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SBD/Issue 36/NBA Season Preview
Top NBA Execs Discuss State Of The League As Season Tips Off
Published October 31, 2007
Many believe the NBA is in the midst of a resurgence, with several teams able to compete for a championship, and the strengthening of Eastern Conference teams, the Celtics in particular, helping to balance the power between the two conferences. And Commissioner David Stern touts record ticket sales and attendance, $7.4B in TV deals and strong sponsorship sales as indicators of the league's health. But, of course, the NBA has its share of challenges. Just before last week's BOG meeting in N.Y., Bulls Exec VP/Business Operations Steve Schanwald, Suns President & CEO Rick Welts and Warriors President Robert Rowell discussed the state of the league with Managing Editor Marcus DiNitto.
|Suns, Warriors Execs Looking Forward
To Watching Teams' Style Of Play
Welts: We’re enjoying a lot of success on the court, which has been very good to our business. We were able to cut off season-ticket sales last spring, and enter the season with 71 consecutive sellouts, so we’ll add three preseason games and another 41 consecutive sellouts to that. I think just from a pure excitement standpoint, the anticipation in our market and interest in the NBA is probably as high as it’s been anytime in the 40-year history of the Suns franchise. That’s definitely a result of the product we’re putting on the floor, but also, I hope, a little bit of a game changer in terms of the style of play in the NBA.
Rowell: I’m looking forward to getting the season started and building on some of the momentum that we were able to capture towards the end of last season. The Warriors for about a 15-day period had the nation pretty spell-bound with what we were able to do in beating Dallas and the level and the style of play that our team brings on a nightly basis. And I think I echo what Rick says that style of play is very similar to what Phoenix does, and I think we’re going to have some fun games this year with teams like the Suns and the Mavericks and some of the other teams in our conference.
Schanwald: A lot of the same things apply in Chicago. We’ve been wandering the desert for about -- well this is the tenth anniversary of our last championship actually -- and we’ve been climbing the mountain slowly but surely and have had a lot of young draft picks that are ready to come into their own; and so I [look forward to continuing to go] back to the glory days back in the '90s; it’s been a while. Our young kids are ready to mature and take the next step. Last year we swept the Heat in the first round and got beat by Detroit, and hopefully we can take it another step this year.
Q: Let me go back to Steve and Bob’s point about the rejuvenated style of play in the NBA. During Phil Jackson’s Hall of Fame induction, he put forth the notion that NBA players are really outgrowing the court. How do you respond to that?
Welts: I think that has been a point that only has been made for about the last 40 years. We’re starting a center that is maybe 6' 10" [Amare Stoudemire]. He’s more of a forward than he is a center. Think about how many big men there are in the game today. I think it’s smaller than anytime in the history of the NBA. I think the incredibly, physically gifted athlete who can play two or three positions now is kind of the new model NBA player. I think we see more versatile players, more athleticism in players than we ever have before.
Schanwald: It kind of started with Magic Johnson and Scottie Pippen. A lot of it was accelerated a couple years ago when the league initiated some rule changes, which encouraged more ball and player movement and better spacing. I think the coaches responded to that and have made for a more interesting and more beautiful and more graceful product for our fans to watch.
Rowell: I’ll address it on kind of a different note. I think one of the great things about our game is the intimacy of our arenas and the fact that the fans are on top of our game and our players are visible and we don’t wear helmets and the players are out there in front of everyone. I think if you changed some of the operational things with respect to what Phil Jackson talked about, you’d have some problems in a lot of our more modern arenas that were built for basketball.
Q: What do you think the most pressing issue facing the league right now is?
Schanwald: It’s not unique to the NBA, but for every sports league, because when something affects one sports league, it kind of rubs off on all of us. But the image of professional athletes. The image of our players. That is I think the most pressing issue facing all sports leagues today, and it’s something that I know the NBA works extremely hard at. I don’t know if anybody on the outside could understand how hard every individual team and how hard the league as a whole works to ensure that its players understand the importance of being involved in the community, of doing charitable work in the community, not only in the Chicago community. In our case, Luol Deng is the guy who does charitable work around the world, focusing on Darfur. And so unfortunately, it’s a reality of our business that when bad things happen, there tends to be a lot more attention focused on that than all the good things that are going on. But I can assure you the good things, in terms of our players, far outweigh the bad.The second thing would be just the economics of our business. And just ensuring that every team has the ability to field a competitive product and to operate in a way where in doing that it won’t lose money.
