Wilson: WNBA Lost $2 Million in Detroit Last Year

Tom Wilson, the President of the (former) Detroit Shock, gave some insight into the financial considerations that resulted in the Shock moving into Tulsa.

"The attendance this year was the toughest ever, and we had to make the call. If you guessed, we lost somewhere near two million dollars. We had owners stick by year after year through millions of dollars in losses, but they felt obligated and believed in the product. It was just time."

...

"We were never really part of the core (teams of Detroit) and you can attribute that to the (women's) game, you can attribute that to the summer or whatever, but no matter how much we spent on marketing or advertising, no matter how many appearances the women made, we still weren't able to capture the critical mass to make it make sense."

One of my ongoing pet projects is to try to figure out how much it takes to run a franchise. I'm assuming that the $2 million dollars is a net loss. If it takes about $2-3 million in income, the team probably lost about $3-5 million. The Shock could have lost as much as $20 million net over its history.

Granted, for a billionaire it would mean you would go bankrupt in 500 years, but in the tough Detroit economy finances were the clincher.

Fan Post on Swish Appeal

I added a fan post to Swish Appeal on what distinguishes between successful and unsuccessful sports leagues.

My conclusion: the WNBA should apply that rule to the Dream and the Shock.

A Cautionary Tale

Wright Thompson at ESPN writes about the "Legends Seats" at the new Yankee Stadium which can go for as much as $2,500 a ticket. The gist of the story: big time sports is choking off its fan base in exchange for maximizing short-term profits.

The key paragraphs:

A recent poll discovered an unsettling trend emerging for the first time. American families whose household income is $75,000 or less now have zero dollars of discretionary income. According to Luker, that means about 75 percent of the country can never responsibly afford to go to a live professional sporting event. Franchises want them to be fans, to buy the gear and pull for their teams and watch the telecasts the leagues are paid billions for. But they don't need them to come to their stadiums. There are, right now, plenty of rich people who love games. The prices reflect that. The reason sporting events cost so much now, Luker's research shows, is because they are designed to be affordable only to those making $150,000 or more a year.

This wasn't always true. Ten years ago, it was cheaper to go to a baseball game than to a movie in half of the big league markets (take away parking at the game, and it was cheaper in every market). Today, there isn't a single city in America where it costs less to go to a major league game than to a movie. Everywhere we turn, we see examples of the collapsing middle class. This is where that issue lives in the world of sports, and it has predictable consequences.

"The lower the income," Luker says, "the less they're enjoying sports."

His August poll discovered a third of Americans are less interested in sports because of the declining economy. That's bad news, made worse by a problem he first noticed in 2004 and which has continued since: For the first time, the largest number of sports fans aren't 12- to 17-year-old boys. The baby boomers are the group that shows the greatest increase in a love of sports, and they'll be dying soon.



You can damn the WNBA all you want, but there's one truth: you don't have to take out a second mortgage to see a WNBA game. It might not cost as little as a movie, but it's pretty damn close to one.

Tulsa: Needs to Sell $250 K in Tix?

I've commented in earlier posts about trying to understand the financial model of the WNBA.

We've learned a new piece of the picture from an article in the Tulsa World about the hiring of Nolan Richardson. Tulsa investor David Box said the following:

“We just need people to buy tickets,” he said. “We sold $45,000 worth of tickets for 65 people at the event last week at the BOK. We have 15 suites available at about $13,000 apiece. If we can sell those suites, we’re home. We’re not that far away. We need some sponsors and we need to sell these suites.”

Okay. Let's assume that Tulsa has sold $45K of tickets for 65 people in one of its meet-and-greet events. That's about $700 for each of those people, so I'm assuming that those are season tickets. (The cost is about $750 in Atlanta.) Let's assume that you need about 2,000 season ticket holders. That would give you $1.4 million from the gate, whether or not those tickets are actually used or not.

Box also wants to sell the suites. That's $195K.

Here's the newest WNBA budget:

Season Tickets Sales: $1,400,000 ($700 x 2000)
Suite Sales: $195,000 ($13 K x 15)

Arena Rental: $255,000 ($15 K x 17 home games)
Arena Operations: $153,000 ($9 k x 17 home games)
Salary for Players: $803,000 (Collective Bargaining Agreement)

Income: $1,595,000
Outgo: $1,211,000

Theoretically, this is a profit, but it doesn't count any of the items mentioned in the first link above: player meal money, player travel/relocation, coach costs (Richardson alone will be a six-figure hire), etc.

Once again, these figures are posted entirely for speculative purposes. They are vague approximations at best. The above is simply to give one the idea of the costs of running a team, and where the money comes from and where it goes.

Arena Rent: $15,000/Game?

An article about the possible departure of the Tulsa Talons - an "arenafootball2" team - from the BOK center in Tulsa gives one an idea about the economics of arena rental.

