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Pacers finances baffle me

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  • #31
    Re: Pacers finances baffle me

    Originally posted by Naptown_Seth View Post
    I do know that some teams have started working with a tiered pricing system where some games cost more than others, and I think the Cubs are going to a system where for a premium you can buy into games ahead of other fans. Basically the team undermining the scalpers and bringing those premium ticket profits back in house.
    The Cubs have been charging extra for 'premium' games for years now, I think this system could definitely work in the NBA too.

    I'd like to see the amount of regular season games go down, but while this may increase attendance per game I don't think it will increase overall revenue because as others have said, people aren't going to be willing to pay that much more for tickets. In my opinion the quickest solution to this problem would be to lower the players' salaries in the new CBA.

    Comment


    • #32
      Re: Pacers finances baffle me

      Originally posted by Hicks View Post
      So is Putnam wrong to be multiplying the rough average of $30 per ticket times the average attendance times the number of home games?

      Maybe I am. I took it to mean the average price of tickets sold, but it might mean the average price of all seats available. The source (linked in the OP) doesn't say clearly what it is.

      But I don't think it would make all that much difference. It is not like all the cheap seats tgo empty while devout fans are clamoring to pay premiums for courtside. The "sea of green" isn't all at the top, not all at the bottom, is it? I observe empty seats at all levels, but guys who go to most games can correct me if I'm wrong.
      And I won't be here to see the day
      It all dries up and blows away
      I'd hang around just to see
      But they never had much use for me
      In Levelland. (James McMurtry)

      Comment


      • #33
        Re: Pacers finances baffle me

        Originally posted by Putnam View Post
        Maybe I am. I took it to mean the average price of tickets sold, but it might mean the average price of all seats available. The source (linked in the OP) doesn't say clearly what it is.

        But I don't think it would make all that much difference. It is not like all the cheap seats tgo empty while devout fans are clamoring to pay premiums for courtside. The "sea of green" isn't all at the top, not all at the bottom, is it? I observe empty seats at all levels, but guys who go to most games can correct me if I'm wrong.
        That's what I was getting at.

        Average ticket price, I believe, is based on the inventory of seats available to the games.

        (There are X number of $yyy seats, Y number of $zz seats, etc.)

        But total revenue/ quantity of seats sold probably won't equal the average from the calculation above. If it does, it is probably coincidence that the seats were sold in the same proportion as the inventory of seats. And I'm 99.9% certain this is in the portion of financial data that is never even going to be disclosed to minority owners of the teams, let alone the general public.

        We do the same thing with the airline business. With all the different pricing schemes and the way prices increase as the date of the flight gets closer, the average price per seat actually flown and the average price of available seats are not the same metric.
        Why do the things that we treasure most, slip away in time
        Till to the music we grow deaf, to God's beauty blind
        Why do the things that connect us slowly pull us apart?
        Till we fall away in our own darkness, a stranger to our own hearts
        And life itself, rushing over me
        Life itself, the wind in black elms,
        Life itself in your heart and in your eyes, I can't make it without you

        Comment


        • #34
          Re: Pacers finances baffle me

          Whether my initial assumption is correct or not depends on the meaning of the source. In any case, the value given can't be weighted unless we know how many of each price seats are sold and, as Jay says, they don't tell us that. For lack of perfect information, I'll argue that ticket sales revenue is approximated by the estimate I gave.

          The point stands under any realistic estimate. The gap between ticket sales and payroll is huge. If the Pacers sold out every seat for every game, that would be 18,345 x 41 = 752,145 seats.

          To raise $66.7 million to pay the payroll, those tickets would have to average $88.67 per ticket. Do they? Not by a mile. and every empty seat widen the deficiency further.

          ----

          Clearly, ticket sales doesn't come close to paying the payroll, and Bills says as much. The next big source of revenue is TV, and Uncle Buck says that is about $40m today. (For the Pacers? Or all NBA teams?)

          The other streams of revenue are concessions, and those have to be pretty small. Count55 tells us that a lot of the advertising in the arena are trade-outs and common sense suggests PS&E can't sell a sign that's going to be seen by 12,000 fans on 41 nights for as much as what a billboard that will be seen by 200,000 motorists five days a week can cost.

          So that leaves the source Duke mentions: corporate sponsorships. If WellPoint and Lilly and RollsRoyce and Allison and SallieMae and others are making up most of the apparent deficiency, PS&E may be just about the biggest charity recipient in Indianapolis.


          Here's the point:

          As basketball, the NBA is unparalleled.
          As entertainment, the NBA is an attractive but flawed product.
          But as a business, the NBA is a disaster.



