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Good NY Times Article On Celtics & Other Teams' Revenues
The Celtics made $12.3 million profit on revenues of $75.3 million....
December 24, 1998
Profits and Losses in League's Ledger
By RICHARD SANDOMIR
The National Basketball Association is like a chain
of 29 franchised stores arrayed strategically
nationwide, each catering to a different market, each
hoping to sell out its inventory of seats. The chain's
employees earn unusually high salaries, but, in turn,
the 29 outlets can charge steep prices to watch their
costumed workers perform in glitzy arenas or on
television.
But the nearly six-month-old lockout has altered the
chain's business. The stores are closed, the employees
are not being paid and advance ticket revenues must be
refunded on a prorated basis each month. The only
bright spot for team finances is the combined $465
million being paid by NBC and Turner Sports, the
league's national television partners, even if the
season is shuttered.
The financial health of the N.B.A.'s teams has been at
the crux of the league's negotiating stance as it
presses for something resembling cost certainty. The
N.B.A has claimed financial distress for some of its
franchises and seeks relief in a restructured contract
with the players. But in an industry generating $2
billion annually, and with most team finances
unavailable to the public, it is difficult to discern
exactly where the problems are.
The league and the players union disagree on how many
teams are losing money, but only two teams, the Boston
Celtics and the San Antonio Spurs, make their finances
public. The Celtics are a public company and the
privately owned Spurs released their statement in a
so-far-unsuccessful bid to get city government
financing for a new arena to replace the five-year-old
Alamodome.
Last season, the Celtics missed the playoffs under
Coach Rick Pitino but still earned $12.3 million on
revenues of $75.7 million. Sparked by the return of
center David Robinson and the addition of the rookie
Tim Duncan, the Spurs returned to the playoffs, but
lost $1.8 million on revenues of $65.9 million.
Without the playoff revenue, the Spurs' loss would have
been $3.9 million.
The largest difference in the teams' revenues was
derived from ticket sales: the Celtics collected $39.1
million (which may include luxury-suite income, but the
statement is not explicit) compared with the Spurs'
$24.3 million.
The Spurs' and Celtics' figures are normal for N.B.A.
teams -- greater than unsuccessful teams with lower
payrolls like the Los Angeles Clippers, but less than
what the Chicago Bulls reap and spend, several sports
finance experts said.
Forbes magazine estimated the Bulls' 1997-98 revenues
at $112.2 million and operating profit at $8.6 million,
while the Knicks made $18.3 million on $109.7 million
in revenues. The Clippers took in $39.3 million, but
lost $4.9 million.
"The Celtics are a typical big-market team, but they're
just another tenant in an arena, and the Spurs are
similar, in a small market," said Michael Ozanian,
statistics editor of Forbes magazine.
In the case of the Celtics and the Spurs, neither owns
the arena they play in. Teams like the Bulls, Knicks,
Philadelphia 76ers, Detroit Pistons, Washington Wizards
and Portland Trail Blazers have the advantages of
earning revenues from other events like hockey and
circuses, while paying no rent to a city or county.
"For some, a lot of revenue is tied to paying off debt
service to build the arena, and the other events were
supposed to be gravy," Ozanian said. "Someone like Abe
Pollin has a lot of debt, and what was gravy isn't the
case now." Pollin owns the year-old MCI Center, the
Wizards and the Washington Capitals.
The Knicks and the 76ers have the added edge in also
being part of the same company that carries their games
on cable television. The companies are now losing out
by not being able to sell lucrative commercial
advertising to their teams' games.
The Celtics reported TV and radio revenues of $28
million, $11.4 million from NBC. The rest came from
Turner Sports, and local radio and TV deals.
The Spurs received $14.7 million from NBC and Turner,
and $18.7 million more from local media rights and
arena advertising, the latter an unusually steep figure
for a team in one of the league's smallest markets that
also plays in an arena without a corporate name
attached to it.
Although the Celtics did not itemize what they received
from royalties from the national licensing that they
split with all other teams, the Spurs revealed their
share to be $2.9 million.
The Spurs, who receive 80 percent of the revenues from
the city-owned Alamodome's luxury suites and club
seats, reaped about $2 million from that lucrative
area. Suite revenues at the Fleet Center in Boston are
divided among the Celtics, the Bruins and debt
payments; the Celtics may have included that income in
ticket sales.
For both teams, the largest expense is salaries. The
Celtics reported $43 million in total basketball
expenses, most of which is paid to their players; the
Spurs' reported a $34.9 million payroll, led by the
$12.4 million paid to Robinson.
But a comparison of the Celtics and the Spurs presents
an anomaly. While Boston is the sixth-largest market,
three times larger than San Antonio, the Spurs' $67.7
million in expenses is greater than the Celtics' $61.9
million.
"Keep in mind, whether it's a small market or a big
one, teams are competing in the same market for
players," said Paul Much, managing director of Houlihan
Lokey Howard & Zukin, an investment banking firm in
Chicago. "And while big-market teams usually have
bigger revenues, they usually have higher expenses."
Although the players are not getting paid during the
lockout, coaches, executives and other employees will
continue to be. To cut down expenses, teams will almost
certainly lay off workers if the season is canceled.
The Celtics must pay one unusually high salary during
the lockout -- Pitino's. Even if Pitino doesn't coach a
game this season, his contract to be coach, president
and director of basketball operations calls for annual
salaries of $6.75 million through May 6, 2003, and $2
million annually through 2007.
The team will also keep paying Red Auerbach, its former
coach and general manager. Now a consultant, Auerbach
receives $250,000 a year for life; he got bonuses of
$500,000, $600,000 and $100,000 in each of the past
three years.
Although all teams will have to pay ongoing expenses if
the season is canceled, the Celtics and the Spurs won't
have to pay rent to their landlords. The Celtics' Fleet
Center lease requires no rent payments, while the
Spurs' payment of $5,000 a game is not required if the
team doesn't play.
But the Seattle SuperSonics and the Golden State
Warriors are in rent disputes at the Key Arena and the
New Arena in Oakland, Calif., respectively, and
disagree over whether their leases require them to pay
rent even if they don't play.
The city of Seattle may lose $4.8 million if the N.B.A.
cancels the season.
"We could go to arbitration, but after Jan. 1, we'll
sit down and try to negotiate," said Sue Donaldson, the
Seattle City Council President. "We feel the team has
an obligation to pay, whether they play games or not."
The Warriors' quarterly rent of $375,000, and other
payments, are needed to repay the debt incurred by the
county for $100 million in arena renovations.
The team and Alameda County will go to arbitration next
month to settle their dispute, said Kyle Spencer, a
Warriors spokesman, over what the team thinks is a
lease clause that absolves it from paying rent during a
work stoppage.
Copyright 1998 The New York Times Company