Operating the Blazers at break even?
Inside John Canzano’s column this morning. there is this quote:
Then, on Thursday, Tod Leiweke, the head of Vulcan Sports and Entertainment said: “Paul Allen shouldn’t subsidize the Blazers to be in Portland and we’re getting closer and closer to that magical break-even number which Paul’s asked for.”
Is this the same owner who, a while back, told Kevin Pritchard to “go for it”? Paul Allen is suddenly asking to break even on this franchise? If that’s the case, I can tell you it’s a lot bigger news than anything to do with Brandon Roy’s contract.
That’s because teams in markets like Portland aren’t breaking even these days. I’m not sure how many times the Trail Blazers, through good times and bad, have had break-even years during Allen’s tenure as the team’s owner. I would guess fewer seasons than you have fingers on your right hand. Or maybe even fewer fngers than you are wearing rings on.
Teams in ANY sport aren’t doing so well right now. In fact, with the exception of mega-franchises like the Yankees, Red Sox, Celtics, Lakers, etc., it’s pretty much only the losing teams that are consistently making money — they don’t have to pay large salaries to players and take profit-sharing checks from their brethren that overcome losses at the gate.
Operating pro sports franchises these days is a lot like running a civic charity (which is ironic because we’re in an era where nobody wants to spend public money on stadiums or arenas — at a time when the teams really need the help). We’ve never worried too much about it in this town because Paul’s got the deepest of pockets and always seemed willing to reach way down for more money because his team was important to him. Winning is important to him. But Allen’s been hit hard by this economy, too.
And I’d say right now, if he needs to stop the losses on his basketball team, there are going to be some pretty lean times around here. This is a private corporation and to find out how much the team has lost over the last few years seems next to impossible. But I’ve heard it’s continued to lose plenty.
To the point that if it’s really true that he cannot afford to lose any more money on the Blazers, I’d be a little concerned about the future of the organization. And let me say this, too: I don’t think we have the right to expect this man to continue to throw millions at the franchise. He does have a right, at some point, to at least break even, doesn’t he?
I just think that’s going to be very difficult. They sold out every game last season and still lost money. That doesn’t leave you a whole lot of room to increase profits. Which means you need to cut expenses. And a whole lot of things that make a team better, including talented players, are expensive.
Of course, he’s still a billionaire, which probably means he gets no sympathy from most people. And he’s got a soft spot in his heart for winning basketball games — which makes him impulsive when it comes to spending on the team.
It’s going to be fascinating to see which side of him wins out — the economist or the basketball fan.
NBA, Trail Blazers | Dwight Jaynes | July 10, 2009
Add new tag, Dwight Jaynes, John Canzano, Paul Allen, Portland Trail Blazers
great post dwight. i read that line in canzano’s article and it seemed kind of odd. i was expecting him to elaborate a bit more on what that commment might have implied.
it should be interesting to see how this all unfolds.
All I can say is remember the contract they offered Hedo? Basketball will win out…
I don’t know that the Hedo thing means anything in regard to this. You don’t know what cuts were going to be made in order for the team to absorb this contract — but certainly it doesn’t sound as if he wants to keep paying luxury tax. You really can’t even hope to break even if you’re paying the tax every season.
That’s true. It’s going to be tough getting used to having to follow all of the fiscal rules if that is what PA wants.
With regard to all that . . . I bet they’re fuming at One Center Court after Memphis renounced the rights to D.Miles the other day.
I just don’t get it. The Blazers got an amazing fan base. Every game is sold out, people are buying jerseys, and fans go to sites like this first thing when the wake up. In short, Portland has rabid customers who love the product Paul Allen puts out. In any other business, this would mean financial success, but with pro sports (or basketball at least) this is rarely the case. Dwight, I’ve never looked at at NBA franchise’ income state or cash flow, but shouldn’t this problem be fixed? I mean, fans are paying tons of money, players/execs are making tons of it, yet the owners are getting screwed? As much as I realize this being a bit of a charity isn’t the worst thing in the world, I just don’t think it’s fair to owners and fans who operate under standard economic conditions to see those on the team’s payroll ruin the overall health of the franchise that employs them. I think we as fans should take at least some offense to that. I didn’t spend close to two grand on the Blazers “resurgence” last year to hear that they are an economic failure.
