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Thread: Pacers finances baffle me

  1. #1

    Default Pacers finances baffle me

    We all know the Pacers are losing money. But take a moment and think about how they are losing it.


    The players' payroll this season is: $66.7 million according to HoopsHype and $66.9 acording to shamSports. That is a big part of the total expense, but not nearly the total corporate expense of Pacers Sports & Entertainment.

    Now look at ticket sales. The Pacers this season are averaging attendance of 13,861.

    The average ticket is down to $30.02.

    Now, do the math. Forty-one games of selling 13,861 tickets at $30.02 yields a little over $17 million. that is 26% of the players' salaries.

    Add in television revenues. Add in what teams under the tax get from teams over the tax. Add in sales of all those hats and jerseys that Duke Dynamite buys. Add in the beer that Heywoode drinks every time he goes to a game.

    How do all those get you up to the total cost of running the organization, which must be around $100 million.

    It baffles me that the Pacers stay in business. Or, let's say, how the whole NBA stays in business:

    Quote Originally Posted by nba.com
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    Commissioner David Stern, in his State of the League news conference Saturday night (before the All-Star game), said that his teams were projected to lose $400 million combined this season, and had lost "at least $200 million" a year since the last CBA was ratified in 2005.

    I think it's been fair to say that the current business activities do not support the current structure, expense structure that we have."

    http://www.nba.com/2010/news/feature...tip/index.html
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    Default Re: Pacers finances baffle me

    But that is just the average ticket price, that doesn't factor in corporate suites or the "Hollywood" seats. You can't just assume that every seat is $30+. Sponsorships have a major role in revenue as well.

  4. #3

    Default Re: Pacers finances baffle me

    Quote Originally Posted by duke dynamite View Post
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    But that is just the average ticket price, that doesn't factor in corporate suites or the "Hollywood" seats. You can't just assume that every seat is $30+. Sponsorships have a major role in revenue as well.

    Show me.

    Lay out the figures of how Legends makes up the difference. If 500 people are sitting in Legends every game, and every one of them paid $500 (both estimatres are excessive), that would only amount to $10 million. And the reality is much less than that.

    (But actually I can "just assume that every seat is $30+." For every seat in Legends sold for multi-hundreds, there are enough $5 or $10 tix to drop the average for all tickets down to a mere $30. That is what the average means. )



    I understand that Pacers losses are only a few million and not the massive gap I can account for between ticket revenues and the payroll. The money is coming from somewhere to make PS&E a barely unprofitable enterprise instead of the blood-spurting crisis that ticket sales seems like. I just don't understand enough of the whole balance sheet to see how it works.


    .
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    Administrator Unclebuck's Avatar
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    Default Re: Pacers finances baffle me

    What amount does every team get from TNT, ESPN/ABC that is their largest chunk of revenue. (2003 it was 26M per team) I am thinking it is in the 40M range today)

    a somewhat interesting article
    http://www.hoopchill.com/2009/07/nba...e-problem.html
    Last edited by Unclebuck; 03-08-2010 at 10:11 AM.

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    Default Re: Pacers finances baffle me

    One of the irritating things about the NBA is they design things to make it extremely difficult for an outsider to figure out exactly how they're doing.

    Additional expenses:
    1. Payroll will not only include the players, but all the behind the scenes staff too. http://www.nba.com/pacers/news/staff_directory.html indicates they probably have another 100 or so employees. I didn't bother to count them up, and some are probably not paid or not paid much, but you're probably adding several million a year there, at the very least.
    2. Travel, lodging, and all that sort of stuff is not insignificant, as well as the cost of actually staging the arena.

    Additional revenues:
    1. Remember that the league has revenue sharing from TV, merchandising, and all sorts of stuff (CBA FAQ Q13). The Pacers are making money from televised games, merchandise sales, etc. I don't have a good estimate of how much, but I'd guess it's probably pretty close to the amount they make from gate receipts. Perhaps more.
    2. The league also has the escrow system in place, which means player salaries are actually quite a bit lower than they appear on paper. Player salaries in total are not to exceed 57% of "basketball related income". So 9% of their salaries were held in escrow last year and returned to the teams. Thus, player expenses weren't 67M, they were about $61M (CBA FAQ Q14).
    3. The team also divides up luxury tax proceeds, so the Pacers got about $3M from that last year.
    4. In addition to BRI, there's probably plenty of non basketball income. Which leads to...

