Monday, February 25, 2008

Is This Anyway to Run a Ball Team?

Well the trade deadline has passed and Michael Heisley, Chris Wallace and everyone else associated with the Grizzlies front office is taking a lot of heat from the local fans. Just as fans were buying into the idea that the team was competing soon with Rudy, Miller and Gasol the team suddenly reversed course and decided to rebuild with youth. Then, instead of a total rebuilding effort by trading Mike Miller and Brian Cardinal's ugly contract for expiring deals and the cap space that comes with it, the Grizz stand pat and only do a minor deal involving Marcus Vinicius.

People exploded on the Memphis radio airwaves expressing their unhappiness to Chris Wallace. It has gotten so bad that Bill Walton called the Grizzlies 'a farm team for the rest of the NBA.' The problem with that is the fans still have to pay major league prices to see it in person. Fans are unhappy right now with the losing ways and the prevalent attitude is that the team isn't being run properly.

But is this fair to the franchise?

The Grizzlies lost a reported $45 million over the last 3 seasons (Heisley claims he lost more like $40 million last year alone). Maybe that doesn't sound like much to some people but at the reported rate of $15 million a year it would only take 11 years for the franchise's losses to out strip the money Heisley paid for the team. And remember two of those seasons the team made the playoffs.

This season the Grizzlies cut payroll. It was reported that the Grizzlies payroll last season was $64,451,991. This season the Grizzlies payroll are supposed to be $52,792,812 adjusting for the trades already made. Now these are just estimations and may not be 100% correct but they do put us in a reasonable ballpark most likely. That is a savings of $11,659,179.

That figure alone is more than Forbes reported that Grizzlies lost in the 2006-07 season. Now let's start making some adjustments. First, the Grizzlies last season were above the luxury tax threshhold and had to pay an additional amount of money on top of their salaries that bottom line deduction is gone. Throw in the luxury tax payment paid by teams over the luxury cap threshhold and the decrease in salaries from Jerry West to Chris Wallace, from the half of a season the Grizzlies have been without Andy Dolitch and the team has to be close to break even this year even with the decreased attendance. They may in fact make a profit this year!

And that doesn't include the impact packed houses for the Tigers games will have on the Forum's, and by default the Grizzlies, bottom line as well. Between concerts, shows (and I hope everyone got to see the Cirque de Soleil show this week), Monster Truck rallies, etc. the Forum has had some pretty profitable events lately.

Of course you will never see it reported that way but the numbers seem to imply that breaking even isn't so remote a possibility.

Maybe the front office is running the team like a business instead of a hobby. While Heisley, Wallace and the rest of the Grizzlies want the team to be competitive and challenging in the playoffs it is still fundamentally a business. We as fans may not like to hear that the Grizzlies are terrible but breaking even yet that does seem to be the case here.

If Heisley starts to make money with the team he could use that as leverage to sell the team but more likely he will just keep watching the bottom line and see what happens. He isn't likely to make another mistake like the Brian Davis affair. A profitable enterprise is more likely to attract legitimate suitors to buy the team than one losing on average $15 million a year. Of course the question becomes can the team survive in Memphis even if it is profitable one year if the team can't attract fans? Isn't there a point of diminishing returns? How long can a business remain profitable if is has no consumers? Can the Donald Sterling model of basketball frugality and profits work in Memphis?

Well let's look at the Gasol trade again. What exactly did the Grizzlies receive? The team got a lot of potential cap space to spend on free agents this summer. The team got draft picks to upgrade talent via the draft, a far more cost effective way to upgrade your team than free agency as well. They got a young swing guard in Javaris Crittenton who exhibited a lot of potential to Laker fans before the trade. Memphis fans haven't seen a lot of him yet but I expect they will either this year or next. He is after all a 20 yr old rookie guard. They don't get a lot of burn on any team in the NBA.

Now granted it may not seem like a great idea to run a basketball team this way with a rookie head coach teaching basically rookie players to play in a new system against veteran led teams. Winning probably isn't in the immediate future. The question is what alternative did the team have? The Grizzlies were losing money and games before. Now they are only losing games. Is that an improvement?

Is winning in the playoffs the only way Memphis is going to support this team? Would the city be able to support a team with young talent headed in or at least appearing to be headed in the right direction? Would a team with Rudy Gay, Mike Conley, Darko Milicic, Javaris Crittenton, Micheal Beasley and maybe someone like Michael Pietrus via free agency attract some fans?

Probably as many fans as the Grizzlies are attracting to games now. The bigger question is how many tickets are sold right now that go unused? That is a hidden revenue stream that may dry up. Everyone realizes that the Grizzlies lower bowl is practically sold out but rarely does it appear that way on game night. Will those fans renew this time? Can Rudy Gay and Mike Conley be promotion enought for the season ticket holders? Would those fans wait to invest in tickets if Memphis wins the lottery? Would they wait until the draft? What if Memphis got a Derick Rose in the draft? What about Eric Gordon, DeAndre Jordan or OJ Mayo? What about an intelligent free agent signing this summer? Does it need to be a big name or what? Where is the line drawn where it is not worth the money?

The key question here is will the team be able to survive in Memphis long enough as a business to become competitive as a ball team?

I only wish I knew the answer.

BallHype: hype it up!

1 comment:

Anonymous said...

Good article

And the question you ask at the end is the one that haunts me continually.