Is the Sale and Relocation of the LA Clippers Probable?

[TheOldRoman]

So, what is this about the Clippers having such a favorable lease? Does that just mean that they pay very little? I had read before that the Clippers were a cash cow specifically because of their lease, which gave me the impression that they get a cut of the take from concerts and other events. Is that true?

[guest23]

So, what is this about the Clippers having such a favorable lease? Does that just mean that they pay very little? I had read before that the Clippers were a cash cow specifically because of their lease, which gave me the impression that they get a cut of the take from concerts and other events. Is that true?

AEG owns staples outright and a majority interest in the Kings (if not the whole team). Phil anschutz owns closely held aeg. He/AEG have a long standing relationship with the Buss family and aeg has bought a significant minority stake in the Lakers. It's been widely assumed that should the Buss kids want to cash out that AEG has the right of 1st refusal to buy them out. The Lakers and Kings even share the same practice facility in El Segundo for the last 10 years (Lakers now building their own). With all that being said, I believe that staples was originally intended to host the Lakers/Kings but at some point the clippers saw an opportunity to ditch the sports arena and put up zero capital for a brand new facility. AEG also saw this as a win/win as the clippers lease is basically free money that also drives foot traffic to LA Live (AEG development) so I'm assuming the terms are very affordable for the Clippers.

As far as other events go AEG rakes in 100% of the proceeds. They also own Livenation (ticketmasters only real competition) so they even book their own venues across the globe. Also I can't remember the official name but every few years AEG offers the Staples Club seats and suites where you get access to every single event held at staples in the calendar year which is in the ballpark of 300 days.

As much as I hate the sterile corporate aesthetics of staples inside, this is one of the few models that make sense for a large city. Thankfully LA is not one of these other mid-major markets that gets hoodwinked into building brand spanking new arenas for both the NBA and NHL (Phoenix Metro etc.) nor is the city going to go broke over bending over backward coughing up tax dollars (Sac, Columbus, L-ville) funding an arena they can't afford.

[TheOldRoman]

Thanks for the info details. How exactly does it help the Clippers, other than that they got a state-of-the-art arena without having to pay for it? I mean, what is so favorable about the lease that the Clippers wouldn't leave for a hypothetical paid-for arena in Seattle? I'm curious because it's one of those things which is always thrown around.

[STL FANATIC]

Thanks for the info details. How exactly does it help the Clippers, other than that they got a state-of-the-art arena without having to pay for it? I mean, what is so favorable about the lease that the Clippers wouldn't leave for a hypothetical paid-for arena in Seattle? I'm curious because it's one of those things which is always thrown around.

I may be misinterpreting your question, but this reminds me a little bit of the stuff in the NFL Merry-Go-Round thread. There seems to be this assumption that the only factor in where a team puts or keeps its roots is the newness of a stadium and/or paying little or nothing for that stadium.

You may be able to show that Seattle could be a bigger cash cow for an organization with a brand new and free-to-them arena, but there are plenty of other reasons why the Clippers might prefer to remain in LA. Some as simple as that's where the people in charge of the franchise prefer to be (this is a bit hard to gauge with the ownership situation being what it currently is), and some being more logistical in nature.

Stadium/arena situations are the #1 reasons teams become candidates for relocation and the #1 reason other cities have a chance to land them, but there is a ton more to the major decision of relocation.

[TheOldRoman]

I'm not suggesting the Clippers should move to Seattle or even that it's a possibility. I just wonder what exactly it is about the Clippers lease that makes it so lucrative that they would supposedly never even consider leaving LA.

[jhans203]

I'm not suggesting the Clippers should move to Seattle or even that it's a possibility. I just wonder what exactly it is about the Clippers lease that makes it so lucrative that they would supposedly never even consider leaving LA.

They won't leave Seattle. I could see them possibly going to Anaheim, but nowhere outside the LA/OC area.

[TheOldRoman]

Well, it's established that the lease is great. They wouldn't leave to move into a worse facility and possibly pay more for it, seeing as it would give them nothing they don't already have in terms of market. Anaheim would never be considered. However, it's at least plausible that they could potentially go to another city and have the entire pie of that market, thus making more money. I'm just curious as to what makes their Staples lease so great.

