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SBJ/July 18-22, 2011/FranchisesPrint All
The Boston Celtics, one of the NBA’s storied franchises, are finalizing a lucrative media rights package with Comcast SportsNet New England that will extend their current deal by 20 years with a big jump in its annual rights fee, as well as give the team a stake in the network.
Multiple sources said that the Celtics and Comcast are close to a long-term media rights deal despite the NBA lockout that has thrown the league into economic uncertainty.
The pact would continue the trend of big market teams securing significant increases in media rights fees that double or triple the payout from existing deals. The deal is also another example of professional sports teams making deeper inroads into the media ownership business.
The NBA lockout, now in its third week, has not slowed progress of the expected agreement so far, though it could cause the league to hold off on a formal announcement until a labor deal is reached.
Once the Celtics and CSN agree to the deal, it will move to the NBA for formal approval. As it has in past local media deals, the NBA most likely will demand a “re-set” after the deal’s first 10 years.
The proposed deal, which could be finalized in the next few weeks, would extend the Celtics’ media deal to 2038 from the current agreement that runs through 2017. In addition, the team would take up to a 20 percent equity stake in the regional sports network and receive a healthy increase in its annual rights fee. The Celtics currently get between $15 million and $20 million annually, which is considered below market for such a strong franchise.
Neither Comcast SportsNet nor the Celtics would comment for this story.
Comcast SportsNet President Jon Litner is the architect of the deal, which will give the Celtics a sizable signing bonus and steep increases in the first few years of the deal, though specific terms are not yet known. The rights fees increases will level off throughout the length of the agreement.
The Celtics and Comcast SportsNet have been partners since Comcast bought the RSN from Cablevision in 2007. Celtics games have been part of the RSN’s lineup since 1981, when it launched as Prism New England. The Celtics clearly provide the most valuable programming on the RSN, which competes in the Boston market with NESN, an RSN owned in part by the Red Sox and Bruins.
The two sides first started talking about a long-term deal a year ago. Sources said that talks heated up just before the Los Angeles Lakers blockbuster 25-year RSN deal with Time Warner Cable was announced in February. That deal averages $200 million per year. Serious negotiations between the Celtics and Comcast then ensued this spring under the shadow of the league’s labor uncertainty.
The Celtics’ new RSN deal follows Comcast’s strategy of giving equity stakes in its RSNs to local teams. Comcast pursues this strategy as a way to stay in the profitable RSN business while keeping teams from launching their own channels. The Houston Astros and Rockets own a combined 80 percent of CSN Houston, while the San Francisco Giants hold a 30 percent stake in CSN Bay Area. In Chicago, the White Sox, Cubs, Bulls and Blackhawks hold a combined 70 percent stake of CSN Chicago.
The expected Celtics-CSN New England deal comes as the NBA works to overhaul its revenue-sharing system, an effort led by Celtics owner Wyc Grousbeck, chairman of the NBA’s planning committee.
NBA Commissioner David Stern said recently he expects the league to triple the amount of revenue sharing among NBA teams and depending on the structure of the new revenue-sharing system, the Celtics could end up sharing proceeds of their increased rights fees from a new local television deal with other NBA clubs.
The Celtics this past season on CSN New England generated the fifth highest RSN ratings in the NBA. Its 4.73 average rating is up 53 percent from the 2009-2010 season. The 116,000 homes that tuned in to each game was the league’s fourth highest.
The Celtics hired Evolution Media Capital to advise them on this deal.
Kevin Johnson needed advice. As a first-term mayor with a background as a professional basketball player, he was facing the issue that was likely to define his tenure. The Sacramento Kings, his city’s only big league sports team, had just announced their intention to leave the city for Anaheim. If he couldn’t save the team, Johnson wanted to lay the groundwork for the city to get another. But how?
Sacramento Mayor Kevin Johnson (right, with Icon Venue Group’s Tim Romani, left, and Johnson's chief of staff Kunal Merchant) went to the NBA as the Kings were about to leave for Anaheim.
