Sacramento can offer Kings more than other cities seeking NBA teams
http://www.sacbee.com/286/story/75354.html
Strip away the raw emotion, the harsh campaign talk, the cheering fans and the booing voters and the Sacramento Kings' future comes down to one thing: Where can team owners Joe and Gavin Maloof get the best business deal?
The answer: They're in it.
An analysis by The Bee and interviews with sports business experts reveal that all of the cities most often mentioned as a new location for the Kings have big obstacles or huge financial risks that make them poor fits for the team. That gives Sacramento significant home-court advantage, the experts say.
"If the Maloofs want total control of an arena, if they want all the revenues, if they want to call all the shots," said Stanford sports economist Roger Noll "then they're stuck with Arco."
The Maloofs understand risk. They say the Kings have lost money four of the eight years the family has owned the team. But here's what they would leave behind if they left Sacramento:
• A top 20 media market with a growing population.
• Nearly two decades of sellouts at Arco Arena.
• A facility that gives them every nickel spent there on everything from parking to popcorn.
• A major metropolitan area with no other major league sports competition.
"With the fan support and everything else that the Kings have there -- even in that older arena -- why would the Maloofs want to leave and risk the unknown?" said Robert Tuchman, head of TSE Sports & Entertainment, a New York City-based sports marketing firm. "It's not like you can plop an NBA franchise down anywhere and know that it's automatically going to work."
The top five cities mentioned as possible homes for the Kings are Anaheim, Las Vegas, San Jose, St. Louis and Kansas City, Mo. All have drawbacks, ranging from competition with other major league teams to arena problems. And Las Vegas, home of the Maloofs' casino, the Palms, may itself be the most difficult city of all for the Kings to enter.
The Maloofs have insisted that they're not looking around. If they did, here's what they'd find.
Bigger markets crowded
Of the top 20 U.S. media markets as defined by Nielsen Media Research, only 12th-ranked Tampa-St. Petersburg lacks an NBA team, and that area isn't part of any serious discussion for a franchise.
Anaheim's Honda Center, home to the Ducks hockey team, and San Jose, where the Sharks play hockey at HP Pavilion, do garner plenty of talk. Those arenas are in richer, bigger media markets than Sacramento, and the Maloofs have business interests in Southern California.
But the Lakers and Clippers broadcast games into Anaheim, and San Jose is considered part of the Bay Area region served by Oakland's Golden State Warriors. Those NBA teams would protest any Kings move into their territories.
"Nothing is more fundamental to the operation of a league than the protection of exclusive territory," said Rod Fort, a sports business expert at Washington State University. "If you didn't do that right, you'd have nine teams in New York City. The whole league would come apart."
That could force the Maloofs to turn to smaller media markets -- which would probably mean less money for local TV broadcast rights. Joe Maloof has said the team earns about $9.5 million from its TV deals with Channel 10 and Comcast SportsNet.
The Sacramento-Stockton-Modesto market has 1.37 million viewing households. The St. Louis viewing area ranks 21st with 1.23 million homes, according to Nielsen. Kansas City has about 913,000 households and ranks 31st, and Las Vegas, 43rd, has about 672,000 households in its market.
Competing for TV time
Some smaller markets, such as Kansas City and St. Louis, can offer gleaming new arenas, but the Kings would vie with baseball, football or hockey teams for ad dollars and TV money.
Noll, the Stanford economist, said hockey and basketball teams often compete for time on regional sports cable stations such as Fox Sports Net, which affects how much they can get the broadcaster to pay.
"The seasons overlap, and the teams frequently play at the same time," Noll said. "It costs an NBA team 10 percent of its broadcasting income to share the market with a hockey team. The competition also cuts into corporate luxury box sales."
Even worse for the Kings, any hockey arena already has an operator -- often the hockey team -- that controls the money from event parking and concessions. The Kings would be mere tenants and the landlord would demand rent, a cut of team operations or both, experts say.
The Maloofs wouldn't accept that. They control all the money flowing into Arco and, as the stalled downtown arena negotiations proved, they want all the revenue that a building can produce.
Besides ruling out Anaheim and San Jose, that also takes the sheen off hockey arenas in St. Louis and distant possibilities like Pittsburgh, the 23rd media market, Raleigh-Durham, N.C., (29), Nashville, Tenn., (30), Columbus, Ohio, (32) and Buffalo, N.Y. (49).
"This isn't the 1980s," Fort said. "The NBA is bigger now, and there just aren't many cities left that make sense for the league."
Of course, the Maloofs could buy a hockey team. But if they purchased the Ducks and moved to Anaheim, the Kings still would have to build their brand in a competitive Southern California sports market with two hockey teams, two baseball teams, two basketball teams and several nationally followed college programs.
