.” I expect the sale of certain teams of the NHL, a team of football, basketball team and perhaps even of a major baseball team. Owners whose core businesses are not well will have to take a decision. What will do with their toys in professional sport? “Are they still able to fund their sports teams lost?”.
According to Forbes, the Nashville Predators Magazine sports blog, the St. Louis Blues and the Florida Panthers are more likely to have new owners in the coming months the NHL teams. In other professional sports leagues, owners of the L.a. Dodgers (baseball), the St. Louis Cardinals (baseball), the Memphis Grizzlies (basketball) (basketball) Indiana Pacers are also in a precarious situation.
According to Michael Rapkoch, potential buyers are reluctant to acquire an NHL team that loses money. According to Forbes, 12 of the 30 teams Bettman circuit made a deficit in 2007-2008. I spoke to people in Canada who want to buy a team, and’ the most important that they want to know is if team gains or loses money, said Michael Rapkoch. “Profits are the most important factor even if the selling price of a team is generally based on income.
There is also a difference between the price demanded by the owners and the prices offered by buyers. “This is the greatest divergence (market) currently, said Michael Rapkoch.” But there are at least two or three interested (Canadian) buyers. ‘Despite economic difficulties, hockey is always a sport too exciting to see in person and interesting to watch on television due to high definition.
Hockey fans hoping a seventh Canadian franchise – Winnipeg, Ontario or Quebec, the three markets likely-, Michael Rapkoch is not to give false hope. A Canadian owner more does not necessarily mean a Canadian team more. The evidence: Barrie Len, B.c., real estate magnate has bought half of the actions of the Lightning last
year while keeping the team in Tampa Bay.
“Many people want to buy an American team and move it to Canada, but teams have a long-term lease, and you cannot break a lease like that!”. You must also comply with the rules of the NHL, said Michael Rapkoch. It is as if you bought a McDonald’s at Hamilton and you want to move to Toronto City Centre because you would be more money. McDonald ‘s will not let you do. “It’s the same thing for an NHL franchise.”
The Molson have not paid too expensive
June 23, 2009
By Vincent Brousseau-Pouliot
Published: June 23, 2009
(Montreal) Experts are not surprised the sum of 500 million US disbursed to purchase Canadian.
Five hundred million US. That is a lot of money for a hockey team, but this record transaction does not surprised Michael Rapkoch, a financial evaluator who worked for George Gillett purchase Canadian in 2001.
“300 Million, I would have been surprised.”. 600 Million, I would have been surprised. “500 Million, but I am not surprised”, said the President of Sports Value Consulting, a firm of Texas who has evaluated professional sports teams for 60 customers in the past 10 years.
Of course, his former client who bought 80,1% Canadian and the Bell Centre to 275 millionsCAN in 2001, will be a considerable advantage to the closing of the transaction at the end of August. But still, Michael Rapkoch believes that the Molson family has not paid too expensive for the Montreal empire of George Gillett. “The Molson family has not paid too expensive, he said.” “It was a good idea value team since it was there involved long and that she knows well leaders, people quality as President Pierre Boivin and his right arm to finance, Fred Steer.”
The financial assessment of a sports team professional is not an easy task, warns Michael Rapkoch. “It is more an art than a science ‘, he said. An art that depends more on income and team borrowing capacity of simple multiplication of profits as any which listed public company. Profits are important, but buyers rely more on
income to determine the value of a team, said Michael Rapkoch.” “Evaluate several criteria, including duration of wells, demand for subscriptions, general economic data contracts market team.”
“The hockey and basketball, profits vary too much from year to year participation team in the series”, adds Marc Ganis, President of SportsCorp, a Chicago firm specialized in sports consultation.
Two experts, the best indicator of the value of a team remains its borrowing capacity. It’s kind of the value assigned to the team by financial institutions. “Good teams who lost money were sold at attractive prices because they had assets that allowed them to borrow”, explains Marc Ganis.
In the case of the Canadian NHL him to jeopardise half of its value (including building). According to our information, the Canadian and the Bell Centre are hypothéqués to height of approximately 250 million. According to this calculation, George Gillett could expect up to 500 millionsCAN for his hockey team.
Several factors contributed to mount bids for le Canadien, which would have been sold for approximately 575 millionsCAN (500 million US). “As of Montreal, Canadian teams that transcend their sport, are found not often on the market, said Marc Ganis.” “It is therefore necessarily added value to acquire the quenching of the Canadian team.”
Between BCE and Quebecor fierce competition in the telecommunications sector has also played a role in the negotiations. “There is an additional price for preventing a competitor to buy”, said Montreal Economist Peter Emmanuel Paradis, the group analysis firm.
George Gillett could get even more money for his hockey team if the credit market is was not tightened since summer 2007. “In a better economic environment, the team could be sold more expensive, said Marc Ganis.” “Maybe even 100 million more dear.”
Paradoxically, accessibility reduced credit has been one of the reasons that forced George Gillett to dispose of the Montreal Canadiens. The American businessman experiencing problems of liquidity with Liverpool FC, his team soccer in England. Mr. Gillett and Tom Hicks partner must renegotiate debt 350 million pounds sterling
(660 millionsCAN) in July.
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When it comes to buying a football team, it looks like slim pickings for Majestic Realty’s Ed Roski, experts say
June 19, 2010
By James Wagner
The San Gabriel Valley Tribune
Published: June 19, 2010
INDUSTRY – Much has changed since local billionaire Ed Roski Jr. embarked on his most recent quest to bring professional football back to the Los Angeles region.
He flexed his political muscle, fighting back two lawsuits with an unprecedented state bill, which gave his $800-million, 75,000-seat stadium full approval to build in Industry.
Now, Roski, CEO and Chairman of Majestic Realty Co., however, is trying to pin down at least one of seven moving targets: an NFL team.
Buying a team is no easy task, said Michael Rapkoch, founder and president of Dallas-based Sports Value Consulting, LLC, who has advised professional teams.
“It’s very hard,” he said. “First, it has to be for sale. Second, you have to agree on the prices.”
That’s all in addition to financing, league approval, local TV contracts and more, he said.
And of the seven teams Roski has targeted, some are trying their best to stay in their cities.
Majestic Realty Vice President John Semcken, who oversees the project, did not return messages seeking comment.
In the Bay Area, the San Francisco 49ers cleared a needed hurdle to stay in the region. Santa Clara voters approved a stadium package on June 8 that included $114 million in public contributions for 68,500-seat stadium projected to open for the 2014 season.
The team sunk about $4 million into a campaign to promote the deal.
“Our priority always was to stay in the Bay Area. We’ve been in the San Francisco-Bay Area for 60 years,” team spokeswoman Lisa Lang said. “So with this vote, we we’ve been able to remove a major hurdle in the Santa Clara stadium site and are very pleased with the outcome.”
The 49ers have had no recent contact with the Roski or any of his representatives, Lang said.
The 49ers stadium plan allows for a second team.
A Santa Clara stadium could be shared with the Oakland Raiders, another Roski-targeted organization.
A Raiders spokesman respond to a request for comment.
In St. Louis, minority owner Stan Kroenke said in April he wanted to keep the team in St. Louis, quelling rumors the team would return to L.A.
He bought 40 percent of the Rams in 1995 as they were leaving for St. Louis. But majority owners Chip Rosenbloom and Lucia Rodriguez – children of late owner Georgia Frontiere – have been trying to sell the team.
To buy out Rosenbloom and Rodriguez, however, Kroenke needs the approval of other owners and needs to comply with league cross-ownership rules. Kroenke, who owns the Colorado Avalanche and Denver Nuggets, hopes to transfer some or all of his stake his NBA team to his family.
In Buffalo, owner Ralph Wilson has said he has no intention of selling the team.
In January, Semcken said the Bills and the Jacksonville Jaguars were top choices among the seven because they were small-market teams struggling with ticket sales. He also said their owners were willing to sell.
That quickly drew the ire Sen. Charles Schumer, D-New York, who did his part to assure fans the Bills weren’t leaving town.
A Bills spokesman did not return an e-mail seeking comment.
In Jacksonville, despite having a losing team and struggling to fill the stadium, Jaguars officials said they are committed to the city.
The team and owner Wayne Weaver have had no recent contact with the Roski or any of his representatives, team spokesman Dan Edwards said.
With promotions that included former players, the Jaguars are ahead of their normal pace of selling tickets, Edwards said. So far, the team has nearly 36,800 new season ticket sales and renewals. The team plays in a 82,000-seat stadium owned by the city.
“We’re continuing to sell at a steady pace and are optimistic for the upcoming season,” he said.
In San Diego, the Chargers have their sights on building a $800-million downtown stadium. To do so, a cap on redevelopment funds would have to be lifted and lengthy study would be needed. A vote on the issue could happen this week.
The team has tried for years to move out of Qualcomm Stadium, which hosted the team’s first game in 1967.
A team representative did not return messages seeking comment.
In Minnesota, the Vikings have said they must line up funding for a new stadium in the state’s next legislative year. The team for years has been trying to find a new home in Minnesota.
“Having an NFL team in Minnesota requires a stadium solution,” the team said in May in a written statement. “This solution must be finalized in the 2011 Session.”
The team’s lease to play in the Metrodome, one of the oldest and smallest venues in the NFL, runs through the 2011 season. And the team has said there will be no extension until a stadium deal is in place.
To make matters worse, the state’s economic outlook appears bleak. A team spokesman did not return an e-mail seeking comment.
Some sports business experts aren’t picking the Vikings, Bills or Jaguars to move to L.A.
“I don’t see a team coming from (there) going to the West Coast,” Rapkoch said. “It disrupts too much.”
Other issues complicate a potential move to L.A., experts say.
Two sports executives, including a former Roski business partner, unveiled their concept in April for building a separate NFL stadium in downtown L.A.
Commissioner Roger Goodell has raised concerns about how Roski will finance his stadium.
And some sports experts say the NFL is focused on resolving its labor issue with its players, which some fear could last through next year.
Until then, they say, little progress will be made on moving a team to L.A.
The Denver Post, St. Paul Pioneer Press and San Jose Mercury News contributed to this report.
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$500M for Pistons? Market won’t support asking price, insiders say
August 15, 2010
By Bill Shea
Crain’s Detroit Business
Published: August 15, 2010
The bank hired to broker a sale of the Detroit Pistons and Palace Sports & Entertainment Inc. is seeking $500 million from potential buyers — a price industry insiders and likely bidders consider inflated by $100 million in this market, a source familiar with the situation said.
Karen Davidson, who has owned the National Basketball Association franchise and the PS&E umbrella management organization since the March 2009 death of her husband, Guardian Industries Inc. Chairman Bill Davidson, has hired New York City-based Citi Private Bank’s sports finance and advisory team to broker a sale.
Citi declined to comment, as has Davidson through her spokesman.
Detroit sports and pizza industrialist Mike Ilitch, who announced Aug. 9 that he’s told Davidson he wants to buy the Pistons and PS&E, likely would pay less than $400 million for both, said the source, who agreed to speak to Crain’s on the condition of anonymity.
That’s because of the economically depressed metro Detroit market, the source said, and because Ilitch in February hired Tom Wilson, the longtime PS&E president who knows the inside details of the Pistons’ and Palace’s financial situations.
Ilitch already owns the Detroit Tigers and Detroit Red Wings, so he’s familiar with the local sports markets.
The most recent NBA team sale was a $450 million deal for the Golden State Warriors in July. Industry insiders have called the sale, which is the most ever paid for an NBA team, significantly inflated.
The Pistons are valued at $479 million by Forbes.com, although analysts warn that the financial publication’s valuations are suspect. That figure is believed to include the Palace of Auburn Hills but not the DTE Energy Music Theatre or the contract to operate Meadow Brook Music Festival on behalf of Oakland University.
Other sports industry insiders agree that $500 million, or even $400 million, is unlikely.
“Today, with the financial uncertainty, the tremendous dislocation of the Michigan economy, that would be an extraordinary price to be achieved,” Marc Ganis, president of Chicago-based sports consulting firm Sportscorp Ltd.
“If it were two years ago, maybe.”
Instead, he also thinks a sale price under $400 million is likely.
“If the sellers are very lucky, and they’re able to get a competitive bid going, the number might start with a four,” Ganis said.
If Davidson wants to sell quickly — she said recently a deal likely will be done before the NBA season begins in October — then the price will be lower.
The Golden State sale price included a “location premium” for the team’s Oakland setting — near the deep pockets of Silicon Valley and San Francisco.
“There’s a location discount for the Pistons,” Ganis said.
The entertainment venues are believed to be equally or more attractive to Ilitch because they are profitable, generating an estimated $70 million annually in revenue, and because they have long been competitors with facilities owned or operated by Ilitch-owned Olympia Entertainment Inc. — Cobo Arena, Joe Louis Arena, Comerica Park and the Fox, Masonic Temple and City theaters.
The Ilitches will see an “immense amount of return” if they buy Palace Sports, said Rodney Fort, a professor of sports management at the University of Michigan, because they will have the “market cornered on everything.”
“It will generate an even larger return than most people think about,” he said. “The profitability of what they do is going to go up compared with what it currently is. The big money seems to be in all the other entertainment events. Between Olympia and Palace, they got “em all.”
The Ilitches funded their sports and entertainment empire with the proceeds from the Little Caesar Enterprises Inc. pizza chain they founded in 1959.
If there are a number of bidders for the team, auction style, then the price could quickly escalate from what a single buyer might pay, said Michael Rapkoch, president and founder of Addison, Texas-based Sports Value Consulting LLC, which does sports team valuations and advising in all four major leagues.
“If you really want it, you’re going to pay it,” he said.
Rapkoch thinks the Pistons would be a good fit for the Ilitches, and considers them a leading contender to complete a sale because they have the money. (See story, this page.)
“People who have the financing in place, and the equity and ability to fund future losses (are the front-runners),” he said, while those who have to assemble partners are less likely to get consideration.
Bill Shea: (313) 446-1626, email@example.com
Some call foul on NBA players’ salaries
October 25, 2010
By Bob Moon
Marketplace Morning Report
Published: October 25, 2010
TEXT OF STORY
JEREMY HOBSON: The new NBA season gets going tonight with the tip off between the Boston Celtics and Miami Heat. As our senior business correspondent Bob Moon reports, despite all the hooplah over big name players like Lebron James, it’s expected to be another money losing season for the league:
BOB MOON: At Sports Value Consulting, Michael Rapkoch has been reading the Wall Street Journal, and making salary comparisons.
MICHAEL RAPKOCH: Why is it the investment banks pay the guys who make them the money 37 percent of the revenue, but in basketball and other things it’s 50-plus percent?
Fifty-seven percent of every dollar the NBA makes, in fact, goes to the players. While basketball commissioner David Stern expects this could rank as one of the top five seasons ever, he insists the NBA can’t make money on those margins.
DAVID STERN: I want to let our fans and our sponsors know that this is a sport that’s going to have a good year, but it doesn’t affect the underlying financial dynamics.
As a sports business analyst who’s consulted with team owners, Rapkoch says the NBA’s projected loss of up to $400 million is real.
RAPKOCH: You can’t support a team, a franchise, a league, if your player salaries greatly exceed your ticket prices.
The player’s union is already digging in its heels and warning of a potential lockout next season, once the current contract expires.
