The Business of the Atlanta Hawks (data by Forbes)

[txsting]

Very interesting financial data was published in an article by Forbes in December. I'm going to take the data as correct (Bruce, feel free to straighten me out!). Check out the link:

http://www.forbes.com/lists/2007/32/biz_07...wks_323662.html

There are some conclusions that I can draw here that surprised me. First of all, you have to give some credit to the ASG as businessmen. The previous four years have shown the strongest operating income in Hawks history, each year having been profitable. For 2004-2007, the net income (EBITDA) was $37M. I think the handwringing about management being totally cash-strapped must be complete bull. Note that ASG bought the team in 2004. Prior to that (1998-2003), the Hawks lost money in 4 of those 6 years.

Furthermore, Philips is one of the top 5 revenue generating arenas in the country. Since 2000, when Philips opened, Hawks revenue has skyrocketed and his increased steadily every year (except for a minor dip in 2003).

Ownership has given us no particular reason to believe that they will not spend the money required to resign our players. The one major move they have made, they signed JJ to a near-max deal in lieu of lost cost draft picks and a low-salaried Boris Diaw. We have operated below the cap up until now but it is certainly justified by the extent of the rebuild.

On the hockey side (we can't ignore it since we share owners), ASG has not done quite as well.

http://www.forbes.com/lists/2007/31/biz_07...ers_317422.html

Revenues aren't quite keeping pace with player costs, and so the Thrashers have been more of a break-even or slight loss team since the strike (-$10M since 2004). This handicaps the owners to some extent.

I've been keeping a spreadsheet with the Hawks salary data on it and projections based on resigning the core. I've shared it before, but the key take-away is that the Hawks CAN resign this core and stay about break-even. In 2009, with all of the core resigned, we're looking at approx $71M in player cost (up $17M from today). We operate at about $10M per year profit now, and the revenue is growing about $3M each year. That would put us right around break even, maybe a little in the red. It's not very reasonable to expect management to go much farther than that. Every other contender in the league (except Dallas) turns a VERY healthy profit. On the plus side, if this team starts to win, gate revenue should grow since there are at least 3,000 unsold seats every night, and the prices are very cheap as it is. (Gate revenue accounts for about 1/3 of revenue for most NBA teams)

The sobering fact is that our revenues pale in comparison to most of the NBA, and there is a clear correlation between revenue and success on the court (Knicks, Bulls, Heat not withstanding). I don't think we'll ever be in the top third of that list, which is where you MUST be to contend.

http://www.forbes.com/lists/2007/32/biz_07...ns_Revenue.html

Until this dynamic changes, how can any of us reasonably expect to see a championship contender here in Atlanta?? I think most of us realize our core will probably be good for 50-55 wins in a few years, but that is it. IMO, our only hope is to capture lightning in a bottle with a VERY deft trade and win before it becomes too expensive to sustain the winning.

[coachx]

I didn't read your links

but

Did you know Phillips Arena's stock went up 120 % yesterday ?

Seems like the ASG are not doing as bad financially as we thought. I know they don't own the arena but it still seems to be a positive sign.

[txsting]

I didn't even know the arena had stock! That seems odd that it operates as it's own little corporation. Who owns it, do you know?

[coachx]

I didn't either until last night and I follow the market alot....I was watching "Money Matters" or one of those financial shows and one of the hot stocks were Arena stocks. They memntioned the Staples Center, Phillips Arena, and Oracle Arena in (San Fran / Golden State), with a few more.

Phillips Arena was #5 in their list of "Top 5 Arena stocks."

The symbol was something very realitive to the Phillips name. I'll research and find out after work.

Speaking of....I better get back to it.

[txsting]

Philips is exceptionally well managed. We have no excuses when it comes to our home. When you look at how much more money started coming in after Philips opened, you begin to understand why everyone was pushing for these modern arenas with tons of sky boxes. It really makes a big business difference.

[Admin]

That is really good information, thank you sting. I wonder, for comparisons sake, how do the Braves do each year financially? I would guess that they do quite well and are among the better profit margin teams considering how good of a team they are annually. If that's the case then there is no reason to think that if we can develop a consistent winning team with the Hawks that the fans won't come out and support that team.

Not that I think he is the right player for this team at all, but I wonder what type of crowd we would draw had we traded for AI last year.

[exodus]

Very interesting stuff. Considering the view most of us had of the ASG finances this should be seen as a positive by everyone.

