Pacers and Pro Sports and NBA and Sports Business

Pacers falls into last place in NBA home attendance

January 28, 2008

The Indiana Pacers have hit rock bottom.

This month, the team slipped into last place in average home attendance among the 30 National Basketball Association teams, falling behind the New Orleans Hornets, a team that is selling tickets in an area still ravaged by Hurricane Katrina.

The Pacers' average home attendance through 19 games is 12,068. New Orleans is averaging 12,159 through 21 home dates.

The attendance slump and two consecutive years of financial losses have stirred speculation the franchise will ask for city assistance.

The situation is so bad, said league insiders, NBA Commissioner David Stern is keeping an eye on it.

"It's one of a handful of clubs the NBA is concerned about," said Marc Ganis, president of Chicago-based Sportscorp Ltd., a firm that works with several NBA teams on business operations. "This is something no one foresaw three or four years ago."

Scott O'Neil, NBA senior vice president for team marketing and business operations, said, "We're putting a little extra time into the Pacers at this point."

NBA account managers have come to Indianapolis to help with marketing, branding and sales, O'Neil said.

"This is not a five-alarm fire," he said. "Our mind-set is, let's get the ship righted."

If the Pacers' attendance doesn't improve, this could be the worst year since 1990-1991, when the team averaged 11,592 per home game at Market Square Arena. The franchise hasn't slid below 12,000 since then and only dipped below 15,500 once since 1994-1995. That was last year, when average attendance for the 41 home games was 15,359.

"This type of attendance drop does surprise me," said Mark Rosentraub, former dean at IUPUI and author of "Major League Losers," a book about professional sports operations. Rosentraub said teams that experience such dramatic attendance declines need to survey their fan base and take action based on the results.

One aspect that is troubling to Rosentraub is that the team's spot in the standings doesn't mirror their attendance rank.

"This is a team that is still in the hunt for a playoff spot," he said. "It makes you wonder."

A string of off-court escapades and courtroom appearances by players hasn't helped, sports marketers said.

Forbes Magazine reported the Pacers lost $12.5 million during the 2005-2006 season and another $1.3 million last year. The team has stemmed the bleeding by cutting its player payroll from $79 million during the 2005-2006 season to $67 million last year, according to Forbes.

It isn't all bad news for the Pacers.

The team's merchandise sales are in the top half of the NBA, Pacers officials say. Corporate support continues to be strong, with all but a couple of Conseco Fieldhouse suites leased, and almost 200 corporate partners on the books, said Jim Morris, special assistant to Pacers CEO Donnie Walsh.

Concert business at the Pacers-run fieldhouse also is growing, after the organization hired a Los Angeles-based booking agency. Eleven of 17 concerts hosted during 2007 were booked during the fourth quarter, and Morris said 2008 is off to a strong start (see story, page 15).

But Pacers home attendance is a crippling financial factor. Sports business experts said a decline of the magnitude the Pacers are experiencing this year could cost the team $7 million to $9 million in ticket revenue alone. Lost parking, concession and other ancillary revenue that results from fewer fans' attending games could easily put the loss in the eight-figure range.

The situation has some wondering if Pacers officials will approach the city to seek financial assistance. New Mayor Greg Ballard said he met with team officials and has been apprised of the situation.

He said he will meet with Pacers co-owner Herb Simon within a week or so, but Ballard called that a "get-to-know-you" kind of meeting.

Officials within former Mayor Bart Peterson's administration also said the Pacers talked to them about their financial straits.

Pacers and city officials said there have been no discussions of sweetening the lease deal for Conseco Fieldhouse. It's already pretty sweet, with the Pacers handling all the events and taking in all the revenue from the 18,345-seat facility, which opened for the 1999-2000 season. The team's annual lease payment is $1.

City officials haven't closed the door on the idea of helping the Pacers financially. There are provisions in the Fieldhouse lease that would allow the city to subsidize the Pacers to help make up financial losses.

"This relationship has to be a win-win for the Pacers and the community, and you always look for ways to make that happen," said Pat Early, a longtime member of the Capital Improvement Board, the city government agency that owns Conseco Fieldhouse.

Early stopped short of saying he'd support subsidizing the Pacers, something the city did before the franchise moved to the Fieldhouse.

"Obviously, the solution is not to build another arena, and a subsidy would be difficult," he said. "But if we can sit down and get the right people in the room, we can get creative."

Pacers officials said they have neither asked to renegotiate the team's fieldhouse lease nor put their hands out for a subsidy. Team owners Herb and Mel Simon did not reply to requests for an interview.

"Herb and Mel have not asked for anything," said the Pacers' Morris. "They've never even raised the issue of the lease deal with the city."

Morris called on city officials and the community to rally around the team.

"We're really working hard to put a good product on the floor," he said. "Herb and Mel Simon got into this business for the community, and they want this to be something this city can be proud of."

The Pacers have to hope the off-the-court incidents that have marred the team's reputation in recent years don't have a lasting effect that supersedes whatever success the team can find in the win-loss column, sports marketers said.

"Winning usually cures all ills," Ganis said. "But this market--maybe more than most--seems to want a team with character."

With the Colts' season over, sports marketers said the time is now for the team to make its push for fan support.

"They've weathered the storm, and I expect things to pick up," said Larry DeGaris, director of academic sports marketing programs at the University of Indianapolis. "But they better have a good plan."

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