“I told Kevin the good, bad and ugly about the process,” he said recently. “In these tough times, mayors have to be as tough as the business leaders, and that includes the NBA commissioner. They’re running a business and you’re running a business, one called City Hall. You have to make sure ego and politics doesn’t overrule a basic business decision.”
But at the same time, McCrory said, “whether people like it to not, sports teams do represent the culture of a city. And even when you disagree with what the NBA does, you need to keep the relationship for a chance at a team.” He reiterated that to Johnson: “Build that relationship. Go see them. That’s the most important thing you can do.”
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McCrory is one of many former mayors who could commiserate with Johnson. For a mayor, interaction with a sports league and its often peripatetic franchises can lead to frustration and rancor, pain and bitterness. After all, there are always cities that want teams — and never enough teams to go around. It’s like a perpetual game of musical chairs, the chairs in this case being the newest arenas with the most favorable lease terms.
Yet few aspects of civic business resonate as deeply as the loss — or gain — of a sports team. Other companies can come and go, and make a substantial economic impact in the community in the process. But none of them wears the name of the city or the state on its shirts. “There’s an emotional attachment to a sports team, both good and bad,” McCrory said. “So people take the actions of those teams very personally. Sometimes to the detriment of both the city and the sports team, and sometimes to the benefit of both.”
Throughout the last half-century, sports franchises have hopscotched the continent, leaving cities and their disgruntled chief executives behind. “Every owner knows the threat to move is the biggest thing they have in their favor to get the deal they want, and that makes the discussion unequal,” said former New Orleans Mayor Marc Morial, whose father, Ernest, was running New Orleans when the NBA’s Jazz left for Utah in 1979. (Later, Marc Morial successfully lobbied the league to keep the Hornets in place after Hurricane Katrina.)
Some mayors make the decision, whether ideological or pragmatic, not to intervene. When the NBA’s SuperSonics were leaving Seattle, then-Mayor Greg Nickels did little more than round up potential buyers for the franchise should a new arena be approved, though he later sued the team’s owners in an effort to get a larger exit payment for the city. Similarly, Atlanta’s Kasim Reed pointed to the poor economic performance of the NHL’s Atlanta Thrashers as the reason that the city was powerless to prevent them from moving to Winnipeg last month. “The Thrashers are in an extraordinary position,” he said. “We have not seen a path … where we can reverse those losses.”
Cleveland’s Michael White famously was able to convince the NFL to let the city keep the Browns nickname for future use when the team left for Baltimore in 1995, but such a Pyrrhic victory, coupled with the vague promise of a future team, is about the best that a mayor can expect. Far more frequently, he or she is left with … nothing. “We were played by the NHL,” said Susan Thompson, who was mayor of Winnipeg when the NHL’s Jets left for Phoenix in 1996.
When the team that leaves is the only one in town, as in Winnipeg, the loss has that much more impact. “Having a team gives you a certain status level,” Thompson said. “An NHL team is a huge component of economic development. Beyond that, cities are human entities. Having a team builds pride and sense of community. And then there’s the international outreach. How many economic entities do you have in the city that give you that? I think the reach, recognition and status that a team brings to you is highly underestimated. That’s why it was such a blow.”
That her city has recently regained big league status with the relocation of the Thrashers only makes Thompson, who was in her second term as mayor when the Jets left and chose not to run again, that much more certain that she was right. “Anyone with an ounce of intelligence,” she said, “can see that this is a place that the league should have come back to. Or never left.”
NBAE / GETTY IMAGES
Charlotte Mayor Pat McCrory (center) celebrated the Bobcats’ arrival with NBA Commissioner David Stern (left) and team owner Bob Johnson.
