Ball Business

[MavKikiNYC]

April 11, 2006
Sports Business
Nets' Chances Look Good; Books Don't

By RICHARD SANDOMIR
The Nets can't leave the Meadowlands soon enough for what they believe will be the friendlier financial confines of downtown Brooklyn.

The Nets are not dying at Continental Arena, as might have been expected for a team with one sneaker out the door. Attendance is averaging 16,784 a game, up 11.2 percent from last season. There have been a modest four sellouts (compared with two last season through the same period). And sponsorship revenues have doubled largely because of the addition of 85 new sponsors.

The ownership group led by Bruce C. Ratner has made the arena a better place to watch a game, and the team, far from being a Knicks-like disaster, gives fans reasons to trek to the Meadowlands. The Nets (47-29) recently had a 14-game winning streak (the shot at a 15th victory, against Cleveland, did not sell out Saturday, but came close) and are among or close to the N.B.A.'s elite.

Still, none of this has made the Nets a financially solid team. They are solid only if you assume that Brooklyn will make them so. If the Nets ever make a profit, it will be in the arena that is the centerpiece of the enormous Atlantic Yards development, which has met with community opposition for, among other things, overpowering the scale of the neighborhood.

Brooklyn can't be any worse financially for the Nets than the Meadowlands.
In the fiscal year that ended Jan. 31, the Nets generated an operating loss of $8.3 million for Forest City Enterprises, which owns a 21 percent stake in the Nets on behalf of its subsidiary, Forest City Ratner. But because Forest City is responsible for 31 percent of the team's losses, the $8.3 million loss computes to $26.8 million when spread out to the Nets' 100-plus investors. The filing was reported in this week's issue of the Sports Business Journal.

Forest City also reported a $16.3 million loss from amortization and insurance policies required by the N.B.A.

Those losses followed a year in which losses totaled $10.9 million for the nearly six months between Ratner's taking control of the Nets in August 2004 and the end of January 2005, a period that included less than half a season. The report did not specify how much of the loss was from team operations. (Forest City Ratner is a development partner for the office tower being built for The New York Times Company.)

Ratner declined to speak about the team's financial losses.

But he probably expected major financial losses as a pre-Brooklyn cost of doing business on top of what his group spent to buy the team. The sale price was announced as $300 million, but Ratner's group fell $60 million short of its goal, causing him to retain the former ownership group, led by Raymond Chambers, as a minority owner.

Ratner has so far been unsuccessful since last May in finding new equity partners to provide at least $60 million. A team spokesman, Barry Baum, acknowledged the team was seeking equity.

Part of the reason for seeking new investors, like the rapper Jay-Z, is that the Chambers group cannot be asked for cash infusions to finance the team operations. For that, Ratner must go to one of the new investors he brought into the team and the real estate he is developing, including the arena.

The Forest City financial filing said only that the team's current cash losses were being paid for by drawing on the team's "credit facilities."

One man who can finance team losses for close to eternity is Paul G. Allen, who made his billions through Microsoft. He is now worth $22.5 billion — according to Forbes magazine — and owns the Portland Trail Blazers.

All in all, Allen might wish he were in the Meadowlands.

He says that his Blazers (21-55) have lost, astonishingly, hundreds of millions of dollars in his nearly 18-year tenure as owner, and that the team will lose $100 million more over the next three years if public officials and the owners of the Rose Garden do not carve out a lease deal to keep him from selling.

Allen once owned the Rose Garden, earmarking luxury suite, club-seat and concession revenues to pay off his debt. But by 2004, those revenues were not enough to pay off the arena's debt. Attendance was falling. Allen's arena company filed for bankruptcy protection, citing its inability to pay the debt service, and the creditors took over ownership.

David Stern, the N.B.A. commissioner, recently withdrew from an effort to create a compromise between the team and the arena, and he said in a statement that the arena owners "have not offered any constructive response to these efforts and recently advised us that they are satisfied with the status quo."

Allen, who could buy all 30 N.B.A. teams and have enough left over for several beers, said March 11 on the Blazers' Web site that, rich as he is, he would not finance his team's losses forever.

"While I have deep pockets," he said, "it's sickening to know the model is broken, hemorrhaging money."

[dude1394]

Shocking that they don't sell out the arena.

[chumdawg]

Yeah, it really is shocking that the NY market can't fill a 20,000-seat or less arena. Goddamn, how obscure is the NBA?

On Allen...he ought to just move his team to Vegas and beat the Maloofs there. Or even Saint Louis or Fort Worth. I'm here to tell you, Fort Worth would support a team like you wouldn't believe. It's just the way they do things out there.

[EricaLubarsky]

Vegas, Oklahoma...

just avoid Canada.

[Drbio]

Originally Posted by dude1394

Shocking that they don't sell out the arena.

Except for that one promotion....."Ganja Days at the Rose Garden".

[capitalcity]

Originally Posted by Drbio

Except for that one promotion....."Ganja Days at the Rose Garden".

Wait.... what? Did I miss it.

When? Hold on, are you serious?

[MavKikiNYC]

Originally Posted by dude1394

Shocking that they don't sell out the arena.

Not that shocking. The Meadowlands is a pit. The arena itself isn't that bad, but getting out there usually isn't worth the trouble. Right now, there is a huge pile of dirt outside the arena, the size of a large building complex. It blocks most of the view of the Manhattan skyline. You feel like you're out in a construction site.

And then after the game there's nothing to do, but pile into the car and get into a long line of traffic. By comparison, I can get to MSG in 15-20 minutes via subway, and only spend about 5 minutes outdoors. Then after the game, there are literally hundreds of restaurants ( or bars or clubs, if one is inclined) to go to.

