Friday, July 30, 2010

Did We Hit A Raw Nerve?

It looks like someone didn't like my recent comparison of attendance numbers to the Indianapolis Indians games versus the Indiana Pacers and the respective economic impact of the two teams on the downtown economy. The Indians draw a very similar number of people downtown to Victory Field during their season as the Pacers, albeit with more home games than the Pacers play at Conseco Fieldhouse. The IBJ's Anthony Schoettle, without mentioning the discussion on this blog, tackles the issue in his recent blog post:

Several IBJ readers recently asked about the economic impact of the Indiana Pacers. One wanted a comparison between the Pacers and Indianapolis Indians.


The city recently commissioned a study—done by Chicago area consultant Rob Hunden—which found that the Pacers have $55 million annual economic impact on Indianapolis.

Mayor Greg Ballard used that economic impact as justification for paying $33.5 million over the next three years for Conseco Fieldhouse operations expenses as well as $3.5 million in capital improvements.

The reason the comparison is interesting is because the Pacers and Indians bring about the same number of people downtown each year. Last year, the Pacers total attendance for 41 regular season games was 582,295.

For 72 home games, the Indians are on target to draw near 600,000 this season. Last year, the team drew about 550,000 fans to the home games despite lots of rain. In 2008, the team drew 606,166.

The other reason the comparison is interesting is because the Indians pay to play in Victory Field and pay for all the upkeep of the place to boot.

The Indians too commissioned an economic impact study—in 2007. That study—done by Strategic Marketing and Research Inc.—found that the Indians brought $28 million in spending downtown annually.

So why the disparity? . . .
Do the Indians draw as many people downtown as the Pacers and Colts? Yes. Money, though, is another kettle of fish.


As for the value that each team brings the city, that’s another debate entirely.
Schoettle then goes on to explain how ticket prices, corporate entertaining and concessions for Pacers games are considerably higher than Indians games to explain why the economic impact of the Indians is about $28 million annually versus $55 million for the Pacers. But as he notes, the Indians are paying the CIB to play at CIB and pay for all of the operating and maintenance expenses on Victory Field and still manage to turn a profit. The Pacers claim they are losing tens of millions of dollars a year despite their rent-free use of Conseco Fieldhouse and getting to keep all of the revenues for both game and non-game events, but for obvious reasons, won't open up their financial statements for public scrutiny, unlike the Indians who annually report their financial statements to shareholders. I would actually dispute the $55 million economic impact number that flawed study the CIB manufactured to promote the $33.5 million give-away to Herb Simon. It seems to me that the Indians tend to draw families, who often come from out-of-town and stay overnight in hotels and take in other downtown attractions during their visit to Indianapolis, unlike Pacer fans, who drive in and out of the games with few staying overnight or dining at restaurants downtown. It's obviously a debate in which the CIB and the downtown elites, however, don't really want to engage.

I continue to dispute Herb Simon's claim that the team has been losing tens of millions of dollars a year. I believe the public has a right to be skeptical, particularly when they won't publicly disclose the franchise's financial statements. We're also not being told what Herb Simon paid this past year to buy out his late brother Mel's 50% stake in the franchise. How much is an NBA franchise that is losing so much money worth? It's entirely relevant, but the corrupt leadership of the CIB made damn sure we won't know the truth. I find it particularly telling that sister-in-law Bren Simon said of Herb Simon during her deposition over the case disputing the validity of a will her late husband supposedly executed giving her a larger share of his estate that he speaks out of both sides of his mouth. Yeah, he tells us he's losing tens of millions of dollars, while he and his wife continue to lead a very lavish lifestyle out in California. I'm sure Jim Morris has been well compensated by the Simons for pulling off yet another fraud on the taxpayers of Marion County. It wasn't enough that he convinced the City to pay double what the water company was actually worth and then walked away with an $8 million golden parachute. He had to come out of retirement to bag another haul.

12 comments:

ProCynic said...

Gary,

I'm not questioning the dollar amounts you mention here, but I must take issue with the idea that minor league baseball will draw more out-of-towners than an NBA team.

Minor league baseball teams don't usually draw well, if at all, from outside their home markets. An NBA basketball team is an order of magnitude more likely to draw out-of-towners than a Triple-A baseball team. There is generally neither the emotional connection nor the emotional bond to a minor league team that there is to a major league team, be it MLB, NBA, NFL or NHL; thus, the motivation to drive long distances to see a minor league team is far less.

This is one reason why minor league baseball stadiums are usually much smaller than their major league counterparts. To use a comparison directly relevant to your post, a Los Angeles Laker fan in Dayton, Louisville or Cincinnati is much. much more likely to come to Indy to see the Lakers play the Pacers than a fan of the Norfolk Tides or Toledo Mudhens located in the same cities to see those teams play the Indianapolis Indians.

Advance Indiana said...

Sorry, ProCynic, but I know people who drive over here from my home town in Illinois, including my own family members, to watch the Indians play. Several years ago, people would drive in from out-of-town to see the Pacers play, but not any more. They ruined their product by filling the team with a bunch of ego maniac, overpaid, and misbehaving players who were more known for their after hours antics than their on court performance. If the team is losing moeny, it's of their own making and it shouldn't be our responsibility to subsidize the billionaire owner because he runs a lousy NBA franchise.

ProCynic said...