In Los Angeles, I’m Bob Moon for Marketplace.
Featured in: Marketplace Morning Report for Tuesday, October 26, 2010
The Astros are for sale, with a big number attached; there are similarities to the Indians
November 19, 2010
By Joel hammond
Crain’s Cleveland Business
Published: November 19, 2010
Paul Dolan told The Plain Dealer this week he and his father weren’t looking to sell the team. But I couldn’t help but wonder how closely the Indians would listen if someone offered a big sum.
That wondering increased this morning, when news of the Houston Astros getting serious about selling broke. Astros owner Drayton McLane has hired an investment banker to help with a sale and he wants — are you sitting down? — $800 million. He bought the team for $117 million, though anyone’s purchase would include a stake in a new Comcast regional sports network created for the Astros and Rockets.
According to Maury Brown of BizofBaseball, the Astros have gained $116 million in value since 2001.
The Indians, according to Forbes, still are worth $391 million, though that’s down from $417 million in 2008 but up from $292 million as recently as 2004. So there’s value there.
But the differences in the situations lie in the markets and the RSNs. CSN Houston likely holds far more value, because of what this chart clearly lays out: Coverage areas are vastly different.
Additionally, the market plays perhaps the biggest role.
Indians team president Mark Shapiro often has laid out the challenge here in this way: Cleveland has lost vast amounts of people, and many of those people have been some of the region’s biggest earners. In other words, when Fortune 500 companies leave the region (or close), and take their well-paid employees with them, it hurts the Indians doubly: fewer fans with less money to spend, and fewer corporate clients to splurge for front-row tickets or one or two of Progressive Field’s vastly overbuilt 121 suites.
“In Houston, oil and gas are huge parts of the economy, but it’s also diverse,” said Michael Rapkoch, the president and founder of Addison, Texas-based Sports Value Consulting LLC, in a Friday morning phone call. “In Cleveland, the economy’s not as strong. What’s the draw?”
As an aside, think about this: McLane, according to Forbes, is worth $1.6 billion. And yet he still finds owning a pro sports team a drain on his finances. That’s alarming, folks, and it tells me that we haven’t seen the last of sports team sales; far from it.
If you want my opinion — and if you’re reading this, you probably do — I’d tell you that if someone offered the Dolans $400 million, or $375 million, or $350 million, for the team, they’d sell in an instant. They bought the team, reportedly, for $323 million, from Dick Jacobs.
“In this current economy, there’s not going be the right price,” Mr. Rapkoch said. “Buyers are being more cautious about lending, not offering exorbitant amounts of money.”
Assets like Astros’ park, TV network should land deal
November 20, 2010
By David Barron
The Houston Chronicle
Published: November 20, 2010
Whether it takes six months, a year or longer for Drayton McLane to sell the Astros, the combination of a state-of-the-art ballpark, a new television network and a strong business operation should ensure a successful — and profitable – outcome for McLane and his family, the executive who will help conduct the sale of the team said Friday.
McLane announced he has hired former Major League Baseball official Steve Greenberg, a partner in the New York investment banking firm Allen & Co., to work with prospective buyers. Greenberg, the son of baseball Hall of Famer Hank Greenberg, said most comparable franchise sales require from six to 12 months and that he is open to examining offers from groups or individuals.
“There are only 30 of these (franchises) … and they do not turn over with great frequency. This is why there has been a robust market for them,” Greenberg said. “I can pick better times (to market a team) in the sense that we haven’t fully recovered from the recession, but things are on the move upward and there are certainly plenty of qualified buyers around who can do this.”
The Astros’ recent agreement with the Rockets and Comcast to launch a new regional sports network in 2012, Greenberg said, “puts them in a class with the Yankees and Red Sox and a handful of others, which enhances the overall asset. I’m very pleased and look forward to a strong process.”
Neither McLane nor Greenberg would speculate on the eventual purchase price for the team, its lease at Houston’s downtown Minute Maid Park and the team’s portion of Comcast SportsNet Houston.
“We’ll let the market determine the price,” Greenberg said. “We’re not going to put prices out there. We’ll let people come to us and tell us what they think.”
One inevitable benchmark, however, will be the recent sale in federal bankruptcy court of the Texas Rangers for $593 million to a group led by sports agent Chuck Greenberg and Hall of Fame pitcher Nolan Ryan. That sale, plus the value of the new cable network, led to speculation that the sales price on the Astros could approach $700 million.
‘In a good situation’
“(McLane) is in a good position,” said George Postolos, the former president of the Rockets. “Baseball has momentum. There have been a number of successful transactions over the last couple of years, and Drayton has the Astros extremely well positioned. He is in a good situation.
“The Astros compare favorably (to the Rangers) because of the new television agreement, because of the location of the station and because of the way the team has been managed at a high level over a long period of time. It is a great asset.”
As McLane prepares to sell, perhaps the most important aspect to keep in mind is to have realistic goals for the final outcome, said Mike Rapkoch, the president of Sports Value Consulting in suburban Dallas.
“What sellers are wanting to pay is always more than what a buyer is willing to pay, and I think this is a buyer’s market,” Rapkoch said. “You have to have reasonable expectations, or you scare away reasonable buyers.”
However, Dallas attorney Tom Melsheimer, who recently represented former Rangers owner Tom Hicks in his sale of Liverpool FC in England’s Premier League, thinks the pursuit of major league franchises remains a seller’s market.
“These teams remain trophy purchases, and there are almost always multiple buyers with the wherewithal to make purchases,” Melsheimer said. “The Astros may not have the brand quality of the Yankees, but they are still one of a limited number of franchises.”
One of McLane’s primary advantages as he prepares to sell the team, Postolos said, was his decision to engage Steve Greenberg as his representative. Greenberg, a former MLB deputy commissioner, advised the family of commissioner Bud Selig on the sale of the Milwaukee Brewers and assisted Dan Gilbert in his purchase of the Cleveland Cavaliers. He also was involved in the launch of Classic Sports Network, now ESPN Classic, and CSTV, now CBS College Sports.
‘A tough act to follow’
“He has as good a relationship with the sport as with anybody who is not employed by MLB,” Postolos said. “He has a close relationship with the commissioner, and his family has a long history with baseball. You will see a process run by the highest standards and by the books.”
By the same token, Postolos said, whoever buys the Astros will face the challenges of living up to McLane’s standards as a steward of baseball in Houston.
“You can see the high regard in which he is held by the people who work with him, and you can see how seriously he takes his responsibilities and how motivated he is to do things the right way,” Postolos said. “Looking at some of his accomplishments, it’s incredible to consider where he found the Astros and where he is leaving them. He will be a tough act to follow.”
Stafford’s injuries could hurt Lions, too: Ticket sales may take it on the chin
November 21, 2010
By Bill Shea
Crain’s Detroit Business
Published: November 21, 2010
Second-year quarterback Matthew Stafford literally is the poster boy for the rebuilding Detroit Lions, appearing on billboards and other marketing materials aimed at selling tickets.
Fans, however, may not be interested in buying individual game or season tickets to watch second-stringer Shaun Hill pressed into service at quarterback because Stafford is sidelined again with another shoulder injury.
Stafford’s failure to finish three of his last four starts has raised questions about his durability, and it doesn’t help ticket sales. Especially for a team that’s just 4-37 since 2007.
“Stafford downtime hurts, especially for a team that has a low sellout rate like the Lions,” said Rodney Fort, a professor of sports management at the University of Michigan. “Long term, that is a real concern for the Lions. He is so good when he is healthy, but that isn’t often enough. Fans must wonder, “Why buy season tickets when the team’s fortunes are really week-to-week?’ ”
Going into this past weekend’s game at Dallas, the Lions were 2-7 and had set the NFL record for consecutive road losses at 25 with a 14-12 loss to the Buffalo Bills.
However, the team announced Thursday that its next home game, the annual Thanksgiving Day game that’s a tradition among fans even if the Lions are terrible, has sold out.
Half of the team’s home games were blacked out on local television in 2008 and 2009. So far this year, only Detroit’s 37-25 victory over the Washington Redskins on Oct. 31 has been blacked out.
Ironically, that was Stafford’s first game back since injuring his throwing shoulder in the first half of a season-opening 19-14 loss at Chicago, which forced him to miss the next five games (in which the Lions went 1-4).
Stafford threw four touchdowns against Washington, but only the 46,329 fans at Ford Field saw it live. The next week, Stafford threw two touchdowns and ran for another before reinjuring his shoulder and being forced to leave with about five minutes left against the New York Jets, who later won in overtime.
The Lions must sell 54,500 tickets to sell out 65,000-seat Ford Field in each of its eight home games every season. Premium/club seating at NFL stadiums is exempt from sellout requirements.
The NFL mandates that games be sold out 72 hours before kickoff or they are blacked out within a 75-mile radius of the home team’s stadium. If a team is close to a sellout, the league sometimes will grant a 24-hour extension to sell tickets.
The Lions’ stated goal this season was just one or two blackouts.
Detroit has averaged 54,132 for its four home games this season, which is 29th in the 32-team National Football League. Only St. Louis, Tampa Bay and Oakland draw fewer per game on average.
Detroit has three straight home games coming up, starting Thursday with the New England Patriots, who have the NFL’s best record. After that, they host the Chicago Bears (Dec. 5) and Green Bay Packers (Dec. 12) before a two-game road trip to Florida. The season finale is Jan. 2 at home against the Minnesota Vikings.
Black out, red ink
Not being on television doesn’t have a serious direct financial impact on the Lions because the NFL negotiates its network and cable television deals collectively and distributes the revenue evenly among teams. That averages about $100 million per team each season.
But the team doesn’t get local exposure when blacked out, which can perpetuate the cycle of blackouts if fans continue to lose interest. That, in turn, leads to less revenue from game-day concessions and merchandise sales.
The Lions, according to Forbes, posted a $2.9 million operating loss against $210 million in revenue last season. Only one other team, the Miami Dolphins, took an operating income loss in 2009 ($7.7 million), Forbes calculated.
Shouldering a load
The NFL is a quarterback-driven league.
In an old NFL Films feature about quarterbacks, former Cincinnati Bengals passer and current CBS Sports analyst Boomer Esiason put it plainly: “No one is watching the nose tackle except for the nose tackle’s wife and mother. Everyone is watching the quarterback.”
Quarterbacks get the most money and most attention. In Stafford’s case, it’s a contract that could pay him $78 million, the most lucrative deal in franchise history.
While details of the contract haven’t been made public, it’s believed some of the potential payout is linked to playing time benchmarks that he’s unlikely to meet in the short term because of the injuries. (See box at right.)
That protects the Lions to some degree financially, but hits Stafford in the pocketbook. His endorsement potential is affected, too. He’s reportedly due to earn $750,000 this season in endorsements, which include pitching nationally for Unilever’s Axe male-grooming products and locally for Blue Cross Blue Shield of Michigan.
Sports marketing insiders have their eyes on Stafford.
“(He’s) on a watch list of sorts — a sports celebrity with great marketing potential on a national level,” said Bob Williams, CEO of Evanston, Ill.-based Burns Entertainment & Sports Marketing Inc., which represents companies that want to hire athletes to endorse products. In the past, Burns has brokered deals involving Detroit stars such as Barry Sanders, Isiah Thomas and Kirk Gibson.
“The stakes are much higher on the local level. The Lions have invested their future monetarily and from a marketing standpoint in Matthew,” Williams said. “Lack of playing time due to injury has a ripple effect. It slows ticket sales with the team not winning as much. Matthew’s image growth is slowed by the lack of performance. Companies are in a “wait and see mode’ with Matthew. His career could go either way at this point.”
Stafford has played in 13 games since being drafted by Detroit as the first overall draft pick out of the University of Georgia in April 2009, but he’s been forced to leave four games with injuries — three of them to his throwing shoulder.
The latest injury, a shoulder separation on Nov. 6, has him on the bench and has team management playing coy with reporters about the severity of the injury. Stafford was examined last week by orthopedic surgeon James Andrews, who specializes in treating such injuries among pro athletes, and it was determined that surgery isn’t needed at this point.
The team also decided not to put Stafford on injured reserve, which would end his season. It still could do so.
For now, Stafford is on a rehabilitation program and potentially could return in mid-December.
“We’re not setting any timetables,” Lions coach Jim Schwartz told reporters. “I don’t know what kind of timetable he’s going to be on because it’s going to be on how he’s feeling.”
Some say there are other reasons to watch the Lions beside Stafford.
“Don’t forget they are still impressive to watch on the defensive side of the game with their new first-round draft pick, Ndamukong Suh,” said Michael Rapkoch, president of Addison, Texas-based Sports Value Consulting, LLC. Suh is a contender for NFL defensive rookie of the year.
The success Stafford has had in his limited playing time may have bought the team some breathing room, he said.
“Having Stafford helped bring a sense of loyalty to the team and, thus, the fans may continue to show their support,” Rapkoch said.
Bill Shea: (313) 446-1626, firstname.lastname@example.org
McCourt, MLB Reach Agreement To Sell Dodgers
November 2, 2011
By Mike Pesca
Published: November 2, 2011
Los Angeles Dodgers owner Frank McCourt and Major League Baseball have reached an agreement to put the team up for sale. While McCourt’s ownership has been widely seen as a disaster for the club, it will still likely sell for nearly three times what he paid for it.
ROBERT SIEGEL, HOST: Now, to another intractable mess, this one with slightly lower stakes, that is unless you’re a Los Angeles Dodgers fan. All season, one of baseball’s marquee franchises has been in limbo. It’s been caught up in owner Frank McCourt’s nasty divorce, the team’s subsequent bankruptcy and a takeover by Major League Baseball.
Well, after a tepid season and plummeting ticket sales, McCourt and the league have agreed to a deal to put the team up for sale, pending approval of a judge. NPR’s Mike Pesca has our story.
MIKE PESCA, BYLINE: For the last month, the phrase unprecedented baseball collapse has attached itself to the Boston Red Sox, blowers of a nine-game lead in the race for the playoffs. The Red Sox also sucked attention from Atlanta, which blew an eight and a half game lead in the playoff standings.
But the real collapse, well beyond single year wins and losses, was happening a continent away. An acrimonious divorce between Frank McCourt and his wife laid bare the loose sand upon which the Dodgers rested. Baseball tried to take control from McCourt, who fought back, but as of last night, league and owner agreed one of the most coveted brands in sports would go up for bid.
John Moag, an investment banker specializing in sports deals, says the Dodgers brand is strong, but the bottom line was hurt by McCourt’s actions.
JOHN MOAG: He has taken streams of revenues, such as the parking lot, such as sponsorship, converted them to cash and then stripped them out of the franchise. And by doing so, he’s robbed the franchise of the streams of revenue that would normally be around for several years, five years, ten years.
PESCA: Frank McCourt bought the Los Angeles Dodgers for $9 million of his own and $440 million which were loaned. He increased revenue, but the cash often flowed into his own pockets or the balance sheets of McCourt-owned companies with names like Blue Land Co.
However, Michael Rapkoch, founder of Sports Value Consulting, LLC, says that any deals McCourt made with himself should not affect potential buyers.
MICHAEL RAPKOCH: Yeah. That’s the same thing that happened with Tom Hicks and with the Texas Rangers. Right? So any self-dealings, right hand to left hand, is going to be eliminated.
