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Pacers finances baffle me

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  • #46
    Re: Pacers finances baffle me

    Originally posted by Putnam View Post
    Does anybody here work in advertising? What would you pay for an illuminated sign inside Conseco Fieldhouse?
    I work in online advertising but I've got a pretty good idea on what local costs are for other media. I'll give a general idea of cost and my guess on ad revenue the Pacers make. It's good to know that costs can vary significantly for the same ad because of frequency, total spend, media trades, etc.

    Billboard: $2000.00 / month

    Radio Spots: $500 - $10,000.00+ per month (Bob and Tom are the most expensive spots in this market) .

    Newspaper Ads: You pay per square inch. Depends on circulation. A small ad can cost less than $100.00 and a full page would be in the $4K - $7K range.

    TV: I was surprised when I learned how inexpensive commercials costs. Cable costs less and you can target geographic areas around the city. A cable ad can run $500 - $1000 per month. I've not heard a quote for the network stations but I think they can be quite a bit higher, even when it's just local.

    Pacer's Advertising Guesses

    Billboards around Conseco: I can't see an advertiser spend more than $250.00 - $500.00 per day (looking at it with 365 days in mind since people will see the ads during other events). My guess is $100,000 on average for the year.

    Suites: I assume the cost of the suites are based on the seats they include. $2000.00 - $4000.00 per game plus costs to keep it stocked.

    Krieg Devault Level: I drove by their building this afternoon and wondered what they pay for the naming rights to the club level (I don't know if they even still sponsor it this season). The back page of the Yellow Pages cost around $200K and I heard that large law firms don't mind paying that much because it only takes one client to win a huge lawsuit. They could spend $200K - $400K for the year to sponsor the club level.

    There's also score table / scoreboard ads, Mountain Dew/ Pepsi Section, ads in the programs, ads on the free items they give out (great clips jerseys), discounts at stores for winning, companies paying to be the one who gets to donate money to charities for hitting 3's, etc. Companies pay to sponsor all these things.

    Hope this helps.

    Comment


    • #47
      Re: Pacers finances baffle me

      I've often wondered how the Pacers could ever make a profit given the small market in which they operate. There is charity involved here and that is the charity that allows this franchise to play in Indy subsidized by the Simons.

      This thread has been most interesting and I thank all (including geeks) for their astute insights.

      Comment


      • #48
        Re: Pacers finances baffle me

        Originally posted by Putnam View Post
        I'm getting it from Bill Simmons:



        It isn't just the Pacers, it is the whole league. I've used the Pacers for examples, but the problem is league-wide.
        I wouldn't put much stock in what Stern is saying about the NBA economic situation while the table for the CBA negotiations is being set. That's a projection and they often get projections wrong. For example, in the off-season they were projecting ticket revenue to be down by 7% this season; by January the ticket revenue was down by 1.7%.

        Every year the Forbes Magazine elaborates a study about the economic/financial situation of the NBA. I'll wait for the next one. What records tell us is that years where the league revenue decreases are an extremely rare occurrence.

        More importantly, one year (or 2, or 3) of losses doesn't mean a business isn't viable. If that was true, entrepreneurship and investment would be long buried concepts. The idea that a business is only successful if it presents a profit every year is amusing.

        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.
        The major component of the cost structure of the NBA is the players salary.

        The players salary has a cap - it can't surpass about half of the revenue generated.

        How exactly is this inflexible to you? As I missing something here? I wish my business had this kind of flexibility.

        Can you provide an example of a non-failing business? I'm really curious.

        If he were here now, looking at the way things are, I imagine Red Auerbach would agree, don't you?
        Certainly not.

        Comment


        • #49
          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, not "any" such case is charity. I won't say every one is, but many are.

          If I were a farmer, I would plan to break even on my crops and livestock, without counting on the money from a "Chew Mail Pouch" sign to pay the bills. But even if I did that, I surely wouldn't ask my neighbor to build a barn for me to paint "Chew Mail Pouch" on.

          I don't know the details of the Pacers deal with the city for Conseco Fieldhouse. I hope the Pacers will get a good deal in the renegotiation, but it is a pity that the team and the city have to wrangle over the deal at this time.

          By the way, I strongly approve of the Simons. I hope you didn't call them "evil, greedy, self-serving" in parody of me.


          Finally, I don't know why we're arguing about this. David Stern says costs are out of whack and the league needs an overhaul.



          .
          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


          • #50
            Re: Pacers finances baffle me

            Originally posted by cordobes
            I wouldn't put much stock in what Stern is saying about the NBA economic situation while the table for the CBA negotiations is being set.
            I guess there's no sense in our trying to agree on the details if we don't agree there is a fundamental problem.

