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The Score - Anthony Schoettle

Welcome to The Score, your place for hard-hitting sports business news, fast-breaking updates and fuel-injected debate.  Buckle up.  I'm your host, Anthony Schoettle, IBJ sports reporter.

Sports Business

Despite financial pain, Pacers not seeking investors

January 5, 2010
KEYWORDS Sports Business

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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