PESCA: A couple of years ago, the Texas Rangers, under owner Tom Hicks, were indeed in a similar situation to McCourt’s Dodgers, highly leveraged and unable to meet expenses. As embarrassing as the situation was for Hicks and baseball, the franchise was sold and the Rangers quickly established themselves as a great baseball team, appearing in the World Series the past two years.
The point is that Dodgers fans needn’t despair. Michael Rapkoch says baseball’s intervention also helped the team’s chances.
RAPKOCH: I need to say only good things to Commissioner Selig for stepping in and handling the Dodgers like he has to prevent a potential meltdown.
PESCA: That meltdown, in Rapkoch’s eyes, would have been if McCourt were allowed to sell TV rights, bolstering finances in the short term, but providing no long-term stability. Under that base path not traveled, the team’s sale price would have been much lower.
But the Dodger brand has taken hits. On opening day this year, a fan was brutally assaulted in the parking lot, and last week a lawyer for the Dodgers said that a jury might find that the fan bore partial responsibility for the serious brain injuries he suffered. As a legal argument, that’s rock solid. As a public relations declaration, it’s rock-headed.
But the Dodgers do have the likely most valuable player in Matt Kemp, the probable Cy Young Award winner in Clayton Kershaw, three Gold Glove winners, a magnificent stadium and the announcing voice of Vin Scully. Are those assets worth a billion dollars or more? That’s why they play the sales game. Mike Pesca, NPR News.
NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR’s programming is the audio.
In signing Fielder, Ilitch isn’t stretching dough
January 29, 2012
By Bill Shea
Crain’s Detroit Business
Published: January 29, 2012
In signing Fielder, Ilitch isn’t stretching dough
No, the iconic Little Caesars $5 Hot-N-Ready pizza isn’t increasing in price to pay for superstar slugger Prince Fielder’s new nine-year, $214 million contract with the Detroit Tigers.
Ticket prices, set for the 2012 season in December, won’t suddenly go up, either.
That was the message from Chris Ilitch, president of the Ilitch Holdings Inc. family of companies, after the Fielder signing was made official Thursday.
His father, Little Caesars Enterprises Inc. co-founder and Tigers owner Mike Ilitch, instead can rely on a variety of revenue sources to meet his upcoming payroll, which is likely to surpass $110 million to $120 million in salaries and bonuses — a figure that inflates further when benefits are added.
The payroll includes a combined $63 million alone this season to Fielder ($23 million), Miguel Cabrera ($21 million) and Justin Verlander ($20 million).
That spending is typical of markets larger than Detroit, but it isn’t thought to be financially stressful for the wealthy Ilitches, baseball insiders say. The big salaries are high-stakes bets on winning a World Series, which would provide the team millions in new revenue.
And the Ilitches can afford it.
Mike and Marian Ilitch personally are worth an estimated $2 billion, good for No. 212 on Forbes’ list of the 400 richest Americas.
The Ilitch-owned companies generate more than $4 billion in annual revenue, the company has said. About $2 billion of that comes from the pizza business, but sports insiders don’t think Ilitch has to dip much into nonbaseball business to subsidize player payroll spending.
Major League Baseball’s financial structure shields them somewhat from having to use pizza money to pay for baseball players.
The Tigers will get nearly $90 million this season from shared revenues with Major League Baseball’s other teams, and from its local cable deal to air games.
The Tigers get about $40 million annually from baseball’s Central Fund of shared revenue generated by national broadcast rights contracts and copyright royalties, said Andrew Zimbalist, professor of economics at Smith College and author of several sports finance books including May the Best Team Win: Baseball Economics and Public Policy.
The team gets another estimated $40 million to $45 million annually from its 10-year deal with Fox Sports Detroit to air Tigers games locally, Zimbalist said.
Financial terms of the Fox Sports contract were never disclosed, but it is known that the Tigers, Detroit Red Wings and Detroit Pistons each inked decadelong deals with the network in 2007 and that collectively they are worth $1 billion.
The estimate of the Tigers’ annual portion approximation is based on the number of games they play, which is twice as many as the other teams (162 versus 81).
Detroit also gets some level of revenue sharing from baseball, but it’s believed to be a small amount. The more lucrative clubs end up paying into revenue sharing rather than getting money each year.
Expensive. Very expensive.
The Tigers had $192 million in revenue for the 2010 season, the most recent estimate available from Forbes.com.
The financial news website estimated that the team lost $29 million in operating income, which it defines as earnings before interest, taxes, depreciation and amortization. Forbes includes revenue sharing and the cable deal in its revenue calculation.
That revenue-loss calculation is against an estimated $150 million in player expenses that included salaries, bonuses and benefits.
The Tigers also have an undetermined number of other expenses beyond player payroll, such as management salaries, game-day operations and construction debt on 41,255-seat Comerica Park.
Forbes estimates that the Tigers are worth $385 million and have a 56 percent debt-to-value ratio — or $215 million in debt. Some of that money is believed to be from non-stadium borrowing, as well.
The team borrowed $140 million in August 2005 from a syndicate of 11 financial institutions, led by what is now Sumitomo Mitsui Bank, to refinance what had been $115 million remaining in debt from the original $145 million loan to build Comerica Park.
The team also has borrowed from the Major League Baseball Trust.
Teams can borrow from the $1.2 billion credit facility, which is backed by baseball’s TV revenue, at better terms than may be available to them on the open market.
In 2005, Detroit had borrowed $73 million from the lending pool, Sports Business Journal reported at the time. Neither the team nor baseball will say how much the Tigers have borrowed in total and how much they still owe.
The Tigers, as policy, don’t comment on their finances.
The team is saving money in 2012 by not re-signing aging outfielder Magglio Ordonez, who was paid $10 million last season but who also has broken his ankle the past two seasons. Also off the payroll is second baseman Carlos Guillen, who got $13 million in 2011.
Together, their contracts have the same value as Fielder’s pay this season. He also gets $23 million in 2013 before the team elevated it to $24 million annually over the final seven seasons. There also are several million dollars in potential bonuses in the deal.
Fielder was signed to replace the offensive production lost when designated hitter Victor Martinez was lost for the year to an offseason knee injury two weeks ago.
Martinez’s $13 million salary this season is expected to be covered at least in part by the team’s insurance policy.
Rich. Very rich.
The Ilitches have not hoarded their substantial fortune.
Since Ilitch bought the team in August 1992 for $85 million from Domino’s Pizza Inc. founder Tom Monaghan, he has spent more than $1.1 billion on player salaries.
Marian Ilitch paid $600 million to buy MotorCity Casino from other investors in 2005 and for subsequent renovations. Revenue totaled $472 million in 2011, a 5.7 percent increase over 2010, according to revenue figures released by the Michigan Gaming Control Board.
The total financing for MotorCity is believed to be $950 million through a highly leveraged mix of fixed- and variable-rate bank debt and junk bonds, according to Forbes.
Marian also has invested in an ongoing effort by the Southampton, N.Y.-based Shinnecock Indian Nation to build a casino on Long Island, which her Gateway Casino Resorts LLC (with partner Mike Malik) would be under contract to operate in return for a portion of the gaming revenue.
The casino ownership is separate from Mike Ilitch because of baseball’s rules prohibiting team owners from having investments in gambling operations.
The Ilitch family has other sources of income, such as concerts and events via their Olympia Entertainment Inc. business, a food distribution and restaurant equipment service and three movie theaters. They also have a concession to manage parking garages and lots in downtown Detroit.
The Ilitches have owned the Detroit Red Wings since 1982 — only an $8 million investment — and have a $58 million payroll this season. They benefit from the National Hockey League having a salary cap, a cost control absent in baseball. The team, which has won four Stanley Cups under the Ilitches, regularly fills Joe Louis Arena and its suites and collects revenue from the Fox Sports Detroit cable deal to offset costs.
The family has also committed to building a new downtown arena for the Wings in coming years, a project expected to have a $300 million to $400 million price tag. Financial, construction and location plans haven’t been disclosed, but it’s believed that the Ilitches will have co-investors on any new facility.
The long view
The spending on the teams is seen by economists as a way to boost long-term value of multiple properties.
“Given his wealth and his wife’s wealth and their myriad business interests, it’s quite plausible what he’s doing with the Tigers is maximizing his wealth portfolio,” Zimbalist said. “If the Tigers are successful on the field, if he’s got superstars playing for him, he thinks people will be more likely to gamble, to eat pizza.”
If Fielder is the final ingredient the team needs to win a World Series, the team can expect a revenue bounce from a boost in season-ticket sales, suite sales, new corporate sponsorships, merchandise, etc. Teams typically raise ticket prices after winning the Fall Classic, as well, and see increased income for several years.
“There are opportunities to create revenue,” Chris Ilitch said.
Signing a superstar such as Fielder is viewed as spending money to make money.
“Owners bring in big-name players in hopes of increasing ticket sales, sponsorships and other revenue items, so that it can pay for itself. They often do,” said Michael Rapkoch, president Addison, Texas-based Sports Value Consulting LLC.
That’s how Fielder and the other top-dollar contracts will be paid for: “It’s going to come from an increase in ticket sales and sponsorships. That’s where the money is going to come from,” Rapkoch said.
When news of the signing broke on Tuesday afternoon, the team was swamped with interest from fans, team officials said.
For example, the team’s season ticket staff stayed until 8:30 p.m. on Tuesday handling calls, said Dave Dombrowski, Tigers president, CEO and general manager.
Mike Ilitch, 82, said he had no qualms about investing so much money in a single player, giving him the most lucrative contract in Detroit sports history.
“I go by my instincts like everybody else does in business, and my instincts told me this is going to work out just fine,” Ilitch said. “I don’t have any concerns. I’m not nervous about it.”
Bill Shea: (313) 446-1626, email@example.com. Twitter: @bill_shea19
Dragons’ value ranked best in Class A
June 12, 2012
By Kyle Nagel
Dayton Daily News
Published: June 12, 2012
The Dayton Dragons are the country’s most valuable franchise at their level of minor league baseball, and the eighth-most valuable minor league baseball franchise in the country, according to Forbes.
The Dragons, who last year set a record for professional sports’ longest consecutive sellout streak that is still running, are valued by Forbes at $23 million, the highest in Class A.
In their 13th season, the Dragons have sold out each game of their existence at the 7,230-seat Fifth Third Field.
But Larry Grimes, president of sports mergers and acquisitions company the Sports Advisory Group, said the valuation was much too high for a Class A franchise.
Grimes said Class A franchises usually sell in the range of $9 million to $11 million.
“There are exceptions to the rule, but not exceptions at $23 million,” Grimes said.
Michael Rapkoch, president of Texas-based Sports Value Consulting LLC, echoed that Forbes’ valuation was too high. But, he said, a minor-league baseball team with high attendance has significant value.
The Dragons’ average attendance was 8,288 per game (571,886 total) last season, which ranked sixth in all of Minor League Baseball behind five Class AAA franchises.
Three other franchises in the region ranked in the top 10, including the Class AAA Columbus Clippers and Class AAA Louisville Bats (tied for fourth at $24 million) and Class AAA Toledo Mud Hens (tied for No. 9 at $22 million).
Dragons President Bob Murphy declined to comment on the Forbes ranking.
“Since 2000, (the Dragons have) been a great thing for baseball and baseball at this level,” said George Spelius, president of the Midwest League, of which the Dragons are a member. “It’s a beautiful park, and they’ve been great people to work with.”
Who will it be for AEG?
September 19, 2012
By Roger Vincent, Walter Hamilton and Andrew Tangel
Los Angeles Times
Published: September 19, 2012
The surprise announcement that billionaire Philip Anschutz is putting his sports and entertainment empire up for sale sent potential buyers scrambling to launch bids that insiders say could reach $7 billion or more.
The big question on everyone’s mind: Who can pony up enough cash to buy such marquee properties as Staples Center, L.A. Live and the Los Angeles Kings?
A likely scenario is a group of investors similar to the consortium that bought the Dodgers — deep-pocketed private equity firms combined with sports and entertainment experts and a celebrity frontman. Los Angeles billionaire Patrick Soon-Shiong has already expressed interest, and well-known names such as Mark Cuban and powerhouse Santa Monica investment firm Colony Capital are seen in the running.
Potential bidders are pining for what could be the biggest deal of its kind, and a chance to be the hero who brings pro football to L.A. after an 18-year drought.
“In the world of sports this might be the greatest crown jewel of them all,” said John Cushman, chairman of real estate brokerage Cushman & Wakefield. “This is a huge deal for whoever wants to get into the game.”
A “healthy number” of potential bidders already have expressed interest since the sale was announced Tuesday, including wealthy individuals, private equity firms, foreign-government investment funds and pension plans, said a person familiar with the matter.
AEG has indicated privately that it expects to sell for $5 billion to $7 billion, but no official price has been set. The company also holds a minority stake in the Los Angeles Lakers.
“This is your one chance to buy a piece of one of the most iconic franchises, the Lakers, to own the Stanley Cup champion Kings, the Galaxy with David Beckham,” said Michael Rapkoch, president of Sports Value Consulting.
A sale is likely to follow the template used in the record-breaking deal for the Los Angeles Dodgers this year. Basketball legend Magic Johnson joined baseball specialists and private equity giant Guggenheim Partners to secure joint ownership of the baseball franchise for $2.15 billion.
The list of potential buyers for AEG is deep. First out of the gate was Soon-Shiong, part owner of the Lakers, who said Tuesday night that he is “clearly” interested.
Colony Capital also is expected to make an offer, according to a person familiar with the process. The investment firm manages $27 billion in assets and is considered to be an influential player in financial circles. Its chairman, Tom Barrack, keeps an intentionally low profile, though he was part of an unsuccessful bid to buy the Dodgers this year. It declined to comment.
Barrack, a former USC rugby player, has led Colony to invest in such properties as a French soccer club and a Japanese baseball club, with significant real estate surrounding the sports venues.
Another logical contender is Madison Square Garden Co., which bought the Forum this year and embarked on a $50-million renovation of the former home of the Lakers and Kings to turn it into a concert venue.
But with a market capitalization of $3.1 billion, MSG would be too small to buy all of AEG by itself, said Laura Martin, an analyst at Needham & Co. MSG declined to comment.
A wild card could be Guggenheim Partners, the financial company that leveraged some of its more than $160 billion worth of assets into buying the Dodgers. The Chicago financial services company outbid its closest rival by more than $500 million, and recently bought Dick Clark Productions.
Dodgers President Stan Kasten once served simultaneously as president of major league baseball’s Atlanta Braves, the Atlanta Hawks of the NBA and the Atlanta Thrashers of the NHL.
On Wednesday, Kasten declined to say whether Guggenheim executives had asked him about the feasibility of owning and operating multiple sports franchises.
In coming weeks, potential buyers are to receive key financial information about AEG and its assets. Competitors will be vetted in coming months by AEG’s banker on the deal, Wall Street giant Blackstone Group, which also helped orchestrate the Dodgers sale.
Blackstone and Anschutz expect to have a deal in place by the first half of next year.
AEG’s sale announcement caught many off guard because it is in the final stages of negotiating city approval to build a football stadium near Staples Center and woo an NFL team to play there.