            I respect the heck out of your understanding, but in this case I'm going to remain skeptical.



            .
            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


            • #51
              Re: Pacers finances baffle me

              Stern is negotiating a new contract with the largest category of expense (player salaries), not filing a 10-k under GAAP. I'd be skeptical... very skeptical.
              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


              • #52
                Re: Pacers finances baffle me

                Originally posted by cordobes View Post
                I wouldn't put much stock in what Stern is saying about the NBA economic situation while the table for the CBA negotiations is being set. That's a projection and they often get projections wrong. For example, in the off-season they were projecting ticket revenue to be down by 7% this season; by January the ticket revenue was down by 1.7%.
                .
                If I recall correctly, the articles from that time actually referred to the ticket sales (i.e. number of tickets sold) as opposed to revenue from those sales, which likely presents an entirely different picture due to the virtually league wide promotions that have been going on this year that probably are more significant, on average, than even what was seen last year, and definitely more significant than they had been for many years prior to that. I believe a thread we had here actually determined that league revenue has declined this year by quite a bit, not just 1.7%.

                Comment


                • #53
                  Re: Pacers finances baffle me

                  Originally posted by ChicagoJ View Post
                  Stern is negotiating a new contract with the largest category of expense (player salaries), not filing a 10-k under GAAP. I'd be skeptical... very skeptical.
                  Can you elaborate?

                  Comment


                  • #54
                    Re: Pacers finances baffle me

                    Its not GAAP. There are a wide variety of ways the numbers can be manipulated.

                    The easy one to think of is for franchises that record depreciation on the arena. Not a cash expense. Not even consistently an "expense" of the franchise (again, it could be the arena holding company.)

                    Businesses that have been sold in the past few years might also be carrying amortization expense for assets such as player/ coach/ front office contracts, season ticket holder and advertiser relationships, favorable arena lease terms, etc.

                    Again, non-cash expenses, but if player contract intangible asset is, say, $60 million, amortized over the first four years after the acquisition, that is $15 million of expenses that are non-cash, and might even be non-GAAP (an expense for tax purposes only.)

                    These numbers aren't GAAP. Be careful.
                    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


                    • #55
                      Re: Pacers finances baffle me

                      Originally posted by Brad8888 View Post
                      If I recall correctly, the articles from that time actually referred to the ticket sales (i.e. number of tickets sold) as opposed to revenue from those sales, which likely presents an entirely different picture due to the virtually league wide promotions that have been going on this year that probably are more significant, on average, than even what was seen last year, and definitely more significant than they had been for many years prior to that. I believe a thread we had here actually determined that
                      league revenue has declined this year by quite a bit, not just 1.7%.
                      I see your point, because the initial NYT article isn't clear, but I think the comparison is valid - ticket revenue to ticket revenue or volume of tickets sold to volume of tickets sold. For example:

                      http://www.bizofbasketball.com/index...news&Itemid=54

                      NBA Ticket Revenue Down Less Than Expected.

                      Written by Matthew Coller
                      Monday, 25 January 2010 06:02

                      The New York Times reported this Sunday that the NBA’s ticket revenues have not dipped as much as the league had projected pre-season. The NBA’s ticket revenue is down 1.7 percent, far less than its predicted a 6 to 7 percent drop in sales. Most of the loss, the league says, is due to major declines in New Jersey Nets and Detroit Pistons attendance. The league said arenas have been 89 percent filled to capacity so far this season.

                      “The fact that we’re only down roughly 1.7 percent going into tonight’s games, I’m pleased about,” said NBA executive Chris Granger.

                      Before the season, the NBA sent a memo to teams warning of a possible decline in the league’s salary cap, which currently stands at $57.7 million. The league had originally thought the cap could drop to between $50.4 million and $53.6 million for next season, but if decline in ticket revenue remains limited, the cap could be around $54 million.
                      I think that the fact that the league offices actually revised their projection for the cap suggests the decrease in revenue wasn't as steep as they initially projected, no? And in any case, the less the revenue, the less the players salaries, which makes things not as bad as they apparently look.

                      Now, I have no doubt that the revenue league-wide will decrease this year and probably by more than 1.7%, but the $400 millions in losses Stern mentioned is just too far-fetched and more of a way of inducing panic. It's a non-credible threat, more directed towards the public (and the public favour) than exactly the players union. In last season's awful economy, the average operating income was $7.8 million per team. A $400 millions loss would imply a $640 millions turnaround. That would be amazing. It'd mean that the teams started spending money like drunken sailors during this season (and not in players salaries). Do you really believe that's what they're doing?