The San Jose-San Francisco-Oakland region already has two football teams, two baseball teams, a hockey team, one basketball team and big-time collegiate sports at Stanford and Berkeley.
Arco Arena always filled
Kings sellouts are as close to a sure thing as there is in pro sports. While overall NBA attendance averaged 88 percent of capacity last season, the Kings were one of six teams to sell out every home game. The team has announced total sellouts five seasons in a row and 17 of its 20 seasons in Sacramento.
Diehard fans like Jim and Fran Letcher keep the Kings streak alive. At the Kings Monday home opener against the Minnesota Timberwolves, the Newcastle couple snacked on $5.50 slices of pizza and sipped $6 beers as they watched the team warm up before game time.
For seven years the Letchers have shared two season tickets with a small group of friends. This year they have $140 midcourt seats in section 103, halfway up Arco Arena's lower bowl.
"Our group gets together every season to pick what games we're going to," Fran Letcher said. "It's like a draft."
The couple embodies the kind of goodwill equity and fan stability the league prizes, said Harvey Benjamin, a top NBA executive.
"The NBA has a paramount interest in keeping the Kings in Sacramento," Benjamin said. "We don't want them to leave."
If the Kings abandoned Sacramento, it would be "a travesty for the league," said Steve Kerr, a former NBA player who now analyzes games for cable network TNT. "The Sacramento fans have been so loyal for so long that it would be an NBA public relations nightmare if the Kings left."
Then there's the very substantial risk of moving to the wrong place. "A new city can be a loser," said Tuchman, the sports marketing expert. "Look at Charlotte, Vancouver, New Orleans, Memphis. The NBA has gone to a lot of cities and failed."
Las Vegas payoff uncertain
Sin City is a favorite with those who speculate about the next place the NBA will land, and the Kings, the thinking goes, would perfectly complement the Palms.
"I believe the Maloofs would pack up in 24 hours and leave for Vegas tomorrow if they could," Tuchman said.
Las Vegas Mayor Oscar Goodman, who was unavailable to comment for this story, is pushing for an NBA franchise. Last month a consultant picked four possible sites for a $404 million arena to replace 23-year-old Thomas & Mack Center and suggested various sales taxes and fees to pay for construction.
Goodman is encouraged because this season's All-Star game is in Las Vegas, the league plays preseason games there and it is the training camp site for the USA Olympic basketball team.
But all of that could be a desert mirage. League Commissioner David Stern opposes placing a team in Las Vegas unless the casinos stop taking bets on NBA games.
That would be expensive. Nevada sports books last year took in $581.8 million in basketball bets, according to the Institute for the Study of Gambling and Commercial Gaming in Reno. The casinos kept $38 million.
Even if the Las Vegas sport books quit taking NBA action, who would go to the games?
The Las Vegas market has about 672,000 households, about half the number in Sacramento's market. The city has 13 large publicly held corporate headquarters, more than the two in Sacramento, but far fewer than most big cities.
"And you're talking about a service-based economy with construction mixed in," said Fort, the Washington State sports business expert. "So you can't depend on the locals to buy premium seats."
The conventional wisdom is that the casinos would snap up luxury suites and high-priced seats for their guests.
"But why would people going to Las Vegas to gamble get on a bus to go watch a basketball game?" Fort asked. "And why would casinos comp high rollers with a basketball game when they can give away Elton John tickets in their own building?"
And it's more likely, said Fort and others, that Las Vegas would acquire an expansion franchise -- but the league has said it isn't looking to expand any time soon.
"Expansion puts money in all the owners' pockets with expansion fees," Fort said. "They don't get that when a team moves."
Maloofs playing for keeps
There is one other option for the Maloofs: Sell.
The family bought the Kings for about $250 million eight years ago; Forbes magazine estimated its value last year at about $345 million, and that's probably low.
Howard Schultz sold the poorly attended Seattle Sonics for $350 million earlier this year, $150 million above his purchase price in 2001 -- and KeyArena wasn't part of the deal.
"The pro sports business rarely makes money," said Stanford's Noll. "That is, until you sell."
But for now the Maloofs, their representatives and NBA executives all say they want to keep the team -- and keep it in Sacramento.
"As Joe and Gavin have stated repeatedly ... we are committed to Sacramento and we're going to keep working at this," said John Thomas, president of Maloof Sports. "It seems clear we need some new ideas and we are going to seek guidance from the NBA to help us find a means to achieve our objectives in Sacramento."
Joe Maloof also was adamant about one key point.
"We will never sell this team. Never. That will never happen," he said Friday.
