"Better info on Warriors, Kings and San Jose"

[CruzDude]

Tim Kawakami posted a blog down here yesterday on his "Talking Points: Tim Kawakami on Bay Area Sports" that got an amazing response. Here is the link to the complete article and the long list of comments:

http://blogs.mercurynews.com/kawaka...rial-rights-is-not-veto-power/#comment-136047

Gist of the initial blog is the idea of the Kings moving to San Jose to share the arena with the Sharks and how that would sit with Warriors owner Chris Cohan, who could not stop such a move. But the body of the blog gets to the meat of the possibility and how the NBA Board of Directors merely need a simple majority to approve a move if one is justified to the Board. Stern has stated many times to the effect the he does not like moves for the whim of an owner but with the board (of owners) "...there is not a high tolerance for watching massive annual losses by any franchise", according to Kawakami.

Take a gander at the blog. Very interesting points of view, some very valid other not so or not at all.

 

[Peter_Gibbons]

Yeah, it was kind of discussed in the personnel forum. They don't need the owner to agree. If the Maloofs want to move the team to Anaheim, they don't need Buss or Sterlings' approval. Just need to get approved by the board and maybe pay some money to the owners within the area.

The reason why the fee is worth it is because cities such as San Jose or Anaheim has a bigger market and a much better chance to land corporate sponsors that = millions every yr.

Not to mention if they move the team to Anaheim, thats basically LA. It makes it that much easier to attract free agents.

 

[Superman]

Not to mention if they move the team to Anaheim, thats basically LA.

Just ask the Los Angeles Angels of Anaheim.

 

[bigd]

LA already has two teams. IMO, it would make much more sense for the Clippers to move to Anaheim. At least then they would have some niche over the Lakers.

 

[Vlade4GM]

LA already has two teams. IMO, it would make much more sense for the Clippers to move to Anaheim. At least then they would have some niche over the Lakers.

Yes it would, but that ship has sailed unfortunetly. I think Orange County can support their own NBA team even with two LA teams (lets be honest it's really one LA team). The Honda Center needs an NBA team, and I can't wait for one to show up.

 

[Section 101]

I think the key point right now is the 30 mil + compensation to the local team.

Even if it was just 30 mil if you make 5 million a year it would take 6 years to recoop that money. In todays economy I'm not sure they would be able to make enough to recoop it within 10 years. The from my calculations from the forbes franchise values http://www.forbes.com/lists/2008/32/nba08_Golden-State-Warriors_324799.html

the warriors have averaged 3.4 mil operating income the past 10 years. And now we are in a down economy and the warriors are having a terrible season coming off all their excitement the past 2 years. Now you take away some of that money and they will be lucky to break even.

The Kings would be better off waiting another 5 years for a new arena than moving in this economy and paying the relocation fee + other compensation. Oh, and not to mention they would have to pay off the city loan too.

Also, if they Kings did move what does that do to the value of Arco which they own? They would be taking a hit on its value losing its major tenant. And its not like housing development is looking good either for the property.

 

[Peter_Gibbons]

I think the key point right now is the 30 mil + compensation to the local team.

From what I've read and heard, the city that they move to and the arena owner there would all chip in to pay. Having a sports team definitely benefits the arena owner but also the city there.

 

[Monty'sBiggestFan]

I'm sure the Kings/Maloofs are well aware of the costs of relocation, which is why people keep harboring on why the discussion about relocation incredibly premature. They've waited this long so five years is a drop in the bucket so to speak. But they aren't going to wait for five year to have nothing happen in that intervening period. The only reason to leave Sacramento is because nothing is going to happen on the arena front and if Stern isn't able to get it done I doubt it's going to get done.

Dropping change in Cohan's hand compared to their annual losses in an arena that can't generate revenue? Even I can do that math.

However, let's get a cart and a horse before we try to put one before the other.

 

[Section 101]

I'm sure the Kings/Maloofs are well aware of the costs of relocation, which is why people keep harboring on why the discussion about relocation incredibly premature. They've waited this long so five years is a drop in the bucket so to speak. But they aren't going to wait for five year to have nothing happen in that intervening period. The only reason to leave Sacramento is because nothing is going to happen on the arena front and if Stern isn't able to get it done I doubt it's going to get done.

Dropping change in Cohan's hand compared to their annual losses in an arena that can't generate revenue? Even I can do that math.

However, let's get a cart and a horse before we try to put one before the other.

