Ken Berger: Wizards gate revenue down $4 million

Gives us a better idea of how much money was lost this year. Interesting.

8 months ago Mike Prada 28 comments 0 recs |

Comments

Sure doesn't paint a very rosy picture, does it

Wizards one of the lowest teams in actual butts in the seats at only 11,030 per game (7th worst in the League)…. That’s a lot of lost revenue, just in parking and concessions.

And the Wizards will have a payroll somewhere in the top 10 in the League this year; possibly top 5?

I think that should put to rest the notion that Abe is cheap.

Bullets Forever - where "Dagger ! " happens......

by Rook6980 on Jul 9, 2009 5:09 PM EDT reply actions 0 recs

I think the picture is good, not bad

Other teams lost a lot more, and the Wizards lost ONLY $4 million. That’s pretty good (1) during a recession; (2) for a team that was out of the playoff race by Thanksgiving; and (3) that was without its star player all year.

Does anyone know how the Wizards are doing on season ticket renewals this summer?

by disgrunted on Jul 9, 2009 5:19 PM EDT reply actions 0 recs

Not great

I spoke with my account manager on the same day that we hired Flip and she says it’d been weak. That was well past the official renewal “deadline”, though it was obviously some time ago now. (I doubt it’s been “solved”.)

She didn’t have any hard numbers on other teams, and didn’t offer any for us, but she said that she thought it was primarily the team’s record and secondarily the economy that was affecting it. (Both were clearly factors.) Keep in mind this is WITH the vast majority of seats being offered a substantial one-time discount with renewal (or new sale).

More interesting/sad: she said a lot of ticket-holders were downright nasty with her regarding the team’s record. I can understand being frustrated by the performance, and even deciding not to renew because of it. What I don’t understand is how people with the means and maturity (these are all lower bowl seats) feel the need to berate a 23-year old girl who obviously has no control over the W-L record.

On the plus side, my seats got six rows better!

by RamV on Jul 9, 2009 7:25 PM EDT up reply actions 0 recs

all that is

is the need to vent to someone. I don’t imagine Ernie has a fan-hotline. I’m not defending it, just explaining. I regularly unleash my fury on some unsuspecting Customer service rep when a certain product or service isn’t up to snuff. But I also apologize when my concerns are alleviated.

As for the ticket sales, I’m not sure it’s reasonable to expect people to buy tickets in this economy for a team as lackluster as last years. Especially for those who were subjected to the debacle while attending games this year?

And lastly, most of us on here know Flip, but he’s not exactly a household name at coach. Very few coaching, or front office for that matter, hires are gonna boost ticket sales. You’ve got the obvious in a Phil Jackson or Pat Riley, or the exciting like an MJ or Larry Bird.

Maybe they should make Big Gheorghy public relations director.

by CJHutch on Jul 9, 2009 8:12 PM EDT up reply actions 0 recs

No excuse

Customer service jobs suck, and its mostly because of that kind of treatment. When is this woman going to get her apology? These folks are going to call her back when we make the ECF? Anyway, probably not the forum for this point…

I’m with you on renewals, though – they are down, and it’s totally unsurprising and totally reasonable. If that’s not what people want to spend their money on, more power to ‘em. Nobody’s cursing them out on the phone.

Finally a clarification: This conversation occured on the day of the Flip intro presser, but I didn’t mean to imply that the Flip hire would meaningfully drive renewals. I was allowing for the possibility that things have picked up since, but I kind of doubt it.

by RamV on Jul 9, 2009 8:25 PM EDT up reply actions 0 recs

Good might be pushing it

But it’s about what we expected, and I imagine single-game sales will go way up once we start winning like you said. Like the Caps this year.

You know you'll get devoured by Cheaney, Wallace, and Juwan Howard.

by Mike Prada on Jul 9, 2009 9:12 PM EDT up reply actions 0 recs

the reason for the drop was not the recession

although I am sure that didn’t help. I think people did not go to the games because one the wiz were terrible, two they did not have an exciting player to generate “buzz”, three Caps were amazing, games were fun, had an exciting player to generate buzz. Pretty much it was the absolute worst time to have a bad year because people have less money, team stunk, and their biggest competition for live sports had their best year this decade with the league MVP

by Blatche4MVP on Jul 9, 2009 5:32 PM EDT reply actions 0 recs

Yeah, I agree more with this-

The article says that they lost more than 4 million so that is kind of ambiguous. But I expected them to lose money given that at some games practically all of the upper level was empty. I think the casual fan is attracted to the superstar factor. Arenas was incredibly popular here. As far as season tickets go – I don’t believe the wizards raised the ticket prices but not sure. I know for me, I actually got a much better seat for the same price I paid last season. Also they instituted a 10 month payment plan which eases the burden on a lot of people.

