Despite financial pain, Pacers not seeking investors

January 5, 2010
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Despite a recent report in Forbes magazine that says the Indiana Pacers are one of seven or so NBA teams looking for investors, the team’s president, Jim Morris, said that’s not the case.

“That’s absolutely untrue,” Morris told IBJ. “Herb Simon is one of the best owners in this league and he has absolutely no plans to seek any investors.”

I take Morris at his word. And I will add, when last I interviewed Simon and asked him about potentially seeking outside investors for the team, well, saying he bristled at the notion is putting it mildly. He made it clear that he has every intention of keeping this team solely in his family's hands for years to come.
 
But you can’t blame people for speculating. Over the last year, the Pacers have come clean with how much money the team has been bleeding. Forbes pegs the loss at $15.7 million last year. From all I can gather, that might be conservative.

The Pacers are one of 12 teams in the 30-team NBA that Forbes says lost money last year. Only Dallas and Portland lost more.

In the past, Simon hasn’t been bashful about saying the Forbes numbers are historically inaccurate. But this much we do know: The Pacers are still seeking $15 million annually from the city’s Capital Improvement Board to operate Conseco Fieldhouse, an expense team officials say they can no longer shoulder while running a competitive NBA franchise.

The CIB’s new president, Ann Lathrop, said discussion of the Pacers’ plight and what to do about it will be on the front burner when the newly appointed CIB meets publicly for the first time Jan. 19.
 
Lathrop told IBJ this morning that she’s not prepared to set a timetable for a decision until after Jan. 19, but said “sustainability” and “a cost-benefit analysis” will be key in determining how much, if any, the CIB gives the Pacers.

Last year, Morris said Pacers’ ticket revenue is more than $400,000 per game below the $900,000 league average. It’s unlikely that picture is much rosier this season, with the Pacers languishing at 10-23 and sitting 26th in the league in attendance with an average of 13,917 showing up per game.

Other NBA teams have sought investors to lighten the financial load and bolster the potential for diverse, new commercial opportunities. It isn’t good enough for teams to merely look in their own backyards for revenue streams anymore.

Exhibit One: The Cleveland Cavaliers.
 
Last month, the Cavs took on a Chinese investor, which eventually could own as much as 15 percent of the team. Cleveland, with a $476 million valuation and about $5 million in profits in the bank from last year, is much healthier these days than the Pacers.

Still, the commercial opportunities were too great to pass up.
 
Already the Cavs have leveraged the investment deal into a sponsorship pact with Tsingtao, China’s most popular beer company, and the brain trust behind the Chinese investment group promises an even bigger deal within the next month. These kinds of multimillion-dollar sponsorship deals are eye openers.

A few deals like this could all but wipe out the Pacers' need for financial assistance. But just as important, such marketing deals could be a real bargaining chip in luring savvy players looking for entry into the most lucrative global markets.

With an estimated 300 million basketball fans, the chance to capitalize on the Chinese fan base is potentially even greater than in the U.S. Which is why Cavs’ forward LeBron James has been trying to promote products there, especially through Nike.
 
And it’s not just China. The NBA is making a strong push into lots of foreign markets.

And the Cavs are hardly alone in looking for investors—foreign and domestic. The Charlotte Bobcats, Memphis Grizzlies and New Jersey Nets are just a handful of the NBA teams turning over every stone looking for money—including taking on investors.

Where the money will come from to secure the Pacers’ long-term future in this city is not clear. But one thing is certain: The rules of the game are changing. And I’m sure CIB’s Lathrop isn’t the only one thinking about sustainability these days.
 

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  • Pacer's Plight
    Since there are so many NBA players making so much money from endorsements, perhaps it is way past time to lower salaries by 25%. What else will keep 1/4 to 1/3 of the teams from folding in time? Certainly there are few cities that will be left willing to forge the types of deals made in the past.

    With the NBA's image being further tainted by Gilbert the thug, how many more fans will pull away from the assoication of thugery, bodies full of tattoos, guns, woman beating and law enforcement hating rappers and the like?

    It is a sad situation brought about by the down side of the hip hop culture. Must make someone's momma's proud?