Anschutz Co. said the sale fits its business strategy of building successful companies and then selling them when the time is right.
“This was choreographed and well-planned,” said Steve Soboroff, who worked with Philip Anschutz on the massive Alameda Corridor transportation project in the 1990s. “I believe that these guys determined that the announcement would increase the value of company, improve their chances with the National Football League and improve their chances with the city of Los Angeles.”
Stan Ross, a prominent real estate accountant who has worked with Anschutz in the past, said the billionaire might also be making a calculation that the nation’s tax structure could change after the November election.
“Different tax rates could make a substantial difference where you’re talking about this kind of money,” said Ross of the USC Lusk Center.
Also, there are many large investors with deep reserves of cash looking for secure investments, Ross said.
“These are trophy-type assets with cash flow,” he said. “The timing is really right to capture their value.”
Times staff writers Bill Shaikin and Joe Flint contributed to this report.
Copyright © 2012, Los Angeles Times
Low-key ownership style suits San Francisco Giants’ Johnson
October 28, 2012
By Bill Shea
Crain’s Detroit Business
Published: October 28, 2012
Charles Johnson, 79, is the San Francisco Giants’ principal owner, reportedly with a 25 percent stake in the team. That’s believed to be the largest among the team’s 32-member ownership group, San Francisco Baseball Associated LP.
But his management style is reportedly mostly hands-off, empowering the top team executives to make decisions on payroll investments and other day-to-day matters.
Forbes estimates Johnson’s worth at $4.7 billion, tied for 72nd-richest American.
His wealth originates from his chairmanship of San Mateo, Calif.-based Franklin Resources Inc., a holding company better known as Franklin Templeton Investments. The investment firm was founded by Johnson’s father in 1947, and Johnson took it over at age 24 in 1957 upon his father’s retirement and after a two-year stint in the U.S. Army.
In 1999, Johnson stepped down as Franklin Templeton’s CEO, a role now filled by his son. Many of the company’s top key management positions are family members, and the firm was grown largely by Johnson and his half-brother, Rupert.
Johnson is the firm’s largest individual shareholder, owning nearly 17 percent of Franklin Templeton stock. Its shares opened Friday morning at $129.16, and he owns 36.5 million of them.
The firm went public in the 1970s and reported net income of nearly $2 billion last year on revenue of $7.1 billion. Its filings with the U.S. Securities and Exchange Commission indicate it had $670 billion under management at the end of 2011 — quite the leap from the $2.5 million in mutual funds under Johnson’s management in 1957.
Johnson lives in a historic 98-room mansion, according to Forbes. The family interest in the Giants dates back to the mid-20th century. Johnson’s father had box seats at the Polo Grounds when the Giants still played in New York City, according to a September profile in the San Francisco Chronicle.
A New Jersey native who graduated from Yale University, Johnson became a minority owner as part of an investment group in 1992 and slowly increased his stake until becoming majority owner last year, according to several reports.
Johnson, who didn’t move to California until the 1970s as his company was growing via acquisitions, initially invested in the Giants when former Safeway Inc. Chairman and CEO Peter Magowan (grandson of Merrill Lynch co-founder Charles Merrill) put a consortium together to buy the team for $100 million in December 1992.
The group’s intent was to stave off then-owner Robert Lurie’s plan to relocate the team to Tampa. Lurie had bought the team for $8 million in 1976 and had been losing money on it because of erratic play and because of the unpopularity of Candlestick Park.
How much Johnson initially invested has never been disclosed.
Magowan stepped down as principal managing partner in 2008. His replacement was Bill Neukom, perhaps best noted as principal legal counsel for Microsoft Inc. and Bill Gates for 25 years.
Neukom retired, reportedly under pressure or orders from the team’s operating committee, in September 2011 amid media reports that there were disputes over communication about spending and revenue apportionment. He divested himself of his stake in the team.
Johnson acquired his majority ownership by buying some of Neukom’s shares, and those of other stakeholders who have died in recent years.
He reportedly is a very low-profile, hands-off owner. He wasn’t in the stands in Texas when the Giants beat the Texas Rangers two years ago to win their first World Series since 1954 — when the team was still in New York.
Johnson relies on team CEO Larry Baer, who is a minority owner, and Brian Sabean, senior vice president and general manager, to oversee day-to-day operations of the team.
“I can’t remember one time he has ever asked me, ‘Why did we make this trade?’ or ‘Why aren’t the seats filled?’ ” Baer told The Chronicle.
That doesn’t mean Johnson’s influence isn’t felt.
Being able to keep an expensive and talented roster together to make the World Series two out of the last three seasons is incredibly difficult because of the financial pressures involved, said Michael Rapkoch, president of Addison, Texas-based Sports Value Consulting LLC.
“That takes commitment from ownership and the general manager,” he said. “The Giants, for them to come back again, in a short amount of time, that’s so difficult. A lot of owners will pay for that one-time shot, and then the team is different the next year.”
San Francisco’s Opening Day payroll this season, including prorated signing bonuses, was $131.3 million. The team added a few million more in salary with midseason trades for key starters such as second baseman Marco Scutero and right-fielder Hunter Pence.
The Giants didn’t exceed $100 million in payroll until 2011. That spending threshold has been passed by the Detroit Tigers for the past five seasons.
The Giants struggled financially, reportedly losing $100 million over seven seasons in the 1990s, in part because the team was mediocre and because fans disliked windy, decrepit Candlestick Park, which the Giants shared with football’s San Francisco 49ers. The team privately financed $357 million AT&T Park, which opened in 2000.
Forbes values the team at $643 million and estimates it had $8.8 million in operating income on revenue of $230 million last year. The team has been profitable since moving into the new stadium, and it’s enjoyed a two-year sellout streak.
The Giants ownership includes several other major names.
Among the other investors in the team are iconic venture capitalist Arthur Rock, who financed the infancy of Silicon Valley’s giants, and former Yahoo Inc. President Jeff Mallett, who also co-owns British pro soccer team Derby County along with Rochester sports entrepreneur Andy Appleby.
Sports insiders admire the team’s ability to keep egos in check.
“Sometimes when you have multiple owners and have to agree on something, it can be difficult,” Rapkoch said.
Bill Shea: (313) 446-1626; firstname.lastname@example.org. Twitter: @bill_shea19
Here’s why the miserable Sacramento Kings are selling for $200 million more than Tom Gores paid for the Detroit Pistons
January 22, 2013
By Bill Shea
Crain’s Detroit Business
Published: January 22, 2013
The Sacramento Kings will be sold in a deal whose eventual cost is expected to approach $600 million after the team relocates next season to Seattle and is reconstituted there as the SuperSonics.
The Sacramento Kings for $600 million? Really? That much for a team whose on-court history pales in comparison with the legacy of the Detroit Pistons? The same Pistons who sold for $325 million in June 2011?
You have to adjust your thinking to put the two deals into comparative context. What the Kings’ buyers are getting isn’t the value of the deal for a Sacramento NBA team, but that of one in Seattle — a much hotter market.
“You’re not buying the team. You’re buying a new team in Seattle, with all the demographics and corporate base, which is much stronger in Seattle than Sacramento,” said Michael Rapkoch, president of Addison, Texas-based Sports Value Consulting LLC.
“The price reflects how valuable a franchise it is in Seattle. It would be significantly less to keep the team in Sacramento.”
The purchase agreement price was reported by ESPN.com at $525 million, or $200 million more than private equity baron Tom Gores paid for the Pistons in 2011. The new Kings/SuperSonics owners reportedly also will pay $30 million to $50 million to the NBA as a relocation fee, once the deal is approved.
For his money, Gores got the Pistons, the modern Palace of Auburn Hills, DTE Energy Theatre, the contract with Oakland University to manage Meadow Brook Music Festival, and the Palace Sports & Entertainment Inc. umbrella management and marketing company.
The initial asking price was $500 million in 2010.
Forbes.com estimated last year the Kings are worth $300 million and the Pistons are valued at $332 million.
Buying the Kings are hedge fund manager and Seattle native Chris Hansen, who founded the $2.7 billion San Francisco-based Valiant Capital Management LP hedge fund in 2008, and Steve Ballmer, CEO of Microsoft Corp., whose corporate offices are 16 miles east of Seattle in Redmond. It’s believed there are other minority investors in the deal.
They’re buying the 53 percent majority stake in the Kings held by the Maloof family and a 12 percent stake owned by Bob Hernreich.
Also driving the price: There was only one NBA team for sale and available for relocation, Rapkoch said.
“There’s one team available, and what does that do to the price?” he said. In other words, the Maloofs got to set the market price.
Hansen and his consortium intend to move the team after this season. It’s unclear if the Maloofs will retain the Kings’ arena, which they own.
Hansen already has worked out a deal with local governments to build a $490 million, 18,500-seat multi-use arena in Seattle that would include up to $200 million in public funding.
Former Pistons and Palace Sports owner Bill Davidson, whose death in 2009 led to the team’s sale, built the Palace in 1988 for $90 million out of his own pocket. He spent an additional $112.5 million in subsequent renovations, and Gores pumped $13 million into it prior to this season.
Also in 1988, the Kings’ home, 17,317-seat Sleep Train Arena, opened for just $40 million as ARCO Arena. It was called Power Balance Pavilion before taking its current name in 2011.
It’s the smallest arena in the NBA. When the Kings relocate, the plan is to play for two seasons at 17,072-seat KeyArena, the former home of the original Sonics which opened in 1962, until the new facility is built.
There’s much talk that the National Hockey League could relocate the league-owned Phoenix Coyotes to the new arena, something that’s address (no team is named) is in Hansen’s memorandum of understanding with Seattle and King County.
An NHL team would be a rent-paying tenant for the new SuperSonics’ owners, making the deal even more lucrative and driving their willingness to pay a premium for the Kings.
“The dual team concept will enhance the sponsorships, the naming rights, the luxury suites. They will control the arena,” Rapkoch said.
He noted the presence of so many large corporate headquarters, the strong real estate values and other factors that make the move enticing.
“Seattle is a fantastic market,” he said.
The Seattle market is home to 4.2 million people, according to the 2010 Census. That makes it the 12th-largest U.S. metro area (officially the known as a “combined statistical area” by the U.S. Office of Management and Budget).
Detroit comes in as the 11th-largest metro area, with 5.2 million people (it includes Warren and Flint with Detroit).
The Sacramento metro area is 2.4 million, which is 18th largest in the country.
One factor that didn’t fuel an even larger sale price for the Kings: Winning.
The Pistons’ were attractive to Gores for several reasons, not the least of which was their strong attendance history and their legacy of winning — something devoid from the Sacramento/Seattle deal.
“(Gores) bought the fantastic legacy. You buy that legacy in hopes to revive it,” Rapkoch said.
Had the Kings had that legacy, they’d not likely be for sale. And if they were, it’s possible the price could have been millions more.
The Kings — they started at the NBL’s Rochester Royals in 1945, switched to the NBA in 1948, played in Cincinnati and Kansas City before relocating to Sacramento in 1985 — won their sole NBA title in 1951. They’ve managed division titles in just three seasons (1979, 2002, 2003).
After an eight-season playoff run from 1998-99 to 2005-06, the Kings have struggled and not made the postseason. In 65 seasons, they’re 2362-2721 (.465). Since moving to northern California, they 956-1303 (.423).
The SuperSonics played in Seattle from 1967 (winning their lone NBA title in 1979) until being moved to Oklahoma City, where they play today as the Thunder. In 41 seasons, the original SuperSonics were 1,745-1,585 (.524).
By contrast, the Pistons — they began in Fort Wayne in 1941 until moving to Detroit in 1957 — have won three NBA titles (the last in 2004), nine division crowns and five Eastern Conference championships.
In 65 seasons, they’re just slightly better than the Kings at 2497-2583 (.492). In Michigan (Detroit, Pontiac and Auburn Hills), they’re 2,184-2,277 (.490).
The Pistons’ recent lack of winning also help deflate their sale price. Fans don’t come out to see a losing team in Auburn Hills.
The Pistons are dead last in the league at per-game average capacity of the arena filled at 63.2 percent. Sacramento is 28th at 76 percent.
The Kings are last in the 30-team NBA with a per-game attendance average of 13,153. Detroit is two spots better at 13,949 per game. Both numbers are for 22 home games this season.
The Pistons also sold for much less that two other teams recently:
• Washington Wizards owner Ted Leonsis bought the 56 percent of the team and the Verizon Center he did not already own for an enterprise value of $551 million, according to Mike Ozanian at Forbes.com.
• The Golden State Warriors sold for $450 million in July 2011, which is the most paid for an NBA team in a deal that didn’t include an arena, Ozanian wrote.
Shake-up at AEG clouds NFL’s return
March 14, 2013
By Walter Hamilton and Sam Farmer
Los Angeles Times
Published: March 14, 2013
After seeking a buyer for months, the billionaire owner of entertainment giant AEG abruptly took the company off the market, leaving a parade of high-profile suitors empty-handed and damaging the prospect that professional football will return to Los Angeles any time soon.
Philip Anschutz announced Thursday that he is retaining ownership of Anschutz Entertainment Group and parting ways with Chief Executive Tim Leiweke, the company’s public face and force behind the development of L.A. Live and the plan to build an NFL stadium downtown.
Leiweke’s departure stunned civic leaders and political figures. He had orchestrated the complicated political agreements required to bring a National Football League franchise to the nation’s second-largest market. He was AEG’s point man for the stadium deal, and even Anschutz has credited Leiweke with selling him on the idea.
“Tim Leiweke was always a proponent of the stadium. Phil Anschutz was always reluctant about the whole idea,” an NFL source said. “With Tim gone, and with Anschutz’s proposal being unacceptable to the NFL, it would seem like the downtown stadium is dead.”
Leiweke was apparently unaware that Anschutz was about to take the company off the market, and learned of the plan only at the last minute, according to sources familiar with matter.
Contacted at home, Leiweke would not discuss his future. He told The Times that he plans to “resurface” in a few days. “Right now I’m going to take a deep breath and enjoy life, and then I’ll talk next week.”
AEG is a sprawling entity that owns and manages a variety of sports and entertainment properties, including L.A. Live, the L.A. Galaxy professional soccer team and a worldwide concert-promotion business. The company also owns a minority stake in the L.A. Lakers.
In a rare interview at AEG’s downtown headquarters, Anschutz, 72, was circumspect about Leiweke’s departure. He vowed to take a more active role in managing his empire, though he did appoint longtime finance chief Dan Beckerman to be the new president and CEO.
Anschutz said he terminated the sale in part because the closely watched process, which the company announced with great fanfare in September, had become a distraction interfering with day-to-day operations.
“This became a very noisy process,” he said. “Lots of people. Lots of talking heads. Lots of unnamed experts and lots of opinions. Many of them were wrong, but that didn’t seem to dampen their enthusiasm. So that was a contributing factor. It just got too noisy. I didn’t like the process.”
Anschutz also indicated that he didn’t get the price he was seeking. “We were very clear from the start: Unless there was the right buyer, the right set of terms and the right price, we might not sell…. We haven’t been misleading.”
Among potential bidders said to be interested in AEG were Los Angeles billionaire Patrick Soon-Shiong and powerhouse Santa Monica investment firm Colony Capital. Guggenheim Partners, which led the consortium that bought the Los Angeles Dodgers, also was said to be interested.