See, but how do they know they can make a profit somewhere else? They won't own the arena or parking. They won't be making the advertising deals for the arena. They can only project season ticket sales. I assume they will be splitting the luxury boxes with the other tenants (assuming a luxury box gets in to all events).

And how would it effect the overall value of the franchise. Right now the Kings are at $350 million (16th in nba). Clippers are at $297(25th). The clippers have a $10 mil operating income and look how low the franchise is valued. The Kings had $7 mil operating income last year.The Ducks are 16th in the NHL and had an operating income of $1 mil.

Oh and BTW the Ducks are averaging over 17,000 people. Which sounds good, but they still are just breaking even.

 

[kennadog]

Owning a pro sports team is a hobby for rich people, not a money maker. At least not in most markets. The only way an owner is likely to make money is when they sell. The Kings have lost money most of their years in Sacramento. The idea is to at least come close to breaking even. The Maloofs can't continue to have huge losses every year. Also, Arco is losing out on more and more non-basketball events, because of it's deficiencies.

They will need to go where there is a modern arena equipped to handle the big shows and events that Arco cannot. Also, most modern arenas have far more concessions that can ever fit in Arco, another revenue source. Also, I can guarntee the costs of keeping Arco functional (maintenance and repairs) is going up every year.

Simply put, they won't move without a better arena situation/market. For example, Kansas City has a shiny brand new arena and are more than ready to give a team a sweetheart deal. They are sorry they ever let the Kings go and would be thrilled to have them back. Not sure the Maloofs want to go there, but it likely wouldn't be impossible to find a more profitable situation than Sacramento/Arco.

On the other hand, while I think the Maloofs want to stay in Sacramento, I think the league/CAlExpo better be able to make this deal fly, because I am convinced this is Sacramento's last chance. Ten years of trying to get something done is enough for the Maloofs, I'm sure. If this deal can't work, there's not many, if any, avenues left to try.

 

[Capt. Factorial]

They will need to go where there is a modern arena equipped to handle the big shows and events that Arco cannot. Also, most modern arenas have far more concessions that can ever fit in Arco, another revenue source. Also, I can guarntee the costs of keeping Arco functional (maintenance and repairs) is going up every year.

I have a couple of questions about these points. I make it out to Arco once or twice a year. The place isn't beautiful, but I don't really feel like I'm in a dump when I get there. I totally understand that maintenance costs may be skyrocketing, but I don't really understand why the other things you mention are particular problems for Arco.

For instance, would more concessions actually mean more concessions sales? I already pretty much max out on what I'm going to buy from concessions when I go. If they had more options I might go outside of the traditional hot dog or pizza, but I wouldn't spend much, if any, more money on other options (and if I did it would probably be because the food was more expensive to supply, not that the profit margin was higher.) So the Maloofs aren't very likely to get any more money out of my pocket by adding more concessions - would that not hold true for other people?

Also, I don't really know what big shows and events Arco can't hold now. They have concerts in there, and they have monster truck rallies and dirt bike races and rodeos, which are about as large events as I can imagine being held indoors. Arco had the opening rounds of the NCAA tournament a few years ago, which is about as big as it gets, and I'm not under the impression that the capacity is low. So what events is Arco missing out on?

Pursuant to that, if we needed a "bigger" arena to get these events, would that imply that the seats would be further from tha action?

I guess aside from the fact that it's getting old, or that we would just like a neat-o new arena, I don't really understand the arguments for replacing Arco. Can anybody shed some light?

 

[kennadog]

Actually it's not necessarily a "bigger" arena. As a matter of fact, the Maloofs have said they don't want many more seats. They want to maintain the "intimacy" of Arco as much as possible.

A couple of consultants have analyzed the economic deficienies of Arco and conlcuded it's near the end of it's economic life. I won't go into great detail, but: it has one small kitchen; the ice-making equipment is old (for ice events), constantly breaking down and very, very slow at making ice; there is just one, very narrow, ground level concourse which is the only way to exit the arena (in my opinion, a disater waiting to happen in the event of an emergency); the lack of a reasonable number of luxury boxes; and the problem for many events, nowhere near enough loading docks and "marshalling" areas, making turn-around between events too slow. Oh and the visitor's locker room is the worst in the league apparently.

Time is money. For some events the equipment they bring and need to set up means it isn't cost effective to play Arco. They can't set up and take down fast enough.

For example: newer arenas can have ice hockey in the afternoon and basketball at night. It takes 2-3 days to make ice at Arco.

