Been taking some time away from this site to work on other projects, but hey, it’s summer, right? Nothing new ever happens now, certainly not anyone dropping news of an entirely new arena plan out of nowhere—
Clippers owner Steve Ballmer has begun to explore potential sites for a new Clippers arena, multiple NBA sources said.
What the whaaaa? The Clippers have long had one of the most stable arena deals in sports, playing in the 17-year-old-but-none-dare-call-it-anything-but-state-of-the-art Staples Center alongside the Lakers and Kings. According to the ESPN report, Ballmer is sick of playing third fiddle to the other two teams, and wants to explore whether he can do better by going it alone:
A new facility owned and operated by the team would afford the Clippers greater power to maximize earning opportunities, from sponsorship to licensing fees. As the owner of Staples Center, AEG retains control over naming rights, the business operations of running the facility for events and other substantial revenue streams like concessions.
Well, yes. You know what else a new facility owned and operated by the team would come with? Around a billion dollars in construction debt, that’s what. And while L.A. is conceivably one of the few places where you could make a good chunk of that back on naming rights and maybe seat license sales — i.e., the Rams playbook — that’s quite a hefty nut to pay off before you start enjoying all your maximized earning opportunities. Plus, L.A. is already bursting at the seams with existing arenas, so it’s not like Ballmer would have an easy time filling dates at top dollar on non-basketball nights.
(I’m not even going to get into the possibility of Ballmer asking for public money to help out, because it’s L.A. — or possibly Inglewood — and he’d have to hold a public referendum, but we probably shouldn’t rule it out entirely, because America.)
Of course, it’s also possible something else is going on here. The Clippers’ lease doesn’t expire until 2024, so whatever Ballmer is up to, it has a long lead time. So this could be a matter of exploring his options, or leaning on the Staples Center to give him a revised lease (or lease extension) so that he doesn’t explore his options, or doing whichever he decides is most lucrative once he gets there — i.e., the Islanders playbook. Only one thing’s for sure: He’s not going to Seattle.
“The Clippers are not going anywhere, ever,” Ballmer said. “I will die owning the L.A. Clippers in Los Angeles.”
Or maybe that just means that Ballmer has an incurable disease and less than eight years to live. Parsing owner statements is endless fun!
He can’t stay at Staples Center unless the concert industry crashes. The Clippers get virtually nothing from suites or Club seats (in fact, when you talk to a Clippers sales rep it’s as though neither exists) and they get pushed to Mondays, Wednesdays, Saturdays and Sundays (often during NFL games).
When Ballmer bought the team I thought he’d approach USC to get the Sports Arena back, but it was apparently already earmarked for soccer (or Ballmer already had his eye on the west side, or both).
The real story here is how shoddy Kevin Arnovitz’s news breaking report was. The Forum is not undergoing any type of renovation at all and that the Clippers don’t own their own practice facility. (And of note to this site, the Clippers probably received tax credits to build their facility, which is located in Playa Vista. http://articles.latimes.com/1999/may/11/local/me-36100)
Well, they *can* stay in Staples Center. The question is whether Ballmer can make more money from getting better nights for their games than it would cost him to build a new arena, net of naming rights and other new revenues like that. That’s where I’m more dubious, for much the same reasons as the Islanders-to-Queens rumors.
Have you been to the Forum lately? It did recently undergo a huge renovation, which may still be going on, so his statement that “It is currently undergoing a massive upgrade by the Madison Square Garden Company” is either true or not far off.
However, the renovation was designed to make it a better concert venue, not a state-of-the-art luxury-box-laden NBA arena, so it’s not really relevant to the Clippers’ plans.
Yes, what Solvang said. Forum has been/is being renovated (not clear on whether this is continuing or is complete) significantly. It is also, as I understand it, no longer configured specifically for sports use.
They didn’t reconfigure it so much as restore it to its midcentury awesomeness, and optimize it as a concert venue: Plush seats, acoustic adjustments, new lighting/electrical.
You could still play basketball there, but I don’t think there’s an overhead scoreboard/videoboard anymore, and it’s just not configured like a modern NBA/NHL arena (shallow bowl, no luxury boxes, single concourse, limited dining/concession facilities etc.).
If we all pretend that this monster TV deal will be fully paid out before the death of ESPN–what in the world does a little marginal seat revenue really give the Clips that they don’t otherwise get from being in LA in general?
ESPN isn’t likely to die, though I do expect it’ll be a Netflix-style streaming service within ten years. (Maybe Disney will even buy Netflix, so that you have to pay for sports if you want to watch Season 10 of Daredevil.)
ESPN won’t die, but one of the challenges of “disaggregation” is that we find out exactly how many people want to pay for particular sports coverage–rather than the current system of a “cable TV tax to support pro sports.”
At any rate, if sports owners somehow perceive that their future is in convincing Very Rich People to watch in person, rather than in charging grandmothers $4.95 a month for channels they don’t watch, Ballmer’s logic makes a weird kind of sense.
The logical future of local sports broadcasting is the past: The local TV model (free, ad-supported), except that it will be over the internet instead of local airwaves, directly from the franchises, who will cut out the middleman and collect all the ad revenue themselves.