[guest23]

Well, it's established that the lease is great. They wouldn't leave to move into a worse facility and possibly pay more for it, seeing as it would give them nothing they don't already have in terms of market. Anaheim would never be considered. However, it's at least plausible that they could potentially go to another city and have the entire pie of that market, thus making more money. I'm just curious as to what makes their Staples lease so great.

Here's the rationale:

Being LA Metro's 2nd Team = Staples Lease/Tenant + New Cable TV deal in Socal

is more economically valuable than:

Being Seattle's Primary Team = New taxpayer funded arena+ new arena revenue streams + New Cable TV deal in WA

I have not run the numbers but this is the common wisdom. The big 3 sports make bank majority share of profit off of TV. The arena generated and other local revenues have now become secondary. For this very reason being #2 in LA puts a team leaps and bounds ahead of other top 10 markets. I actually read a while ago that some economists published some research that suggested more teams consolidate into the top 10 media markets to increase revenues and profit. It's a very unorthodox position but one of the examples used was that the NY metro (tri-state tv market) could feasibly support 4-5 mlb clubs. They based their model off of the EPL which has a similar footprint, as in so many clubs that are supported within the general London area.

Last tidbit on the Clippers specifically. The rest of the league hated sterling for a multitude of reasons but his business model was extremely successful. Use locally generated revenues to cover payroll & operating expenses so you break even, then pocket the league's national TV revenue and other shared revenue streams. He put up $3 million cash to buy the team and will clear about half a billion off the backs of the other 29 owners. It literally paid off better to be a cheap and miserly owner. Any new owner is likely to follow a similar model in LA. Break even on operating and watch the TV money pour in.

[IceCap]

I'm not suggesting the Clippers should move to Seattle or even that it's a possibility. I just wonder what exactly it is about the Clippers lease that makes it so lucrative that they would supposedly never even consider leaving LA.

I think guest23 alluded to it when he said AEG saw the Clippers' desire to move in as being very fortunate. To AEG/the Kings the Clippers are a date filler that bring in foot traffic to their other businesses. So the lease is probably very favourable to the Clippers. The money the Clippers pay AEG to play in Staples is probably dwarfed by the money the Clippers make AEG just by being there.

So AEG gives the Clippers a sweetheart deal to keep them around and the Clippers get to play in a state of the art arena at little cost to themselves. Add in the money made off of tickets, tv, and merchandise and you have a situation where the team is very profitable because it's not paying significantly (either in the form of rent or by being in debt due to building their arena) for the venue they play in.

[Brian in Boston]

The Los Angeles Clippers have been a Staples Center tenant - along with the Kings and Lakers - since the facility opened in the Fall of 1999. They're the arena's third occupant after the Los Angeles Kings and the Los Angeles Lakers. The Clippers extended their lease in January of last year, with the agreement now running through June of 2024. The Clippers' lease calls for the team to pay rent, but allows them to collect a percentage of luxury-box, parking and concession revenues for their games, as well. That's on top of the revenue they generate through ticket sales, merchandising, and broadcast rights.

[TheOldRoman]

Well, it's established that the lease is great. They wouldn't leave to move into a worse facility and possibly pay more for it, seeing as it would give them nothing they don't already have in terms of market. Anaheim would never be considered. However, it's at least plausible that they could potentially go to another city and have the entire pie of that market, thus making more money. I'm just curious as to what makes their Staples lease so great.

Here's the rationale:

Being LA Metro's 2nd Team = Staples Lease/Tenant + New Cable TV deal in Socal

is more economically valuable than:

Being Seattle's Primary Team = New taxpayer funded arena+ new arena revenue streams + New Cable TV deal in WA

I have not run the numbers but this is the common wisdom. The big 3 sports make bank majority share of profit off of TV. The arena generated and other local revenues have now become secondary. For this very reason being #2 in LA puts a team leaps and bounds ahead of other top 10 markets. I actually read a while ago that some economists published some research that suggested more teams consolidate into the top 10 media markets to increase revenues and profit. It's a very unorthodox position but one of the examples used was that the NY metro (tri-state tv market) could feasibly support 4-5 mlb clubs. They based their model off of the EPL which has a similar footprint, as in so many clubs that are supported within the general London area.