I don’t think this is too much to worry about, the Blazers will not be Tax payers this season or even next season when the extentions of Roy and LMA kick in, infact if Joel leaves they won’t be tax payers even when Oden’s extention kicks in, (even if it is a max deal!). KP has set this team up to be a winning team, and to be that under the luxury tax line, unless it falls more than 10 million, which I guess is possible, or unless he does go sign some crazy deals. But i worked out the cap numbers assuming that Hinirch or some other player making near $10 million was on the team, and it works financially as far as the payroll is concerned.
The problem the Blazers have, is the dead contracts they are still paying on, but are not on the salary cap payroll. They are still paying Millions to players who are not on the team, and are not on the teams player payroll. Those players are left overs from Trader Bob, and Nash/Patterson. I think these are what Leiweke was aiming at in his quote. These contracts are starting to run out, when this team can get back to paying just the players that play for them, they should be finacially stable.
Look if they really needed more money they would have sold the naming rights to the RG already, amoung other simple capital building ways that this team has not yet attempted to do.
The Blazers paid more than $5 million in tax for the past season.
“The Blazers paid more than $5 million in tax for the past season.”
And, who do we have to thank for that? Patterson/Nash, Darius Miles, and the Memphis Grizzlies.
If the team can’t break even in Portland, it’s because of mismanagement and a crappy CBA. I hope the league owners really take it to the players association in 2011.
Thank you for the insightful post. I do hope that Mr. Allen finds the will to keep losing money until the economy recovers. If he doesn’t, and the team negotiates for less than max contracts and time for LaMarcus Aldridge and Brandon Roy, I think we can fully expect them to walk and test the market elsewhere in the near future.
I think usmcr is talking about this next season but I might be wrong. Even with adding another player at the 7-10 million mark, they
might be over the cap, but they won’t hit luxury land. And if Joel is gone after next season, the extensions on Roy and LMA won’t put they over the luxury line either. Granted you have to be over the cap to be competive, but Ithink only a handful of teams actually paid the luury tax this year.
As you may know, Paul Allen is a terrible businessman. He struck it rich with Microsoft and has been losing money ever since. Charter Communications….. what a disaster. Paul finally ponied up and sold his Charter stock for an ENORMOUS loss just recently. Good for his taxes though! I think Paul has just enough loot to last him the rest of his life though, even with the Blazers losing money every season.
Drewbie,
The money comes from broadcasting rights. We just don’t have enough eyeballs on the screens.
key point: …”subsidize…in Portland…” Hello Seattle.
While I’m far from an expert, it seems that the individual franchises make a lot of their money on suite sales and on corporate sponsorships. The Blazers, last I heard, seem to be doing poorly on both of those. Aren’t there still a number of suites that are unsold? And corporate sponsorships in Portland seem to be very hard to drum up. If the Rose Garden were the “Intel Rose Garden” or the “Adidas Rose Garden”, Paul Allen would be making a lot more money. But finding a company to shell out for those kinds of sponsorships is apparently difficult. My point is that ticket sales and merchandise aren’t the full story in terms of team revenue. If the Blazers can’t drum up additional revenue, then sadly, you have to wonder if cutting expenses is the next step. Hopefully not.
If they need more eyeballs on the screens then let people who don’t subscribe to Comcast watch more of the games.
I have been worried about this for awhile. The hype team has been telling us about all the money they will spend. But the last few years if you look at the blazers have been very frugel. The last few years it’s been all rookie contracts or reasonable role players. How much hype did we here about RLEC then nothing. Don’t be surprised if the cap space is used to pay existing players not free agents
Ultimately the financial problems in sports comes down to fans like us bending over and taking it. We pay the players salaries. When Hedo was being offered 10 million/year I made a quick calculation to break that down to $122,000/game or $2500 for every minute of play (all 48 minutes of only 82 games)–that’s just plain wrong even if you’re a capitalistic pig, as I am.
There is only one way to stop obscene salaries and that’s for we fans to get mad and not take it anymore; quit buying tickets, quit watching TV, quit reading blogs, etc. Just say no to NBA Basketball. Let these guys go back to playing basketball for fun in gyms and on playgrounds like the rest of us do.
Who wants to start and maintain an international strike against overpayment in the sports business? I don’t think it’s going to happen because we’d want to include all entertainment businesses, singers, actors, and–oh my god–we’d have to include CEOs too.