by ooba on Jul 9, 2009 5:55 PM EDT up reply actions 0 recs

Yes, they didn't raise prices

And everyone other than sections 100 and 111 was offered a one-time rebate for renewing. It varied from 10 to 25% (I think) based on what section and how quick you renewed.

I believe if you buy season tickets now you can still get the discount.

by RamV on Jul 9, 2009 7:28 PM EDT up reply actions 0 recs

Wonder if there's a chart somewhere

Chronicling (sp?) the steady decline in sales. I’m curious about when the dip occurred.

by Pryme on Jul 9, 2009 6:28 PM EDT reply actions 0 recs

this is a meaningless fact…interesting but useless. maybe the should have lowered prices sooner, like when they hit 50 losses!

by les boulez bomber on Jul 9, 2009 10:51 PM EDT reply actions 0 recs

Why exactly is this meaningless?

You know you'll get devoured by Cheaney, Wallace, and Juwan Howard.

by Mike Prada on Jul 9, 2009 11:53 PM EDT up reply actions 0 recs

I was confused as well...

I don’t understand how something be both “interesting” AND useless?

But – besides that… ANY information we get regarding the financial operations of the Wizards is both pertinent and useful. It helps to frame our understanding of the Organization’s goals.

Bullets Forever - where "Dagger ! " happens......

by Rook6980 on Jul 10, 2009 10:32 AM EDT up reply actions 0 recs

This is a $4m shortfall in one revenue category. IMHO, it is a meaningless fact because I do not know what to do with it. How can it be applied? In other words, how is it meaningful? How does it support or refute anything.

To me, all it means is that if you add up all the people who paid to attend a game, the total revenue was $4m lower. It does not even clarify whether more people attended paying less on average or fewer people attended paying more on average. If more people paid less, than concession and other attendance related sales might offset or even collectively add to an increase in revenue to the team compared to last year.

And it is only one piece of many inputs to determine whether the team earned a profit or not. So it is interesting to me because it is one piece of information towards learning that dynamic. And we can have a lot more fun and accuracy making predictions understanding the true situation better. But at the end of the day, this statistic in itself does not tell us very much. We are limited in how it can be applied.

How do you see it differently? How is it meaningful in a way I overlooked?

by les boulez bomber on Jul 11, 2009 8:47 AM EDT up reply actions 0 recs

The interesting AND pertinent part

Is that Gate receipts and Operating Expenses (Front Office costs and Player Salaries) are two areas that the team can control. The largest Revenue item is the NBA’s Television contracts… and that amount doesn’t change from year to year.

Looking at Forbe’s 2008 valuation page for the Wizards, the 2008 Revenue was $118 Million – of which $35 Million came from gate receipts….

Now, assuming Front Office costs have not changed (I haven’t heard of any cost cutting moves, firings, layoffs etc, from the Wizards. They did hire Flip Saunders, and are still paying at least part of Eddie Jordan’s salary), and that the Player’s salaries have increased from $66 Million in 2008 to at least $76 Million (probably more like $78 Million, once they add the vet minimum front court player they need)…. Couple that with the fact that the Gate Receipts were $4 Million lower…

If the Operating Income in 2008 was 14.5 Million, THEN you add an additional $12 Million in player salaries, and take a $4 Million hit on gate receipts – you start to get a picture that the Wizards are, or are becoming a non-profitable enterprise.

It is interesting to note that the team had a higher Operating Income in 2004….

Of course, “cheap” Abe could alleviate all these worries about profitability, and make a pretty tidy profit, by selling the team…. currently valued at $353 Million. (He bought the team in 1964 for $1 Million)… but apparently, he holds on to the controlling interest because he really does want another Championship.

By the way, in case you were wondering, the revenue numbers from Forbes for 2008 DO include the newly negotiated Television revenues. The NBA recently extended their deals with ESPN/ABC and TNT for eight years at a 20% increase from the previous contracts.