Colony Capital and Guggenheim declined to comment. Soon-Shiong couldn’t be reached for comment.
To this point, Anschutz and the NFL have not been able to agree on a deal, and Leiweke has continually worked to keep the NFL engaged.
Several NFL teams have considered relocating in recent years — among them the San Diego Chargers, the St. Louis Rams and the Oakland Raiders — but none has been amenable to Anschutz’s terms.
Anschutz has demanded that a deal be contingent upon him owning a large piece of a team at a discount. That is unappealing to NFL owners, who don’t want to sell at a below-market price, especially now that the league has a labor agreement with players that favors owners, record-setting TV deals and unparalleled popularity.
Anschutz also wanted to use an arrangement similar to the one the Lakers have at Staples Center, in which the team is the tenant and AEG controls all the marketing and suite sales.
The NFL calls that “asset stripping,” and AEG has been unable to find a team willing to go along. Teams don’t want a middle man dealing with their premium customers; that’s one of the many benefits of owning an franchise.
In the interview with The Times on Thursday, Anschutz expressed interest in the NFL but indicated the next move is up to the league. “It’s the state, it’s the city, it’s AEG, but there’s another chair at this table,” he said. “The NFL has to finally decide what do they want to do and where do they want to do it? We’re open for business here.”
NFL Commissioner Roger Goodell has repeatedly said the league won’t rush into a deal in L.A. From the league’s perspective, neither the AEG proposal nor Ed Roski’s stadium concept in City of Industry is the right deal, and that’s why one NFL source said the L.A. situation had been in a “vegetative state” for months.
But because it’s in the NFL’s interest to keep as many stadium options on the table, thereby creating competition that ultimately could lead to a more attractive deal, the league seldom publicly forecloses on a stadium proposal. The NFL is a re-animator in this sense, and has even circled back to look at possibilities in Carson, at Hollywood Park and at Dodger Stadium.
As for the now-scuttled sale of AEG, many experts in the sports business and on Wall Street had doubted the viability of the idea.
Though a constellation of glittering assets, the company itself is considered to be large and unwieldy with businesses that don’t necessarily fit well together.
“If you’re interested in buying a chunk of the Lakers … why would you want to buy the entertainment business or the arena-management business?” said Michael E. Rapkoch of Sports Value Consulting in Dallas.
Anschutz also was pushing for an extremely high price for the company, which potential bidders were unlikely to meet, they said.
Interested parties were willing to pay $6 billion to $7 billion, according to a well-placed consultant familiar with the sports and media businesses. But Anschutz reportedly was seeking $8 billion to $10 billion.
Anschutz probably would have sold AEG had he received a sky-high valuation, but otherwise was content to stand pat, the consultant said.
Henderson City Council failed to see red flags on stadium project; speculative arenas are practically unheard of
March 15, 2013
By Eli Segall
Published: March 15, 2013
Building a professional sports arena or stadium without a team committed to play there is practically unheard of.
Developer Chris Milam wanted to build four of them — and got the Henderson City Council’s full support.
There were plenty of red flags when Milam pitched his proposed Las Vegas National Sports Complex, but city officials either failed to recognize them or ignored them.
The city eventually sued Milam on fraud charges. As part of a settlement reached Tuesday and finalized Thursday, he is barred from working on future developments in Henderson.
It’s nearly impossible to finance a speculative arena or stadium, let alone a cluster of them as Milam envisioned. Also, the project’s main financier reportedly was a Chinese surveillance-equipment maker, not a well-known stadium construction lender, such as Goldman Sachs or Bank of America.
In the end, no teams committed to the facility, and Milam’s group was sued in late January for allegedly trying to flip the government-owned project site to other developers.
Sports industry executives outside of Nevada laughed at Milam’s stadium plans when contacted by VEGAS INC this week.
“If these are truly major league sports facilities, doing one of them by itself would be an unbelievably difficult task, much less four,” said Jack Hill, project executive for the new San Francisco 49ers’ stadium being built in Santa Clara, Calif.
Milam’s project would have cost at least $2 billion, industry consultant Michael Rapkoch estimated. Rapkoch said he’s “perplexed” the project progressed as far as it did and did not receive closer scrutiny.
“I’m baffled by your city government,” he said.
Milam claimed he negotiated with team owners and league commissioners to lure franchises to his venues.
But pro clubs typically have long-term leases that are expensive to break, making it difficult for teams to move. League officials also are wary of letting teams play year-round in America’s gambling mecca, which is part of the reason Las Vegas currently has no major league teams.
As Rapkoch sees it, Henderson officials failed to thoroughly vet Milam’s plans.
Rapkoch’s Texas-based company, Sports Value Consulting, assesses team values for prospective buyers, some of whom claim to have financing sources in China. When he asks to speak with those bankers, he never gets a call back, he said.
“There’s a lot of that going around,” Rapkoch said of the China claims.
Around the country, speculative facilities occasionally are proposed but rarely are built. John Loyd, an Alabama consultant who helps build and renovate pro stadiums and arenas, could name only one purely speculative facility built in the United States: the Alamodome in San Antonio.
That arena, owned by the city of San Antonio, opened in 1993 to lure a National Football League team. It never got one.
Today, the $186 million facility is used for trade shows, conventions and performances.
Almost no one would lend hundreds of millions of dollars for a speculative facility “and not have some expectation of how they’re going to get their money back,” Loyd said.
When told that Milam planned to build four speculative venues, Loyd chuckled, saying he’s never heard of that kind of project.
“That would be most unusual,” he said.
Milam laid out plans to build an arena and three stadiums on 485 acres of desert owned by the U.S. Bureau of Land Management. He sought to buy the site near the M Resort through the agency’s auction process.
Initially, he received little skepticism from City Hall.
The Henderson City Council in September 2011 unanimously approved a preliminary project agreement with Milam’s group and gave their full support to the BLM land sale.
Councilman Sam Bateman commended Milam and city staff for drafting the project agreement and said the complex is critical for the region.
Councilwoman Kathleen Vermillion lauded Henderson for having a “we can” mentality. She thanked Milam and city staff for pursuing the project.
A few council members had questions about the project’s financing, but no one voiced skepticism about the likelihood that Milam could build such a massive, speculative development.
“I’ve said it all along: What community, what mayor wouldn’t want a project like this in their city?” Henderson Mayor Andy Hafen said last April, after a council meeting in which Milam declared project financing was fully approved. “We’ve done our due diligence, and we’ll continue to do our due diligence. I think that if things fall into place and we get this thing going, it will be a boon for Henderson for years and years to come.”
Milam proposed his project during the recession when there was little other activity in Henderson.
“I think it’s something the city (had) to listen to,” City Attorney Josh Reid said this month.
Reid, who became Henderson’s top lawyer four months after the council approved Milam’s plans, said city officials tried to vet Milam’s claims. But “most of the information was held by him and his investors,” Reid said.
For instance, Milam claimed he worked with investment firms Morgan Stanley, Goldman Sachs and Piper Jaffray to arrange financing. The firms, however, never committed to the project.
“We know that now,” Reid said.
Hafen and council members Bateman, Debra March and Gerri Schroder, who all approved Milam’s plans and remain in office today, did not respond to requests for comment. Vermillion, who resigned from her seat in December 2011 and later was investigated by the FBI for allegedly misusing money from her charity, could not be located.
Milam attorney Terry Coffing said his client would be the first to acknowledge that the project was risky, but Milam felt that if he made enough progress on construction, he could have landed a team.
Coffing said Milam spoke many times with National Hockey League officials about getting the league-owned Phoenix Coyotes to move to Henderson. If that worked out, Coffing said, Milam also could have landed a National Basketball Association team, as the two clubs could have shared an arena.
“It’s kind of a chicken and egg philosophy: If you build a stadium, they’ll come,” Coffing said.
NHL spokesman Frank Brown declined to comment, saying the league doesn’t disclose with whom it does or doesn’t speak.
Milam started planning the stadium project in 2009. He felt his arenas could replace the region’s aging venues, including Sam Boyd Stadium, the Thomas & Mack Center and Cashman Field, all of which are at least 30 years old.
NBA, NHL and Major League Soccer commissioners also “appeared to be warming” to the idea of having teams in Nevada, despite the state’s legalized gambling, according to court papers filed by Milam’s legal team.
Milam initially tried to build an arena or ballpark in several other parts of the valley, including near the Strip, but his plans fell through. He launched discussions with Henderson city officials in summer 2011.
With the region decimated by the recession, the project’s estimated financial impact was likely alluring. Construction alone was forecasted to bring almost $1.5 billion of activity to the city, and the complex’s annual operation would have produced another $515 million a year.
Milam also pushed a fast timeline. He initially sought to break ground in summer 2012, finish the arena in summer 2014 and hold the first NBA game a few months later.
By comparison, the 49ers’ new $1.2 billion, 68,500-seat stadium has been under construction for almost a year. It is expected to open in 2014 — after a decade or so of planning.
Despite claiming to work with powerhouse investment firms to arrange financing, Milam’s main source of funding ultimately was slated to come from China Security and Surveillance Technology. The company, based in Shenzhen, China, manufactures and installs security and surveillance gear.
According to Milam, the company agreed in spring 2012 to finance a $650 million, 17,500-seat indoor arena. It did not require an anchor tenant as a condition for financing. The company planned instead to charge a high interest rate of 20 percent.
A few months later, its board allegedly reversed course and decided they would finance the deal only if Milam lined up a team.
Milam’s group got furthest with a plan to bring the Sacramento Kings to Henderson, according to court documents. But that deal fell apart last year after the construction-financing terms were changed, the filing said. It also cited a “slow pace of discussions.”
Chris Clark, spokesman for the NBA team, would not confirm if talks were held. Representatives for China Security, Morgan Stanley and Piper Jaffray did not respond to requests for comment. Goldman Sachs spokesman Michael DuVally declined comment.
All told, Milam’s potential success with the project depended largely on whether he could get professional teams to move to Henderson — an unlikely prospect.
Only a few teams are candidates for relocation, and league commissioners are wary to allow expansion teams to pop up, said Dan Grigsby, chairman of the national sports law group at the Jeffer Mangels Butler and Mitchell law firm in Los Angeles.
“I don’t know where the teams would come from,” Grigsby said.
Fans buy more Pistons merchandise as team improves on court
January 7, 2014
By Bill Shea
Crain’s Detroit Business
Published: January 7, 2014
The Detroit Pistons say there are new indications that their financial and on-court turnaround is working.
Fans are buying Pistons logo merchandise at a 70 percent higher rate over last season from the official team stores at the Palace of Auburn Hills and Great Lakes Crossing Outlets, and to a lesser degree from the team’s online store.
The Pistons declined to disclose the team’s retail sales revenue, but National Basketball Association team annual merchandise typically accounts for 3 percent to 4 percent of total revenue, sports insiders say.
“We’re seeing a really nice uptick in our merchandise sales,” said Charlie Metzger, Palace Sports and Entertainment executive vice president and chief marketing officer. Palace Sports is the umbrella management company for the Pistons.
Transactions at the team retail stores are up 15 percent compared with 2012, said Metzger, a former McCann Worldgroup advertising executive and a 2002 Crain’s “40 under 40″ honoree.
“The people in the store are spending more,” he said, adding that the revenue is similar to 2009-10. That season, Forbes.com had overall team revenue at $147 million, compared with $125 million for 2012-13.
That would mean new sales of nearly $1 million for an annual total of $5 million to $6 million in revenue. The Pistons keep the revenue from their own brick-and-mortar store and online sales, Metzger said. Other pro sports leagues share such revenue among all teams, as the NBA does from its league-wide online shop.
Michael Rapkoch, president of Addison, Texas-based Sports Value Consulting LLC, said merchandise sales are a small revenue stream for NBA teams, but are one measurement of a team’s overall financial situation.
Increased sales mean more lucrative sources of money — corporate sponsorships, suite sales, season tickets — should increase correspondingly.
“Fans are tuning into them. You’re getting more potential eyeballs on games, which is good for sponsors,” he said.
NBA teams don’t disclose financial data, but Pistons and PS&E President and CEO Dennis Mannion told Crain’s in November that season ticket sales are up 36 percent over 2012, and that the Pistons are no longer borrowing money from the league’s low-interest credit facility to cover operations, as they had prior to the team’s 2011 ownership change.
“It is self-sustaining operation,” Mannion said.
Retail sales help that sustainability.
Twenty percent of this year’s merchandise sales are of the 80 “Motor City” items introduced in August to celebrate the franchise’s Detroit and automotive heritage. The team this season is wearing a blue uniform with “Motor City” replacing the team name atop the front of the jersey for 10 Sunday games.
Adult Motor City jerseys retail for $105, while hoodies and fleeces are $57 to $62.
Detroit was scheduled to wear the Motor City livery on Sunday against the visiting Memphis Grizzlies, then for a pair of upcoming road games before a final time at the Palace on April 13 against the Toronto Raptors.
The team said sales are up because more fans are coming to games.
The Pistons, who have seen management and coaching changes along with $40 million in renovations to the Palace since Tom Gores bought the franchise in 2011, are contending for a playoff berth and have a roster of talented young players.
The Pistons (14-19 going into Sunday’s game) have averaged 14,377 fans per game over 17 games at the Palace this season, good for 26th in the 30-team NBA.
The team was 28th in attendance last season with a 14,782 per-game average, but that number was lower in November, December and January last season because of the quirks of the schedule (opponent, time and day of game, etc.).
Additional merchandise changes are coming for 2014-15. For example, the NBA introduced this season in limited markets what it calls heritage jerseys, which have T-shirt-like sleeves, and the Motor City jerseys will be that style next season, Metzger said.
One infamous Pistons style won’t return.
“Teal is not coming back,” Metzger said, chuckling.
Charlotte Hornets hope fans will bee there for merchandise rollout
January 17, 2014
by Erik Spanberg
Charlotte Business Journal
Published: January 17,2014
You’ve seen the logo, but will you wear it? Charlotte Bobcats executives hope the answer to that question is a resounding yes.
On Saturday, the soon-to-be Hornets will begin selling Hornets gear featuring the updated logo unveiled last month by team owner Michael Jordan. Last summer, Jordan and the Bobcats won unanimous approval from the NBA to change the Charlotte franchise’s name to Hornets from Bobcats, starting next season.
Since then, the franchise has taken full advantage of the nostalgia and excitement. The Hornets debuted as an expansion franchise in 1988 under founder and owner George Shinn, becoming one of the most popular franchises in the league before Shinn’s off-court controversies and demands for a new arena soured fans. In 2002, Shinn moved the Hornets, name and all, to New Orleans.
That left Charlotte without a team, a situation remedied when cable TV entrepreneur Robert Johnson paid $300 million for a second Queen City expansion team in 2003. Johnson’s Charlotte Bobcats began playing a year later, but neither the owner nor the team gained traction with the region’s sports fans.
Which brings us to Jordan. Four years ago, he bought majority interest for $275 million and revamped the front office and basketball operations. Investing $4 million to $5 million for the name change is just one of the makeover moves ushered in by Jordan’s management.