          .
          Last edited by Putnam; 03-08-2010, 05:41 PM.
          And I won't be here to see the day
          It all dries up and blows away
          I'd hang around just to see
          But they never had much use for me
          In Levelland. (James McMurtry)

          Comment


          • #35
            Re: Pacers finances baffle me

            Originally posted by chrisjacobs7 View Post
            The Cubs have been charging extra for 'premium' games for years now, I think this system could definitely work in the NBA too.

            I'd like to see the amount of regular season games go down, but while this may increase attendance per game I don't think it will increase overall revenue because as others have said, people aren't going to be willing to pay that much more for tickets. In my opinion the quickest solution to this problem would be to lower the players' salaries in the new CBA.
            Actually, the Pacers already have a tier system for "premium games" for this current season. If you look at the folding schedule, you'll notice that certain home games have an asterisk that indicates that game is a "premium game" and it leads to another price chart.

            Fortunately, Season ticket holders were not subject to this pricing.
            ...Still "flying casual"
            @roaminggnome74

            Comment


            • #36
              Re: Pacers finances baffle me

              Originally posted by count55 View Post
              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
              Yeah, pretty good. Coon is probably right: it's all about the bargaining power and the owners have enough to force down the salaries to the point that every franchise - even a losing, badly managed, excessively leveraged, within a small media market franchise - becomes profitable. And the middle-of-the-class guys will probably trade most of the cost to superstars, stars and future rookies. Players were unlucky, they should have renegotiated the CBA 2 years ago.

              I think the owners may be short-sighted following that strategy.

              Originally posted by Naptown_Seth View Post
              I do know that some teams have started working with a tiered pricing system where some games cost more than others, and I think the Cubs are going to a system where for a premium you can buy into games ahead of other fans. Basically the team undermining the scalpers and bringing those premium ticket profits back in house.
              I remember the Blazers instituting variable pricing at the start of last season and that causing a big uproar among their fans. I was very surprised, maybe because here tiered prices are the default situation. It seems like a no-brainer to me.

              Originally posted by Putnam View Post
              Whether my initial assumption is correct or not depends on the meaning of the source. In any case, the value given can't be weighted unless we know how many of each price seats are sold and, as Jay says, they don't tell us that. For lack of perfect information, I'll argue that ticket sales revenue is approximated by the estimate I gave.

              The point stands under any realistic estimate. The gap between ticket sales and payroll is huge. If the Pacers sold out every seat for every game, that would be 18,345 x 41 = 752,145 seats.

              To raise $66.7 million to pay the payroll, those tickets would have to average $88.67 per ticket. Do they? Not by a mile. and every empty seat widen the deficiency further.

              ----

              Clearly, ticket sales doesn't come close to paying the payroll, and Bills says as much. The next big source of revenue is TV, and Uncle Buck says that is about $40m today. (For the Pacers? Or all NBA teams?)

              The other streams of revenue are concessions, and those have to be pretty small. Count55 tells us that a lot of the advertising in the arena are trade-outs and common sense suggests PS&E can't sell a sign that's going to be seen by 12,000 fans on 41 nights for as much as what a billboard that will be seen by 200,000 motorists five days a week can cost.

              So that leaves the source Duke mentions: corporate sponsorships. If WellPoint and Lilly and RollsRoyce and Allison and SallieMae and others are making up most of the apparent deficiency, PS&E may be just about the biggest charity recipient in Indianapolis.


              Here's the point:

              As basketball, the NBA is unparalleled.
              As entertainment, the NBA is an attractive but flawed product.
              But as a business, the NBA is a disaster.

              .
              The Pacers aren't the NBA and they aren't representative of the average NBA franchise from a financial and economic perspective (pretty much like 2010 isn't a representative year for the entertainment industry).

              And the TV revenues for the league are above $900 millions per year. You're also forgetting stuff like merchandising, parking, naming rights (how much per season do the Pacers get from the arena naming rights?) , revenue sharing (it was increased to $50 millions awhile ago, the Pacers certainly get a fair part of that money - probably +$6 millions per season),

              What's the NBA current credit rating? IIRC, it used to be pretty strong, a BBB+ or something, even after the financial crisis.

              In any case, the current CBA and the way it regulates the players salary - with a mechanism that maintains personnel costs at a targeted percentage of the revenues - is extremely favourable for the NBA from a business perspective. So favourable that I suspect many individual teams don't have much incentive to cut wasteful spending - if I were Derek Fisher I'd be very interest in finding out the evolution of the GMs/FO staff salaries in the last 5 years (the fact that for many owners economic and financial efficiency isn't a priority is another contributing factor).
              Last edited by cordobes; 03-08-2010, 07:34 PM.

              Comment


              • #37
                Re: Pacers finances baffle me

                Jay and Putty, my post was about exactly your discussion. And my point to Duke is that if anything your math might be showing more revenue rather than less.

