SBJ/June 11 - 17, 2007/This Weeks News

Rare look into NBA team biz

A report sent by the New Orleans Hornets to Oklahoma City officials provides an unprecedented look at the finances of an NBA franchise that generated $38.9 million in local revenue during the 2006-07 season, $1.1 million short of the $40 million threshold that would have triggered revenue sharing with the city.

Home team in two cities: Bobby Jackson in Oklahoma
City and Rasual Butler in New Orleans

The report, filed by the Hornets with the city on May 21 and obtained by SportsBusiness Journal, shows that the Hornets generated $24.8 million in ticket revenue for the team’s 35 regular-season games played in the Ford Center during the 2006-07 season. It was the second season the Hornets played in Oklahoma City after being forced to relocate because of Hurricane Katrina.

The Hornets reported $9.35 million in sponsorships and media advertising revenue, $3 million in suite sales, $874,000 in club seat premiums, $591,712 in concessions, $125,143 in merchandise and $96,067 in parking. According to the team’s relocation agreement, any local revenue above the $40 million threshold would have been split equally with Oklahoma City.

“Despite no revenue sharing for the 2006/2007 season, when considered over the two years, Oklahoma City and the Hornets have both exceeded all expectations,” said Brice Collier, former chief financial officer of the Hornets, in a letter attached to the filing. Collier left the team when he opted not to relocate with the franchise back to New Orleans, team officials said.

This report includes only local revenue generated from the Oklahoma City market and does not include any national revenue or shared league revenue, including television rights fees, league licensing revenue, and national sponsorships dollars.

Hornets owner George Shinn (center) with wife
Denise and NBA Commissioner David Stern,
thanks the fans of Oklahoma City for their support.

The filing also shows $3.15 million in ticket revenue and $434,590 in premium-seating revenue from the six games the team played this past season in New Orleans that pushed total revenue from all games played in both New Orleans and Oklahoma City to $46,079,167.

Parsing the numbers reveals the intricacies of a team’s local revenue structure. For example, the Hornets generated almost $26.5 million in total ticket revenue at the Ford Center, with about $24 million coming from season-ticket sales, $1.2 million from single-game ticket sales and $1.3 million from group sales. The total ticket revenue to the team, however, was reduced to $24.8 million after the NBA took a gate fee of $1.59 million and certain season-ticket and group-ticket refunds were made.

The team had a total of 41 sponsorship commitments with the value of the deals ranging from a $10,000 deal to a $2.6 million annual agreement. Five of the sponsors exceeded $1 million in spending with the team. The report does not identify the specific sponsors.

The team’s total local revenue puts the Hornets in the lower third of the NBA, according to one industry expert who declined to be identified given the sensitivity of the financials. The NBA does not comment on specific team financial information.

OKC fans wore their hearts on their Hornets shirts.

“The Hornets’ ticket revenue is a decent number and in the midrange of the league, but they are low in their sponsorship revenue,” said the source, who is familiar with NBA team finances. “Most teams average around $15 million in team sponsorships with $30 million on the high end. But given the team’s circumstances, their revenues are decent because they were hamstrung by not being able to secure deals due to their short-term tenure in Oklahoma City.”

Per capita merchandise revenue at the Ford Center averaged $0.88 per game, or a total of $125,143, low by industry standards with the NBA average hovering around the $1 per cap mark. Concessions revenue was also relatively low in Oklahoma City, with a per game average of $26,308 generated for a total of $591,712 reported by the team. In New Orleans, according to the report, the per game concessions average was $49,019, for a total of $294,119 in the six games played at New Orleans Arena.

The team filed a game-day report with the city for each of the 35 regular-season games played at the Ford Center, and it wasn’t the marquee Miami Heat or Los Angeles Lakers that generated the highest single-game ticket sales of the year. Instead, it was the Minnesota Timberwolves who, for a game on Nov. 24, brought in $57,290 in single-game ticket revenue, the highest of the season. Hornets officials attributed the large walkup to a holiday crowd attending the game on the day after Thanksgiving.

The Hornets had an average posted attendance of 17,833 this season at the 19,163-seat Ford Center, but the filing shows that the average drop count, or actual turnstile count, was 13,269, or 74 percent of the reported average attendance.

The lowest drop count, 4,907 fans, came against the Washington Wizards on Jan. 12, the night of a major ice storm that paralyzed the city. The highest drop count, 17,551 fans, came on Nov. 21 against the Miami Heat.