McCrory remembers the struggle to keep — or replace — the Hornets being one of the most difficult of his tenure. “The community here was very divided,” he said, and that’s never good for a mayor’s popularity. As McCrory describes it, roughly half of Charlotte wanted to save the team at all costs. The other half wanted to run team owner George Shinn out of town, and the NBA with it. Five years before, when the Hornets were still riding high, Shinn had been accused of sexual assault by a former employee. “He had disrespected many of the people in the community by his behavior and specific actions, and that was a slap in the face to the emotional investment that many of our citizens had put into the team,” he said. Yet NBA basketball clearly had a latent base of support in the city. And what mayor wants to lose a team on his watch?
Not McCrory, who pushed through a new arena plan despite losing a voter referendum on the topic. And not Johnson, a political newcomer with the potential for a long career holding elective office ahead of him. “I told Kevin that he’s going to catch a lot of heat from his critics, people who say, ‘The heck with the NBA,” said McCrory, a former college basketball referee. “It wasn’t a slam dunk that he go to New York and fight for this. It was a tough call, both financially and politically. It’s a block/charge call, almost 50-50. Either way, you’re going to irritate someone. But as I learned in refereeing, you’ve got to sell your call. You have to make the case for the long-term investment. That’s what I had to do, and I still catch heat for it.”
Johnson took the advice and went to New York in April, where he presented to league owners. He brought with him $7 million in new business commitments, produced a potential buyer if the Maloofs were willing to sell, and reminded the NBA’s owners that Sacramento is a top-20 television market, one of only two in the country with just a single big league team. (Orlando is the other.) “For an elected official to take such a leadership role and, in essence, put his political future on the line was very, very impressive,” said Clay Bennett, the chairman of the NBA’s relocation committee.
But that was only half the battle. In the midst of an NBA lockout, Johnson still needs to make the case for a substantial taxpayer contribution to a new arena, and do it in the worst fiscal climate in California since the Great Depression. “Ten years ago, a mayor could say ‘I’ll raise my hotel/motel tax.’ ‘I’ll raise my rental car tax.’ ‘I’ll go to the voters,’” Morial said. “You can’t do that now. The money just isn’t there. But if you want a team, you’ve got to bite the bullet and somehow finance a facility. And then all your critics will show up at the ribbon cutting. They’ll all show up and smile.”
That’s easy enough for Morial to say from the comfort of his political retirement. But for a nascent political figure such as Johnson, asking for money for a sports facility is perilous ground. “You can’t have a conversation about subsidizing or underwriting a portion of the cost of an arena without a series of long and difficult conversations with all of the stakeholders involved,” said Sayles Belton. “And when you do that, emotions are likely to run high.”
In this discussion, too, Johnson’s NBA career is more of a liability than an asset. He needs to prove to the city that he isn’t putting his own feelings for the sport ahead of Sacramento’s interests. “If you’re out there saying ‘I want to keep my team,’ that doesn’t work,” he said. “I have to build a case in Sacramento that it’s bigger than basketball.”
The case he is building is mostly about business. If the Kings left, a study commissioned by the city shows they would take 1,000 jobs — direct and ancillary — with them. They would no longer pay the property taxes they had been paying, civic income that is deposited into Sacramento’s general fund. And he reminds constituents that the NCAA already has decided not to book future events in Power Balance Pavilion, the former Arco Arena, which it considers outdated. That move alone, one study has indicated, is costing the city as much as $5 million in annual revenue.
But Johnson also has tapped into the idea that a big league team helps define a city. Former Charlotte Mayor Richard Vinroot, who played college basketball at North Carolina, had made the same case around his city when attempting to secure an NFL expansion franchise, the team that ultimately came to life as the Carolina Panthers. “I don’t think you can overestimate the value,” Vinroot said. “You’ll never get most citizens to understand why you’re doing it, why it’s worth the effort, but in the end, it is worth the effort. Look at Oklahoma City. What went on there this year during the playoffs night after night, what’s going on now in the minds of the people as they think of their city and their future — it’s not the same as it was before. The city has changed because of the team. That’s what makes them worth fighting for.”