Some of the equipment/seating is older than the arena having been brought over from Arco I.

Engineers have already determined that the arena cannot be remodeled to accomodate the changes needed, because the foundation won't support it. Arco was built on the extreme cheap and it was short-sighted. Of course, it was totally funded with private money. As a comparison, The Palce of Auburn Hills was built around the same time. Arco cost = $40 million. PAH cost = $80 million. That's a huge difference. And they've been able to remodel PAH to keep it modern, because they built well, in the first place.

I'm curious if you've been to any other NBA arenas? I have been at American Airlines Arena in Chicago. Arco is a dump, by comparison. It was a lot more comfortable in all aspects. The seating and the concourses were especially notable. I could leave with 22,000 exiting people and not even bump shoulders in the concourse.

As I've said, this is just some of the info that was in the studies done. The city had at least two done, I think. They both concluded Arco was nearing economic obsolescence and couldn't be remodeled.

 

[kupman]

I have a couple of questions about these points. I make it out to Arco once or twice a year. The place isn't beautiful, but I don't really feel like I'm in a dump when I get there. I totally understand that maintenance costs may be skyrocketing, but I don't really understand why the other things you mention are particular problems for Arco.

For instance, would more concessions actually mean more concessions sales? I already pretty much max out on what I'm going to buy from concessions when I go. If they had more options I might go outside of the traditional hot dog or pizza, but I wouldn't spend much, if any, more money on other options (and if I did it would probably be because the food was more expensive to supply, not that the profit margin was higher.) So the Maloofs aren't very likely to get any more money out of my pocket by adding more concessions - would that not hold true for other people?

Also, I don't really know what big shows and events Arco can't hold now. They have concerts in there, and they have monster truck rallies and dirt bike races and rodeos, which are about as large events as I can imagine being held indoors. Arco had the opening rounds of the NCAA tournament a few years ago, which is about as big as it gets, and I'm not under the impression that the capacity is low. So what events is Arco missing out on?

Pursuant to that, if we needed a "bigger" arena to get these events, would that imply that the seats would be further from tha action?

I guess aside from the fact that it's getting old, or that we would just like a neat-o new arena, I don't really understand the arguments for replacing Arco. Can anybody shed some light?

I will take a stab at these questions:

1) Arco is a dump relative to the other venues in the NBA. You would only have to visit a few of the other Arenas in the league to understand the comparison. That being, there is no comparison.


2) I do think as the availability of concessions goes up so will consume her spending. This is also true of the quality of the can be served. If you have an improved kitchen then you can have much better food and people will naturally buy more of it.

3) I think the size of the shows has more to do about the quality of the acts, rather than how many people can fit into the arena. In terms of “big” shows I think you need to begin to think in terms of acts like Madonna, Elton John, U2 etc. Fleetwood Mac just does not compared to U2. Also, in addition to getting a the NCAA round we could be getting things like Olympic qualifying for ice-skating or other such events.

4) Last, if Arco is not replaced the Kings will have to leave out of financial necessity. Once the Kings leave, keeping Arco arena open makes no financial sense whatsoever. Why would they keep such an arena open for if you borderline shows per year? They would probably level it and put in some strip malls.

 

[Capt. Factorial]

Time is money. For some events the equipment they bring and need to set up means it isn't cost effective to play Arco. They can't set up and take down fast enough.

For example: newer arenas can have ice hockey in the afternoon and basketball at night. It takes 2-3 days to make ice at Arco.

Thanks, that makes more sense. I didn't know that the ice-making equipment was obsolete, nor that the design of the arena leads to long turnarounds.

I'm curious if you've been to any other NBA arenas? I have been at American Airlines Arena in Chicago. Arco is a dump, by comparison. It was a lot more comfortable in all aspects. The seating and the concourses were especially notable. I could leave with 22,000 exiting people and not even bump shoulders in the concourse.

I have only been to Oakland (whatever they're calling that arena now) and the Forum when I was young. I don't recall the Forum much, and I didn't get the impressions that Golden State's arena was in general any nicer than Arco but I believe that is also a fairly old venue.

As far as elbow room goes, I've never been to a major sports event where there was elbow room when leaving. Even newer places like Phone Co. park in SF are jam-packed when you leave. I wasn't under the impression it was easy to get good flow when everybody leaves at once.