                But ultimately my engineering sense says that your math is basically a solid estimation start. I think the weighted average per ticket sale is significantly lower than the average ticket price, due to promotions, STH discounts, and where the empty seats are.



                One thing on the tiered pricing, looking back I really couldn't have cared less about going to the Cavs game. I've seen Lebron upclose before, ditto Shaq. But I could have sold those seats for enough to offset some of my cost. Say I do the same for the Magic game too and I could have cut my cost back by 15% or so, just by giving up 2 games.

                The Pacers could benefit from that by having me pass on those tickets, thus allowing them to sell them to the high demand market. I get my cheaper "HST" package without those premiere games and the Pacers still get the full income from the higher price point.

                Actually I did this last year when I took them up on the "11 games for 8" mini which basically featured mostly poor opponents on weeknight games. I'm going for the Pacers so I was happy to pay less to see the Pacers just as much. Meanwhile the people that wanted the FRI/SAT night games and the stars paid more.

                Basically that's a simple tier system.

                oh, RG already followed up on this...
                Originally posted by Gnome
                Actually, the Pacers already have a tier system for "premium games" for this current season. If you look at the folding schedule, you'll notice that certain home games have an asterisk that indicates that game is a "premium game" and it leads to another price chart.

                Fortunately, Season ticket holders were not subject to this pricing.
                Last edited by Naptown_Seth; 03-08-2010, 10:42 PM.

                Comment


                • #38
                  Re: Pacers finances baffle me

                  Psssttt...



                  we are geeks

                  Comment


                  • #39
                    Re: Pacers finances baffle me

                    My further participation in this thread is risky.

                    You're way off on the allocation of league TV money, and other league allocated revenue (licensing, international, etc.)

                    As for the other sources of revenue -- local radio/ tv, in-arena advertising, concessions, naming rights, etc, that's a wild guess.

                    However, I don't recall the terms of this agreement but its not unusual to find that the arena operating company has the first claim on priority seating revenue (e.g., club level)/ suite rental revenue as that is generally the revenue that backs the bonds for the new arena.

                    I'm done. With that I've now said way too much on this topic.

                    Putty, your general premise is right. Its hard for the blue-and-gold to break even when everything is going well. Years ago it was published that the extra revenue from the second round of the playoffs was the difference between break even and a profit. Attendance is down in quantity, and yield (ticket price) is down, too. Local tv (and presumably local radio) ratings and revenue are down. And there's no playoff revenue. Its gotta be ugly!
                    Why do the things that we treasure most, slip away in time
                    Till to the music we grow deaf, to God's beauty blind
                    Why do the things that connect us slowly pull us apart?
                    Till we fall away in our own darkness, a stranger to our own hearts
                    And life itself, rushing over me
                    Life itself, the wind in black elms,
                    Life itself in your heart and in your eyes, I can't make it without you

                    Comment


                    • #40
                      Re: Pacers finances baffle me

                      One thing to remember is 6.7 M of Pacers salaries (roughly 10% of a players salary) goes into a fund to make sure the team (players) only receive 57% of income. Not sure if coaches, Bird and other front office personnel have to abide by this but I doubt it because they are not in the players union.
                      "He wanted to get to that money time. Time when the hardware was on the table. That's when Roger was going to show up. So all we needed to do was stay close"
                      Darnell Hillman (Speaking of former teammate Roger Brown)

                      Comment


                      • #41
                        Re: Pacers finances baffle me

                        Thanks to everybody who's voiced a thought here. Most of us don't know very precisely what we are saying, while Jay knows pretty exactly and cannot disclose it.

                        Cordobes mentions naming rights as another asset. But isn't that another form of sponsorship? Of charity? The city paid for the building and FA Wilhelm built it. Conseco generated real profit brokering insurance so it could afford to pay for the sponsorship. But the Pacers get to keep the money. To me, that puts the Pacers in the same category as a cub scout troop or any other beneficiary of charity.

                        So, admitting variation, we can all agree that the actual product of the NBA (ticket sales, TV deals, and memorabilia) doesn't come close to paying the costs of operations. The league stays viable because of public and corporate largesse.


                        .
                        And I won't be here to see the day
                        It all dries up and blows away
                        I'd hang around just to see
                        But they never had much use for me
                        In Levelland. (James McMurtry)

                        Comment


                        • #42
                          Re: Pacers finances baffle me

                          Originally posted by Putnam View Post
                          Thanks to everybody who's voiced a thought here. Most of us don't know very precisely what we are saying, while Jay knows pretty exactly and cannot disclose it.

                          Cordobes mentions naming rights as another asset. But isn't that another form of sponsorship? Of charity? The city paid for the building and FA Wilhelm built it. Conseco generated real profit brokering insurance so it could afford to pay for the sponsorship. But the Pacers get to keep the money. To me, that puts the Pacers in the same category as a cub scout troop or any other beneficiary of charity.