    The big unknowns
    The arena deal, one time charges and various related shenanigans make it very difficult to tell exactly how much the Pacers are "losing" on the arena. This is a good starting point if you want to dig deeply. In a nutshell, my estimate is that many of the revenues associated therof have been collected by entities other than the Pacers, and on a one-time basis, while many of the costs have been amortized and counted against the Pacers.

    In plain old English, the guys that run the Pacers can assign revenues to other, tax-sheltered streams, and assign costs to the Pacers, treating them as a loss-leader. Which makes it easy, of course, to point to them and ask for better deals and handouts from the local governments.

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    Default Re: Pacers finances baffle me

    I don't know much about how the business side of the Pacers works... but do they get anything from concerts and other events held at Conseco?

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    Default Re: Pacers finances baffle me

    Quote Originally Posted by Putnam View Post
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    Show me.

    Lay out the figures of how Legends makes up the difference. If 500 people are sitting in Legends every game, and every one of them paid $500 (both estimatres are excessive), that would only amount to $10 million. And the reality is much less than that.

    (But actually I can "just assume that every seat is $30+." For every seat in Legends sold for multi-hundreds, there are enough $5 or $10 tix to drop the average for all tickets down to a mere $30. That is what the average means. )



    I understand that Pacers losses are only a few million and not the massive gap I can account for between ticket revenues and the payroll. The money is coming from somewhere to make PS&E a barely unprofitable enterprise instead of the blood-spurting crisis that ticket sales seems like. I just don't understand enough of the whole balance sheet to see how it works.


    .
    I said corporate suites.

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    Default Re: Pacers finances baffle me

    No NBA franchise makes its nut off ticket sales. I pretty much guarantee you that the biggest chunk of locally controlled revenue comes from sponsorships.

    Ticket sales are important not just for revenues but for EYES SEEING THE SPONSOR ADS. That's why discounting tickets to fill the arena is a good strategy, similar to why giving away issues of magazines is a good strategy.

    It's what makes the balance between serving your Season Ticket Holders (who are both known revenue and known eyes) and doing heavy in-season price cuts seem wrong to ticket holders.

    Now, I think the NBA recognizes that TV revenue is changing big time. Except for the top teams (or the teams in the most populated areas), more and more franchises are having to pay for TV rather than get paid for it. Because of this the huge network media contracts are going away, and you are starting to get more from NBALP and other subscription packages.

    This will be a big factor in the new CBA.
    Last edited by BillS; 03-08-2010 at 10:11 AM. Reason: Clarified sponsorship revenue
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    Default Re: Pacers finances baffle me

    Michael Jordan bought the Bobcats for $175 millions. Mr. Johnson had paid a $300 millions expansion fee 7 years ago - not the greatest financial investment. Is this the first time a NBA franchise is sold at loss since Bird/Magic/Stern? I think it is, at least I can't remember another case.

    Still, players make 57% of the "basketball-related income". That still excludes some substantial revenue, like part of important income sources like naming rights, sponsorships and luxury suites, for example. Per Forbes ranking, 12 teams delivered a negative EBITDA last season but the overall revenue didn't go down from about $120 millions per team while the salary cost was around $70 millions per team.

    I suspect there's a lot of posturing in Stern's latest public speeches. And some owners simply don't care that much about the bottom line - that of their NBA franchise, which probably has a non-negligible affect on the overall numbers. I wouldn't be surprised if the NBA needs deeper revenue-sharing mechanisms (or a contraction) more than new and drastic cost controlling mechanisms.

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    Default Re: Pacers finances baffle me

    Quote Originally Posted by duke dynamite View Post
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    I said corporate suites.
    Doesn't matter, the whole point of "average" is that if you multiply it by the total number of seats you get the same number as if you added up each seat's individual cost.
    BillS

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    Default Re: Pacers finances baffle me

    IDK how you guys feel about Bill Simmons, but he had a column about this last week or so: http://sports.espn.go.com/espn/page2...simmons/100224


    I personally found it quite interesting.

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    Default Re: Pacers finances baffle me

    Quote Originally Posted by Day-V View Post
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    IDK how you guys feel about Bill Simmons, but he had a column about this last week or so: http://sports.espn.go.com/espn/page2...simmons/100224


    I personally found it quite interesting.
    http://www.pacersdigest.com/showthread.php?t=51252

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    100 Miles from the B count55's Avatar
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    Default Re: Pacers finances baffle me

    meh...everything I wrote was oversimplified and based on not enough info.

    This doesn't answer all the questions, but JayRedd's podcast with Larry Coon is a fascinating look.

    http://www.bothteamsplayedhard.net/2...ent=FeedBurner
    Last edited by count55; 03-08-2010 at 10:30 AM.