Season-ticket holders get first crack at the new merchandise, with a three-hour preview sale Saturday afternoon at the arena team shop. At 6:30 p.m., the general public can shop, leading into a sold-out game against LeBron James and the Miami Heat at 7:30 p.m. On Sunday, the Bobcats team store will be open from noon to 5 p.m., and normal store hours resume Monday (11 a.m. to 6 p.m.). The arena retains exclusive retail rights for the merchandise through Monday. After that, other retailers will be selling Hornets items, too.
Fred Whitfield, Bobcats president, said the team store sales coincide with the launch of a retro Air Jordan Nike sneaker. The team has increased security and anticipates lines to get in the store, he said.
Ed Kiernan, founding partner at New York brand consulting firm Engine Shop, said the Hornets should ring up big sales beyond the opening weekend and beyond their home court in the Carolinas.
“I love the logo — you’re going to see it popping up in New York and South Beach and L.A.,” he said. “It’s got that pop-culture, cool look.”
So much so that Kiernan, whose firm works with Mercedes-Benz, Johnson & Johnson and other large brands, said he might have to dump his hometown New York Knicks and star Carmelo Anthony.
“I’ve been looking for an excuse,” Kiernan said. “Sorry, ‘Melo.”
Online sales begin Saturday at 3 p.m. All NBA teams share merchandise sales equally, with the
exception of any home arena and team-operated retail outlets. The Bobcats don’t have separate retail stores, unlike some of the more popular franchises in the league. Pete Guelli, chief sales and marketing officer, said the popularity of throwback items featuring the old Hornets logo from the 1980s and 1990s has increased arena store sales by 25 percent this year.
About 50 items, ranging from T-shirts and caps to logo basketballs, will be available this weekend. The product line will expand in the coming weeks and months as the NBA licenses its team logos to 400 companies, many of which make several different types of souvenirs. Adidas is the exclusive apparel company for the NBA.
Jordan, who has a stake in his own line of shoes and apparel at Nike, made sure swoosh-branded Hornets gear will be produced, too. The Nike-Hornets items can be sold only at the arena and not at outside retailers, where Adidas maintains exclusive rights.
Bobcats merchandise has been discounted for several months as the franchise prepares for the name transition. Going forward, Whitfield said the Charlotte club will sell what it calls legacy Hornets gear, its Buzz City apparel introduced last summer after the name-change announcement and the new Hornets logo, billed as a fiercer, more contemporary version.
Industry experts contend merchandise sales are as important as a leading indicator as they are for revenue.
“If fans are interested in your team and they’re willing to pay $30, $40 or $50 for merchandise, that’s a sign of interest,” said Michael Rapkoch, president at Dallas-based Sports Value Consulting. “Now your TV ratings go up (with greater interest), which means the ads (on the broadcasts) go up and more people start going to games. It’s one of the gauges (of franchise health).”
And a jump in sales could help small-market franchises such as Charlotte invest in better players.
Guelli, the Bobcats sales executive, called merchandise sales “a piece of the puzzle” along with food and drink sales, arena bookings such as concerts and family shows and regional TV revenue.
Add in Jordan’s cachet and the Bobcats stand to strengthen their visibility with the Hornets’ arrival. Or, as Rapkoch put it, “Any time you bring Michael into the picture, it’s a benefit.”
Charlotte sports exec kicking around Major League Soccer bid
January 24, 2014
By Erik Spanberg
Charlotte Business Journal
Published: January 24, 2014
The managing partner of Charlotte’s professional lacrosse team wants to add Major League Soccer to the city’s sports portfolio. All he needs is about $75 million or so and a major facelift for Memorial Stadium.
Then again, for 40 years or so, no one ever thought professional soccer would work in the U.S., and look at it now.
Two MLS teams awarded in recent months sold for $70 million and $100 million, respectively, the most tangible sign yet that soccer has realized a sustainable American audience after decades of false starts.
In Charlotte, many questions remain when it comes to the possibility of landing an MLS team.
For starters, who picks up the check? Jim McPhilliamy, managing partner of the Charlotte Hounds, the three-year-old lacrosse team, told me this week his group’s option to purchase the rights held by the Charlotte Eagles in the top tier of the United Soccer Leagues is viewed as a springboard to landing an MLS club. McPhilliamy said the goal is to attract 8,000 fans per game once his group runs the Eagles in 2015 and, at the same time, seek major investors for an MLS expansion team within a few years.
The fate of the Eagles involves McPhilliamy buying the rights to field a franchise in the United Soccer Leagues, a team that will have a new name. (Did someone say Bobcats? Only if that someone has been drinking. A lot.) As for the Eagles, that name and team will stay but move to a lower-level league. McPhilliamy noted he is just buying franchise rights in the USL from the Eagles owners, who will maintain their focus on faith-based programs through sports.
There are 19 MLS teams now, with a second New York club and one in Orlando, Fla., joining in 2015. Last summer, league executives said they hope to have 24 teams by 2020. With additions likely in Miami and Atlanta in the near future, the MLS would be at 23 teams and, based on its growth plans, have one more expansion city to choose. San Antonio and Charlotte are among the interested cities.
Dan Courtemanche, an MLS spokesman, told me Friday the league is aware of McPhilliamy’s interest and the imminent purchase of the United Soccer Leagues’ Eagles franchise. Ownership, sports interest and, more specifically, the appetite for soccer at all levels are among the most important factors for an expansion city, he said.
Team operators in the MLS own a stake in the entire league, not just their local team. That structure differs from the NFL, Major League Baseball and NBA, among others. In those older, more lucrative sports leagues, team operators buy an individual franchise. Thus, Jerry Richardson and his investors invested $200 million to acquire the NFL Carolina Panthers in 1993. Because of pro football’s dominance on TV and in ticket sales, the Panthers are now worth $1.1 billion, according to Forbes. The same magazine ranked the MLS clubs in November 2013 and valued the most successful team, the Seattle Sounders, at $175 million.
Despite the disparity, sports business executives applaud the MLS for a decade of impressive growth. In 2004, the league consisted of 10 teams after contracting by two clubs two years earlier. The MLS started in 1996. Its investors now include major backers from the NFL (the Kraft family, which also owns the New England Patriots; Paul Allen, owner of the Seattle Seahawks; and the Hunt family, owners of the Kansas City Chiefs), Major League Baseball (John Frisher and Lew Wolff, principal owners of the Oakland A’s) and the NBA (Stan Kroenke, whose sports holdings include the Denver Nuggets and NHL Colorado Avalanche). Boxer Oscar de la Hoya, NBA player Steve Nash, Hollywood producer Joe Roth, comedian-actor Drew Carey and former U.S. Treasury Secretary Hank Paulson are also MLS investors.
ESPN, NBA and Univision show MLS games nationally. Later this year, a new TV deal is expected and, thanks to the combination of MLS growth and relentless competition among cable networks to snatch up sports rights to bring in more viewers and advertisers, it should come with a healthy jump in TV revenue. The jump could be even higher if TV ratings were better. MLS audiences on ESPN and ESPN2 declined by 20 percent in 2013 from the previous year, according to the SportsBusiness Journal, a sister publication of the Charlotte Business Journal.
Sponsors leaguewide include adidas, Anheuser-Busch, AT&T, EA Sports, Gatorade, The Home Depot, Microsoft, Pepsi, Visa and Wells Fargo. With all of the gains, the MLS still has much work remaining. Starting with profitability. MLS Commissioner Don Garber said this month his league still loses $75 million to $100 million annually.
“MLS is extremely viable, especially in Seattle and the Northwest and parts of the Northeast,” Sports Value Consulting president Michael Rapkoch told me. “In other areas, it’s taken longer. When you look at a league expanding, you have to look at the viability of each market.”
McPhilliamy, the Charlotte lacrosse managing partner, said the Carolinas will be a natural expansion area for the MLS. Considered in that context, Charlotte really just needs to beat out the Triangle, he said.
Stealing a page from Portland, Ore., one of the most successful MLS cities, McPhilliamy said Mecklenburg County-owned Memorial Stadium could be updated much the way Portland overhauled a minor-league baseball stadium opened in 1926. The biggest changes came as part of a $40 million makeover finished in 2011.
Nothing that ambitious has been discussed in Charlotte. At least not yet. McPhilliamy and the county park and recreation department want to widen Memorial Stadium’s field in time for the 2015 season and install a turf field. The lacrosse and soccer seasons overlap in the spring and summer. With a grass field, the constant use would mar the playing surface, McPhilliamy said.
Memorial Stadium opened in 1936.
The cost for the widening of the field and turf will likely range from $1.5 million to $2 million, the Hounds partner estimated. He also said the Memorial Stadium changes would be paid for with private money.
“We are close to having a proposal on what we would do to the stadium, what it would cost and how long it would take,” said Jim Garges, park and recreation director. “If we move ahead with expanding the stadium (by widening the field), then the hope is to identify the money (and ownership group for a franchise) and entice the MLS.”
MLS teams combined for an average of 18,000 fans per game in 2013. Capacity at Memorial Stadium would be reduced from 17,500 to 15,000 with the changes to the field dimensions. Since the Hounds draw 5,500 fans per home game, McPhilliamy said the popularity of soccer makes it realistic to target an average of 8,000 fans for the renamed Eagles.
The Hounds have five employees and would add three more if and when the purchase of the soccer club is completed in September. The option to buy must be exercised in June. Combined, the lacross team and soccer franchise would generate $2 million annually. McPhilliamy said profitability would also be accelerated, but he declined to disclose specific figures. Sponsors added for the Hounds season, which begins in April, include Harris Teeter, East Charlotte Nissan and Adams Beverages. Sponsorship revenue has increased by 33 percent, said Wade Leaphart, Hounds general manager.
Shelly Sterling reportedly trying to sell the Clippers, and quickly
May 27, 2014
By James Rainey, Andrea Chang, Nathan Fenno
Published: May 27, 2014
Los Angeles Clippers co-owner Shelly Sterling is mounting a hurried sale of the team that her husband, Donald, bought 33 years ago and could name a prospective new owner by the end of the week, according to people familiar with the situation.
Shelly Sterling is trying to sell the Clippers in advance of a Tuesday deadline, when the 30 pro basketball teams will vote on whether to strip control of the team from both of the Sterlings, in response to Donald Sterling’s racially charged remarks about blacks.
The developments in the NBA’s biggest-ever ownership crisis came on the same day that a defiant Donald Sterling lashed out at what he called the league’s “illegal termination process.” In a 30-page response to the charges that the NBA formally leveled against him last week, Sterling excoriated the NBA for insisting on his ouster for what he deemed an illegal recording of a “lover’s quarrel.”
In the documents obtained by The Times, Sterling said he had already received offers “in excess of $2.5 billion” for the Clippers.
The whirlwind series of events suggested a potentially rapid resolution to a scandal that appeared as if it might drag on for months or years, though people close to the NBA cautioned that the sale of the team is far from complete and eventually must be approved by the other owners.
The potential price tag for the Clippers and the field of interested parties came into focus Tuesday, with one likely bidder saying that the team would certainly go for well over $1 billion. That would be the highest sale price in NBA history, topping the $550 million sale of the Milwaukee Bucks earlier this month.
Among the possible buyers is Chicago-based Guggenheim Partners — which bought the Dodgers two years ago for more than $2 billion — in partnership with three billionaires who previously said they would launch a bid for the Clippers: Oracle software co-founder Larry Ellison, entertainment magnate David Geffen and multimedia powerhouse Oprah Winfrey.
Another group of potential bidders includes three people who have ties to major league sports: Tony Ressler, the Los Angeles-based co-founder of the investment firm Ares Management, who holds a minority stake in the Milwaukee Brewers; Oaktree Capital Management co-founder Bruce Karsh, who is a minority owner of the NBA’s Golden State Warriors and chairman of Los Angeles Times owner Tribune Co.; and Grant Hill, a onetime NBA all-star who finished his career with the Clippers. Hill and others from the group met with Shelly Sterling on Monday at Nobu restaurant in Malibu.
A bid is also expected from Steve Ballmer, who stepped down as chief executive of Microsoft in February after leading the software company for 14 years. He met with Shelly Sterling on Sunday.
Ballmer last year joined hedge fund manager Chris Hansen in a bid for the Sacramento Kings with the intention of moving the team to Seattle. NBA owners rejected their offer.
Ballmer said in a recent interview with the Wall Street Journal that if he makes a bid and it is successful, he would not move the Clippers. He said the team would lose much of its value by leaving Los Angeles, the nation’s second-biggest media market.
A prospective buyer, who requested anonymity because of the sensitivity of negotiations, said that the process appeared to be moving quickly and the deadline for bids could be as early as Thursday. “We will probably know who bought the team by Friday,” that bidder said.
Any deal for the team would require approval of three-quarters of the NBA’s owners.
The league is also insisting that the Sterlings sell 100% of the team. NBA spokesman Mike Bass said Tuesday that the league would not be receptive to Shelly Sterling maintaining a minority interest in the Clippers, an idea she has not yet ruled out.
The league said it would move forward with next week’s extraordinary hearing to remove the couple from ownership. “Should the Board vote to sustain the charge,” Bass said, “the Sterlings’ interests in the Clippers will be terminated and the team will be sold.”
Reiterating a statement NBA Commissioner Adam Silver made last week, Bass said: “It would be a preferred outcome if the Sterlings were to voluntarily transfer 100% of the ownership in the team to new owners, rather than to have their ownership in the team terminated.”
People familiar with two of the prospective buyers said they believed that Shelly Sterling, who has previously said she did not want to control the team, would be happy just keeping season tickets and a preferred parking pass. Someone familiar with her thinking said the co-owner might still want more.
Shelly and Donald Sterling have been married for 58 years and she holds half of the team through a family trust. Last week, her husband said he had turned over control to her to facilitate a sale.
“Donald Sterling has authorized Shelly Sterling in writing to negotiate the sale of the Los Angeles Clippers, including his 50% ownership of the team,” Pierce O’Donnell, Shelly Sterling’s attorney, said Tuesday. “Shelly is managing the sale of the Clippers. While no formal offers have yet been received, Shelly and the NBA are working cooperatively on the transaction.”
Donald Sterling remains the controlling owner of the team in the eyes of the NBA, but league officials said they would not stand in the way of any legitimate sale.
The Clippers had their best regular season ever and were in the first round of the playoffs when a recording of Donald Sterling’s disparaging remarks about blacks was posted on the celebrity website TMZ.
The rant caused anger among fans, a threatened boycott by players and the flight of sponsors, and led to sanctions by the NBA against Donald Sterling — a $2.5-million fine (which Sterling refused to pay), a lifetime ban from the league and the pending forced sale.
Much of the defense that Sterling emailed to the NBA hours before a midnight deadline Tuesday centered on his complaint that he was being punished for remarks he made in private to V. Stiviano.
Stiviano, 31, has been his frequent companion and sometime assistant. She has described her relationship with the 80-year-old real estate magnate as platonic, akin to a father and daughter. But Sterling has said he was enamored of the young woman from Boyle Heights.
Stiviano has previously said she routinely made recordings of Sterling and at times used them to try to coach him to be more politic in his comments. She said he knew about the recording she made in September 2013, which began with his anger over a photo she had posted on Instagram of herself with former Laker Magic Johnson.
Complaining about Stiviano’s Instagram photos, Sterling said in the recording: “Yeah, it bothers me a lot that you want to … broadcast that you’re associating with black people. Do you have to?”