The Bee's Jon Ortiz can be reached at (916) 321-1043 or jortiz@sacbee.com. The Bee's Ailene Voisin contributed to this story.
http://www.sacbee.com/286/story/75354.html
Strip away the raw emotion, the harsh campaign talk, the cheering fans and the booing voters and the Sacramento Kings' future comes down to one thing: Where can team owners Joe and Gavin Maloof get the best business deal?
The answer: They're in it.
An analysis by The Bee and interviews with sports business experts reveal that all of the cities most often mentioned as a new location for the Kings have big obstacles or huge financial risks that make them poor fits for the team. That gives Sacramento significant home-court advantage, the experts say.
"If the Maloofs want total control of an arena, if they want all the revenues, if they want to call all the shots," said Stanford sports economist Roger Noll "then they're stuck with Arco."
The Maloofs understand risk. They say the Kings have lost money four of the eight years the family has owned the team. But here's what they would leave behind if they left Sacramento:
• A top 20 media market with a growing population.
• Nearly two decades of sellouts at Arco Arena.
• A facility that gives them every nickel spent there on everything from parking to popcorn.
• A major metropolitan area with no other major league sports competition.
"With the fan support and everything else that the Kings have there -- even in that older arena -- why would the Maloofs want to leave and risk the unknown?" said Robert Tuchman, head of TSE Sports & Entertainment, a New York City-based sports marketing firm. "It's not like you can plop an NBA franchise down anywhere and know that it's automatically going to work."
The top five cities mentioned as possible homes for the Kings are Anaheim, Las Vegas, San Jose, St. Louis and Kansas City, Mo. All have drawbacks, ranging from competition with other major league teams to arena problems. And Las Vegas, home of the Maloofs' casino, the Palms, may itself be the most difficult city of all for the Kings to enter.
The Maloofs have insisted that they're not looking around. If they did, here's what they'd find.
Bigger markets crowded
Of the top 20 U.S. media markets as defined by Nielsen Media Research, only 12th-ranked Tampa-St. Petersburg lacks an NBA team, and that area isn't part of any serious discussion for a franchise.
Anaheim's Honda Center, home to the Ducks hockey team, and San Jose, where the Sharks play hockey at HP Pavilion, do garner plenty of talk. Those arenas are in richer, bigger media markets than Sacramento, and the Maloofs have business interests in Southern California.
But the Lakers and Clippers broadcast games into Anaheim, and San Jose is considered part of the Bay Area region served by Oakland's Golden State Warriors. Those NBA teams would protest any Kings move into their territories.
"Nothing is more fundamental to the operation of a league than the protection of exclusive territory," said Rod Fort, a sports business expert at Washington State University. "If you didn't do that right, you'd have nine teams in New York City. The whole league would come apart."
That could force the Maloofs to turn to smaller media markets -- which would probably mean less money for local TV broadcast rights. Joe Maloof has said the team earns about $9.5 million from its TV deals with Channel 10 and Comcast SportsNet.
The Sacramento-Stockton-Modesto market has 1.37 million viewing households. The St. Louis viewing area ranks 21st with 1.23 million homes, according to Nielsen. Kansas City has about 913,000 households and ranks 31st, and Las Vegas, 43rd, has about 672,000 households in its market.
Competing for TV time
Some smaller markets, such as Kansas City and St. Louis, can offer gleaming new arenas, but the Kings would vie with baseball, football or hockey teams for ad dollars and TV money.
Noll, the Stanford economist, said hockey and basketball teams often compete for time on regional sports cable stations such as Fox Sports Net, which affects how much they can get the broadcaster to pay.
"The seasons overlap, and the teams frequently play at the same time," Noll said. "It costs an NBA team 10 percent of its broadcasting income to share the market with a hockey team. The competition also cuts into corporate luxury box sales."
Even worse for the Kings, any hockey arena already has an operator -- often the hockey team -- that controls the money from event parking and concessions. The Kings would be mere tenants and the landlord would demand rent, a cut of team operations or both, experts say.
The Maloofs wouldn't accept that. They control all the money flowing into Arco and, as the stalled downtown arena negotiations proved, they want all the revenue that a building can produce.
Besides ruling out Anaheim and San Jose, that also takes the sheen off hockey arenas in St. Louis and distant possibilities like Pittsburgh, the 23rd media market, Raleigh-Durham, N.C., (29), Nashville, Tenn., (30), Columbus, Ohio, (32) and Buffalo, N.Y. (49).
"This isn't the 1980s," Fort said. "The NBA is bigger now, and there just aren't many cities left that make sense for the league."
Of course, the Maloofs could buy a hockey team. But if they purchased the Ducks and moved to Anaheim, the Kings still would have to build their brand in a competitive Southern California sports market with two hockey teams, two baseball teams, two basketball teams and several nationally followed college programs.