Life is just not fair, is it? Poor Paul Allen.
Dwight, correct me if I’m wrong, but ticket prices are going up next year right? It seems to me that this is step 1 in breaking even. He put a product on the floor that this city is crazy about, and now he’s hiking up ticket prices because demand is at an all time high and people will pay those prices. It sure seems like a good start to me.
The big issue is that the US economy has been going downhill for the average citizen for the past 30 years or so. All of the money concentrated at the top (which is well documented) has totally skewed the buying power of the typical sports fan.
All you have to do is compare the price of a decent seat in the Rose Garden to your salary. Which one has gone up more?
The ratio between executive pay and worker pay is now somewhere around 1700 to 1 in the USA. That is an economy on death-watch.
Enjoy the Blazers while you can- the radio is still free…
I heard Larry Miller about 6 months ago say the same thing Leiweke just echoed. He said they were a few years away from breaking even. That tells you how financially “nuclear” damaged this franchise was. Now imagine teams nobody gives a rip about: Bucks, Grizz, T-Wolves etc..
I am a season ticket holder and there hasn’t been an empty seat in the house in so long, I often am amazed at how our fans have responded to this new era. I just about lost control of my vehicle when I heard Larry Miller say we are a few years away. Meanwhile I will do my best and keep buying $8 dollar beers. Yikes.
The bottom line is they pay these clowns (see Miles, Randolph, Derek Anderson, Randolph, Raef Lafrentz, Chris Dudley, Rueben Patterson) way too much.
They created this system and now they have to fix it. I wouldn’t be surprised to see a couple of teams fold or move again.
RipCityPeru,
How does that make any sense? That may encourage lower ticket prices, lower-priced merchandise, etc, but in the end, management is still going to overpay it’s players to try and field the best team out there. It’s up to them to make their organization profitable. The fans striking will only hurt the organization and sports in general.
I’m sick of people saying that athletes, entertainers etc are overpaid. They largely have unique skill sets/cultural appeal that makes them mostly WORTH what they get paid. Financial worth has nothing to do with personal attitudes, family lives etc. All it has to do is with the bottom dollar or the personal fulfillment of the people signing their paychecks. If Paul Allen or any other private owner wants to lose money to get wins that’s up to them and it’s worth it to them. Movie stars get the $20 million dollar paycheck because their appeal gets summer blockbusters $100+ million dollars of profit. If they don’t, then they won’t get that paycheck next time.
You’re right, life just is not fair. Some people get the talent, the drive and the luck to make it big. Get over it and try to make a few bucks yourself. If you’re satisfied with what you do earn, who cares what other people are getting paid?
It appears to be open season on the Blazers, a season filled with the pessimism of uncountable skeptics and their whines. Please take a moment to give the Blazer organization credit for building this organization back from truly dire circumstances; perhaps you should also give some credence to the fact that when it took a financial commitment on the part of PA to aid this team, he has written a check–I invite correction if I am wrong. Most recently, he was prepared to write a series of checks totalling $50 million to an Istanbul native not as talented as some players already here, notwithstanding his directive to the troops that the team break even. Those who forget the past (and the recent past) are doomed, apparently, to engage in constant but unneceassary fretting over the teams fortunes.
Jeremy – thanks for the info on broadcasting rights. How does that work exactly? Does Comcast or NBC pay the team a fixed amount based of anticipated ratings or are they paid on a game by game basis? Surely, with the amount of people who love the Blazers in this state and Washington, we could get decent ratings.
I think part of the problem is, yes, the Comcast programming was terrible (though any Blazer fan still enjoyed it; it just couldn’t attract new customers IMO). In this sense, firing Luftman may be the key to breaking even. Seriously though, all Blazer games should be in HD and have professional studio analysts. I like the Mikes, and clearly Blazer’s management realized the rest needed a mix up. I actually don’t put all the blame on Tony and that other dude who’s name I can’t remember. I would have trouble broadcasting in front of a time warp like background as well. Just put the games in HD and give the professional analysts a classy studio to camp out in, and I guarantee the ratings will adjust.
As far as corporate sponsorships go, that could be trouble given that there is only one fortune 500 operation in town. Anyone know why Nike doesn’t take a little more responsibility with the Blazers? Not only are they the only large gig in town, but c’mon, they are the premier athletic company in the world. Plus, they already sponsor about half the guys on our roster. And the CEO of the Blazers has HUGE ties to Nike. Seems like something could be done (I know, I’m naive).