Sterling reiterated in his written defense Tuesday that he did not know Stiviano was recording him. He said that California law not only prohibits recordings without an individual’s permission but forbids such content to be used “in any judicial, administrative, legislative or other proceeding.”
Citing California case law, Sterling’s response called the NBA’s use of his private conversation against him “nothing less than a direct and blatant invasion of Mr. Sterling’s California constitutional guarantee of privacy.”
The response went on to claim Sterling was “distraught” when he made the statements because Stiviano told him she planned to bring “four gorgeous black guys to the game” and that his emotional state should be viewed by the NBA as a mitigating factor.
While making a blanket rejection of the six counts leveled against him by the NBA, Sterling said he was hindered from conducting his own investigation because he’s “locked out of his office at Staples Center” — part of his ban from the league.
Sterling said he does not have high expectations for the hearing before his fellow owners next week in New York. The response claimed that no American court “will enforce the draconian penalties imposed on Mr. Sterling in these circumstances.”
“Indeed,” the response continued, “we believe that preservation of Mr. Sterling’s constitutional rights requires that these sham proceedings be terminated in Mr. Sterling’s favor.”
If the NBA owners vote to terminate the Sterlings’ ownership, the league would then conduct the sale of the team on its own. The proceeds would still go to the couple.
Donald Sterling paid $12.5 million for the Clippers in 1981. The potential windfall from a sale would come at some cost, though, Sterling noted in his filing with the league. He said the forced sale would mean the family would pay $300 million to $500 million in capital gains taxes.
Two potential buyers were meeting into the night Tuesday, and considering a combined offer, according to one of their representatives. Another interested buyer said he had reviewed the books and was not impressed by the Clippers’ narrow profit margin. Another likely bidder said he believed no one had yet seen the team’s finances.
The Guggenheim group has extra incentive to be in the mix.
Guggenheim created SportsNet LA after the firm and Magic Johnson bought the Dodgers two years ago. Time Warner Cable, which is handling distribution for the Dodgers, paid more than $8 billion for a 25-year deal, according to a valuation by the Dodgers and Major League Baseball.
Time Warner Cable SportsNet LA launched in February, but it has struggled to attract distributors because of its high price tag. The addition of Clippers coverage would make the channel more appealing to other distributors such as DirecTV and the Dish Network, which aren’t carrying SportsNet LA.
Michael Rapkoch, president of Sports Value Consulting, said adding a basketball team to SportsNet LA’s lineup would nicely complement its current baseball offerings.
“The seasons don’t necessarily overlap that much. If you have a sports network, you’ve got to have something 12 months out of the year,” he said. “To be able to add on a basketball team would be great.”
What happens to Buccaneers and Manchester United after Malcolm Glazer?
May 30, 2014
By Daniel Roberts
Published: May 30, 2014
The billionaire owner of the NFL’s Tampa Bay Buccaneers and the Premier League’s Manchester United FC has passed away. Here’s a look at what his death means for the two very different sports franchises.
When Malcolm Glazer first acquired the necessary shares needed to become sole owner of the Manchester United soccer club in 2005, there was widespread fan outrage. A group of diehard Man U. supporters even came together to found the F.C. United of Manchester (see what they did there?), still an active team today in the less glamorous Northern Premier League.
But despite fears of American corporate influence on the elite British squad, it hasn’t exactly cost any wins (though the most recent season was a poor one): Manchester United won the Champions League title in 2008 and made the Champions final in 2009 and 2011. The team’s star forward Wayne Rooney is one of the five highest-salaried soccer players in the world. It remains, to many sports fans in America, the New York Yankee equivalent of the global soccer world.
Now Glazer, who suffered a stroke in 2006 that left him in poor health, has passed away at 85, the Buccaneers confirmed on Wednesday. In the wake of Glazer’s death, you might be wondering what will change for the two teams he owned. The short answer is: not very much.
Glazer had a longtime succession plan in place to keep both teams in the family. In its official statement on his’s death, the Bucs (which refused further comment beyond the press release) referenced Glazer’s “long-established estate succession plan” and said, “Linda Glazer, along with their five sons and daughter, will continue to own and operate the team as they have throughout the family’s ownership.” Expect Linda to become the public ownership face of the team, while sons Bryan, Edward and Joel, currently the co-chairmen of the team, will likely become its co-presidents. (Malcolm, previously, was owner as well as president.) If one son becomes the sole president or assumes more of a leadership position, even if not in title, it could be Bryan (even though he is known to be quiet and reserved) because, of the three co-chairmen brothers of the Bucs, Bryan is the only one who is not also a co-chairman of Manchester United.
The Glazers were undoubtedly a good thing for the Tampa Bay Buccaneers. The Bucs won their first Super Bowl in the 2002 season, over the Raiders. (A Tampa Bay Times columnist called Malcolm Glazer “the best thing to happen to sports in Tampa Bay.”) After that, the team won its division, the NFC South, in 2005 and 2007.
Manchester United, too, will still be run by the family, but its management structure is a bit more complicated, only because so many Glazers hold positions of power. Brothers Avram and Joel are the club’s executive co-chairmen, while four more Glazers—Kevin, Bryan, Darcie and Edward—are all on the board of directors. But it is a non-family member, Ed Woodward, who has been the face of the team’s management. The club’s executive vice chairman since David Gill stepped down last June, Woodward (who is barely 40) is responsible for the club’s commercial strategy and trade negotiations. He took the brunt of the blame for the club’s player decisions made last summer, and as Bleacher Report wrote this month, it will fall to Woodward to redeem the club and make the right moves during the coming trade window. Expect Woodward to continue to be the face of the team from the business side of things.
In other words, with both teams, look for very little change in the short-term, but perhaps some family moves to be made later down the line. Malcolm and Lisa’s six children all own an equal stake in Manchester United (despite the elevated roles of Avram and Joel) and as the Telegraph speculates, that could eventually change: “Kevin, Edward and Darcie are mystery figures… the loss of their father – the patriarch of the family business – could lead to a reassessment of their involvement in United.”
The soccer club’s official statement was far more brief than the Bucs’ release. The club’s statement, in addition to mentioning that the news was first announced by the Buccaneers, merely says, “The thoughts of everyone at Manchester United are with the Glazer family tonight… Malcolm leaves behind his wife Linda, six children and 14 grandchildren. Staff at Manchester United extend deep and sincere condolences to them all at this difficult time.”
Sports-marketer Bob Dorfman, partner at Baker Street Advertising, says that the management of both teams is unlikely to change soon, mostly because, due to his health, Malcolm had already been removed from the day-to-day operations for quite some time. And Dorfman says that in the long-run, the children could usher in change. For the Buccaneers, “the younger generation could bring in more technology, more of a digital angle to the business, more cutting edge kind of things,” says Dorfman.
As for Manchester United, despite the early grumblings of fans in 2005, most would have to say that the team has been successful under Glazer ownership. This year in particular was a big disappointment because the team did not finish in the top four in the Premier League, which is almost unheard of for Man U. That, Dorfman says, is a big deal and overshadows past successes. “It’s like the Yankees finishing below .500.” Still, he says, “I think the fans are less upset about the ownership right now, it’s more blamed on the managerial changes after Alex Ferguson,” the team’s legendary former manager. Indeed, David Moyes, Ferguson’s successor, was let go after just one season of his six-year contract, and much-revered former manager Ferguson reportedly aided in the search for a new manager that arrived at Dutch manager Louis van Gaal, who will take over after the World Cup.
The question with Manchester United moving forward, Dorfman says, is, “How will the New York Yankees of soccer get back to where they were?” Whether the Glazers themselves will be able to address that question remains to be seen. But if you ask Michael Rapkoch, president of Sports Value Consulting, Malcolm Glazer’s legacy is an impressive one when considering the other wealthy Americans who have tried to get into English soccer. (Tom Hicks for example, the former Texas Rangers owner, had to sell off the Liverpool football club in 2010.) “Glazer really was a visionary for American investors buying in the Premier League,” Rapkoch says. “He built a really solid foundation. So I expect his children to build on that foundation with both teams. I’m sure Mr Glazer taught his sons well.”
With the owning family’s patriarch gone, change will come to both of these teams. But not for a few years. “Man U is a lot more difficult than the Bucs, because it’s everyone’s favorite football team over there—everything they do is scrutinized one way or the other,” says Rapkoch. “So that’s what the family faces. In the long-term, if you look at what happened with the Blackhawks and even with the Yankees [after George Steinbrenner died], when the next generation takes over, slowly you start to see a little bit more innovation. It’s like, ‘We understand and respect our father and mother and their wishes, but let’s try to branch out a little bit.’”
Franchise values: Which price is right?
June 30, 2014
By Daniel Kaplan & John Lombardo, Staff Writers
Sports Business Journal
Published: June 30, 2014
When a team unexpectedly reels off a long winning streak, fans can be tempted to start thinking even bigger: championships, parades — the good times going on and on. So when the news hit last month that the Los Angeles Clippers were selling for the staggering sum of $2 billion, sports team owners understandably might have started to do the same. In their case, “good times” would mean the radical escalation of the value of their own franchises and the prospect of selling their teams for what not long ago were virtually inconceivable sums.
But before they contemplate those sales, they might want to consider the following: No MLB team has sold since Guggenheim Partners paid the astounding price of $2.15 billion for the Los Angeles Dodgers in 2012.
As occurred with the Dodgers sale, the Clippers deal is serving to spark confusion in the marketplace about what teams are really worth. It’s an effect that is reverberating through team sponsors, marketers and regional sports networks, as well.
“Expectations have risen,” said sports finance adviser Mitchell Ziets, who counseled Chris Hansen on his
attempted bid to buy the Sacramento Kings last year. “The question is, How deep is the market? There are not 15 buyers lined up for every team.”
The Clippers presented a host of unique circumstances, including the forced sale (with pending litigation) and the lucrative Los Angeles market. Those circumstances are unlikely to get replicated elsewhere, but tamping down expectations that all teams in sports are now worth at least $1 billion is a challenge.
Live for the moment — that can be part of the equation, even if it means dollars outside of a book-value calculation.
“Look at the world,” said sports investment banker Sal Galatioto. “The Russians are taking over Ukraine …
terrorists are taking Iraq and Syria, the North Koreans are testing cruise missiles — there could be a flash point in the next 10 seconds, and everything could change.”
So is there a present-day benchmark for what teams are worth, both now and looking ahead?
Many bankers believe that instead of the Clippers deal, a better standard for the market going forward is the sale of the Milwaukee Bucks that occurred earlier this spring. That deal came in at $550 million. While that amount pales in dollars relative to the $2 billion that Steve Ballmer has offered in Los Angeles, consider what was acquired for that $550 million sum: a team that plays in an outdated arena and in a small market, and that has a modest, at best, following. Despite all that, the Bucks attracted a purchase amount that at the time — and pending approval of the Clippers’ deal — was a record franchise-sale price in the NBA.
Further, that Bucks price represents about five times the team’s revenue, said Rob Tilliss, a sports finance adviser with Inner Circle Sports. Previously, teams typically sold for three to 3 1/2 times revenue, so five times revenue could be the new floor, Tilliss said. By contrast, the Clippers’ $2 billion deal comes for a franchise that had $150 million in revenue last year — so it represents a double-digit multiple that is hard to justify from the perspective of a traditional financial model.
That said, Tilliss pointed out that from a tax perspective, the deal for Ballmer in Los Angeles has a benefit in that the Microsoft billionaire can depreciate the purchase over 15 years. Ballmer also represents a new type of owner in sports: the mega-wealthy, with their riches often coming from hedge funds or entrepreneurship. For these owners, paying a few times more on revenue than what the traditional team-purchase model suggests should be done is not the concern that it was for owners in prior years.
“Steve wanted the team and he didn’t want to be outbid,” said Michael Rapkoch, founder of Sports Value
Consulting, which has been involved in analyzing the value of a variety of big league teams. “The other bids were $1.2 billion and $1.6 billion by sophisticated buyers, but [Ballmer] wanted a major-market team and didn’t want to leave a chance of being left out.
“But the game-changer in all this is the Bucks deal,” Rapkoch said. “That deal set the floor.”
View from the owners’ suite
Of course, financial advisers aren’t alone in seeking trend lines. Current franchise owners and others active in the industry are watching the marketplace, as well. Former team owners also are following the numbers, and for some of them, neither the Clippers’ price nor the Dodgers’ deal will have substantial bearing on future franchise transactions.
“Based on the things we know, neither the Dodgers’ or the Clippers’ value pencils out,” said Jerry Colangelo, former owner of the Phoenix Suns. Colangelo bought the Suns in 1987 for $44 million and sold the team in 2004 for a then-NBA record $400 million.
“You look at all of it, and it doesn’t figure,” he said. “But there are some individuals with the capacity and the desire to own a team and it has nothing to do with the true value. The bio of the owner today is so different. They are entrepreneurial and hedge fund guys and they look at it through a different microscope. The number wasn’t imperative to Ballmer. He was willing to pay. There are still only 30 of these jewels.”
But former Sacramento Kings owner Joe Maloof, whose family last year sold the Kings for a then-record $534
million, said the increase in franchise values that’s being seen is likely to continue.
“There was a line around the block to buy the Clippers,” Maloof said. “Maybe [Ballmer] overpaid in the short term, but in the long term, it will be a great investment for him. Los Angeles is a platform to the
Part of that platform includes being in the nation’s No. 2 TV market. Talk to anyone in the business of buying and selling sports teams, and likely their first point of comment in assessing a deal will be the
value of the team’s local TV deal.
“Typically, TV plays a big role in the actual purchase decisions for teams,” said Chris Bevilacqua, co-founder of Bevilacqua Helfant Ventures, which helps teams negotiate television rights fees. “This is
especially true in a sport like basketball, which is a global sport that gets the vast majority of its revenue domestically. There’s a lot of upside growth in the league’s international business, [and] you benefit from new national and local TV deals. If you add those three up, over time, NBA franchises as a whole will continue to see an increase in value.”
That said, Bevilacqua considers the $2 billion purchase price for the Clippers high — even with the prospect of the team signing a new local TV deal expected to be worth significantly more than its current level of around $30 million per year. That local deal expires after the 2015-16 season.
“In the case of the Clippers, it doesn’t feel to me that TV revenue had a lot to do with it,” Bevilacqua said. “It’s not a price you can justify on today’s known set of facts. It’s like a piece of art: It’s worth what somebody will pay for it. It’s the price for Ballmer to get into the exclusive club of NBA owners.”
Sponsors considering impact
The recent run-up in team valuations does have brand and marketing executives expecting clubs to start charging higher prices for sponsorship categories across the board. That expectation comes from the team owners looking for ways to offset their record-setting franchise prices.
And sponsors might not be alone.
“The usual suspects will be the targets for increased revenue: advertisers, media rights holders, suite and clubseat holders, and season-ticket holders,” said Tony Schiller, executive vice president and partner of Paragon Marketing, which represents brands including Bud Light and PNC Bank. “The reality is that we’re close to a ceiling from a sponsorship and advertising perspective, relative to what brands are willing to invest for sports marketing partnerships. So if there is any opportunity, it will be from new brands in new categories. I don’t think the existing group of rights holders [is] going to spend two or three times more.”
