The Athletic is one of the latest new sports websites, and I wish them all the luck in the world, since more sports news (and more sports news jobs) can only be a good thing for those of us who cover this world. One thing I can’t do, though, is read The Athletic, because it has a hard paywall that doesn’t even allow a certain number of free articles a month, and they simply don’t run enough must-read stories for me to cough up $5 a month for a subscription.
So instead I’m reading (and linking to) this summary in The Big Lead of Tim Kawakami’s Athletic article about how the Golden State Warriors don’t have to worry about the $200 million luxury tax bill they’ll be hit with starting in 2019 for all their high-priced players, because hey, they’ve got a new arena:
According to Kawakami, the Chase Center will have “membership fees” of about $15,000-$20,000 per seat for season tickets, which get paid back without interest in 30 years. A Warriors official said that 79% of season ticketholders who have been pitched so far have agreed to pay them; additionally, most luxury suites are already sold, and Chase is paying about $20 million a year for the naming rights. Add in parking, concessions, actual ticket sales, and money from both local and national TV and even if the Warriors are paying $300 million a year for their players they are going to be just fine.
Two things: First off, yes, the Warriors owners are going to collect bucketloads of money from their new arena — if the above is correct, that’s somewhere in the neighborhood of $700 million just for seat licenses and naming rights alone. But they’re also going to have roughly a $1 billion construction bill for the new San Francisco arena, so most of that new revenue is already spoken for.
Secondly, Kawakami (or at least The Big Lead’s summary of Kawakami) fundamentally misunderstands the difference between fixed and marginal costs and revenues. Most of those new revenues — certainly the PSLs and the naming rights — the Warriors owners will be getting regardless of whether the Warriors are any good for much longer. So the decision they’ll be facing won’t be “do we have $200 million extra lying around to tithe to the NBA for having all the good players” — their owners have more than $2 billion in wealth between them, so cash on hand isn’t so much an issue — but rather “would we rather have another all-but-guaranteed ring, or would we rather have $200 million more this year?” (Previous Kawakami reporting showed that the Warriors bring in about $35 million a year in added revenues from each playoff run, which isn’t enough by itself to justify those crazy luxury tax expenses.) And that’s a tough call for even the most championship-hungry sports team owners, as witness the New York Yankees‘ scramble to get under MLB’s luxury-tax threshold.
So anyway, short version: Yes, the Warriors’ arena will bring in lots of money; no, it’s not all free money that the owners will happily spend on whatever bills come in under the door. Thanks to the crazy San Francisco market, it may well be the exception to the rule that most sports venues don’t even pay their own construction costs, but it’s not “an ATM machine” as this article claims, either.