Baby Huey, haven’t ticket price already shot up over the last few years? I don’t think the fans should have to fork over anymore money than they do. Not until every other option has been exhausted (including paying players a more representative salary or what they are actually doing).
I think you go wrong when you say ‘suddenly’ in your opening paragraph. Trying to break even financially has always been Pauls goal. It is just now actually close to happening.
As much as I love basketball, movies, music, and any other entertainment that gives me a break from my everyday grind, there is NO way anybody on this planet is worth more than 10 million a year. Does that stop me from watching? No, but it makes me resent these rich guys who complain about money. Especially the rich guys who get paid to play a game for a living.
The best quote of the summer so far came from Ron Artest when he signed with the Fakers. When the media asked him why he took such a pay cut, he laughed and said something like “hey man, I’m still getting paid millions. I came from nothing and I’ve made enough money, I want to win.” –sorry I don’t have the actual quote, but it was something like that. The guy may be nuttier than squirrel crap, but I respect the hell out of him for that, even though he plays for our rivals.
I think it’s that reason why I like Przybilla so much. He spurned signing for more money to come back to the Blazers and show loyalty.
portlandpeter,
While I agree that special talent/extreme cultural appeal warrant pro athletes and movie stars (not calling them actors) to make large salaries, I still think these people are grossly overpaid. I just think you have to look at the spirit of the game. Pro sports should be something that the average joe should be able to take their kids to, without worrying about how huge a dent that decision will make on their wallet. What we’ve seen over the past twenty years is a shift from a family-like atmosphere, to one which relies upon “corporate sponsorships” and expensive suites just to “break even.” Now players are demanding so much that even that source of revenue is not enough. What’s next? I mean, yeah, people still go to the games because frankly, we are wired towards sports and competition, but that doesn’t mean it’s fair. I guess I just don’t think ANYONE needs to rake in $12 million a year when there are better people sacrificing their lives/finances for others.
I got the privilege to sit courtside last season in $1,000 Nike seats. Would any single person pay that amount to see the Blazers play the Pacers? Probably not, but Nike will. The problem is that these types of corporate sponsorships are drying up with the slowed economy. Only the players salaries are not, leaving the owners in a hole. If the players’ salaries were based off actual supply and demand (not two teams in the red trying to outbid each other), this problem would not exist. Make a reasonable salary cap.
I came, I saw–I ranted. I’m all over it now. Go Blazers. This blog is about sports, not economics.
The NBA could be like many Hollywood movies – they make an increasing amount of their money overseas. That would illustrate why Rudy – for example – is much more important to the NBA than we realize.
As far as breaking even, I wonder what the worth of the franchise is now compared to 10, 20, or 30 years ago. If the team continues to grow in value, then that is a form of return on Paul’s investment.
Amen to that Peru…
In Other News:
Patty Mills has a broken foot. I was really pulling for the kid too.
http://www.nba.com/blazers/news/Mills_Sidelined_with_Fracture_-318794-1218.html
here’s the link
But if economics drove the Blazers out of town (which it almost did a few years back) wouldn’t that make it a legitimate topic in this forum?
One last point before I do stop talking about economics. The hardcore capitalists here like to say that if people are willing to pay more for tickets, than it should be fair to raise the prices. My counter is that, if players’ salaries were less, the same guys would still be willing to play in the NBA. If the max a player could make decreased to $15 million, I’m pretty sure Kobe would still play ball and not sell insurance. I will admit that the resurgence of Euro leagues may have an effect here, but I don’t think us competing with the Spanish or Greek leagues is what got us here in the first place. It was greed.
Bill McDonald,
Good point, that seems to be frequently overlooked.
I think my biggest issue is that people confuse personal worth vs. financial worth. If someone makes you more than $20 million a year, then they are financially worth a $10 million paycheck you write to them. Personal worth is entirely different. Should we as a society tie personal worth and financial worth closer together? Probably. But to say that a group of people (obviously there are instances of overpayment) are overpaid is us trying to project what we think of personal worth with financial worth and that just doesn’t jive the way things are currently constructed. If we throw out finances and assign salaries based on the character of people, than all great parents would make a lot more money and firefighters/policemen/teachers would be driving Bentleys.