And we’ll all laugh at this period, when it was widely believed that watching your local MLB/NBA/NHL team play regular-season games – at home, on your TV, with commercials! – is some kind of “premium” experience that the masses will pay through the nose for.
Why would any league or team do that when they can charge people for the right to watch?
I guess the equation changes if people start tuning out, but that doesn’t seem very likely at the moment. People want their live sports, and so long as leagues have a monopoly on those broadcasts, they can charge through the nose for them.
(If people start streaming games from their seats on Facebook Live, then it’s a different story.)
I’m 100% with Ballmer on this one. Forget financials for a minute. Teams in the same league sharing the same arena is just tacky. From the street being named after a famed Laker announcer, to all the statues of Laker greats outside the arena and of course, the banners of all the championships and retired numbers, the Clippers are absolutely 3rd class citizens in their “own” arena.
Now, getting to the financial element, Ballmer gets ZERO in suite revenue and very little of anything else on top of an overall horrible lease. Sterling signed that lease because other than Anaheim, he had very little options out there. He’s too cheap and even if he wasn’t so cheap, he’s not wealthy enough to build his own arena without asking the city for help and we all know that wouldn’t end up well nor should it.
Ballmer is a completely different story. He obviously has the cash to make this work and being that he wants the franchise in his family even after he passes away, it makes sense to get the ball rolling on an arena now. Keep in mind that he is looking for development opportunities as well. 2024 may seem like a long time from now but remember that Ratner bought the Nets in 2004 and Barclays didn’t open until 2012.
Joe Lacob bought the Warriors in 2010 but won’t open his arena until 2019 if he’s lucky so I could see Ballmer just getting things done by 2024.
If there is a best case scenario and he gets things done early, let’s keep in mind how overblown these lease deals are. I’m surprised at how many people keep talking about how iron clad this lease seems to be. Vancouver was able to get out of their lease with 4 years to go and we all know how Clay Bennett was able to buy out the final 2 years on his lease. And that was for city’s that would lose their team altogether. Ballmer isn’t leaving the city and even if he did, you would still have the Lakers in town. Vancouver and Seattle were left high and dry so Ballmer is most likely going to have an easy time figuring out how to get out of his lease assuming he even has that option in the first place.
Doesn’t really answer the question though. Assuming there is a “need” (or even a strong “want”), who pays for the arena?
I don’t think anyone believes that the lease is iron-clad. However, until someone puts a ton of money together for a new arena with dubious business prospects.
Also strange that the Celtics (for example) played on a lease for nearly all of their history, and it didn’t seem to hurt their competitiveness. Why is a hockey and basketball team sharing an arena so much less objectionable than two basketball teams?
Ballmer is paying for the entire thing, you can count on that. He won’t get a cent of public money nor should he.
If it were me, I’d try to buy the Ducks and take over the Honda Center but for whatever reason, he is hell bent on staying in LA county.
The Clippers have earned their third class citizenship by not winning any championships. When they do, they will have banners and statues and the what not. Especially the what not.
maybe he ballmer should buy the ducks and team the clippers/ducks on a new arena.
Perhaps Ballmer will pay for “the whole thing”.
As has been said above, he certainly has the money to do so (witness his purchase of the Clippers, purported to be worth $640m under the previous owner at the time of the sale, for $2Bn).
However, he gains nothing by building his own arena with his own money. The new revenue streams referenced will not be enough to cover the payments on the arena (or the lost investment income, in the unlikely event that Mr. Ballmer chooses to pay cash up front) itself, let alone generate any net revenue from suites and the like.
If he wants to create his own entertainment company and needs a new arena (out “west” or wherever) as a centrepiece for this, perhaps he might be willing to live with the lack of a return on investment for the basketball team…. but then we aren’t talking about a new building justified via a bad lease (like to see more details on what constitutes “bad” in the Clippers sense) or poor scheduling options etc. We are talking about a new building with which to build one or more new businesses… almost by definition this cannot be justified through “having to play games on Tuesdays – bummer”.
Let’s not forget that one of the reasons that Arnovitz referenced in his article for Ballmer wanting to leave was “development opportunities”. If there are options beyond just an arena then you obviously have a larger return on your investment. Otherwise, why would the Warriors want to invest a billion dollars in their SF arena venue or the Nets with Brooklyn? If there was no value or return on the investment, these teams would’ve been better off just paying rent in their old buildings.
One thing to consider is Ballmer’s ownership of the Clippers is less a business and more a retirement hobby for a very rich guy.
It make sense for the Clippers to go to Anaheim at the Honda Center. Don’t know how the revenues would work between the Ducks owner and the Clippers owner. Splitting it 50-50 should work but it may not.
The best bet, and what I have suggested, is for Ballmer to just buy the Ducks and control the arena and both teams. It would be cheaper than a new arena but Honda Center is 24 years old already, lacks that land for other development opportunities unless he wants to wipe out parking and he has said he has no interest in owning a hockey team. That being said, Henry Samueli sold his shares in broadcom so no reason to believe he wouldn’t be open minded towards selling the Ducks. After all, he’s much more passionate about microchips than he is hockey so I could see it happening.