Thursday, March 05, 2009

Cry A River For The Simons

Pacers President Jim Morris says the Simon family has lost $200 million on the NBA franchise during the decades they've owned the team. WTHR's Mary Milz plays the violin:

The Indiana Pacers say they are losing millions of dollars each year, far more than previously reported.

"Almost every year [Mel and Herb Simon] have owned the team, they've lost money. The cumulative losses probably approach something in the neighborhood of $200 million," said Pacers Sports and Entertainment President Jim Morris.

Morris says the team needs help. They're talking with the city's Capital Improvement Board, which operates Conseco Fieldhouse about the options, particularly who pays for maintenance of the facility. Right now the Pacers cover the cost, estimated at $15 million a year, and Morris said they can no longer afford it.

"The Pacers are not asking for help for the team. That's our responsibility to operate the team, but the team does not have the financial capacity to operate the building," Morris said.

Morris said there were at least a dozen other issues it needed to address, including the revenue the city now gets from the Virginia Avenue garage. He attributed the Pacers' financial troubles to a number of factors, including the 2004 brawl in Detroit and several off-court incidents that followed hurt attendance. While Morris said it's up about 1,500 per game this season, it still lags.

"The average gate revenue for an NBA game this year is in the neighborhood of $900,000, our average is something below $500,000," Morris said.

Morris said NBA salaries have "gone up substantially." He also said NBA revenue sharing is limited and the Pacers TV revenue has been well below the NBA average.

Even though the Pacers get all the revenue from all the other events at Conseco Fieldhouse concerts, Morris said, most events are "tightly controlled by the promoters...the margins are very, very thin and not significant in the overall operation of the enterprise."

Don't put a lot of stock in what Morris is saying. This is the same former Indianapolis Water Company executive who had a water utility to sell to the taxpayers of Indianapolis. He walked off with a $6 million golden parachute contract when the city taxpayers paid NiSource at least double what the utility was worth, while long-time water company workers had their benefits slashed to the tune of almost $50 million. You got stuck with over $800 million in debt and soaring water rates. Those poor Simons are doing so badly that they are "hoarding cash" to take advantage of opportunities in the real estate market. And don't forget that $28 million Bel-Air mansion Bren Simon got when she got tired of her Malibu mansion. Or the millions of dollars in campaign contributions Simon family members have showered on a variety of politicians.


Downtown Indy said...

At this point, the only ones with any money left to give them is the players. Maybe they can turn it into an employee-owned enterprise.

Anonymous said...

There is one very simple solution to the Simon's delimma. Sell the team. Current market value per Forbes estimated the team is worth about $300 million, assuming a buyer could be found.
When the Simons bought the Pacers I believe they paid about $12 million for it.
Not bad asset appreciation by anyone's standards.
If the Simons are actually losing that kind of money then they would have put the franchise on the market years ago. That's how the Simons do things. Never believe they intentionally operate anything at a loss.
Owning a professional sports franchise is an ego trip. Trust me, operating at a loss of $200 million will deflate the biggest of heads.
My advice to Mel and Herb, spare us the insult of more taxes and just sell the damn thing. It' a wise business decision to do so.

artfuggins said...

The Simons have no one but themselves and Larry Bird for filling the team with thugs, druggies, women beaters and criminals and then acting suprised when they behaved like they did. They then seemed suprised when the city and state voted NO with their ticket money to the thug kingdom. I probably will never attend another Pacer game and dont even follow them ..I couldnt even tell you the starting 5. It is as if they don't exist.

Downtown Indy said...

Obama today said this:

"Nothing is harder in politics than doing something now that costs money – in order to gain benefits 20 years from now."

Is he hinting that his recent actions are going to take 20 years to possibly show a benefit?

I have long felt politicians time their actions while in office so nothing blows up during their term. When the s**t DOES his the fan, no big deal because the next guy takes the blame.

Seems Obama may have shown his hand on this one.

Gary R. Welsh said...

It's my belief that the Simons have every intention of selling the Pacers. First, they want to get a sweetened taxpayer subsidy to up the selling price for their franchise. That's their end game.

Sean Shepard said...

If they can't afford to operate the building, it shouldn't have been built. Wasn't the reason for building it so that they could increase revenues?

Market Square seated over 16,000 people if memory serves, easily accommodating the 13,900 or so the Pacers are currently averaging.

They complain because salaries for players are out of control. The team owners caused that, the Pacers can choose not to participate although that risks the quality of their product. I don't see where it is appropriate for government to forcibly transfer money from poor and middle income people so that it can be transferred to millionaire players of sports, their management and their owners.

I would hate to see them leave, but AI makes a great point as well that getting a big giveback from the city raises the value of the team. $15 million a year, depending on the valuation multiple could easily mean anywhere from $45 to $150 million in additional value.

This problem probably isn't isolated to Indiana. The national NFL folks laid off around 15% of their staff recently. Sports franchises need to scale back.

M Theory said...

Gary keep yourself right in the middle of SUNSHINE!

M Theory said...


varangianguard said...

But what a tax break! With these kinds of breaks, who needs Switzerland or the Cayman islands?

Downtown Indy said...

Chief of Protocol

Gladys Boluda is 'acting' CoP