NBA taking preventative measures during slow economic times
The full brunt of the nation's economic tailspin won't be felt in the NBA until we begin to see foreclosures on luxury suites. At about that time, some team will acquire Nate Robinson and Earl Boykins in a misguided attempt at downsizing.
The league that pays its athletes the highest average salary in professional sports (in excess of $5.3 million) isn't there yet. NBA teams generally report solid ticket sales and honored sponsorship contracts. Still, the league passed several significant markers recently on the road to financial hard times:
The Bobcats laid off approximately 35 employees from their front-office staff two weeks ago, heeding the recommendation of an outside consulting firm. The Charlotte franchise continues to lose millions of dollars in its fifth season of operation.
The Indiana Pacers, who ranked last in the NBA in official home attendance last season (12,222), began or beefed up numerous sales initiatives. Among them: an 11-for-8 mini season-ticket package (11 games for the price of eight, including the home opener against defending NBA champion Boston); reduced rates for military personnel and, on certain dates, college students; and $2 rooftop parking near Conseco Fieldhouse.
The New Jersey Nets are selling 1,300 tickets for a package price of $440 -- $10 per game -- and not charging customers' credit cards until January.
NBA deputy commissioner Adam Silver said timing has provided a buffer, with many of the league's most important contracts already in place. "There seems to be a fair amount of lag time between a downturn in the economy and its impact on sports leagues,'' said Silver, the NBA's chief operating officer and deputy commissioner. "Our TV deals, by and large, are long-term, as well as our sponsorships.'' Silver said this slump would need to last longer, qualifying by then as an official recession, before the league would feel its full effects.
Still, as 401(k) account balances plummet, once-secure jobs vanish or turn shaky and mortgage payments stretch household budgets to the max, the NBA, which charged an average 2007-08 ticket price of $48.83 (that's nearly $200 for a family of four, before anyone drinks, eats or buys a replica jersey), is trying to be sensitive to fans' needs.
"The higher food prices, higher gas prices, they didn't just start the other day when the market went down 770 points,'' Pacers CEO Rick Fuson said. "Our ticket folks had been hearing things for two years, that the amount of money people had to spend on various things was tighter -- way before this most recent serious round of economic hardship.''
Indiana has other factors at play in fans' reluctance to open their wallets. The Pacers' most recent shot at a championship contender crumbled with their November 2004 brawl in Detroit. Over the past two seasons, the team is 22 games under .500. Former Pacers such as Stephen Jackson and Ron Artest and current Indiana point guard Jamaal Tinsley (who is sitting out while the team tries to trade him), have had brushes with the law and chafed at team policies -- arguably bigger turnoffs in a smallish market such as Indianapolis.
"There is a wait-and-see attitude here,'' Fuson said. "Our sponsorships have held up pretty well, but there are a lot of small- to-medium-sized businesses here that are affected by the rising costs of gas and energy. But we've got good guys, good citizens and they're doing a lot of good work in the community. The needle has been moved.'' Fuson said certain partial-season packages are exceeding last year's sales pace, as are single-game sales.
Minnesota president Chris Wright, whose team ranked 25th in attendance (14,477) last season, said that the Timberwolves' Club Cambria VIP level is sold out, even though the Wolves finished 22-60 last season. The team began offering a three-pack ticket plan, hoping that those buyers upgrade to six- or 10-game packages in more prosperous years. "People still want and need to get out of the house,'' Wright said of those wintry Twin Cities nights. "We think we're still a viable option.''
To save the 30 teams from having to reinvent the sales or financials wheel in a challenging economy, the NBA has an internal Web site dedicated to team marketing and business opportunities. It serves as a clearinghouse for ideas and strategies; if a promotion works in Philadelphia, it might just work in Sacramento, too. Silver said teams have been encouraged to step up some community activities, through their NBA Cares program. "We want to demonstrate that we share some of the pain people are feeling right now,'' Silver said.
Some teams are riding a wave of popularity, apparently untouched by the economic downturn. Celtics president Rich Gotham, whose team won the NBA title in June, said it's been business as usual. "We're lucky in Boston, in respect to a market where people really do spend on sports, where we're really over-indexed against the norm,'' Gotham said. "We're fortunate coming off a successful season that, more than anything, has been our hedge against a tough economy.''
Renewals of season tickets are at 100 percent, Gotham said. Sponsorships are up. And having the league's highest-paid player, Kevin Garnett ($24.75 million for 2008-09), hasn't rankled working-class fans. "Fans here see the work ethic KG brings every night,'' Gotham said. "A couple of years ago, they might not have felt the same about the money some of the players here were making.''
Even the Celtics, though, have been careful about staffing levels, leaving some positions open rather than face layoffs later. "We aren't going to get caught off guard,'' Gotham said. "You don't want to find yourself too far out over your skis.''
The Orlando Magic, after some financial issues with their 20-year-old arena, are on schedule to move into a new, state-of-the-art downtown facility in 2010. "We sold all the suites in advance, and actually had to go back to the blueprints and create four more,'' Magic senior vice president Pat Williams said. "We're ever-alert [to the economy], as everyone must be. But we've met our goals. We have signed contracts. We had a very good offseason.''
Most teams, thanks to their deadlines for ticket renewals and deposits, had customers' money before the Congressional bailout bill and the most recent stock market swoon. But awareness of, and adjustments to, rising ticket prices overall -- something many NBA clubs addressed after the 1998-99 lockout soured some fans -- has kept seats filled. The most common strategy: affordable seats near the rafters, subsidized by VIP locations and corporate suites.
"We had our own sale date this past weekend and sold the second-highest number of tickets in team history,'' Dallas Mavericks owner Mark Cuban wrote in an e-mail. The Mavericks have reduced prices in the upper bowl of American Airlines Center in three of the past four years and sell at least 4,000 seats for each game at $19 or less.