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    Default Re: Pacers finances baffle me

    Quote Originally Posted by duke dynamite View Post
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    My apologies. That was posted a few weeks before I joined.

    But, I'm glad to see you agree with me on it being interesting. I really hope this doesn't lead to another lockout. That "1999" season felt like it took an eternity to get "unlocked" and started up.

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    Default Re: Pacers finances baffle me

    Quote Originally Posted by Day-V View Post
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    My apologies. That was posted a few weeks before I joined.

    But, I'm glad to see you agree with me on it being interesting. I really hope this doesn't lead to another lockout. That "1999" season felt like it took an eternity to get "unlocked" and started up.
    Most definitely. Most of his points in this article are well-received. That and I've always felt that shortening the NBA season would be a great idea.

  22. #16

    Default Re: Pacers finances baffle me

    Duke and Bill mention the advertising dollars and corporate sponsorships.



    Think about Conseco Fieldhouse as an advertising venue. Now compare it to a billboard on I-70. Or to a 30-second spot on the radio station of your choice. Or a message printed on a bar napkin.

    Does anybody here work in advertising? What would you pay for an illuminated sign inside Conseco Fieldhouse?
    And I won't be here to see the day
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    Default Re: Pacers finances baffle me

    Quote Originally Posted by duke dynamite View Post
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    Most definitely. Most of his points in this article are well-received. That and I've always felt that shortening the NBA season would be a great idea.
    Why would the owners agree to shorten the season? That takes away money making opportunities. If they did a 42 game season are you prepared to pay double for your tickets?


    I really do not believe that the Pacers lost money every year but 2 since Conseco has been open. That is just a flat out lie. Its all accounting techniques. They sold out almost every game of the finals season, and sold out almost every game of the Eastern conference finals team that had Artest. They were a very successfull team during Thomas's coaching term as well. If they have to sell out every game in a season to stay out of the red, then they made a horrible decision in choosing the field house design. Also remember that they have had arena football in there, numerous concerts, Big 10 tournaments, ice hockey. PACERS made money from all those events. I just simply don't believe it, billionaires are billionaires for a reason and Simon properties isn't hurting for money.

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    Default Re: Pacers finances baffle me

    I think once these big contracts expire in 2011 we'll be a lot better. Maybe with JOB gone and a decent team by then we'll get more tickets sold.

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    Default Re: Pacers finances baffle me

    Quote Originally Posted by duke dynamite View Post
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    But that is just the average ticket price, that doesn't factor in corporate suites or the "Hollywood" seats. You can't just assume that every seat is $30+. Sponsorships have a major role in revenue as well.
    Fail on the meaning of "average".

    Come on Duke. Averages are just scaled aggregates. Layman terms - you add it all up, then divide.


    Now perhaps the math is wrong in the sense of how they calculated the average ticket price. If the price average is based on total seat costs by number of seats, not seats sold, then that average is not directly connected to the average attendance.

    But this doesn't help your case because what this means is that seat price could be weighted heavily toward high end seats that aren't being sold and are therefore not part of the average attendance. You're assuming that the attendance is mostly filling the high dollar seats and based on my anecdotal experience this year which includes being aware of numerous below normal seat price sales (buy a lower level seat for $20 for one game special) I think this assumption is dead wrong.

    Plus, if that average ticket price is based on total seats divided by total cost to buy all those seats, we don't know which price is being assigned to each seat. Is it the face value or the season ticket holder price?

    If it's face value then again we know the team is actually making far less money per seat than that.
    Last edited by Naptown_Seth; 03-08-2010 at 11:44 AM.

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    Default Re: Pacers finances baffle me

    Quote Originally Posted by graphic-er View Post
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    Why would the owners agree to shorten the season? That takes away money making opportunities. If they did a 42 game season are you prepared to pay double for your tickets?


    I really do not believe that the Pacers lost money every year but 2 since Conseco has been open. That is just a flat out lie. Its all accounting techniques. They sold out almost every game of the finals season, and sold out almost every game of the Eastern conference finals team that had Artest. They were a very successfull team during Thomas's coaching term as well. If they have to sell out every game in a season to stay out of the red, then they made a horrible decision in choosing the field house design. Also remember that they have had arena football in there, numerous concerts, Big 10 tournaments, ice hockey. PACERS made money from all those events. I just simply don't believe it, billionaires are billionaires for a reason and Simon properties isn't hurting for money.
    I don't buy any of that. What would the motive be to lie about finances? Simon Properties isn't hurting for money, but PS&E is. Billionaire or not, losing money is losing money. Nobody wants to lose money.