At the stands

CONCESSIONS
In 35 regular-season home games in Oklahoma City, the Hornets generated $591,712 in concessions sales, an average of $16,906 per game. By comparison, fans rang up $294,119 in food and beverage sales at the six games played in New Orleans, an average of $49,020 per game.
Among the Oklahoma City games:
High: Fans brought their appetites on Wednesday, Nov. 21, when Miami came to town. Just under $25,000 in concessions sales were posted for that game, played the night before Thanksgiving, edging out the Opening Night posting by about $350 for the top spot.
Low: An ice storm on Friday, Jan. 12, kept fans, and their appetites, away. Only 4,907 fans passed through the turnstiles that night, leading to a food and beverage sales take of $7,325.

MERCHANDISE
The team pulled in an average of $3,214 per game in merchandise sales, or an average per cap of about $0.88, in Oklahoma City.
High: The highest per cap was $1.22, when Sacramento was in town for a Valentine’s Day night game (a Wednesday night).
Low: Toronto was visiting on Tuesday, Nov. 28, and generated a $0.59 per cap.

Source: New Orleans/Oklahoma City Hornets’ 2006-07 statement of local revenue



TOTAL LOCAL REVENUE: OKLAHOMA VS. LOUISIANA
Hornets’ total local revenue for the 2006-07 season, accounting for 35 regular-season and two preseason games in Oklahoma City and six regular-season games in New Orleans.


Category
Oklahoma City
New Orleans
Total
Tickets
$26,255,473
$3,914,582
$30,170,055
Sponsorship and advertising
$9,353,513
$0
$9,353,513
Suite sales
$3,191,859
$749,699
$3,941,558
Club seats
$923,450
$434,590
$1,358,040
Concessions
$626,670
$294,119
$920,789
Merchandise
$125,143
$6,637
$131,780
Parking
$102,883
$94,689
$197,572
Other (mascot, cheerleader appearances)
$5,860
$0
$5,860
TOTAL
$40,584,851
$5,494,316
$46,079,167

Source:
New Orleans/Oklahoma City Hornets’ 2006-07 statement of local revenue


GAME-DAY REVENUE
Following is a summary of game-day revenue for the 35 Hornets regular-season dates played in Oklahoma City in 2006-07. The information does not include preseason revenue or the NBA’s share of revenue. In addition, other accounting adjustments made to these figures result in the overview financials noted elsewhere in the team’s report to the city.

Date
Season tickets
Single-game tickets
Group tickets
Premium-seat sales
Suite sales
Concessions
Parking
Avg. per game
$684,517
$34,355
$37,919
$24,962
$86,487
$16,906
$3,760
Total $23,958,091 $1,202,410 $1,327,172 $873,660 $3,027,046 $591,712 $131,586

• High: The team garnered $57,290 in single-game ticket sales for a matchup with the Minnesota Timberwolves on Friday, Nov. 24, the night after Thanksgiving. That number was nearly matched on Friday, Dec. 29, when Carmelo Anthony and the Denver Nuggets came to town during the December holiday season.
• Low: Portland visited Monday, Jan. 29, and generated $10,235 in single-game ticket sales.
• Other select games:
Date
Opponent
Season tickets
Single-game tickets
Group tickets
Premium-seat sales
Suite sales
Concessions
Parking
11/7/06 Golden State (season opener)
$678,712
$37,550
$50,876
$25,145
$86,487
$24,637
$4,506
11/21/06 Miami
$681,530
$49,474
$61,788
$25,550
$86,487
$24,984
$3,754
1/20/07 L.A. Lakers
$693,577
$44,377
$61,620
$24,220
$86,487
$21,691
$3,706
4/13/07 Denver (season finale)
$691,316
$30,474
$69,803
$24,975
$86,487
$23,981
$3,573

A game-by-game look at revenue from each of the Hornets’ 35 games in Oklahoma City.
Source: New Orleans/Oklahoma City Hornets’ 2006-07 statement of local revenue


FINANCIAL OVERVIEW: LOCAL REVENUE IN OKLAHOMA CITY
Hornets’ local revenue for the 35 regular-season games played in 2006-07 at the Ford Center in Oklahoma City.
Category
Amount
Ticket sales
$24,842,147
Sponsorship and advertising
$9,353,513
Suite sales
$3,027,047
Club seats
$874,000
Concessions
$591,712
Merchandise
$125,143
Parking
$96,067
Other
$5,860
TOTAL
$38,915,489

Source: New Orleans/Oklahoma City Hornets’2006-07 statement of local revenue
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