Utah Jazz: Playoff payoff? Each home game has big impact on Jazz bottom line
Scott G. Winterton, Deseret News
Getting into the playoffs again this year wasn't just good for the morale and competitive nature of the Utah Jazz and their fans.
It'll also help the NBA franchise's bank account not lose quite as much money this year.
"There are roughly half the teams that are making money," Jazz president Randy Rigby said,"and half that are losing money."
Playoff revenue will help some, including the Jazz, but not all of the league's 30 teams. While visiting Salt Lake City in March, NBA commissioner David Stern said he'd prefer if his league members could sustain themselves financially whether they make the playoffs or not. Earning a postseason spot, he said, shouldn't be "vital" for their budgets. It should be a financial bonus.
"I think our teams should budget to break even (in the regular season)," he said, "and if they make the playoffs they make money."
There was a time in the NBA when many teams would break even or better during the regular season and then "make a little money" in the postseason, Rigby said. But now the "icing on the cake," as he called going into the black, often gets licked off by skyrocketing player salaries and other franchise costs (front-office payroll, production costs, rent payments, etc.).
"Now we (the Utah Jazz) will not make money in the regular season," Rigby said. "That's just the dynamic. I'm not apologizing. We're not feeling sorry for ourselves."
In fact, the Jazz even bank on having a bank deficit. Though Forbes Magazine ranked Utah as the 16th most-valuable NBA franchise listing its value at $342 million as of December 2007 Larry H. Miller's team currently plans on not recouping all of its costs on an annual basis.
Rigby wouldn't divulge how much money the Jazz are set to lose this season, but it's no secret that the longer Carlos Boozer, Deron Williams and company stay alive, the better it is for the club's coffers both for the present and future.
The Jazz's biggest expenditure, Rigby said, is the players' paychecks, which cost Miller $60 million-plus this year. That eclipses the league's $56 million salary cap. The killer is that teams have to pay for exceeding the cap, so a playoff run could help recoup some of that.
"It's critical. It's very important," Rigby said when asked how important making the playoffs is for NBA franchises' finances. "The reason is not only what it establishes for you financially for the remainder of the season but also what it does to establish credibility for the future year."
The Jazz benefited from their run to the Western Conference Finals last season. Fans flocked to snatch up season tickets in record numbers after the 2007 playoffs, helping to put a dent in what they claim will be an inevitable deficit.
That's one of the main reasons the Jazz upped their value according to Forbes by 15 percent about $45 million, as was reported in the Deseret News in December from the previous season. Only Cleveland (20 percent), Toronto (18 percent) and Golden State (16 percent) had better valuation increases.
The magazine claimed that the Jazz's first NBA playoff stint since 2003 helped them earn $114 million in revenue for the 2006-07 season and $5.7 million in operating income (earnings before interest, taxes, depreciation and amortization).
According to Forbes,"the playoff run helped the Jazz add close to 6,000 new season ticket holders this year, one of the biggest sales gains in NBA history ... Miller can use the added revenue to help pay the $250 million worth of long-term contracts he doled out in 2004."
Several months later, Rigby said the Jazz won't have any extra revenue. It's worth noting, however, the Jazz's claimed losses do not include any revenue from concessions at EnergySolutions Arena, which Miller owns. That likely accounts for a good chunk of the difference between Utah's loss claim and Forbes' report that shows revenue gains.
Rigby agreed that the playoffs are valuable and not just for financial reasons.
"Sports is all about hope, about breeding hope to a community. The excitement and hope (during the playoffs) has a big impact on ticket holders, sponsors and the future years for them wanting to be involved with you," Rigby said. "The community has been great about rallying around (the Jazz)."
For years, it's been rumored that NBA teams pocket about $1 million for each home playoff game. But that figure, Rigby said, is high. For one thing, the NBA takes a 45-percent cut of each home gate during the playoffs (up from just 6 percent per home game during the regular season) to cover its annual expenses.
If a playoff series goes an odd number of games, the visiting team also gets 25 percent of ticket sales from the final game on top of that.
"We share a big part of our gate," Rigby said. "That impacts us."
Franchises also don't get as big of a chunk from TV revenues because of national production and broadcasts. Players and some personnel also receive per-round bonuses for playoff success.
Even with the financial losses not to mention attractive purchasing offers, which Miller has received don't count on the Jazz beelining for Oklahoma City or anywhere else. For one thing, Miller loves having an NBA franchise in Salt Lake City for himself and his neighbors in the Intermountain West. That means the Jazz aren't going anywhere.
"Larry has shown his colors on this. Larry is very committed to this community," Rigby said. "We feel that the Jazz is an important part of enhancing the quality of life in this community, of giving a great product that the community can get around and cheer for. It becomes a diversion for people and their personal challenges."
The Jazz owner also has so much invested in the area in other business projects from movie theaters, sports merchandise shops, a motorsports mecca, a minor-league baseball club, to multiple automobile dealerships that bolting is far from his mind.
So even if the Jazz happen to lose money something they didn't always do back in the John Stockton and Karl Malone days that huge brand name is an invaluable resource for the rest of Miller's ventures.
Rigby, who is also the president of Miller's Sports Entertainment Group that oversees entities like the Jazz, the Salt Lake Bees, the multiple movie theaters, EnergySolutions Arena and broadcasting properties, admitted the basketball franchise is good for marketing and for goodwill purposes.
"It does give credibility to our company and organizations," Rigby said. "It gives name awareness to Larry's other entities."That's especially the case, it stands to reason, when the Jazz are winning in the playoffs.
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