                      Originally posted by Putnam View Post
                      I guess there's no sense in our trying to agree on the details if we don't agree there is a fundamental problem.

                      I respect the heck out of your understanding, but in this case I'm going to remain skeptical.
                      Yeps, agree to disagree on this issue - although it seems to me that the fundamental disagreement is about the existence of a mechanism that makes players salaries a function of the revenue generated and the importance of that mechanism in terms of cost control/economic flexibility.

                      Comment


                      • #56
                        Re: Pacers finances baffle me

                        Originally posted by Putnam View Post
                        By the way, I strongly approve of the Simons. I hope you didn't call them "evil, greedy, self-serving" in parody of me.
                        No, not you - I still have a bug up my bumper over the reaction to the CIB renegotiation and the general public slamming of the Simons as opposed to the elevation to sainthood of the Irsays.


                        Originally posted by Putnam View Post
                        Finally, I don't know why we're arguing about this. David Stern says costs are out of whack and the league needs an overhaul.
                        Agreed. I think any business where selling the product itself can't pay the basic costs is doomed to have problems.

                        I think what might be best is to change ALL contracts to include a base salary portion and a revenue-sharing portion, where the individual player contract (and salary caps and luxury tax, if you stick to the current system) are adjusted WAY downward to reflect a more logical number for ticket revenue. You then have a standard percent that is based on league revenues that is added. This can be set up to vary by player, so a "franchise" player gets a higher percentage than the 15th man but it totals up to a specific number per team. You base it on league revenues because it means a player isn't punished for playing for a "poor" team, and also so that there are still incentives for teams to draw fans and manage their money wisely.

                        That plus making contracts non-guaranteed after a very small number of years would help immensely.
                        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


                        • #57
                          Re: Pacers finances baffle me

                          Originally posted by Putnam View Post
                          I guess there's no sense in our trying to agree on the details if we don't agree there is a fundamental problem.

                          I respect the heck out of your understanding, but in this case I'm going to remain skeptical..
                          So does your argument reduce to "there's a fundamental problem regarding the league's cost structure" because David Stern says so?

                          One point of consideration should be that if there's a single individual most responsible for the league's cost structure, wouldn't it have to be David Stern?
                          SportsTwo.com

                          Comment


                          • #58
                            Re: Pacers finances baffle me

                            Originally posted by BillS View Post
                            I think what might be best is to change ALL contracts to include a base salary portion and a revenue-sharing portion, where the individual player contract (and salary caps and luxury tax, if you stick to the current system) are adjusted WAY downward to reflect a more logical number for ticket revenue. You then have a standard percent that is based on league revenues that is added. This can be set up to vary by player, so a "franchise" player gets a higher percentage than the 15th man but it totals up to a specific number per team. You base it on league revenues because it means a player isn't punished for playing for a "poor" team, and also so that there are still incentives for teams to draw fans and manage their money wisely.
                            How would that help teams controlling costs more than the current system?

                            League-wide, all salaries can't exceed a percentage of (part of) the league revenues. The Pacers players won't really make $66 millions this season if the ticket revenues are indeed sinking.

                            Comment


                            • #59
                              Re: Pacers finances baffle me

                              Originally posted by cordobes View Post
                              How would that help teams controlling costs more than the current system?

                              League-wide, all salaries can't exceed a percentage of (part of) the league revenues. The Pacers players won't really make $66 millions this season if the ticket revenues are indeed sinking.
                              What it does is aligns individual contracted salaries with revenue, so when there is a revenue drop payments to players go down automatically instead of staying the same and putting the team into an economic situation like they are now. It gives players a bit more of an direct incentive to work together get people in the door and increase other revenue rather than just focusing on their own contract and hoping BRI goes up so their contract can be bigger next time.

                              I think it also makes salaries look more understandable to a lot of people.
                              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


                              • #60
                                Re: Pacers finances baffle me

                                Originally posted by BillS View Post
                                What it does is aligns individual contracted salaries with revenue, so when there is a revenue drop payments to players go down automatically instead of staying the same and putting the team into an economic situation like they are now. It gives players a bit more of an direct incentive to work together get people in the door and increase other revenue rather than just focusing on their own contract and hoping BRI goes up so their contract can be bigger next time.

                                I think it also makes salaries look more understandable to a lot of people.
                                But isn't that exactly how things are now?
                                Players get 57% of BRI. A big chunk of their salaries are held in escrow, and if the salaries are too high compared to revenue, that chunk of salary is paid back to the teams.
                                SportsTwo.com

                                Comment

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