Last tidbit on the Clippers specifically. The rest of the league hated sterling for a multitude of reasons but his business model was extremely successful. Use locally generated revenues to cover payroll & operating expenses so you break even, then pocket the league's national TV revenue and other shared revenue streams. He put up $3 million cash to buy the team and will clear about half a billion off the backs of the other 29 owners. It literally paid off better to be a cheap and miserly owner. Any new owner is likely to follow a similar model in LA. Break even on operating and watch the TV money pour in.

Thanks. It seems that the Clippers would never leave more because of being in the market than specifically the Staples Center lease itself. I guess the Clippers' recent surge in relevance has helped their TV rights, because I can't imagine that the Clippers of ten years ago (while they sucked and the Lakers were still in dynasty mode) would have gotten a great TV deal even with being in LA. It doesn't seem like the Clippers are a threat to win a title in the next few years, but they will be really competitive. They could be going into a serious money-making period with the Lakers heading into oblivion for a while.

As for Sterling's management, isn't that essentially what all the owners do? Outside of a team like Memphis, doesn't everybody rake it in hand over fist due to the salary cap? Was Sterling particularly cheap in his non-player expenditures (coaches and front office)?

[guest23]

Well, it's established that the lease is great. They wouldn't leave to move into a worse facility and possibly pay more for it, seeing as it would give them nothing they don't already have in terms of market. Anaheim would never be considered. However, it's at least plausible that they could potentially go to another city and have the entire pie of that market, thus making more money. I'm just curious as to what makes their Staples lease so great.

Here's the rationale:

Being LA Metro's 2nd Team = Staples Lease/Tenant + New Cable TV deal in Socal

is more economically valuable than:

Being Seattle's Primary Team = New taxpayer funded arena+ new arena revenue streams + New Cable TV deal in WA

I have not run the numbers but this is the common wisdom. The big 3 sports make bank majority share of profit off of TV. The arena generated and other local revenues have now become secondary. For this very reason being #2 in LA puts a team leaps and bounds ahead of other top 10 markets. I actually read a while ago that some economists published some research that suggested more teams consolidate into the top 10 media markets to increase revenues and profit. It's a very unorthodox position but one of the examples used was that the NY metro (tri-state tv market) could feasibly support 4-5 mlb clubs. They based their model off of the EPL which has a similar footprint, as in so many clubs that are supported within the general London area.

Last tidbit on the Clippers specifically. The rest of the league hated sterling for a multitude of reasons but his business model was extremely successful. Use locally generated revenues to cover payroll & operating expenses so you break even, then pocket the league's national TV revenue and other shared revenue streams. He put up $3 million cash to buy the team and will clear about half a billion off the backs of the other 29 owners. It literally paid off better to be a cheap and miserly owner. Any new owner is likely to follow a similar model in LA. Break even on operating and watch the TV money pour in.

Thanks. It seems that the Clippers would never leave more because of being in the market than specifically the Staples Center lease itself. I guess the Clippers' recent surge in relevance has helped their TV rights, because I can't imagine that the Clippers of ten years ago (while they sucked and the Lakers were still in dynasty mode) would have gotten a great TV deal even with being in LA. It doesn't seem like the Clippers are a threat to win a title in the next few years, but they will be really competitive. They could be going into a serious money-making period with the Lakers heading into oblivion for a while.

As for Sterling's management, isn't that essentially what all the owners do? Outside of a team like Memphis, doesn't everybody rake it in hand over fist due to the salary cap? Was Sterling particularly cheap in his non-player expenditures (coaches and front office)?

Yes you are on point. Sterling was the worst sports owner in recent memory he's had a reputation for nickel and diming all of his employess (players included) in addition to being a horrible boss and treating people like garbage. mccourt was another bastard but his reign of terror was short lived.