 

[Warhawk]

Also, I don't really know what big shows and events Arco can't hold now. They have concerts in there, and they have monster truck rallies and dirt bike races and rodeos, which are about as large events as I can imagine being held indoors. Arco had the opening rounds of the NCAA tournament a few years ago, which is about as big as it gets, and I'm not under the impression that the capacity is low. So what events is Arco missing out on?

Have you been to a monster truck rally in there? Floor space is so small, all they can really do is have two trucks going in one circle each. It stinks. Ice events, like kennadog said, takes an order of magnitude longer to set up and tear down because of the facility capabilities, preventing other events from being held.

Turnaround is king (no pun intended) for arenas - the more events you can cram in per year the better. Arco holds 200± events per year - Staples Center has over 250. Madison Square Garden? over 300.

The seating arrangement is very unusual, as basketball seating is 90° off from seating for other events, etc., requiring more time to convert the arena from one event to another during the basketball season. Look at page 7 of this document, for example, for more info:

http://www.nba.com/media/kings/Business Task Force Report.pdf

 

[Capt. Factorial]

4) Last, if Arco is not replaced the Kings will have to leave out of financial necessity.

Do the Maloofs own Arco? Or do the Kings get a cut of other events at Arco?

It's hard to imagine that increased concessions and some more luxury boxes alone would make the difference between the Kings being financially comfortable in an arena and being forced to change cities because of impending financial necessity. If Arco is losing other events, and those events generate income for the team, it's easier to understand.

I'm not against a new arena - in fact I would like a new shiny arena. But my reasons are because I want a new shiny arena, and that's not the easiest thing to sell to people who don't care about a new shiny arena. But I also have a hard time understanding why a new arena would make a big difference in the financial outlook of the Kings, which is why I'm asking these questions.

Obviously Arco will not last forever, it can't be remodeled, and when it's no longer usable for basketball, the Kings would need to have a new arena or leave. But there's a difference between desirability and necessity as far as a new arena goes, and I'm just trying to figure out where we are there, I guess.

 

[kennadog]

The prior owners owned Arco outright and MSE does now.

When the prior ownership was going bankrupt the city approved 2 loans to the ownership, which MSE is paying on now. If my memory serves me, in return the city got ownership of part of the original land and has a form of lien on the current Arco and/or franchise.

Bottom line, is MSE gets all revenues they can generate at the arena and they make payments on the loan from the city. When times were better there for a couple of years, they even made an advance payment on the loan. Of course owning the arena means being responsible for all operating costs, maintenance and repairs, liability, etc.

 

[Capt. Factorial]

The prior owners owned Arco outright and MSE does now.

When the prior ownership was going bankrupt the city approved 2 loans to the ownership, which MSE is paying on now. If my memory serves me, in return the city got ownership of part of the original land and has a form of lien on the current Arco and/or franchise.

Bottom line, is MSE gets all revenues they can generate at the arena and they make payments on the loan from the city. When times were better there for a couple of years, they even made an advance payment on the loan. Of course owning the arena means being responsible for all operating costs, maintenance and repairs, liability, etc.

So if MSE does not have full ownership of any new arena, that would reduce/eliminate their income from other events I'm assuming. Would we expect MSE to get an ownership stake as a part of any arena plan?

 

[Section 101]

So if MSE does not have full ownership of any new arena, that would reduce/eliminate their income from other events I'm assuming. Would we expect MSE to get an ownership stake as a part of any arena plan?

That's all part of the negotiations. The Railraid plan had MSE leasing, but controlled everything.

Want to know how outdated Arco is? Just try going into a bathroom stall and closing the door. You have to saddle the toilet to just close the door. no way the bathrooms would pass osha and inspections now. Also, if 2 people stop on the concourse it cause a traffic jam with people going around.

 

[kennadog]

That's all part of the negotiations. The Railraid plan had MSE leasing, but controlled everything.

Want to know how outdated Arco is? Just try going into a bathroom stall and closing the door. You have to saddle the toilet to just close the door. no way the bathrooms would pass osha and inspections now. Also, if 2 people stop on the concourse it cause a traffic jam with people going around.

Bingo. The worst part of Arco is the part that isn't readily visible to people attending the event. I'm actually quite impressed with the maintenance of the areas that fans see.

However, at this point there's more basic design needs that can't be fixed or aren't worth fixing or spending money on. It would be like buying new furniture and high end electronics, when the roof, windows and siding on your home need to be replaced and you really need that second bathroom with 6 kids. (Wait I think I've seen people do that....)