Could bad deal mean end to Jazz in Utah?

Small-market NBA teams facing tough times

Published: Sunday, Nov. 20 2011 11:05 p.m. MST

For years, the Millers have considered the Jazz's financial losses "a cost of doing business." After all, what better marketing tool than to be directly associated with the most popular team in the region? That connection helped the Millers sell billions of dollars worth of cars, movie tickets and merchandise, easily making up for Jazz-related economic losses. In 2010-released "Driven," Larry H. Miller said the LHM Group brought in $3.2 billion in sales annually. (For a companywide perspective on his basketball team, Miller revealed: "If the Jazz were a Toyota car dealership, they'd be only our fourth largest Toyota store in terms of annual revenue in 2008.")

Last year, Greg Miller also told the Deseret News the LHM companies streamlined expenses during the recession, reducing overhead and increasing cost-efficiency. Car inventory, for example, was reduced by 40 percent.

That's helped the Miller group counter a rough economy, make money monthly and service debt despite decreased revenues.

"Fortunately, we're doing very well," Miller said at the time. "My dad left the organization very well capitalized (and) very well positioned economically.

"With the combination of our expense reductions and our (collective efforts) to keep our house in order, we've been able to remain profitable."

That success helps the Millers sustain financial setbacks by their most popular organization. The Jazz, according to the Larry H. Miller autobiography, will pay off the final part of the $20 million bond for their arena by 2013. Forbes claimed the Jazz have the fourth-best debt-to-value rating in the NBA at 5 percent, trailing only the Los Angeles Clippers, Detroit Pistons and New York Knicks (all debt-free).

"The profits from those entities far and away made up for the minor losses of the Jazz," the source said.

Miller also said Jazz management, committed to paying higher salaries for competitive purposes, was looking to capitalize on new and existing revenue streams (e.g. club seats) "without pricing ourselves out of the market" in hopes of not requiring other entities within the LHM Group to carry the financial burden.

Still, Miller called coping with rising player salaries and revenue issues in a rough economy "a very delicate balance."

"That's without question the biggest challenge that we're going to have," Miller said in 2009. "As long as this community is willing to support us to the level that they have, it's going to work out."

Nobody likes losing money, especially when it's believed the hole in the financial dam can be patched up.

Getting an economic boost from the league would be important for the Jazz, who have the sixth-smallest market size (954,000 homes with TVs compared 7.5 million in L.A.), according to Sports Media Watch.

One reason for concern and additional help is a dramatic decrease in season-ticket sales for the Jazz — from 15,000 in 2008 when Utah ranked No. 1 in the NBA to 10,000 last season.

It's also challenging to get enough fans to buy single-game tickets to consistently fill up the 19,911 seats in EnergySolutions Arena. A new variable pricing plan — placing a premium on seats for more enticing match-ups — helped counter some ticket losses last season, but it's a mystery how, or if, the departure of the Jazz's Hall of Fame coach and All-Star point guard might affect sales.

Over the past three seasons — after stellar Stockton-and-Malone era attendance was finally being realized again — Utah has seen its attendance dip from 19,900-plus per game in 2009 to just over 19,500 last season. That means 400 fewer people bought tickets (which average $44, per Forbes), concessions and souvenirs at the Miller-owned arena at 41 home games. The Jazz also lost out on all playoff revenue, due to their historic second-half collapse last season.

The possibility of fan backlash is another factor that could hurt the Jazz when the lockout ends.

Watching owners and players bicker and battle about the portioning of a $4 billion pie while the overall economy struggles and unemployment hovers around 9 percent doesn't sit well with some people. Venting Jazz fans have told the Deseret News they will withhold financial support in protest.

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