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Yet for every Oklahoma City that gains a franchise, there’s a Seattle that loses one. And for every Sacramento, there’s an Anaheim, which — for the moment, at least — has done nothing more than put the Kings in position to get a better deal where they already are.
Johnson advised mayors to watch recent documentaries about the Colts’ departure from Baltimore and Seattle’s loss of the Sonics to underscore the message that no city is safe. “They terrified me,” Johnson said.
In the mid-1990s, Morial co-chaired a task force on that topic under the auspices of the U.S. Conference of Mayors. “We said, ‘Look, we’re being asked to go out on a limb and build new facilities,’” Morial said. “We need to ensure that there are objective rules so some owner who might get a better deal in another city can’t just go move there with no strings attached.”
The task force made tangible gains, including convincing the NFL to revise its rules governing franchise relocation. But it didn’t — couldn’t — solve the problem. This year, Indianapolis Mayor Greg Ballard convened a meeting to try to establish a nonprofit organization that would have a database of lease agreements around the country, and a staff to help mayors faced with the impending loss of a team figure out where to turn. Johnson spoke to the group in June, advising mayors to watch recent documentaries about the Colts’ departure from Baltimore and Seattle’s loss of the Sonics to underscore the message that no city is safe. “They terrified me,” Johnson said.
Ballard’s group is going forward. But mayors still need to pursue their constituents’ interests. It’s important to remember that, after chairing the task force on mitigating franchise relocation, Morial spent his eight years in office zealously pursuing an NBA team to replace the Jazz. As it turned out, his was a zero-sum solution. On the day in May 2002 that Pat McCrory was coming to grips with the Hornets’ departure from Charlotte, Morial and his staff were jubilantly celebrating their arrival in New Orleans.
Bruce Schoenfeld is a writer in Colorado and can be reached at email@example.com.
It’s a tall task for NBA teams rolling out offseason marketing programs without their biggest asset: the players. But that hasn’t stopped them from hitting the streets, as one team, the New Jersey Nets, unveils a new summer campaign to help meet the huge challenge of selling season tickets at Barclays Center during the NBA lockout.
The team’s new “We Are Here for You” offseason campaign includes at least 50 events aimed at season-ticket holders, with 70 percent of the marketing effort geared toward Brooklyn, where the team is scheduled to open its $800 million, 18,500-seat arena in September 2012. The team will play next season at the Prudential Center in Newark.
To push interest in the team, which last year had the third-worst attendance in the 30-team NBA, the Nets this month began offering season-ticket buyers a 5 percent annualized rebate on their investment with the team. The policy states that fans will get a 5 percent annualized rebate on their season-ticket spending from July 1 through the end of October when the NBA season usually begins. The 5 percent rebate will be given to season-ticket holders after the start of the season, regardless of whether games are lost because of the lockout. The policy will continue through however many games may be lost to the work stoppage. Season-ticket buyers will be able to take the rebate in cash or in a credit toward future purchases with the team.
“The goal is to stay connected to our fans,” said Nets Chief Executive Officer Brett Yormark. “We have to manufacture as big a voice as we can. When you think about what we have to do in the next 15 months, we have to take it to a new level.”
The lockout comes as the Nets last month began selling 4,400 lower bowl premium season tickets priced between $4,356 and $61,000 a season in Brooklyn. Yormark refused to disclose how many of the tickets have been sold.
The Nets are not alone. Many NBA teams have adopted offseason promotional efforts as the lockout enters its third week, including the Washington Wizards, New Orleans Hornets, Minnesota Timberwolves, Indiana Pacers and Sacramento Kings, all of which struggled at the gate last season.
The recently rebranded Wizards are planning a series of fan-based events as the team tries to sell against the lockout. The Wizards have held conference calls with season-ticket holders and owner Ted Leonsis, will hold “family days” at the Verizon Center and offer tours of the arena for new season-ticket buyers, and are considering offering discounts to Washington Nationals games to Wizards season-ticket holders.