Basically the new CBA is designed to put a ceiling on expenses and have the owners reap the TV revenue due to the strength of the NBA brand. So in that instance sterling was a pioneer. With the nba and mlb you now have the top tier/big market clubs doing all of the huge contracts and effectively promoting the league brand while the mid to small markets are keeping costs down and raking in the guaranteed revenues. Not a great model for the leagues as a whole but this is how modern sports have evolved and what keeps the fans interested are the occasional feel good stories like the Pirates, Tigers, OKC that can get on a sustained streak of success.

[hawk36]

You guys are missing the point discussing whether LA or Seattle would be a better market. It doesn't matter to Hansen/Balmer just like it didn't matter to Clay Bennett that OKC was a far worse option than Seattle. They are not doing it to make money, they simply want the team in their city.

[BBTV]

You guys are missing the point discussing whether LA or Seattle would be a better market. It doesn't matter to Hansen/Balmer just like it didn't matter to Clay Bennett that OKC was a far worse option than Seattle. They are not doing it to make money, they simply want the team in their city.

Those aren't good cases though, because the "losing" cities (Sacramento and Seattle) had arena problems that didn't look like they were going to be resolved, and that likely had enough of a financial impact to make it worth it to flee, even if to a lesser market (in the Sonics case.)

You are right that there could be some billionaire who just wants a new toy to play with in his hometown, and doesn't care about breaking the lease or giving up the LA market, but for most potential owners, they'd look at the revenue the team generates and it would be very hard to justify walking away from that.

[MadmanLA]

In regards to the TV rights, the Clippers' current regional TV deal with Fox Sports West/Prime Ticket expires after the 2015-16 season...pretty much, since both the Lakers and Dodgers have recently left for Time Warner Cable, the Clippers have a lot of leverage right now in terms getting what they want from Fox. Take the Clips away from Fox Sports, all you're left with locally are the Angels (locked into a 20-year, multi-billion dollar contract), Kings (recently also locked into a new deal with Fox for ten more years), and the Ducks (whose TV deal, I believe, expires in 2017). In fact, it wouldn't surprise me if Fox buys the Clippers just keep them off TWC SportsNet/SportsNet LA...if the Guggenheim Group gets ahold of the Clippers, it's a pretty much a formality they'll join the Dodgers on their new network.

I read a 1996 story recently from the L.A. Times archives that the Clippers and the L.A. Coliseum Commission (who also oversaw the L.A. Sports Arena) were in talks, after Donald Sterling backed out of a deal to move to Anaheim at the last minute, to build a replacement for the Sports Arena that would have cost upwards of $90 million--18,000 seats, 84 luxury suites, and an on-site practice facility (a rarity back then, especially when most teams were still practicing at local colleges or the like). Given that the land where the Sports Arena and Coliseum is on state-owned land, and Staples Center was still in planning stages (and eventually built right up the street from Exposition Park), a new Clipper arena (which I presume would have also included USC basketball since they were still playing at the Sports Arena) was nothing but a pipe dream.

[IceCap]

You guys are missing the point discussing whether LA or Seattle would be a better market. It doesn't matter to Hansen/Balmer just like it didn't matter to Clay Bennett that OKC was a far worse option than Seattle. They are not doing it to make money, they simply want the team in their city.

This assumes the league agrees to sell the team to Hansen/Balmer. Hansen probably burnt a lot of bridges with the NBA when he pulled that underhanded stunt trying to get Sacramento's new arena derailed.

Besides, it's been mentioned that it would cost the new owner tens of millions to break the lease with the Staples Centre. Hansen and Balmer might decide that money on top of the cash needed to buy the team simply isn't worth it.

[guest23]

You guys are missing the point discussing whether LA or Seattle would be a better market. It doesn't matter to Hansen/Balmer just like it didn't matter to Clay Bennett that OKC was a far worse option than Seattle. They are not doing it to make money, they simply want the team in their city.

This assumes the league agrees to sell the team to Hansen/Balmer. Hansen probably burnt a lot of bridges with the NBA when he pulled that underhanded stunt trying to get Sacramento's new arena derailed.

