48minutes.net

By Geoff Lepper
48minutes.net

The Forbes list of NBA Team Valuations for 2008 is out, and the Warriors are continuing their ascent. In the last three seasons, they’ve gone from No. 27 (worth an estimated $267 million at the conclusion of the 2005-06 campaign) to No. 21 ($309M after ’06-’07) and now to No. 18 ($335M after ’07-’08).

So, what does the future hold in store for Golden State owner Chris Cohan’s balance sheet, as crafted by team president Robert Rowell?

In the short term, there’s most likely another season of growth coming, even with the overall economy stumbling as badly as it has.

After that is when things will truly get interesting.

The Warriors posted pre-tax earnings of $14.2 million for ’07-’08, far and away the highest such number in the last dozen years, which is all the data I could lay my hands on at short notice. (I suspect it could very well be the most the Warriors have ever made in a single season, but I can’t confirm that.)

Nevertheless, I think that profit number has legitimate potential to go even higher next season. Why? Glad you asked. Here are a couple of the biggest impacts I see on the 2008-09 books:

(Please note: These are my best estimates and guesstimates, based on the available data. They are certainly not written in stone. And it may very well be that the team, armed with much more detailed data, is expecting a different outcome. With those caveats, then. . .)

Negative impacts
Player salaries, which cost the Warriors $65 million last year (including bonuses and incentives), are currently set to run approximately $2.5 million higher this season, not including any extras. I’ll guess that that figure will land somewhere between $4 to $5 million higher when all the premiums are factored in.

Also, Golden State’s average attendance has fallen. It’s not as precipitous as in some places around the league — Hello? Memphis? Anybody there? Elvis? B.B.? Three 6 Mafia? Anyone? Bueller? Bueller? — but it’s still noticeable.

Through eight games, the Warriors are drawing 18,571 fans, on average. That’s a 5.4 percent decrease from last season’s average of 19,630, but since attendance historically is lower in November and December (when football is still in season), a better apples-to-apples comparison is to look at the first eight games of 2007-08. The Warriors drew 19,408 in those games, meaning that they’re running 4.3 percent behind last season’s pace.

Based on the number of open seats spotted in the upper reaches of the Arena so far this year — and the fact that many of the higher-value lower bowl seats were renewed as full-season ticket packages back in March, before the economy tanked — I would estimate many of the tickets that make up that 4.3 percent decrease are on the cheaper end of the price scale. But since we don’t know for sure, let’s use the Warriors’ average ticket price for 2008-09, as per the Team Marketing Report: $39.

Using that count — .043 (attendance decline) x 19,630 (last season’s average attendance) x $39 (average ticket price) x 41 (home games) — the Warriors are on pace for a drop of approximately $1.35 million in gate receipts.

That’s a total shortfall of $5.35 to $6.35 million that the Warriors have to make up.

Positive impacts
The Warriors (and all teams) will be getting a bigger slice of TV revenues because the league’s new eight-year contracts with ABC, ESPN and TNT have kicked in this season, bumping the league’s average annual payout to $930 million (or $31 million shares if split evenly between all 30 teams) from $767 million ($25.6 million), representing a gain of $4.4 million for Golden State.

Golden State may be filling fewer seats than last season, but the ones they are filling come with a higher price tag after a 25.3 percent increase to the average ticket cost over 2007-08. Last season, with an average attendance of 19,630 and an average cost of $31.13 per ticket, the team took in $25.1 million in ticket revenues.

(A sidebar here: Forbes lists the Warriors’ total gate receipts from 2007-08 as $44 million, with a footnote that the figure “includes club seats.” I suspect that means that revenue from luxury boxes, which adds up quickly given their price tags, is not part of the cost-per-ticket equation and represents most of that delta.)

Plugging in the numbers for this season — $39 average ticket cost x 18,784 expected average attendance (based on that 4.3 percent projected drop) x 41 home games — give us a total of $30 million. That’s an increase of $4.9 million.

Now, it’s probable that, if the Warriors crater in the standings, the 4.3 percent drop will accelerate. But based on what’s available to us now, adding the TV and ticket bumps, you get a projection of $9.3 million in increased revenue, with a $3 to $4 million increase in profit compared to last season.

So for 2008-09, the Warriors look like they have a solid chance of matching last season’s rollicking financial success.

Beyond that, however, is an open question. Will all those season ticket holders come back once 2009-10 renewal notices start rolling out in February and March? Unless President-elect Obama has some kind of miracle up his sleeve, I don’t think so. Discretionary income is already drying up.

Additionally, a team’s profit in one season is often a reflection of its success in the preceding year. According to Forbes, even with all the hoopla surrounding the 16-5 finish and the playoff series victory over Dallas, the Warriors cleared only $1.3 million pre-tax in 2006-07. The real profit wave hit the books last season.

That means that if the Warriors do tumble to a 35-47 record (or something worse) this season, it’s probably not going to show up on the books until 2009-10.

One other economic note:

** Back in 2005-06, the Warriors had the league’s lowest average ticket prices by a wide margin, at $23.82. That was almost $5 cheaper than the second-most inexpensive team (the New Orleans Hornets, at $28.61) and just slightly more than half of the league average ($45.92).