I also thought it was very interesting to see that the Wizards/Bullets had a negative Operating Income number prior to 2002. Then when the previous television contracts went into effect, the team was suddenly operating under a positive OI, but it’s been declining ever since….

Bullets Forever - where "Dagger ! " happens......

by Rook6980 on Jul 11, 2009 10:38 AM EDT up reply actions 0 recs

all pro sport owners under-report real, cash earnings. plus, abe owns the building so he can pretty much report whatever he wishes as he completely controls his number 2 cost.

if $380m is in the ballpark for what the team would fetch in a sale, then the wizards are really earning about $20 to $40 million per season in a normal year.

by les boulez bomber on Jul 11, 2009 3:52 PM EDT up reply actions 0 recs

another way to look at it- and this is really interesting to me is this way:

he bought the team in 1964 for $1m. In 1964, the new ford mustang went on sale in 1964 for $2400. So Abe paid the equivalent of 416 Ford mustangs.

Today, the mustang has a base price of $26,000. 416 of them gives values the team at $10.8m!

If Forbes is right and the team is worth $353m, then that leaves $342m in tax free capitalized gains.

So if Abe ran the team at break even for $45 years, he still earned $7.6m per year in profits!

My point is simply, these franchises are enormously more profitable than advertised. People don’t spend $350m for something that makes only $14m per year before debt payments.

Think about it. These franchises are always financed when purchased. And with only 20% down and a 4% fixed interest rate loan for 30 years, which are unrealistic terms, just the loan payment is over $13.3m per year. And a bank is going to require at least twice that in profits for any loan that size.

So you are already at $27m in profits just to cover the unrealistic financing in a hypothetical sale. And Abe bought the team for $1m forty-five years ago. So it is all profit to him because that team long paid for itself.

by les boulez bomber on Jul 11, 2009 4:12 PM EDT up reply actions 0 recs

Basketball owners cannot under-report earnings

1. Those earnings are audited as part of the Collective Bargaining Agreement (CBA). Those basketball related earnings (BRE) are used to calculate the Salary Cap, Luxury Tax, Mid-Level Exception (MLE), etc….

So… no. The Owners cannot under-report earnings.

2. As for owning the building – I’m sure there are advantages. But he would get into trouble with the SEC (and perhaps the IRS) if he were to play too freely with the building rental fees that the Wizards have to pay (vs. what he charges for the Caps or Mystics for instance… or for other sports or entertainment events)… The SEC might not like it if the Wizards played for free, but the rival (in terms of fan dollars) Caps were required to pay.

3. Just because a business is “worth” $365 Million – does not mean it is making money.

Bullets Forever - where "Dagger ! " happens......

by Rook6980 on Jul 11, 2009 4:16 PM EDT up reply actions 0 recs

The SEC has zero jurisdiction in professional sports. They regulate securities (stocks, bonds, etc.) as their name suggest.

and accounting does not operate in the real world. if it did, then half our major banks would not have gone from “well capitalized” to needing $12 trillion in loan guarantees and bailouts over the course of three months!

moreover the IRS does not operate in the real world either. for example, did you ever notice that the adjusted gross income is quite a bit different from the income you actually earned. it is for most everybody because of accounting changes. so the CBA has a formula it uses, but i am not suggesting that owners fudge that number.

i am saying that that number is not the real number that reflects the true cash earnings of the franchise.

so if you accept that accounting itself is subjective in many areas, which i think just looking at your own tax return will prove to you. and you accept that over long periods of time, banks will not fund loans so some rich guy can buy a pro sports team that will not be paid back with interest, then you have to accept the fact that the wizards make more than they claim, which was simply my point:

here is a fact from wikipedia:
In May 1999, he purchased the team and their then two-year old stadium for $800 million following the death of the previous owner Jack Kent Cooke. At the time, it was the most expensive transaction in sporting history. The deal was financed largely through borrowed money, including a $340 million borrowed from Société Générale and $155 million debt assumed on the stadium. Annual loan servicing costs are an estimated $50 million. Snyder was very interested in the appearance of the team and the surrounding area. He also renamed the stadium FedEx Field, changing it from Jack Kent Cooke Stadium, the beloved late owner of the franchise.

So let us just apply these real world terms to the wiz, and assume it pertains to $200m:
Redskins: paid $800m, $305 down (38%), borrowed $495m, debt service $50m.