Welts: I was a media relations director for an NBA team in the late '70s, and I really try to have people understand what a different environment our players are operating in today than what they were then. I really don’t believe that players in any court are misbehaving or doing anything any worse than historically has been the case in any industry. We are feeding an unbelievable appetite for celebrity in our country and anyone who has celebrity is subject to personal scrutiny today that was never a part of sports or any industry in the past. We can’t complain about it. We just have to adjust to it, because it’s a reality.
Rowell: I echo what Rick says, because to me our biggest challenges are managing content, and dealing with access. Those are two areas that in order to grow in our business we have to develop new measures and new ways in which to generate content and get access to that content. And the other thing is we have to accept the fact that if someone does something, it will be covered in the media. It will be out there whether it’s good or bad. We also have to manage how we better use that technology so that our players are positioned in the best possible light.
Panel Says Donaghy Incident Had Little
Effect On Selling Tickets, Sponsorships
Rowell: I did one interview with one of the media outlets in the area and essentially it was very simple. I think the league handled the communication of the Tim Donaghy situation very well. It was one individual who basically put himself in a position where he disrespected and disregarded the hard work of everyone else in this league from players to management to ownership to the fans. It’s actually disgusting, but it’s one person. I think we’ve all moved on. We communicated to our fans if they wanted to talk to us, we called them back.
Schanwald: There were not a lot of calls at all at our office from either sponsors or season-ticket holders. It has had absolutely no impact on our ability to sell tickets successfully. I do think the unfortunate consequence of that situation is that whenever there are questionable calls it’s just going to open up that referee to more scrutiny, unfair scrutiny, but that’s an unfortunate consequence of the situation. As far as communications, we basically communicated that we were on the same page as the league and communicated to our fans and our constituencies what the league was communicating.
Welts: The league I think did a great job in giving us as much information as was available. The story came out before the facts were really together, before the league was really allowed to be upfront with the issue. The NBA’s normally very upfront with issues. … We all have developed very good communication systems through e-mail and our Web sites and talked to our season-ticket holders and our other fans on a very regular basis; anything that was communicated to the teams was immediately communicated. And that’s all people really want to know.
Q: The NFL is playing a game in London this weekend; the NHL began their season with two regular-season games there. The NBA had four teams in Europe and two teams in China for preseason games. How important in a league’s efforts to grown internationally is it to play authentic, regular-season games, as opposed to exhibition games, abroad?
Welts: It depends very much on the market. It’s different depending on where you go. The games that we’re doing in Europe right now are serving a tremendous value. It’s a cultural issue and it does vary from market to market. If you had a whole bunch of money you wanted to invest in sports franchises today, I believe you would place your bet in an NBA franchise because it is going to continue to increase in value perhaps at a rate faster than the other leagues in the future. We inherited the opportunity [because of the game's popularity internationally], but we can’t say we created the opportunity. I think the real measure of our league is going to be if we’re up to taking complete advantage of that opportunity.
Rowell: The other unique aspect of our international plate has been that we’ve been able to play other international teams as well as other international clubs. You don’t see some of the other sports taking their team overseas to play other football teams, because they’re aren’t any, whereas our game is comprised of a lot of international players representing multiple countries. The opportunity is here, it’s now, and I think the league has done a fantastic job of taking advantage of the opportunity and they began that years ago.
Q: What about Mark Cuban’s point that there are U.S. markets that need to be cultivated before the NBA looks overseas? Do you buy that at all?
Schanwald: I have full faith in David [Stern] and his team in New York to make those kinds of judgments. I think you market to everybody. I feel like we have the best commissioner in the history of sports, he put together a hell of a game and they’ve done a hell of a job growing this sport over the last 25 years when the NBA was on its deathbed. So I have full confidence in their ability to market not only domestically but internationally, and I think you have to focus on both.
Welts: They’re not mutually exclusive. There’s no reason they have to be. I think as we’re looking long term, while we’re never going to take our eye off the domestic product, it’d be hard to argue that the opportunity that exists in the international market isn’t much bigger than incremental value of U.S. markets.