It's a shame that they can't share MSG with the NYKs. But I think moving to Brooklyn will definitely boost attendance.

[MavKikiNYC]

Damn, those Maloofs sound shady. I think the NBA would be walking a real tightrope putting a franchise in Vegas. In fact, I think they're walking something of a tightrope with owners like the Maloofs.





Kings Owner Lives Out Fantasy in Vegas

By THE ASSOCIATED PRESS
Published: May 16, 2006
Filed at 10:23 p.m. ET
LAS VEGAS (AP) -- George Maloof Jr. steps out into the hallway away from a raucous party where his luxurious Sky Villas have just been opened to the public.
The marble-encased villas' infinity pools jut out from the futuristic tower and offer a panoramic view of the Las Vegas Strip to the east. In one two-story villa, more than 100 guests are celebrating, among them Paris Hilton, actor Jeremy Piven, and Maloof's ex-girlfriend, Tishara Cousino, Playboy's May 1999 Playmate of the Month.
Maloof, whose family owns the Sacramento Kings, is plowing $650 million more into what will be a $915 million casino, resort and condo development known as the Palms.
The newest addition, the 40-story Fantasy Tower, includes the six Sky Villas, which span up to 10,000 square feet and can go for $40,000 a night. By September, the Palms' second tower will be topped by the first Playboy Club to be in operation in 25 years.
The wide-ranging expansion is a risk for the grandson of a Lebanese immigrant known for pushing the limits in a city that seemingly has none.
But Maloof, 41, is used to winning big. He parlayed an $8 million family investment in a neighborhood casino back in the mid-'90s into what is now a nearly $1 billion resort less than a mile from the Strip.
''As they say, 'All in,''' says Maloof, a former late-night gambler in his college days at UNLV. ''We're all in on this. We're all in.''
By some accounts, Maloof is a visionary tycoon-in-training, following in the footsteps of billionaire Steve Wynn, who raised the level of opulence on the Strip with The Mirage back in 1989.
Maloof's main contribution to Las Vegas, though, has been to up the star wattage in what has increasingly become a celebrity playground.
Maloof had his eyes set on the Hollywood glitterati even before the Palms burst into the public eye when it hosted MTV's reality show ''The Real World'' in 2002, and later two seasons of Bravo's ''Celebrity Poker Showdown.''
In October 2001, a month before the Palms hotel-casino opened, Maloof hosted a party at the Playboy Mansion in Los Angeles with his blackjack dealers enticing celebrities and the media to take a hit with play money.
''He made it known that he was going to court the hip L.A. crowd,'' said Anthony Curtis, president of LasVegasAdvisor.com, who attended the event. ''And this was easy for him to do because of his family's background in sports and entertainment.''
The sighting of celebrities and pro athletes is now a cottage industry in Las Vegas, providing plenty of grist for gossip columnists, magazines and a permanent bureau for the entertainment TV show ''Extra.''
Maloof is credited with helping set the trend, especially with his courtship of the MTV generation.
'''The Real World' was an absolutely staggering hit for all of those involved: MTV, the cast, and most importantly George Maloof and the Palms and then Vegas,'' says TV personality and AOL blogger Robin Leach. ''That opened the floodgates for celebrities. So you've got to give George that.''
Maloof also has been instrumental in helping Las Vegas inch closer to its dream of permanently hosting a professional sports franchise.
The city has long been shunned by leagues afraid of the taint of legalized sports betting.
But a little more than a year ago, Maloof received a call from his brothers who run the Kings, Joe and Gavin, with news the NBA was interested in bringing the All-Star game to Sin City. He called around to casino executives.
''I asked them if we had the opportunity to get the NBA in Las Vegas for the All-Star game, would you consider taking the game off the book?'' Maloof recalls. ''And everybody said, 'Absolutely.'''
When they brought the proposal to Las Vegas Mayor Oscar Goodman, Goodman says he was skeptical. But after a call to the league commissioner and after an order was given from the state gaming commission not to accept bets for the event, the game was quickly OK'd.
''He was the brains behind the outfit,'' Goodman says. ''Without George and the Maloofs, this wouldn't have been a twinkle in my eye.''
Observers note that the influence of the Palms belies its size -- by the end of September it still will have only 711 rooms, qualifying it for ''boutique'' status in the land of 3,000-room megaresorts. Its planned 599-unit condo tower, with buyers from pending celebrity divorcees Jessica Simpson and Nick Lachey to race car drivers Michael and Mario Andretti, won't be finished until around the end of 2007.
''It's not on the Strip, and it's not downtown, and it's not the biggest casino,'' says David Schwartz, coordinator of the UNLV Gaming Studies Research Center. ''What Maloof has been great at is using synergy. You know, things that are culturally very significant, things like MTV, things like the NBA. He's able to kind of tie that all together.''
Maloof's next great branding exercise is the Playboy Club. Set to open in three levels atop the Fantasy Tower, the club is pushing the boundaries in Nevada, besides being the only one to operate anywhere in more than two decades.
Maloof persuaded state legislators and regulators to change rules that will for the first time allow gambling inside a club with a cover charge.
''We're reinventing the Playboy Club,'' says Maloof, who adds the casino will pay the adult entertainment giant a licensing fee to operate.
Despite constant parties in which he plays late-night host, Maloof says he's never stayed in bed past 8 a.m. ''Las Vegas (hospitality) is the most competitive industry in the world. You can't sleep. You can't rest. You've got to be in the game all the time.''
He looks back at the party.
''My fantasy is this. This is it. This is a dream.''
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