George injury will cost Pacers plenty of money

August 6, 2014
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If rising star Paul George is lost for the entire 2014-2015 season, his absence will likely trigger an eight-figure loss for the Indiana Pacers.
 
Part of that loss will be determined by how local basketball fans—and corporate sponsors—respond to the loss of George and the resulting on-court fortunes of the Pacers.

Financially, the Pacers’ blow should be cushioned by an insurance policy which will cover part of George’s salary. He is owed $15,937,290 for next season. George’s contract with the Pacers is guaranteed, meaning he gets it whether he can play or not.

NBA bylaws stipulate that every team has to pay for insurance for their five highest-paid players, if offered by the league insurance policy issuer, MetLife.

Given George’s age, 24, and his history—or lack thereof—of injuries, he’s almost certainly covered by MetLife. Pacers officials declined to confirm that.

That doesn’t mean the Pacers are off the hook if George is out all of next season.

According to the collective bargaining agreement hashed out by the NBA Players Association and team owners, the MetLife insurance policy takes effect after a 41-game deductible. That means the Pacers are on the hook for the first $7,968,645. But that’s not all.

After that, MetLife will pay 80 percent of George’s salary while he’s recovering from his injury. That means the Pacers will cover the other 20 percent, or another $1,593,729 of his remaining salary for the 2014-2015 season. The Pacers will pay $9,562,374 for a player that likely won’t play a game.

And, NBA officials said, George’s entire salary will count against the salary cap—even if he doesn’t play a single game. The NBA has a soft salary cap, meaning teams can exceed that cap under certain circumstances. There’s a luxury tax for teams that exceed the cap by about $14 million or more, but the Pacers are never going to do that.

The collective bargaining agreement does have a disabled player exception that is more than a little complicated. It will allow the Pacers to replace the injured George with another player. There are a number of governing parameters per the collective bargaining agreement.

In any event, adding a player to the roster to replace George could cost the Pacers another $8 million next season.

Pacers owner Herb Simon has been adamant in the past that the franchise will remain fiscally conservative when it comes to exceeding the salary cap. He’s been clear that he has zero intention of paying a luxury tax.

If the Pacers are going to compete for a playoff spot in the NBA's Eastern Conference this upcoming season, Simon’s fiscal restraint may have to loosen.

Here’s what’s even less clear than all that. How will Pacers fans respond to George’s injury?

Indianapolis is not exactly known for its die-hard sports fan base. Basically, the fans’ rule here seems to be ‘win and we’re in, lose and we’re outta here.’

Some call Indy a bandwagon town.

There have been exceptions to that, of course. Pacers fans rallied behind the team immediately after the 2004 brawl in Detroit. But when the Pacers faltered in subsequent years, the team’s attendance sunk to the lowest in the NBA.

When the Colts have faltered, fans stayed away too. Most recently, when the Colts lost quarterback Peyton Manning for the entire 2011 season and his long-term prospects here looked dubious, the team’s season ticket renewal and waiting list shrunk dramatically.

Pacers’ attendance has been on a big upward trend the last three years—as the team has excelled on the court. Last year, the Pacers averaged 17,501 for 41 home games, and season ticket renewal for the upcoming season is well over 90 percent. Season-ticket sales as of mid-June were running 15 percent ahead of where they were a year ago, according to Pacers officials.

Simon was pushing Pacers sales boss Todd Taylor and his staff to sell out the 18,165-seat Bankers Life Fieldhouse for every home game this season. While Taylor told IBJ in June that was a tall task, he didn’t discount the possibility.

But a lot has changed since then. Last month, starter Lance Stephenson left the Pacers for what he considered a better contract in Charlotte. Then George went down on Friday with a broken leg. Many speculate he’ll miss all—or at the very least the vast majority—of the upcoming season.

The Pacers have gone from a team that was projected to be second or third best in the Eastern Conference to one that will be fighting for a playoff spot.

While many Pacers fans are upset that basketball operations chief Larry Bird let Stephenson get away, they can hardly blame him—or anyone else within the organization—for what happened to George.