    Right.......
  • I think that is a good idea. Of course as soon as the owners impose that, the players will go on strike (I mean how could Lebron live on $8 mil a year?) and life in the NBA will get uglier. Of course if the players did accept it, then the owners would pocket the money.

    What would be a feasible idea is that 25% of players revenue (or whatever is decided on) goes into a revenue sharing pot to help small market teams compete. Explain to the players without doing so, the league could go from 30 teams of 15 players or 450 players each to 20 teams and lose 150 players.
  • We ARE Herb's Partners
    Memo to Anthony: Thanks to our (past, present, and future)CIB, all of us in Marion County are partners with Herb. Herb keeps the books, shows them to no one, then complains about his (paper) losses. The CIB hands him a state-of-the-art facility and more and more of our money to keep the team in Indy. Perhaps the Pacers should play half of their games in Shanghai, and Herb can share part of the gate WITH the CIB.
    Look for Ann Lathrop to be sitting courtside at Conseco before the regular season ends.
    And so it goes.
  • Idea
    I second the idea of putting in x percentage into a pool
    to help the small market teams but there are problems with that

    One - do you honestly think the NBA players or the union will go for it - never

    They live in this unreal world and don't understand that people don't have the throwaway cash they used to have and won't realize it till they're done playing

    Two - they will argue that there are plenty of suitble NBA cities here in the US or out of the US and will say move teams to whichever city come calling

    For that reason, they won't budge because they could care less about what city they play in, as long as their check clears
  • Pacers
    Gary,

    And how many cities these days have a facility suitable to the NBA that's not in use and would be willing to pony up the $$ necessary for a team?? Vegas? Where else??? Are you kidding me???

    Maybe the anointed one will give the bottom rung teams some stimulous cash.

    Shoot......
  • Reply
    Kansas City, San Jose, Louisville, Col Oh, Anaheim, Seattle (it will get one back), St. Louis

    There are more, and more always want a team, even a lousy one at the moment

    Don't discount out of US cities, it will happen

    don't kid yourself, there are always alternate cities
  • Gary
    Are you kidding me? Some of those cities couldn't support ABA teams. Some others lost their NBA franchises. With city and state budgets languishing in red ink, but the NBA will be sinking faster than the Titanic without serious action to lower player salaries and, more importantly, get rid of the THUG image. It's growing old with 'white' America.

    Kudos for your optimism, Gary, but the days of NBA desires for cities to throw money at are over.
  • Larry Legend
    Larry Bird once had an option for a small ownership piece when he was coach. Maybe it's time he put together a group and take over the whole shooting match.

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  1. The east side does have potential...and I have always thought Washington Scare should become an outlet mall. Anyone remember how popular Eastgate was? Well, Indy has no outlet malls, we have to go to Edinburgh for the deep discounts and I don't understand why. Jim is right. We need a few good eastsiders interested in actually making some noise and trying to change the commerce, culture and stereotypes of the East side. Irvington is very progressive and making great strides, why can't the far east side ride on their coat tails to make some changes?

  2. Boston.com has an article from 2010 where they talk about how Interactions moved to Massachusetts in the year prior. http://www.boston.com/business/technology/innoeco/2010/07/interactions_banks_63_million.html The article includes a link back to that Inside Indiana Business press release I linked to earlier, snarkily noting, "Guess this 2006 plan to create 200-plus new jobs in Indiana didn't exactly work out."

  3. I live on the east side and I have read all your comments. a local paper just did an article on Washington square mall with just as many comments and concerns. I am not sure if they are still around, but there was an east side coalition with good intentions to do good things on the east side. And there is a facebook post that called my eastside indy with many old members of the eastside who voice concerns about the east side of the city. We need to come together and not just complain and moan, but come up with actual concrete solutions, because what Dal said is very very true- the eastside could be a goldmine in the right hands. But if anyone is going damn, and change things, it is us eastside residents

  4. Please go back re-read your economics text book and the fine print on the February 2014 CBO report. A minimum wage increase has never resulted in a net job loss...

  5. The GOP at the Statehouse is more interested in PR to keep their majority, than using it to get anything good actually done. The State continues its downward spiral.

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