                          So, admitting variation, we can all agree that the actual product of the NBA (ticket sales, TV deals, and memorabilia) doesn't come close to paying the costs of operations. The league stays viable because of public and corporate largesse.


                          .
                          So, wait - anyone accepting advertising as a major part of their revenue stream is a charity? Anyone operating a building owned by someone else who gets revenue from advertising on that building is a charity? I think you are stretching things to try to denigrate the Pacers as a business.

                          By the way, the city did NOT pay 100% for the Fieldhouse. At the time, the evil greedy self-serving Simon brothers paid more toward the new arena than had been done by any franchise in recent times. And that was without a payment from the city backing it up.
                          BillS

                          A bird in the hand is worth two in the bush.
                          Or throw in a first-round pick and flip it for a max-level point guard...

                          Comment


                          • #43
                            Re: Pacers finances baffle me

                            Originally posted by Putnam View Post
                            The next big source of revenue is TV, and Uncle Buck says that is about $40m today. (For the Pacers? Or all NBA teams?)

                            .
                            Yes each NBA team gets the exact same amount of money from the national TV package. (Don't forget though that the pacers have to pay the old owners of the St. Louis ABA team a % of the TV money - I think that is about 4m per year now)

                            I remember reading that back in the first couple of years at Conseco the pacers would gross almost $1M per home game. That of course doesn't account for game expenses. But that is ticket sales, parking, concessions,......I would guess that is cut in half now from lower ticket prices, lack of ticket sales......

                            Comment


                            • #44
                              Re: Pacers finances baffle me

                              Originally posted by BillS View Post
                              So, wait - anyone accepting advertising as a major part of their revenue stream is a charity? Anyone operating a building owned by someone else who gets revenue from advertising on that building is a charity?
                              No, I don't agree advertising/naming rights/sponsoring can be qualified as charity either. If so, every professional sports enterprise leaves of charity - as well as every newspaper. Or Google. There are lots of industries out there that rely heavily on income from corporate sponsorship.

                              Advertising and sponsoring creates value. Sports sponsorships create a very specific and particular kind of value - it's often more about image enhancement and brand awareness than direct impact on sales; it's more about long-term impact than short-term impact. There's plenty of peer-reviewed literature about this issue (there's even a publication dedicated to it: http://www.imrpublications.com/journ...x?volno=L&no=L )

                              Obviously, sponsors can make mistakes assessing the benefits and gains of sponsorships, but such lapses are generally called decision-making errors, not charity.

                              The transfers of money by politicians is a more complex issue. If government handouts for private industries didn't exist, the taxation on players would be much smaller - so the labour cost would diminish quite a bit. Basketball consumers would possibly have more money to spend in ball games as well. This kind of economic calculation is just too complex to be made.

                              In any case, I'm not convinced that even a franchise facing very difficult circumstances like the Pacers doesn't generate enough revenue to "come close to paying the costs of operations", unless I'm misunderstanding what you mean by "costs of operations". Forbes Mag. pointed to a -$15M deficit in operating income, but after reading the link provided by graphic-er I have some doubts about this number.

                              Still, even though the Pacers are surely haemorrhaging a few millions per year, I still don't understand why Putman equates the Pacers to the NBA and extrapolates from the current situation of the Pacers to the viability of the NBA business model. 1) In times of slow economic growth+low consumer expectations the entertainment business (or parts of it, including pro sports), tend to suffer disproportionately. 2) the Pacers aren't the prototypical NBA franchise.

                              An analogy would be using the Lakers economics in the moment of a bullish economy + a title run with a team filled with future HoFers and call the NBA one of the most profitable businesses in the history of the Western Civilization.
                              Last edited by cordobes; 03-09-2010, 06:25 PM.

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                              • #45
                                Re: Pacers finances baffle me

                                Originally posted by cordobes View Post
                                I still don't understand why Putman equates the Pacers to the NBA and extrapolates from the current situation of the Pacers to the viability of the NBA business model.
                                I'm getting it from Bill Simmons:

                                Originally posted by Simmons
                                As a failing business -- and, really, a league that loses $400 million in a single year has to qualify as "failing"
                                It isn't just the Pacers, it is the whole league. I've used the Pacers for examples, but the problem is league-wide.

                                As to the argument that this is just a bad year, a viable business ought to be able to trim its costs in bad times. The NBA can't. It is inflexible, like General Motors was before it went bankrupt. That, again, shows me that the NBA business model is flawed.

                                If he were here now, looking at the way things are, I imagine Red Auerbach would agree, don't you?
                                And I won't be here to see the day
                                It all dries up and blows away
                                I'd hang around just to see
                                But they never had much use for me
                                In Levelland. (James McMurtry)

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