The BOK Center charges the Talons 15-thousand dollars rent per game, but report the team receives 25-thousand dollars from BOK Suite and Premium seat ticket sales. The Talons say they also have to pay 9-thousand dollars per game in operation expenses like ushers and security and have never received more than $22,800 from the seats.

Let's assume the Talons are telling the truth about their economic situation. You would then get this budget for running a team like, say, the Atlanta Dream:

Arena Rental: $255,000 ($15K x 17 home games)
Arena Operations: $153,000 ($9 K x 17 home games)
Salary Cap: $803,000 (from Collective Bargaining Agreement)

So this is $1.2 million dollars a year minimum to run a WNBA team. This isn't counting such things as:

- player meal money
- player travel and player relocation
- coaching expenses (in the six figures)
- staff operationing costs (salary/office rental/office expenses)
- promotions

It all adds up after a while. Of course, the gate helps alleviate some of the expenses. You hope that the gate at the very least takes care of the arena costs. It's an interesting exercise in speculation, and gives one an idea of the challenges an owner or team president faces.

Total Productivity Versus Marginal Productivity

Stacey Brook at the University of Iowa writes about the difference between total productivity and marginal productivity, using the 2009 WNBA Dispersal Draft as an example.

Brook's argument is that a team picking in the dispersal draft choose the player - center, power forward, point guard, whatever - whose value most exceeds the value of the player currently holding the postion. For example, if you have a great center, and the best player available is also a great center, you really don't gain much by drafting that available center. On the other hand, if you have a crappy shooting guard, and there is an average-to-good shooting guard available in the dispersal draft, it makes more sense to pick that average-to-good guard than the great center.

(It's hard to explain this without recourse to math. The math is in the link.)

With the Houston Comets folding, the Atlanta Dream got first pick in the draft. This was a long time before the arrival of Chamique Holdsclaw and Angel McCoughtry. The Dream was significiantly lacking in the post department, and Erika de Souza had been injured for a large part of the 2008 season. It wasn't just that Sancho Lyttle was a great post, it was that we didn't really have a great post otherwise. Picking Lyttle made sense.

Of course, the link provides a simplified example and doesn't take into account contract negotations, future draft needs or address any of the intricacies of providing a WNBA team. However, I've always been a big believer in increasing marginal value, so the link appealed to me. I think marginal value also provides an explanation for many of those mysterious trades in sports. "Yes, we're acquiring a sucky player. But that sucky player sucks marginally less than the player we're letting go, so the whole team gets better."

It's also great to see the WNBA be turned into a math problem. "A drink of alcohol increases blood alcohol content by 0.3% per drink per 150 pounds of weight at an inverse ratio. Assume that a player from the Phoenix Mercury enters the bar...."

If Footmen Tire You, What Will Pacers Do?

"If running against men has wearied you, how will you race against horses? And if in a land of peace you fall headlong, what will you do in the thickets of the Jordan?" - Jeremiah 12:5

A article from the Associated Press indicates that the Indiana Pacers organization wants the city to take over to cost of operating Conseco Fieldhouse, home of both the Indiana Pacers and the Indiana Fever. The Indianapolis Star states that the Pacers have lost money nine out of the last 10 years.

Furthermore, co-owner of the Pacers Herb Simon states that the Indiana Fever will not be long for Indianapolis.

Simon said he is committed to the WNBA team for just one more year. The team has lost "several million dollars," he said, and must double corporate sponsorships and attendance if it is to survive.

Why did he stop there? He might has well have asked for John F. Kennedy to rise from the grave and fly around the rafters of Conseco Fieldhouse. To ask a WNBA team to double its attendance in a year is asking the impossible. If you don't think so, ask any other team in any other franchise to do the same without massive giveaways or book cooking.

It's not that I'm not worried about the fate of the Fever - I'm certainly worried. A fact that many might not realize is that all of this is part of a game of chicken being played between the owners of the Pacers and Fever and the city of Indianapolis. Neil deMause of the blog Field of Schemes - a blog dedicated to sports owners' attempts to extort cities - writes in the comments that the Pacers are paying $1 a year - that's one dollar a year - in rent. "The notion of them moving anywhere just to get out of paying to clean their own bathrooms is, frankly, laughable."

Basically, the Pacers want a sweetheart deal akin to the one that the Colts got, and they're trying to play hardball by pleading poverty. "There's lint in our pockets! We're broke! If you don't give us X amount of dollars we'll move to Kansas City/Seattle/Sucker City!" The danger is that Pacers ownership might throw the Fever to the baying wolves in an attempt to prove just how serious they are. ("Oooooo!")

So the owners of the Pacers and Fever would kill a franchise that's existed for 10 years just to get out of paying operating costs of a stadium that is given to them by the city for rent-free use? For all the complaints about the WNBA not being a "real" sports league because it doesn't pay out zillions of dollars, it makes the owners of the Fever look all that much more cheap. The Pacers should bring someone smarter than them to Indianapolis to show them how to run a business...say, Hilton Koch. (/sarcasm)