Still, the new owners will be looking to get a positive return on their team purchase deals, so they’ll want to maximize the gains from the deals they do with the corporate marketing community for sponsorships, suites and media, said Michael Lynch, who runs Repucom’s U.S. consulting business.
Those pricing concerns can be heard on the brand side as well.
“It has evolved to the point where it is less about the business model and more about the ego,” said Tim Collins, senior vice president of experiential marketing for Wells Fargo, whose list of sports deals include facility naming-rights agreements, team sponsorships and a league-level contract with MLS. “If someone has the money and thinks it is a good value, then fine. But I question whether there is a business model with revenue streams to support that. I’m concerned that prices brands will pay will be jacked up to justify that.”
Chuck Browning, head of sponsorships and events for Farmers Insurance, is more blunt.
“In some way, we are going to pay the piper,” he said. “We’ve seen [team sales] go from millions to billions. Brands are going to pay the price, and so are consumers.”
Bigger roll for smaller stakes
Even if Ballmer’s $2 billion bid for the Clippers won’t necessarily stoke other NBA franchise sales, the price might cause some owners to consider selling new limited-partnership stakes in their franchises.
“The [Clippers’ sale] won’t just impact the sale of 100 percent of a franchise; it will also impact the valuation when current ownership brings in one or more investors,” said Bob Caporale, chairman of Game Plan, which has been involved in numerous team sales over the past decade.
Marc Ganis, president of SportsCorp Ltd., which represented Tom Benson in buying the New Orleans Pelicans
from the NBA in 2012, stressed the importance of the Milwaukee deal in this regard more than the higher-price deal in Los Angeles.
“The Bucks’ sale at $550 million has more impact than a Clippers sale because the Bucks are the lowestvalued team and everything is higher than that,” Ganis said. He added that the sale of 100 percent of a franchise doesn’t always translate into a huge run-up in the value of minority shares.
“There is a huge premium on control,” Ganis said.
There’s also a key financial downside to these increasingly rich deals: more difficulty for current longtime owners in succession planning, given that inflated team values mean a substantial hike in estate taxes.
“That goes for minority interests as well,” Ganis said. “The IRS is licking its chops.”
So sometimes, no matter how long the winning streak lasts, the victories don’t end with a parade.
Soccer entrepreneur aims for pro Detroit team deal by August
July 6, 2014
By Bill Shea
Crain’s Detroit Business
Published: July 6, 2014
Local soccer entrepreneur Dan Duggan worked the room, so to speak, at the World Cup in Brazil as part of his effort to bring a professional fútbol team to Detroit next year.
Now, the clock is ticking.
Organizational and financing planning are ongoing, and Duggan said his goal is to have everything in place for a formal announcement before the high-profile, sold-out Manchester United-Real Madrid exhibition game at Michigan Stadium in August.
Duggan, owner of the semipro Michigan Bucks in Pontiac and brother of Detroit Mayor Mike Duggan, announced in April he had preliminary approval from the Tampa, Fla.-based United Soccer Leagues to launch a USL Professional Division expansion team in Detroit in 2015.
USL Pro, as it’s known, is equivalent to Double-A minor-league baseball, but with the potential to eventually become elevated to the top-tier Major League Soccer.
That’s nothing more than a dream until Duggan gets his expansion bid organized and financed.
A June 15 deadline for Duggan to provide the league with financing details for the expansion team and a 5,000-seat stadium in Detroit has passed, but that’s not a problem, those involved said.
“We remain in active dialogue with Dan Duggan regarding his efforts to bring USL Pro to Detroit. It is apparent he is making progress and we support his initiative,” said United Soccer Leagues President Tim Holt via email.
The league doesn’t disclose financial details about expansion teams, but such teams reportedly have been bought for more than $500,000.
The new Detroit team would cost about $2 million to operate annually, Duggan told Crain’s in April, and he predicts a 5,000-seat stadium in the city could be built for up to $5 million.
He’s not identifying potential stadium sites or other investors other than to say that he’s in talks with the Apostolopoulos family, who own the Pontiac Silverdome and previously sought an MLS team for metro Detroit.
Duggan, who last week returned from the World Cup, where he attended games and conducted soccer business meetings, said he could not be specific about what remains to be done on his bid for an expansion team and stadium.
“We are making a great deal of progress with the ownership group and the stadium site, but there are so many moving pieces involved that I have told the league that I am still working through the process of who fits where and how this is all going to come together,” he said in an email.
“The United Soccer Leagues fully understand my current position and the challenges that we have in securing the land to get a downtown stadium built to play in for 2015. That is still our plan, and we are working with several entities to get this accomplished.”
Duggan said he’s not talked with the league about a new deadline for Detroit’s inclusion in the 14-team USL Pro for next season.
Duggan also said the August announcement would happen only if there was a firm deal in place.
“We are working hard to get this done since the soccer world will be in our backyard that weekend, but I will only do this if I have something concrete so that it does not appear that I keep attempting to get in the media to announce that I have nothing to say,” he said.
The USL Professional Division, which began play in 2011, is a developmental league. Its players are paid, and the league is two steps below MLS and one below the North American Soccer League within the Chicago-based United States Soccer Federation’s organizational pyramid. The federation is the U.S. soccer system’s governing body for amateur and pro soccer.
USL Pro expansion teams already on the books for 2015 include Austin Aztex, Saint Louis FC, Colorado Springs Switchbacks FC, Tulsa Roughnecks FC and Louisville City FC.
A Detroit USL Pro team could open the door for potential MLS expansion: MLS and USL Pro agreed in January 2013 that the third-tier league would eventually integrate into MLS’ reserve team system. Every USL Pro team will be owned and operated by MLS teams or have a formalized affiliation.
Duggan has said his long-term goal is to field a profitable USL team that eventually could be elevated to MLS — which is what happened to Orlando City FC. That team, last season’s USL Pro champions who averaged 8,000 fans per game, is shifting from USL Pro to MLS in 2015.
Duggan’s current team, the Bucks, has an affiliation with the Columbus Crew of MLS.
The Bucks, founded in 1996 in Saginaw as the Mid Michigan Bucks, are part of the 64-team USL Premier Development League, the fourth tier of the soccer pyramid and the top amateur level of U.S. soccer. Detroit City FC of the semipro National Premier Soccer League also is a fourth-tier amateur team.
The Bucks have won four league titles, qualified for the playoffs in 16 of 18 seasons and never had a losing record, Duggan said.
The Bucks, which run on a $150,000 yearly budget, play at 5,000-seat Ultimate Soccer Arenas in Pontiac, where the team relocated in 2008. Duggan is the team’s chairman and CEO.
He would be majority owner of the expansion USL Pro team. MLS, on the other hand, is a single-entity league, meaning the league owns all the teams and pays all salaries. Investors buy into the league for a right to operate a team in a certain market.
The proposed stadium would seat 5,000 with room for 3,000 more on open hills in the end zones.
USL Pro, league-wide, averaged 2,611 fans per game in 2013.
Duggan said he expects a stadium could be built for $2 million, but expects to spend $5 million.
He’s seeking 2.5 to 7 acres of land for a stadium complex that also would include two outdoor practice fields for adult and youth soccer use. He has said the stadium could be incorporated into an existing developed area or be a stand-alone project.
He looked at sites in Pontiac, Livonia and Canton Township before deciding on downtown Detroit.
Duggan said he has yet to determine how the ownership of the expansion team would be organized as a business and whether the stadium will be part of it or not.
“These are all pieces of the puzzle that will or could involve individual sponsorship of local Detroit businesses or could all be rolled into one entity,” he said. “The stadium project is also a huge piece to this. It may be that the stadium/soccer complex in the city is owned by the same entity or it could also be a separately-owned structure.
“It really is going to depend on how much the companies we are speaking to want to invest at the initial stage of the project and which piece of land we decide on.”
Steve Apostolopoulos told Crain’s his family is involved in talks with Duggan, but no specifics of the relationship have been disclosed.
The Apostolopoulos family in 2009 bought the Silverdome and has staged soccer games there as part of an attempt to secure an MSL expansion team.
World Cup networking
Duggan spent time at the World Cup in talks with people in the soccer community, and learning from others, he said.
“We went to the first two U.S. games and had several soccer-related meetings in Sao Paulo, Rio, Natal and Manaus trying to put the pieces of the puzzle together,” he said. “It is amazing what you can get done when you have that many soccer power brokers in the same place at the same time, so it was a convenient place to conduct meetings between games.
“The meetings all related to the important integrated parts to our entire structure that include the USL Pro team, a world-class international soccer partner, an eventual MLS partner, (and) structuring our youth academy program that will provide the finest soccer education and training for our youth affiliates, with a major emphasis on continuing the development of the growth of the kids in the city of Detroit.”
Whether a minor-league soccer team succeeds or fails will depend entirely on simple financial math, said Michael Rapkoch, president of Addison, Texas-based Sports Value Consulting LLC.
“It all comes down to economics. With all minor-league teams, what drives investors is the ability to make money or break even,” he said.
Unlike major-league teams, minor-league clubs typically don’t increase in value every year because they lack star players and don’t have media rights deals or major sponsorships. So, there’s little or no ability to sell off a money-losing club for more than the initial sale price, he said.
“It’s fun for maybe the first year, but it’s no fun losing money.”
Crain’s reporter Dustin Walsh contributed to this story.
Bill Shea: (313) 446-1626, email@example.com. Twitter: @bill_shea19
Golfing tips of the month
February 2, 2016
The European languages are members of the same family. Their separate existence is a myth. For science, music, sport, etc, Europe uses the same vocabulary. The languages only differ in their grammar, their pronunciation and their most common words. Everyone realizes why a new common language would be desirable: one could refuse to pay expensiveRead more
Golfing on a budget
February 2, 2016
The European languages are members of the same family. Their separate existence is a myth. For science, music, sport, etc, Europe uses the same vocabulary. The languages only differ in their grammar, their pronunciation and their most common words. Everyone realizes why a new common language would be desirable: one could refuse to pay expensiveRead more
February 2, 2016
The European languages are members of the same family. Their separate existence is a myth. For science, music, sport, etc, Europe uses the same vocabulary. The languages only differ in their grammar, their pronunciation and their most common words. Everyone realizes why a new common language would be desirable: one could refuse to pay expensiveRead more
Clippers’ $2B price tag might not affect future NBA sales that much
February 9, 2017
By Geoff Baker
The Seattle Times
Published: May 30, 2014
A record $2 billion paid by Steve Ballmer for the Los Angeles Clippers is unlikely to lead to dramatic increases for future NBA franchises in Seattle and other markets.
Sports-valuation experts said Friday that while franchise prices could rise some, Ballmer’s purchase, the highest in NBA history and second-largest in North American sports, was driven by factors unlikely to be repeated in markets beyond Los Angeles. In fact, Don Erickson, president of Texas-based Erickson Partners, said the splurge appears driven mostly by Ballmer’s desire to own a team regardless of whether the final price makes sense.
“There’s no precedent at all for the kind of revenue multiples that he paid for the team,’’ said Erickson, whose company does franchise valuations in all sports.
Erickson said that, even anticipating a major television-revenue boost for the Clippers, Ballmer paid nearly double what the numbers suggest the team is worth. Erickson noted the third-place bid of $1.2 billion by Los Angeles investors Tony Ressler and Bruce Karsh was just more than half what Ballmer offered and more reflective of the team’s true value.
With the price inflated by a bidding war, Ballmer beat music mogul David Geffen’s second-place bid by $400 million — which is what teams were selling for a few years ago. And Erickson chalked it all up to ex-Microsoft CEO Ballmer having more free time, nearly-unlimited funds and a desire not to be outbid by deep-pocketed rivals.
“If I went out gambling and lost $20,000, that would bother me financially,’’ he said. “This is a guy who could go lose $2 billion and it won’t bother him financially. That’s the lens you should be looking through.’’
In other words, future owners are unlikely to have the desire or means to follow suit.
And that’s good news for would-be Seattle owner Chris Hansen, whose investment group already faces a challenge to replace Ballmer as it seeks an NBA team and permission to build a Sodo District arena. Hansen on Friday posted a message on his website congratulating Ballmer on his purchase.
“I would also like to assure Seattle fans that my remaining partners and I remain committed to bringing the NBA back to Seattle,’’ Hansen wrote. “The environmental review process for the Seattle arena is nearing completion and we will soon be in a strong position to attract a franchise back to the Emerald City.’’
Sports-valuation consultant Michael Rapkoch agreed the Clippers sale is more anomaly than trendsetter. Rapkoch said the recent $550 million sale of the Milwaukee Bucks is more indicative of where things are heading for Hansen and other potential NBA owners.
“The Bucks set what we can expect to see going forward,’’ said Rapkoch, whose Sports Value Consulting firm has worked on deals with a number of NBA teams. “They’re in a small market, a good team and a solid ownership. I think that has more of an impact on the value of teams than the Clippers do.’’
But that Bucks price was for an offer to keep the team right where it was.
ESPN reported Friday that Hansen and Ballmer offered in excess of $650 million for the Bucks, but were turned down because owner Herbert Kohl didn’t want them leaving the state. With a relocation fee, the report said, the final price would have been more than $800 million to move the Bucks to Seattle.
In other words, that’s now the starting price for Hansen’s group if the small-market Bucks really are the new NBA baseline. And assuming even a much smaller impact on future prices by the Clippers sale, it’s reasonable to assume Hansen’s group might have to spend $1 billion or more to land a team.
Both Rapkoch and Erickson agreed the key to future revenue boosts for the Clippers lies in a pending new regional sports network (RSN) television deal. The Clippers take in about $25 million annually from their deal with Fox Prime Ticket, which is up for renewal after the 2015-16 season.
Some analysts expect the new deal could quadruple that annual intake to an average of $100 million, especially with an anticipated bidding war looming between Fox and Time Warner. But that still wouldn’t be enough to justify a $2 billion price tag without other major revenue contributors kicking in.
Rapkoch also cautioned against teams banking too much on future RSN money. He points at the Los Angeles Dodgers — who set a North American record by selling for $2.1 billion two years ago off the anticipated strength of their local TV deal — and the problems they are having.
Time Warner guaranteed the Dodgers $8.5 billion over 25 years for marketing and distribution rights to a new team-owned RSN. But the Dodgers are now seen in only 30 percent of their TV market because rival cable and satellite distributors have refused to pay the higher carriage fees Time Warner is charging for their game broadcasts.
“I think the landscape in how we do media deals is going to completely change,’’ Rapkoch said.
Rapkoch still sees the Clippers getting a sizable TV-money boost, just maybe not enough to justify the price Ballmer paid — even in the nation’s second-largest market. Forbes had pegged the Clippers at $575 million in their latest valuations, which is nearly four times less than Ballmer paid.
And Rapkoch said that means, unlike the Bucks, the Clippers’ price isn’t the first thing to consider when placing realistic values on franchises in other markets.
“I think people are going to look at the Bucks and say – ‘OK, $550 million, $600 million, that’s our floor,’ ” Rapkoch said. “ ‘Where do we go from here?’ ’’
That’s something Hansen and his group will no doubt ponder as they seek Ballmer’s replacement.
Geoff Baker: 206-464-8286 or firstname.lastname@example.org