The San Jose-San Francisco-Oakland region already has two football teams, two baseball teams, a hockey team, one basketball team and big-time collegiate sports at Stanford and Berkeley.
Arco Arena always filled
Kings sellouts are as close to a sure thing as there is in pro sports. While overall NBA attendance averaged 88 percent of capacity last season, the Kings were one of six teams to sell out every home game. The team has announced total sellouts five seasons in a row and 17 of its 20 seasons in Sacramento.
Diehard fans like Jim and Fran Letcher keep the Kings streak alive. At the Kings Monday home opener against the Minnesota Timberwolves, the Newcastle couple snacked on $5.50 slices of pizza and sipped $6 beers as they watched the team warm up before game time.
For seven years the Letchers have shared two season tickets with a small group of friends. This year they have $140 midcourt seats in section 103, halfway up Arco Arena's lower bowl.
"Our group gets together every season to pick what games we're going to," Fran Letcher said. "It's like a draft."
The couple embodies the kind of goodwill equity and fan stability the league prizes, said Harvey Benjamin, a top NBA executive.
"The NBA has a paramount interest in keeping the Kings in Sacramento," Benjamin said. "We don't want them to leave."
If the Kings abandoned Sacramento, it would be "a travesty for the league," said Steve Kerr, a former NBA player who now analyzes games for cable network TNT. "The Sacramento fans have been so loyal for so long that it would be an NBA public relations nightmare if the Kings left."
Then there's the very substantial risk of moving to the wrong place. "A new city can be a loser," said Tuchman, the sports marketing expert. "Look at Charlotte, Vancouver, New Orleans, Memphis. The NBA has gone to a lot of cities and failed."
Las Vegas payoff uncertain
Sin City is a favorite with those who speculate about the next place the NBA will land, and the Kings, the thinking goes, would perfectly complement the Palms.
"I believe the Maloofs would pack up in 24 hours and leave for Vegas tomorrow if they could," Tuchman said.
Las Vegas Mayor Oscar Goodman, who was unavailable to comment for this story, is pushing for an NBA franchise. Last month a consultant picked four possible sites for a $404 million arena to replace 23-year-old Thomas & Mack Center and suggested various sales taxes and fees to pay for construction.
Goodman is encouraged because this season's All-Star game is in Las Vegas, the league plays preseason games there and it is the training camp site for the USA Olympic basketball team.
But all of that could be a desert mirage. League Commissioner David Stern opposes placing a team in Las Vegas unless the casinos stop taking bets on NBA games.
That would be expensive. Nevada sports books last year took in $581.8 million in basketball bets, according to the Institute for the Study of Gambling and Commercial Gaming in Reno. The casinos kept $38 million.
Even if the Las Vegas sport books quit taking NBA action, who would go to the games?
The Las Vegas market has about 672,000 households, about half the number in Sacramento's market. The city has 13 large publicly held corporate headquarters, more than the two in Sacramento, but far fewer than most big cities.
"And you're talking about a service-based economy with construction mixed in," said Fort, the Washington State sports business expert. "So you can't depend on the locals to buy premium seats."
The conventional wisdom is that the casinos would snap up luxury suites and high-priced seats for their guests.
"But why would people going to Las Vegas to gamble get on a bus to go watch a basketball game?" Fort asked. "And why would casinos comp high rollers with a basketball game when they can give away Elton John tickets in their own building?"
And it's more likely, said Fort and others, that Las Vegas would acquire an expansion franchise -- but the league has said it isn't looking to expand any time soon.
"Expansion puts money in all the owners' pockets with expansion fees," Fort said. "They don't get that when a team moves."
Maloofs playing for keeps
There is one other option for the Maloofs: Sell.
The family bought the Kings for about $250 million eight years ago; Forbes magazine estimated its value last year at about $345 million, and that's probably low.
Howard Schultz sold the poorly attended Seattle Sonics for $350 million earlier this year, $150 million above his purchase price in 2001 -- and KeyArena wasn't part of the deal.
"The pro sports business rarely makes money," said Stanford's Noll. "That is, until you sell."
But for now the Maloofs, their representatives and NBA executives all say they want to keep the team -- and keep it in Sacramento.
"As Joe and Gavin have stated repeatedly ... we are committed to Sacramento and we're going to keep working at this," said John Thomas, president of Maloof Sports. "It seems clear we need some new ideas and we are going to seek guidance from the NBA to help us find a means to achieve our objectives in Sacramento."
Joe Maloof also was adamant about one key point.
"We will never sell this team. Never. That will never happen," he said Friday.
The Bee's Jon Ortiz can be reached at (916) 321-1043 or jortiz@sacbee.com. The Bee's Ailene Voisin contributed to this story.
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