Q: You’re in a meeting with ESPN and TNT executives. What one suggestion do you make to help them increase ratings?
Rowell: That’s an important question, but I’m going to bring up another subject. We play 82 games in the regular season. We broadcast 70-plus of our Warrior games. There’s a lot of emphasis on ratings. I think again you’ve got to go back to access and content. Those networks are the same networks that have pregame shows, halftime shows and "SportsCenter." Our product is probably more visible now than it’s ever been to the consumer. I think sometimes the focus on ratings is overrated.
Welts: We do every game that isn’t taken by one of our national broadcasts and we broadcast it in the Phoenix market. I think the greatest area for improvement is in our local broadcasting that would make the biggest difference as opposed to our national partners, who I think we would agree are doing a pretty darn good job.
Q: So at the team level are you ever asked for input on the national TV product?
Schanwald: Yeah, we have a team advisory committee. … All the team president’s get together at least once or twice a year and talk about various league issues.
Warriors Cashing In On Last Season's Playoff Run
Rowell: We have been fortunate in this area to have a wonderful fan base and have had it for many years. They were just hungry for a product. We’ve been able to sell season-tickets at a pretty good clip over the course of the past seven or eight years. And primarily because I think I have a pretty good sales staff and the people that work for me that push our brand. And we have family entertainment that I think is second to none in the Bay Area, and it’s just an atmosphere that’s created in the building. But once the product finally caught up, we were able to take advantage of the success that we gained in the playoffs. That was the first time we’d been in the playoffs for 12 seasons. So you didn’t just have hungry fans, you had famished fans that were just dying to see some playoff action.
We’ve been working hard all summer long to create something for everyone. And we added a new amenity to our building called Club 200, which is basically a rebrand of the entire upper level. It will no longer be called the "Upper Level" or some of the other connotations it may have had in the past. We built two kid zones and a lot of interactive things for kids and adults. I think we were able to take advantage of an opportunity, and we’ve been waiting to take advantage of that.
Q: How are offseason sales for Rick and Steve?
Schanwald: Ticket sales for us are great. We’re not back to where we ended the Jordan-era yet, but we’re close. It’s the highest it’s been since Jordan retired. We’ll sell out every game again this year; we sold out every game last year, so we’ve got a streak of 49 straight going into this season. We’re well-positioned to be successful not only this year but, because we’re such a young team, well into the future. The last sell-out streak we had lasted 13 years, and I hope we can go 14 with this one.
Welts: We are coming off again another very successful season. We were able, as I mentioned before, to cut off season-ticket sales. We wanted to keep some available for both groups. Our learning in our league is that that’s a smarter way to go about it. We’ve been able again to take a page out of some of the other teams and build something called the THX Club. You pay $100 to be a part of our waiting list, and you get a lot of amenities that go along with that, but it also secures you a place in line that allows you to buy tickets when they do become available. We’ve had three teams in our area that have had tremendous success, but I think the better story in our league is how many teams could be around this table telling you exactly the same story.
Q: Have any of you experimented or used the “influencer parties” that Brett Yormark started at the Nets to some degree of success?
Rowell: I think those are called season-tickets sales events, and I think we all started them about ten years ago.
Q: So I’m wrong in crediting Brett with that?
Rowell, with all three laughing: Didn’t say that.
Schanwald: Give him credit for creating amazing public relations value around a very important way to get new clients. I think we all admire what they’ve been able to do. But I think some version of that, hopefully, every team is going to have success.
Q: There’s been an emphasis on selling premium services like courtside seats, trips on the team plane. What are your teams doing creatively in these areas?
Rowell: Again, it’s access. Your fans who have been with you for a long time want the opportunity to be a part of something on the inside. And it’s up to all of us, and I think as a league we’ve been able to be successful and be creative and figure out ways to get people involved and give them the opportunity to get more access to our product, to our players, to our environment, to different people. I think it comes in the form of the bunker suites, it comes in the form of private clubs and amenities you have in your building, and it comes in the form of being creative with the space that you have to deal with in your buildings and in your arenas, and I think that our teams have done a fantastic job in being creative with those resources.