Wiz: value $200m, $76m down (38%), debt service would be $12.5m. Since Abe has no debt on the Wizards, that is pure profit. And good for him, btw.

So I do not know if Washington is worth $350m, $200m or some other number. But I do know that without access to the real facts, you have to trust the side that bets with their hard earned cash.

And that tells me in a normal year, the wiz make at least $12.5m if their true value is $200m and at least $19m per year if they really are worth $350m.

Don’t believe everything you hear is my point. And back to the original comment: we neither know nor is there any incentive in any way, shape or form for the owner of any private business to share what it earns after all expenses. I mean, come on, the NBA does not even select the lottery order live. They do it in some private room and announce the results later. You really think it is above board 100% all the time?

by les boulez bomber on Jul 11, 2009 7:13 PM EDT up reply actions 0 recs

Clarification

I should point out that the article says that our gate revenue fell by $4 million, which includes only ticket sales, not that we only suffered $4 million in losses total. We probably lost a lot more in parking and concessions. And we have no idea if the revenue generated the season before last was actually enough to make the franchise profitable. For all we know, things merely went from bad to worse.

I doubt that we are in as bad a shape as some teams (will the Grizzlies need to relocate again?), but we shouldn’t fool ourselves into thinking we can go out and spend as much money as the Lakers, Knicks, or Celtics can.

"It's OK for the Bullets to trade baskets, as long as they can score on their end." -- Words of wisdom from Phil Chenier

by cuppettcj on Jul 10, 2009 11:19 AM EDT reply actions 0 recs

All it means...

…is that fans stopped going to see a dreadful team. That’s the way it goes in the NBA. Home attendance relates to winning. If the Wizards win, they’ll sell out.

by TheSecretWeapon on Jul 10, 2009 1:10 PM EDT reply actions 0 recs

Not entirely true

Even in 2006-07 when the Wizards were leading the Eastern Conference, getting ready to send 2 players to the All-Star game (almost 3), and Eddie Jordan was named to Coach the All-Star team, the average paid ticket sales for games was only 18,372, compared to the VC Seating capacity for Basketball at 20,173 – - – -

And as I recall, the only times the Wizards sold out was when Kobe, LeBron or Shaq were in town.

2007-08 paid ticket sales was 17,962 per game
2008-09 paid ticket sales was 16,612 per game

Bullets Forever - where "Dagger ! " happens......

by Rook6980 on Jul 10, 2009 1:28 PM EDT up reply actions 0 recs

THIS ISNT A FOUR MILLION DOLLAR LOSS

“Other teams sustaining massive declines at the gate were the Raptors ($9.1 million), Pistons ($7.7 million), Clippers ($6.8 million) and Heat ($5.3 million). The Wizards, Bobcats and Pacers each went down more than $4 million. "

This wasn’t a pure four million loss of cash or revenue as the Prada posts on the front page. In the article it clearly states as seen by the quote above it was a decline in gate revenue.

The wizards may have lost money last year but they did not lose four million dollars, their revenues from ticket sales declined four million dollars, but they may still have made money even though their gate revenues declined.

by tachmelik12 on Jul 10, 2009 3:31 PM EDT reply actions 0 recs

actually

its more likely that they lost much more than 4M, not less. If the gate goes down most of the rest of the streams go with it.

by Jheiser3 on Jul 10, 2009 3:32 PM EDT up reply actions 0 recs

Hmm... good point

I’ll change the headline.

You know you'll get devoured by Cheaney, Wallace, and Juwan Howard.

by Mike Prada on Jul 10, 2009 4:08 PM EDT up reply actions 0 recs

Apologies for being unclear there

You know you'll get devoured by Cheaney, Wallace, and Juwan Howard.

by Mike Prada on Jul 10, 2009 6:44 PM EDT up reply actions 0 recs

It sounds like

the proper wording in the article should have been that gate revenues for 2008/2009 were $4 million less than 2007/2008. Crowds were definitely down significantly. Also it should be noted that there is virtually no parking revenue for the Wizards as almost all of the parking is in private lots nearby. And upper deck season tickets are almost given away. Just $16 a game if you buy a full plan. Great deal, but not a great money maker.

by hotplate on Jul 10, 2009 7:54 PM EDT reply actions 0 recs