Either way, an attendance decline of 1,000 to 1,500 per home game would cost the Pacers another $1.5 million to $2 million in ticket revenue alone. Including parking, concession and merchandise sales that those fans would contribute and the financial hit could exceed $3 million.

As the Pacers attendance has risen, so has the team’s sponsorship revenue. Sponsorship sales increased 10 percent last season from the year previous, and in June Taylor said they were trending in that same direction for the upcoming season. Again, that was before the Stephenson departure and George injury.

It’s unclear how sponsors will respond, but it’s safe to say fewer fans in the stands won’t help sell any new sponsorships. It wouldn’t be a stretch to say the Pacers could lose another $1 million in lost sponsorship sales opportunities.

Factor in what they’re paying to bring in another player and the loss could easily exceed $12 million.

Pacers officials remain upbeat.

"Season-ticket holders, sponsors and fans in general have responded in an overwhelmingly positive tone since the (Paul George) injury. We believe the community will rally behind the team Larry Bird has put together," said Pacers spokesman Bill Benner.

For the team and its fans, however, putting a price on the lost opportunity the upcoming season could represent is impossible.
 

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  • Lost $$$
    So how did the Bulls do when they lose Derrick Rose..excluding the fact there fan base is a gazillon times bigger
    • taxpayers
      The title of this story should have been that the injury will cost tax payers money since they subsidize the team.
    • The Game has noot been called because of rain...
      I found the article very enlightening as to the situation the Pacers have before them. The guaranteed contract, the insurance policy with its amazing 41 game deductible, plus the fact MetLife only pays 80% of the remaining salary. When you add the writer's reference to potential loss of attendance and sponsorship, what you get from this article is an outlook for the Pacers just slightly better than finding your home's pantry is empty and you have no money to buy food. Despite the gloomy outlook, life's hardships tend, in many instances, to release a new energy to carry on and succeed despite the adversity. Don't get me wrong, the loss of Paul George on top of Lance Stephenson is daunting. But let's not forget players like David West and former IUPUI great George Hill still have us anchored pretty well. Difficult to overcome: yes. Impossible to overcome: no. So may I just suggest that we all take a deep breath, think this thing out, and then set a goal of creating the best team with what we have or can augment without busting the bank. One final thing: The people of Indianapolis have not bailed out when our teams go through tough times. Yes, we may show some doubt at the gate, but pride wills out here in Indy. Let's not "call" this game because it's raining. Despite what you might think, rains do abate and the sun does come out again. Keep the faith. Things will clear up.
    • What boggles my mind
      ...why are the pacers permitting players to do exhibition games if they're on the hook for paying injured players? Does the American team provide any further insurance against injuries?
    • Marketing Spin
      The Pacers will pay Paul George the 15 million no matter what. Why not make him the face and voice of the team. He should do all kinds of media "selling" the Pacers. Maybe even a snippit on the big screen before each home game updating fans on his recovery. Anyway, the Pacers need him to step up and be the biggest Pacer Fan there is.
    • History Repeats Itself?
      Reminded of the San Antonio Spurs who tanked the '96-'97 season after Robinson got hurt. Drafted Duncan #1 and have won 50+ ever since. Another by-product of PG going down could be a lottery pick if we really struggle next season. 1st to worst back to 1st? Sounds like the Colts recent history too.
    • nay sayers
      Life happens and it was an accident. That is why they Pacers have insurance on each player. He will recover and come back from this injury plus he is young. Now is the time to support our team and hope that one player does not make a team. The others will have to step up and play.
      • Oh Well...
        There's always the taxpayers.
      • Bulls
        Bulls had to mostly rely on the players they had. Brought in relatively cheap free agents like Hinrich and Augustin. Loss of Stephenson hurts a lot more now.
      • "Life happens and it was an accident."
        Most of us don't have $10 million dollar accidents from optional activities which have a potentially dramatic effect on a team being heavily subsidized by taxpapers though.
      • PG
        Just increase my beer to $20, dogs to $10 and charge an pat down charge for getting into the fieldhouse. It's covered!

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