Schanwald: We’ve been sending out a high-quality, four-color magazine for the 20 years that I’ve been with the Bulls (to all season-ticket holders). We haven’t let season-ticket holders on a charter or anything like that. We haven’t had the ability to build bunker suites in our building, but we just added six courtside seats a year ago. And if I can return the kudos to Rick … he helped us maximize the revenues from our floor seating. Six seats selling at $2,500 per seat, per game for the whole season. And [that's in addition to] the number of other floor seats that we have, and were able to maximize revenues there.
Welts: Every team has many more products like that then we had five or six years ago. They are specialized products targeted to a specific group with a certain set of amenities that have appeal -- not to a huge number of people -- but to enough people to make our premium inventory really what it should be. You can go to an NBA game for the same price as a movie ticket in any one of our markets. I think the goal of all 30 of us in this position is to make our season-ticket holders feel like insiders. As a league, I think we were at 88[%] season-ticket renewals, which was an all-time record for us.
Q: Where do you all see revenue sharing heading?
Schanwald: It is a very complex issue, I think that all of us here have confidence that David, [NBA Deputy Commissioner & COO] Adam Silver and [Celtics CEO & Managing Partner] Wyc Grousbeck, who is heading up that committee, will get us to the right place eventually. There’s an awful lot of components on this that have to be weighed. It’s very complex because a lot of questions have to be answered. Did we expand into markets that can’t support the current NBA business model? If we did, how then do you explain San Antonio, or how do you explain Portland when they were going good way back in the day?
But I do want to point out that there is already substantial revenue sharing in the league. An awful big part of our revenues comes from national TV money, which is shared equally. A big chunk of money comes from licensing revenues which is shared equally. I do know that a big chunk of our budget is divided equally among all the teams. And the question has to be answered by the committee, "Is it a revenue problem? Or is it an expense problem?"
Welts: We don’t want to reward bad management. And we have every year tried to refine our understanding of what are the factors within a market that lead to success for an NBA franchise. Be able to measure those market by market and try to figure out what we can apply, what we can learn from our history in terms of how teams have performed. And we want to make sure that we’re not rewarding bad management. We want to make sure that we have our teams operating as well as the possibly can, or close to it. It is the issue for every sports league every year, and will be, I can guarantee you, for every year going forward.
Q: Should the weighting system of the draft lottery be changed to minimize the perception that teams are tanking games late in the season?
Schanwald: The draft lottery is as perfect a system as you can possibly get it to be. It should absolutely not be [changed].
Rowell: I agree with Steve.
Welts: I think it’s fine as it can be. I thought it was absolutely wonderful that the teams this year that had the 4th, 5th and 6th best chances in the lottery ended up with the 1st, 2nd and 3rd choices. I thought that was fantastic.
Q: But let’s be honest. There were some teams that were putting forth less than their best efforts [toward the end of last season].
Welts: Were those teams rewarded for that?
Welts: So our system doesn’t guarantee really any benefits. As a fan I love that. I love knowing that there’s no benefit to tanking games.
Q: Should the first-round of the playoffs be changed to best of five?
Welts: No. You’re talking to revenue guys. Absolutely not. Why would you take two games away from the fans? I mean the fans have been with you all season long, rooting for the team to get in the playoffs. Let’s make it fun.
Bulls Exec Feels Deng Deserves
More Attention From Fans
Schanwald: Luol Deng.
Rowell: Baron Davis.
Welts: Leandro Barbosa.
Q: We will see an NBA overseas expansion by what year?
Welts: I don’t think in my business lifetime we will see an NBA franchise placed internationally. I think a more likely scenario is other leagues that we are either operating or affiliated with.
Schanwald: I agree with Rick. I think it’s far more likely that you’re going to have an NBA China, and an NBA Europe and maybe an NBA South America and at some point there will be a round-robin tournament between the NBA champion and the champion of those other leagues. I just don’t know if travel-wise and currently -- as [Stern] has said -- arena-wise if it’s going to happen in our professional lifetime a 31st team added to the league that is based in China or based in Europe.
Q: One team executive, outside of the NBA, who you all really admire?
Welts: Tod Leiweke.
Rowell: Bob Kraft.
Schanwald: I really admire the job they’ve done in Boston of maximizing revenues at their tiny little ballpark of theirs and dominating the entire New England area. So whoever is responsible for that -- John Henry and Larry Lucchino.