[txsting]

I think if we had an AI type draw we might sell out the arena. That would mean 3,000 more butts per night X 41 home games X conservatively $30 a butt (cheap seats plus beer, tshirt, etc) = another $3M or $4M a year in revenue. Who knows how much in jerseys? But it probably doesn't pay back as much as it sounds like.

Our attendance has been around 15,000+ and there are like 18,500 seats.

[TheDude]

yeah i think bringing in another contract (i'll use mike miller for an example if traded using expires and shelden) could even be offset by the betterment of the team. not only in just ticket sales but also merchandise...

remember when a teams starts hitting the playoffs on a regular basis, jerseys start showing up on peoples backs everywhere...i live in florida and see zero hawks jerseys but do see other teams jerseys from time to time (winning teams)...not to mention the positive media coverage and ticket prices going up due to increase demand..

good news though, thanks for the info Tx..

[WraithSentinel]

I don't know the exact numbers. Ever since the Braves cut back on the payroll. They started to turn a profit and attendance has went up. Attendance can be thank in large part due to the young players the Braves have now. Now they said with the new profit they would be willing to spend. That will be put to the test with Tex. They should be able to break even with Tex contract with Hampton and Glavine deals are up after the season.

[WraithSentinel]

I think we will see how well they are doing when it come to Hossa. The Thrashers last I heard offer him 4 years at about $28 Mil. At first I thought it wouldn't be enough. Looking at it now that is a fair offer for Hossa. Now they could be doing offer him a contract ans save face. Ignore all of the overpaying teams did this past offseason.

Hossa is worth about $7 mil a year. However, he is not a franchise player and nevers show up in the playoffs. Just go ask Sens fans. Kovy contract is up in about another year or two. Thrashers have to re-sign more than anyone else along with Kari.

[txsting]

I probably underestimated the bump that AI would have brought. For those that want hope, look at Cleveland. They were tooling along in the same boat as us until Lebron came along. Now, BAM, they are top 5 in revenue, huge new local TV contract, packed house, yada, yada. They have the money to jump to the next level.

Fortunes can change, and Stars matter, both on the court and off.

It will be very interesting to look at this data next year and see what Yi meant to the Bucks, if anything. Houston had a huge revenue spike shortly after Yao's arrival, but I don't know if that was a direct effect or not. (To see this data, just click on my revenue link, click any team, and then scroll down to see the bar graphs)

It really seems that those local TV deals separate the haves and have nots in this league. I wish I could find this data, but I don't see it compiled anywhere.

[txsting]

I really dislike the fact that ASG also owns the Thrashers, and that success or failure on that side can actually affect what the Hawks do. It's not nice to think about.

[frosgrim]

That is heartening information. Today I have written a couple of times that the Hawks would trade JJ before anyone else due to finances. Glad to see that my assessmet is off-base.

The question I now have, is why hasn't the ASG gotten rid of Woodson/BK?

In terms of Hossa, from what I am seeeing/hearing the issue is now with Hossa who isn't sure that he wants to resign with the Thrashers.

Speaking of the Thrashers, they are 6 million under the cap. Any explination of why the ASG didn't spend the money to upgrade this team? Some of that money is obviously being saved for Hossa, but at least 3.8 mill of it could have been used on a defenseman who can actually help out Kari.

[WraithSentinel]

It is not the issue of spending money to upgrade the team. It is the matter of DW trading away all of the young talent last year. One of them is already coming to blow up in his face. That is the trading of Braydon Coburn who is turning into a stud defenseman for the Flyers. He gave up on him way too soon. The guy we got for Braydon is old,cost a lot of money, is taking up space. By the way he has several years left on his contract. DW gamble last year to make the playoffs. Now he is paying a huge price for it.

[frosgrim]

That doesn't answer why the Thrashers didn't use the cap money to plug holes along the blue-line. This team hasn't had a top-notch defenseman, ever. Exelby is developing, but he's not a Borque or Leetch. The Thrashers need defensemen, yet nothing is done in the off-season to fix that situation.

Zhitnik was an understandable trade to make it to the playoffs last year considering how bad the T-birds defense was. Tkuchuk (sp?) I thought was a good move as well. But that was last year. Right now the Thrashers are the worst defensive team in hockey. Something needed to be done to improve the defense. I am for trading Hossa if it brings back defensemen to improve the blue-line play.

[Dexmethylphenidate]

Mr. Bruce isn't as stupid as some of you thought.