    You also have to remember if PS&E gets money for non-Pacers/Fever events, you still have to pay staff.

    Why does the design have to do with any sell outs? 18,000+ seats is a modest upgrade from MSA, and probably the best idea. Heck, we know why they didn't add too many more football seats to LOS than the RCA Dome.

    Shortening the season would make each game more of an event, and more of a money-drawer. That is why football is more successful, less games.

    I would understand that .500 or marginally better seasons under Thomas are better than what we have now, but I would not call them "successful" by any stretch.

    That and someone please give me a sell-out figure for 2003-2004. Their average attendance was 16,000.
    Last edited by duke dynamite; 03-08-2010 at 11:44 AM.

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    Default Re: Pacers finances baffle me

    Quote Originally Posted by Putnam View Post
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    Duke and Bill mention the advertising dollars and corporate sponsorships.



    Think about Conseco Fieldhouse as an advertising venue. Now compare it to a billboard on I-70. Or to a 30-second spot on the radio station of your choice. Or a message printed on a bar napkin.

    Does anybody here work in advertising? What would you pay for an illuminated sign inside Conseco Fieldhouse?
    Most of the interior advertising in Conseco are trade offs. My friend works for Caldwell VanRiper, and he was talking about that at a game last season. This is a sign of poor advertising flow. I don't recall if they're still there, but the IRL signs were basically "trades" for Pacer advertising at the track.

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    Default Re: Pacers finances baffle me

    Quote Originally Posted by count55 View Post
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    Most of the interior advertising in Conseco are trade offs. My friend works for Caldwell VanRiper, and he was talking about that at a game last season. This is a sign of poor advertising flow. I don't recall if they're still there, but the IRL signs were basically "trades" for Pacer advertising at the track.
    The IRL signs are still there... and I agree this strategy is poor advertising.

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    Default Re: Pacers finances baffle me

    Quote Originally Posted by chrisjacobs7 View Post
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    The IRL signs are still there... and I agree this strategy is poor advertising.
    It's not a strategy, it's a fall back. If they could sell the spots, they would. As it is, they use them as a cost offset.

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    Default Re: Pacers finances baffle me

    Quote Originally Posted by count55 View Post
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    It's not a strategy, it's a fall back. If they could sell the spots, they would. As it is, they use them as a cost offset.
    Ok my bad, I misread your first post. With the current economy I would imagine it'd be difficult to sell advertising for a good team, let alone the Pacers.

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    Default Re: Pacers finances baffle me

    Quote Originally Posted by duke dynamite View Post
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    I don't buy any of that. What would the motive be to lie about finances? Simon Properties isn't hurting for money, but PS&E is. Billionaire or not, losing money is losing money. Nobody wants to lose money.
    Maybe its not a outright lie, but its various accounting techniques. I read somewhere they factor in depreciation because the team used to be worth 300+ million. They move expenditures from category to category to make it seem worse than it is, all to paint dire picture for CIB.

    You talk about staffing the place for these extra events, if they had that much overhead to where they weren't very profitable then they would refuse to hold the event.

    Quote Originally Posted by duke dynamite View Post
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    Why does the design have to do with any sell outs? 18,000+ seats is a modest upgrade from MSA, and probably the best idea. Heck, we know why they didn't add too many more football seats to LOS than the RCA Dome.
    We don't know the overhead of such a facility like conseco, also the initial investment to build it. They say now days it would be financially impossible to build a fieldhouse like ours.

    Quote Originally Posted by duke dynamite View Post
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    Shortening the season would make each game more of an event, and more of a money-drawer. That is why football is more successful, less games.
    So then what is the number of games that makes sense. 41 home games isn't a terrible amount in my opinion. You want to eliminate all the western conference teams coming in here? Those draw the most fans right now. People aren't clamoring to see the Bucks, Bulls, and Nets. I doubt people will be ponying up $40-$50 per seat to sit up in the upper balcony for 20 games a season.

    Quote Originally Posted by duke dynamite View Post
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    I would understand that .500 or marginally better seasons under Thomas are better than what we have now, but I would not call them "successful" by any stretch.
    Those teams made the playoffs, and weren't the 7-8th seed that's a successful season.

    Quote Originally Posted by duke dynamite View Post
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    That and someone please give me a sell-out figure for 2003-2004. Their average attendance was 16,000.
    I couldn't find a sell out figure but they averaged 89% in ticket sales in capacity. So that tells me they should have had a great year profit wise, but the comes off as they barely broke even.

    I would like to know what percentage of ticket sales do they need to average to have a profitable season?

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