Since then, the team has raised prices for three successive seasons, each time by a larger percentage: 11.8 percent for 2006-07 (to an average of $26.63), 16.9 percent for 2007-08 ($31.13) and 25.3 percent for 2008-09 ($39.00).

That means the difference between the average ticket this season and the average ticket three years ago is 63.7 percent.

Contact: geofflepper@48minutes.net

By Geoff Lepper
48minutes.net

OAKLAND — Warriors guard Monta Ellis will go down in history as having taken the most expensive moped ride in history.

Golden State finally dropped the hammer on its franchise player Saturday, announcing a 30-game suspension that essentially translates into a $2.97 million fine in response to the left ankle injury Ellis suffered while crashing his 250cc moped on Aug. 21, an incident that violated the terms of the six-year, $66 million deal he had signed mere weeks earlier.

“We made a commitment to Monta for $66 million to be a great basketball player,” said team president Robert Rowell, who arrived at the 30-game figure with owner Chris Cohan after discussions with Jeff Fried, Ellis’ agent. “We’re in a situation where he is now not with us. We’re going to do everything possible that we can obviously to get him back and to help him rehab and get back on the basketball floor, but right now we felt that it was an appropriate consequence.”

The decision means the team is certain Ellis, who suffered a high ankle sprain and a torn deltoid ligament that required surgery to repair, won’t be healthy until after Dec. 17, when the suspension expires. When the injury was announced in late August, the team said that Ellis would need six weeks’ worth of immobilization, which just recently ended, and six more weeks of off-court rehab before a potential timetable for a return could be established.

However, one facet of the recovery plan has yet to be publicized: Multiple team sources confirmed Saturday that Ellis will eventually have to undergo another surgery to remove screws that are currently holding the ligament in place, something that will require additional recovery time.

Rowell claimed the team never considered voiding Ellis’ deal — as was reported by multiple media outlets in the wake of Ellis’ failed attempt to originally cover up the true nature of his injury — but said an indefinite suspension was discussed. That option was scrapped for fear it would encourage Ellis to come back before getting fully healthy, leading to the potential of further damage, possibly permanent.

“We could have done an indefinite suspension, and what would that have done?” Rowell said. “Then he would have put himself in a situation where he would have rushed back and all he would have been worried about is the money and getting paid, and then we could have a player that is screwed up forever. You could have a guy who never recovers.”

It’s unknown how Ellis reacted to the decision. The 22-year-old did not attend the Warriors’ 122-102 exhibition victory over the Oklahoma City Thunder on Saturday, and attempts to reach Fried were unsuccessful.

“I’m hoping that (Ellis) is professional and understands that we’re not doing this to punish him,” Rowell said. “This is being done because he violated his contract. And when I say punish him, it’s not vindictive at all. It’s not personal. This is a business decision that we made.”

Rowell acknowledged that the decision was made against the advice of Chris Mullin, the Warriors’ executive vice president and head of basketball operations. A team source said that Mullin was looking at the situation like “more of a father,” wanting to fine Ellis enough to set a boundary and prevent any future similar incidents, but not so much that it would be excessively punitive.

To put it mildly, Rowell disagreed.

“Chris Mullin made it perfectly clear to both Mr. Cohan and myself that he didn’t think this was a big deal at the beginning,” Rowell said. “And we happen to think it’s a very big deal. We happen to think that it’s a big deal for our fans, it’s a big deal for our season ticket-holders, it’s a big deal for our business partners, it’s a big deal for the Warriors organization.”

There was no hue and cry from Ellis’ teammates.

“I know he’s happy to get that behind him,” Warriors forward Al Harrington said. “It was never an issue for the team. We never discussed it as a team. Nobody was in here worried about it. We knew something was going to happen, but at the end of the day, I feel like it’s fair. He’s able to keep his contract. And like I said before, he’s got $63 (million) more.”

That may not necessarily be the case. Rowell said repeatedly that the team has reserved its right to revisit the contract if Ellis, whose quickness made him the NBA’s Most Improved Player in 2006-07 and led to his averaging 20.2 points per game on 53.1 percent shooting last season, can’t regain that form.

But Rowell admitted that, outside of the precedent set by Jay Williams — the Chicago Bulls guard who mangled his left leg in a 2003 motorcycle crash after his rookie season and never returned to the NBA, eventually settling on a $3 million buyout on a deal that still owed him roughly $11 million) — the team is in “uncharted waters” if Ellis is no longer the dynamic slasher he once was.

“I’ve given so little thought to that that I don’t even know if I can give you a real intelligent answer, other than preserving our rights and reserving our rights, which we have,” Rowell said. “We’ve asserted that. As far as how it gets done . . . Nobody wants that scenario to happen. If it happens, you’ve got to deal with it.”

With regards to the cash windfall, Rowell said the Warriors will be giving the $2.97 million back to current season-ticket holders who renew their seats for 2009-10: “The amount will be reflected in next year’s season-ticket holder pricing.”