Gary,

That might be your experience. And I know people who have come out of town for the occasional Indianapolis Indians game, too, but they are in a very small minority. I know many, many more people, not to mention myself, who travel to major league stadiums and arenas across the country, whether to support their favorite team on the road while seeing a different stadium, or seeing a classic venue like (old) Yankee Stadium. Minor league baseball stadiums are small for a reason, even in larger minor league cities like Indianapolis, Columbus or Buffalo. It's something to do in the area and little else. This is no knock at all against the Indianapolis Indians, who have a first rate stadium and are a class organization through and through worthy of praise. But neither they nor any other minor league team have the out-of-town drawing power of a major league team, not even the Pacers.

Your point about the Pacers driving away their own fans with the criminal conduct of their players is accurate, but not totally relevant. The Pacers may not attract their own fans, but they attract fans of visiting teams, especially the Los Angeles Lakers, New York Knicks (both with national followings, even as bad as the Knicks are); Cleveland Cavaliers, Detroit Pistons or Chicago Bulls (all with regional followings). The Indianapolis Indians from a structural standpoint simply cannot consistently attract visiting fans to make a statistically significant difference.

Downtown Indy said...

And the Pacers haven't adjusted player salaries in conformance with the quality of their product.


In fact, the approach is 'we stink, we need to get higher paid players' and thus put a bigger dent in their bottom line.

They can do this because they know they will get the City to make up any shortfall incurred.

What we as taxpayers are forced to accept is what used to be called involutary servitude. We have no say, we have no choice, we are forced to serve our self-appointed masters - pro sports.

dcrutch said...

While we're patiently waiting for the pro salaries to adjust to market reality, we subsidize the difference- all while at 10% unemployment, a 50% graduation of our kids in IPS, and paying for government takeover of a sixth of the economy (health "reform").

How's being a middle market that dreams of being "big" working out, Indy?

HOOSIERS FOR FAIR TAX said...

Gary? This blog is fabulous cause you hit a raw nerve on a daily basis.

KEEP IT UP AND KEEP THE HEAT ON.

timothy dee said...

While I don't necessarily support the actions of the CIB, your assertion that a AAA baseball team draws more out-of-town fans than an NBA franchise is ludicrous and undermines your argument.

I detest the NBA, but ProCynic has it right. Perhaps a glance at the massive differential in payrolls might help you understand how one team loses money and another shows a profit. I witnessed the Simons' loyalty to Naptown when the curtains ruled MSA. Like it or not, we owe any success of our resurgent downtown to the Simons (for the Mall & the Pacers) and the cutthroats who helped Hudnut lure the Colts from Baltimore.

In addition, you fail to mention the issue of maintaining a viable tenant in the recently constructed Fieldhouse. There are important issues here, especially our public schools as dcrutch pointed out. Unfortunately, you missed most of them.

Advance Indiana said...

You obviously missed my review of how well other arenas have done without professional sports team, Timothy Dee. In fact, the departure of the Pacers would actually mean a huge financial windfall for Marion Co. taxpayers. See http://advanceindiana.blogspot.com/2010/07/if-kansas-city-can-do-it.html

Downtown Indy said...

timothydee wrote:

"Perhaps a glance at the massive differential in payrolls might help you understand how one team loses money and another shows a profit."

No, actually, it's the way they MANAGE (or mismanage, as the case may be) their payroll that determines how one loses money and another shows a profit.

Citizen Kane said...

From AS's article:

"First, Pacers tickets—even at a discount—cost much more than Indians tickets, and that’s a big part of any team’s economic impact."

Counting the exorbitant tickets (other than any tax revenue generated) is no way to determine economic impact - the only impact that matters is the impact on employment, wages and tax revenue generated. And when the substitution effect is accounted for, with respect to how much money would have been spent locally elsewhere on entertainment (a luxury option, not a necessity), the economic impact of either has to be paltry indeed. The money collected by the Pacers from tickets(or the Indians for that matter) impacts no one but themselves. The only thing that would change without the Pacers is that the money in the community, as well as the type of jobs would be distributed differently.

Phil Marx said...

I think you're over-analysing this. Maybe the Pacers fans just drink more beer than the Indians fans. Drunks are more likely to spend freely and do other things (such as speeding and driving wrecklessly) that cost money.

Sometimes the simplest explanation is the best.

ProCynic said...

A couple more things:

1. You highlight your comparison of the Conseco to Kansas City's new Sprint Center. A major issue, however, is the loss of THE major tenant. Sprint has never had such a tenant, which makes your compariosn flawed. A more apt comparison would be Kansas City's Kemper Arena, which lost the NBA Kings in 1985; San Diego Sports Arena, which lost the NBA Clippers in 1984; and to a lesser extent Seattle's Key Arena, which just lost the NBA SuperSonics. The San Diego Sports Arena is now basically a slum and a bad joke to the locals. Kemper has been a joke for some time in Kansas City, though precisely why eludes me since it's not in bad shape. Key Arena is a little hard to determine since so little time has elapsed since the Sonics were stolen, but the perception in Seattle seems to be that Key Arena has definite difficulties ahead.

2. Concerning your point in your earlier about the valuation of the Golden State Warriors compared to that of the Pacers, the comment that I hear periodically is, for example, "The Pacers are worth $300million. How can they be losing money?" That number is not income; it may be income potential, but it is not income. That value can't be realized until the team is sold. Until then, the team is like any other business, with income and expenses. It might be best to compare it to a diamond. The diamond might be worth $1 million, but you still have to pay to store it and secure it. Unless the diamond can generate income, the diamond will lose money. A sports team, in a business sense, is similar.