Pacers cut costs, boost marketing to break even within three years

October 27, 2008

The Indiana Pacers are ratcheting up sales and marketing initiatives while cutting costs elsewhere in an effort to simultaneously ride out the economic storm and boost attendance.

The team has little hope of being profitable this year--or even breaking even, said Pacers President Jim Morris, but he added that within three years the franchise's financial status should be much improved.

"The franchise has lost considerable money the last several years," Morris said. "Our objective is to get back to break even, and I think we can get there in the next three years. But we don't want to increase ticket prices. We know we have to keep it affordable."

The Pacers have cut 60 front-office staffers in the last four years, including 15 this year as part of a broad effort to cut expenses. The Pacers are down to 210 employees, including the Indiana Fever and personnel to operate Conseco Fieldhouse.

The league itself is cutting back. National Basketball Association officials announced this month that 80 employees--or about 9 percent of its staff--would be cut due to the economic swoon.

"The economy is affecting most--probably all--NBA teams," said David Carter, principal of Los Angeles-based Sports Business Group. "The pendulum that swings between supply and demand on things like tickets and sponsorships could be pretty delicate in some markets."

The Pacers are coping with a weak economy just as the franchise tries to improve upon last year's attendance of 12,221 fans per game, which was the worst in the NBA. The team must win over fans turned off by a string of player indiscretions and two straight seasons in which the team failed to make the playoffs.

"You're going to see this economic downturn hurt the Pacers a little bit more than most teams because they were already down on attendance and fighting to get back," said Mark Rosentraub, former IUPUI dean and author of "Major League Losers," a book about professional sports operations. "But the good news is, they have a plan to get back on their feet. [Pacers co-owners] Herb and Mel Simon are very smart, savvy businessmen, and they didn't suddenly get less smart."

Despite the challenges that lie ahead, Morris said he's "optimistic" and feels the team has a solid chance to do better financially this year than last.

After last season, Pacers officials began dismantling the team, trading players who didn't mesh well and replacing them with players who reflect the can-do, try-harder persona the Simons want fans to see every game.

The front office also got a makeover, with longtime CEO Donnie Walsh heading to New York, being replaced on the player personnel side by Larry Bird, who previously shared those responsibilities with Walsh. Jim Morris was elevated from special assistant to the president to president, and David Morway was promoted from senior vice president of basketball operations to general manager and Bird's right-hand man.

Herb Simon started working day-to-day with the organization last year, and with his marketing staff unveiled an ad campaign over the off-season to introduce newer players to the community.

The marketing campaign, which includes a blizzard of print, Internet, television, radio and billboard advertising, is continuing full force through the Nov. 1 season opener, team officials said.

The Pacers also called on franchise broadcast partner Fox Sports Net to ratchet up its marketing campaign. Fox started on-air spots--including 60-second player profiles--in August, and this month launched billboards and other ground-level downtown signage.

"Teams like the Pacers won't come through this by simply making wholesale budget cuts," Rosentraub said. "They'll survive by increasing revenue. I think that's what's behind this effort."

Pacers officials, intent on meeting their goal of increasing attendance this year 20 percent over last season, have launched myriad campaigns to make tickets more affordable.

"For this to be successful, we have to have a broad base of support," Morris said. "We need to get it back to where Conseco Fieldhouse is at capacity night in and night out."

Among the promotions launched: free preseason tickets to season-ticket buyers, an 11-game mini-season ticket package for the price of eight games, $5 admission for all military personnel and their families, and $10 tickets for college students on select nights.

About 8,600 seats in the 18,165-seat Conseco Fieldhouse are priced at $25 or less, Morris said, with 2,300 at $10 or less.

The Pacers are offering other cost-saving specials, including $2 parking in the Virginia Street garage and a package that includes four tickets, sodas, hot dogs and T-shirts for $80.

The Pacers are also working to change the environment inside Conseco Fieldhouse to put more attention on the game and give it a college-game feel, using pep bands, school groups and other spirit-filled elements, Morris said.

"Teams have to be creative to survive in the current environment, and that's just what the Pacers are doing," said Rick Horrow, a sports business author and CEO of Florida-based Horrow Sports Ventures. "The days of taking fans and sponsors for granted are over."

Ticket sales are the biggest revenue generator for the Pacers, said Morris, and are thus the biggest concern.

"We've been more flexible with pricing of tickets than any other time in this franchise's history," Morris said.

Season-ticket renewals are above 80 percent, Morris said, but still behind last year. Group sales along with mini-season packages, Morris added, are ahead of last year.

Sponsorship sales, which Morris said are tracking last year's level, is the team's second-biggest moneymaker, followed by suite sales and radio and television deals.

Last year, the Pacers reported having 200 corporate sponsors. This year, the NBA has helped teams create more inventory by allowing sponsors for the first time to advertise on the side and front of the goal supports. NBA officials said teams should be able to generate another $150,000 annually through the new sponsors. By year's end, Morris thinks the Pacers will exceed last year's sponsor revenue total.

Sales of luxury suites are ahead of last year, Morris said, with all but "a small handful" of the Fieldhouse's 71 suites sold for the upcoming season. Annual suite leases range from $150,000 to $275,000 per season at Conseco Fieldhouse.

The Pacers' marketing efforts aren't designed simply to help the team survive the rocky economy, Morris said.

"What has driven our marketing is our effort to strengthen our relationship with the community," he said. "We want to let people understand our passion for basketball and our commitment to this city. We want fans to know we're committed to doing this the right way."

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