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April 19, 2008
Sonics move: Pinning the blame
In its day-after coverage of the NBA's approval of the Seattle Sonics' proposed move to Oklahoma City, ESpn included the following:
The only thing keeping the moving trucks from pulling up and emptying the Sonics' offices is an arena lease, which Stern has called the worst in the league. (The Sonics receive zero revenue from parking, just 40 percent of revenue from suite sales and concessions, and just 60 percent of the revenue from a large swath of thousands of $105 seats in the lower bowl.)
This is the real explanation for why the NBA is set to trade the nation's 14th media market for its 45th, despite Seattle having an arena that was just renovated 14 years ago. It's not the arena, it's the lease.
So, how bad is that lease? Certainly, having to hand over half or more the revenue from suites, seats, and concessions sounds pretty tough - why should the city of Seattle be getting the money when people go to Sonics games? The answer, though, is that that's what the Sonics agreed to, in order to get KeyArena renovated in the '90s: The city would get to keep a large chunk of arena revenues to pay back its $74 million share of renovation costs.
There are several lessons here:
- Teams want new arenas, but not if they have to pay for them.
- If, in fact, the Sonics really can't make money with this lease, then it's unlikely any arena can pay off its own costs and still turn a profit for the team that plays there. ($74 million is a piddly amount in arena construction/renovation terms.)
- If a team owner promises that if you build him a new arena you'll get all your money back eventually, keep one hand on your wallet.
This move is all about NBA franchises maintaining leverage in stadium negotiations. David Stern made the call that downsizing one franchise's media market is less of a hit than losing stadium negotiating leverage in 30 markets. It's smart in the short term for Stern but the ugliness of this move just may wake up the press to the scope of the money of these sweetheart deals that sports franchises squeeze out of local politicians. In Seattle the people finally said 'No' and David Stern put a horsehead in their bed.
Posted by joejoejoe on April 19, 2008 08:23 PM
The biggest lesson may be that rennovations are a worse investment than picking the right time to build a completely new arena.
I'd agree that this is the NBA's attempt to copy what the NFL did with LA.
Posted by Dykstra on April 20, 2008 06:03 PM
Typo in the 3rd paragraph, I believe it should say the nations "14th largest for it's 45th."
Posted by rageon on April 22, 2008 02:23 PM
Bad HTML tag, actually. Thanks, it's fixed now.
Posted by Neil on April 22, 2008 08:17 PM
Good points. But its hard to believe that its a credible threat for other teams in the league. The NBA is in so many substandard markets now that there aren't many options left to move a team to. (I'm having trouble thinking of one other than Vegas.).
Seattle should let the team go. they are better off without them and in a year or two no one will really remember.
Posted by Gdub on April 22, 2008 11:12 PM
Their are many options for an NBA team to move to.
http://www2.nysun.com/article/69393
If Kansas City and Cincy are the best that the NBA can do for a new city, its not much of a competition. KC simply doesn't have the corporate strength to maintain a team--similar to NO, Memphis, OKC. To my mind, neither does Cincy. They are small TV markets, at best.
Posted by GDub on April 24, 2008 01:22 AM