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Despite Terrible Arena, Maloofs Making Money

Via Kelly Dwyer, Forbes digs into the ledger of all 30 NBA teams. The report breaks down franchise value, revenues, player expenses, and earnings. You'll be... interested to note the Kings franchise has turned a profit for the Maloofs each of the past four years, and seven of the 10 years the family has owned the team.

In 2007, the Maloofs turned a $21 million profit. Forbes notes amortization, taxes and interest on debt (of which the franchise has some) are not included; it's likely the actual profit seen by Maloof Sports & Entertainment is smaller. Still... Sacramento is #8 in operating income. Above them, only Toronto records a smaller overall value while operating at a net profit -- if small market teams were supposed to struggle to stay solvent, no one told the King.

Of course, the arena issue is at the crux of this. If the Maloofs shell out anything substantial for an arena, there goes that positive net operating income until the new place opens... and possibly for a few years after. In a dollar and cents sense, it's impossible not to understand the Maloofs' stance -- they can make money at ARCO until the roof caves in, then go to a free, brand new building in some other town and keep raking in the cash. Of course, sports isn't about dollars and cents, and there are plenty of reasons the Maloofs should continue to work on a solution in Sacramento. (Namely, they'll never find a more gracious fan base. If the Maloofs get an arena in Sacramento with no taxation, they will be heroes for eternity.)

It's impossible not to feel a little slighted seeing these numbers when the Maloofs have been crying wolf a bit about finances the last few years. They've made $41 million in 10 years and the value of their investment has gone up 146% in ten years... never mind all the essentially free advertising for their casino/resort through their connection with the NBA. This team has not made them poor. But at the same time, the brightest times for this sporting town has come because they were willing to spend big to bring in the Webbers and Vlades and Bibbys, and keep them. They anted up to keep Kevin Martin. They almost habitually sit courtside; they do a ton of community work. These are not bad people; the Maloofs have made Sacramento a better place.

This sort of thing will get drudged up by the anti-arena segment, even when the proposal without public funding comes down. Make sure those squawking paint the complete picture.

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Re: Despite Terrible Arena, Maloofs Making Money
I'm confused. Are there actually "anti-arena" folks who oppose arena plans that don't include large public expenditures (including subsidies, give-aways, or infrastucture development)? If not--as I assume--isn't it fair to "drudge up," or as I would put it, cite the Maloof's fabulous wealth and their enterprises' profitability as one of multiple reasons the Maloofs should fund the project themselves, or at least without public assistance? By the tone of your final paragraph, you seem to suggest otherwise.

This is an honest question--not bitchy sniping, as it may appear. Keep up the good work.

by thatjwfeeling on Dec 7, 2007 11:00 AM PST   0 recs

Re: Despite Terrible Arena, Maloofs Making Money
Dave Jones tried to kill the Cal Expo plan -- which everyone involved has said won't involve new taxes -- already. Yes, there will still be elements of disquiet no matter who funds the arena. If the city/state/region has to pay a cent for transportation upgrades, there will be complaints.

Also, what I meant (but poorly wrote; I need an editor) in the final paragraph was this: The Maloofs aren't making a mint on the Kings. $40 million over 10 years... that's not building an arena. Even if the Maloofs fund roughly $10 million a year of the arena's costs -- $150 million over 15 years -- their franchise will be unprofitable for about five years, and only possibly profitable after that (depending on adjusting parking revenues, event revenue splits, etc).

by Ziller on Dec 7, 2007 11:29 AM PST to parent up   0 recs

Re: Despite Terrible Arena, Maloofs Making Money
What is difficult for folks to understand is the economics of the NBA - the market in which these owners are operating.  Why would any business pay for an arena when its competitors do not? Why fund a 300 - 500 million dollar project when another city will give it to you gratis?  What business would willingly take on an extra multi-million dollar expense?

I desperately want the Kings to stay. As a fan, I'll be saddened if they should leave. But, from a business perspective, I'll understand if the Maloofs leave. Unless the League and the city can find a way of making a new arena a palatable business decision to the Maloofs, it is not reasonable to expect them to stay.

So, let's keep our fingers crossed and hope that some of the other non-economics factors are calculated into what ever decision the Maloofs make.

by Kusian on Dec 7, 2007 11:36 AM PST   0 recs

Re: Despite Terrible Arena, Maloofs Making Money
I second the fact that Dave Jones is a jackass.  He is an anti-Kings, small minded city politician who doesn't want to see great things for Sacramento.  He wants to keep a small-town feel to Sacramento, a city that is the 19th biggest media market in the US.  As long as he is on the council, bad things are going to happen for Kings fans.  The Maloofs can take that one to the bank (or Anaheim).

by Kings1 on Dec 8, 2007 10:25 AM PST   0 recs

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