Whatever, I disagreed with your initial statement RipCityPeru, but wholeheartedly agree with your last one. Sorry for making it a bigger deal than opinions on players salaries should be. This discussion shouldn’t be about economics. Go Blazers.
looks like you can take brandon bass out of the picture for the blazers… nba.com says he’s going to orlando.
another potential target bites the dust.. and the blazers still don’t have anything yet
Wow, okay it appears that this is not common knowledge. Last year the avg ticket price at the RG was $61.21, that doesn’t include suite’s or comp tickets. The Blazers avg about 17,000 paid customers per game, that is about $45.2 million per season in ticket sales alone, give or take. (road teams get a part of the gate, but it should about wash as the Blazers get their part of the gates as a visitor as well).
Then add in the consessions, parking, gift shops, etc..the NBA doesn’t seem to release these numbers, you have bet that they are at least $10-20 bucks per seat on avg. Then you have to factor in that the total amount of people in the RG, which is closer to 19,000+. If that is the case, then using $10 per seat that is another $7.79 million in change per year, giving a total of about $53 million, and that is conservative.
On top of that the league’s TV deal nets each team about $28 million per year, the Blazers local deal with comcast I hear was about $10 million per year, if those numbers are good that is a total of about $91 million. And we still havn’t talked about suite money, corporate sponsorships, money from league merchandising, etc… which can all add up to more than $25 million per year even for a small market team like PDX.
So the Blazers, even on a conservative estimate, are pulling in $116+ million per year in revenue, which makes it easy to see why PA was losing so much money back in the early 2000′s. But after this year, when they are no longer a tax paying team they will start money back, (teams who don’t pay the tax, get the total tax paid back, minues a few dollars for the league), which could be a $5 or even 6 million dollar swing easily.
With the Blazer payroll slated to be between $55 and $60 million for the next few years, that leaves quite a bit of cash for PA to pay the people who operate the RG, KP, Nate, and all the front office staff, it even leaves him enough to pay his light bill.
This team is sitting pretty for the future, it is the past that has cause it to still bleed a bit of red ink, not the present and the future is looking very good.
I’m sure the Players Association wouldn’t want to hear this but couldn’t this whole problem be solved by significantly lowering the cap again?
And maybe David Stern should take it easy on the whole ‘build a new arena or I’ll relocate your team’ thing.
Let’s see, we pay Steve Francis 20 some million not to play for us. Raef gets his millions not to play. Darius gets “waived” and gets paid. We pay the Kings to take Sergio. We love to buy those first round draft picks for 3 million. Just that money alone is a teams payroll. Paul Allen needs to quit throwing his money down the drain and start spending it wisely. I could change a small community with the money he pisses away!
Cap is determined off of league revenues on a formula from the 2005 CBA (I think). Lowering it even further than it was this year will have to be a result of even worse revenues or a newly negotiated CBA on 2011 or whenever the current CBA runs through (not sure on the year).
I love the little jab, “in Portland.” Sorry, LA and NY are taken.
Maybe Allen could cut some costs over at Vulcan.
Maybe start with that Leiweke guy.
The Accidental Billionaires business acumen….. LMAO !!!
What irks me most is the “in portland” part, like a couple of other people have commented here. To me, it implies that while they may not want to subsidize the Blazers to be in Portland, they would be perfectly willing to subsidize them to be in Seattle or another large market (with more and larger corporate sponsorships).
Ya, the Balzers are such a terrible financial model that Paul Allen is wanting to now use the RG as the focal point in a Cordish development.
blah, blah, blah..the Vulcan’s are simply preying on PDX’ers terrible insecurity.
This is exactly why I worry about the long term future of the Blazers.
Sure, we’re set with Paul Allen. But when Allen dies or decides to sell, who is buying? Portland isn’t rolling in the type of money you need to buy and operate a major league franchise.
We’d be ripe for the plucking by a group just like the jerks from Oklahoma City who stole the Sonics. The NBA doesn’t care, as they proved in Seattle. And I doubt there would be any political will among nerds like Sam Adams and David Bragdon or Kulongski to offer any incentives to keep the team here. Fans everywhere in the NBA should have stood up more for the Sonics, because if it can happen there, it can happen almost anywhere.