Besides, it's been mentioned that it would cost the new owner tens of millions to break the lease with the Staples Centre. Hansen and Balmer might decide that money on top of the cash needed to buy the team simply isn't worth it.

Seattle is a great potential market for relocation due to the 2 billionaires who want to own and the amount of corporate money located in the metro. However that's great for a small market to relocate to. No owner in their right mind nor would the 29 other owners approve moving the clippers from LA as it's a net equity loss.

Also the OKC thing was an aberration. You had a down economy, multiple teams in financial distress, few interested buyers and HS bending Stern over a barrel to get out of the league. Stern and the other owners didn't have many options back then. Same thing happened to the Dodgers when Mccourt bought the team. Fox wanted out in a bad way and they had the leverage. The lesson here is timing is everything and we're in a huge pro sports bubble right now because all of these billionaires want what's trendy and they also read the same long term report that live sports will be the most valuable media asset over the next 30-40 years.

[hawk36]

No owner in their right mind approving a move from LA to Seattle? We said exactly the same thing when Bennett wanted to move out of the #14 market and into the #48 market and we all know how that turned out. No way the NBA would be that stupid. Well, they were.

Remember, Hansen/Balmer were going to pay $575 million for a Kings team valued at $400 million. I don't think they'd care about losing money by moving out of LA.

That being said, I seriously doubt the NBA would even consider selling to a group outside LA.

[The_Admiral]

Last tidbit on the Clippers specifically. The rest of the league hated sterling for a multitude of reasons but his business model was extremely successful. Use locally generated revenues to cover payroll & operating expenses so you break even, then pocket the league's national TV revenue and other shared revenue streams. He put up $3 million cash to buy the team and will clear about half a billion off the backs of the other 29 owners. It literally paid off better to be a cheap and miserly owner. Any new owner is likely to follow a similar model in LA. Break even on operating and watch the TV money pour in.

But see, I don't think they hated Sterling, really. Most of the stories that have come out have said that they found him affable at board meetings and/or enjoyed the fact that his team sucked so hard that it meant free wins for everyone. That's a great point on the business model, though, because when you think about who were kind of the favorite sons among owners, it was all guys who didn't rock the boat. Abe Pollin and Larry Miller were right there with Sterling as Stern's big-time guys, and yet look at how much he despised Mark Cuban.

I read a 1996 story recently from the L.A. Times archives that the Clippers and the L.A. Coliseum Commission (who also oversaw the L.A. Sports Arena) were in talks, after Donald Sterling backed out of a deal to move to Anaheim at the last minute, to build a replacement for the Sports Arena that would have cost upwards of $90 million--18,000 seats, 84 luxury suites, and an on-site practice facility (a rarity back then, especially when most teams were still practicing at local colleges or the like). Given that the land where the Sports Arena and Coliseum is on state-owned land, and Staples Center was still in planning stages (and eventually built right up the street from Exposition Park), a new Clipper arena (which I presume would have also included USC basketball since they were still playing at the Sports Arena) was nothing but a pipe dream.

It's funny that Donald Sterling was so fixated on being a big deal in Los Angeles that he stayed at the decrepit L.A. Sports Arena for all those years rather than give up the ghost and move into the Arrowhead Pond. Anaheim may as well have been San Diego.

[Lights Out]

Last tidbit on the Clippers specifically. The rest of the league hated sterling for a multitude of reasons but his business model was extremely successful. Use locally generated revenues to cover payroll & operating expenses so you break even, then pocket the league's national TV revenue and other shared revenue streams. He put up $3 million cash to buy the team and will clear about half a billion off the backs of the other 29 owners. It literally paid off better to be a cheap and miserly owner. Any new owner is likely to follow a similar model in LA. Break even on operating and watch the TV money pour in.

But see, I don't think they hated Sterling, really. Most of the stories that have come out have said that they found him affable at board meetings and/or enjoyed the fact that his team sucked so hard that it meant free wins for everyone.

Actually, it came out recently that the other owners tried to oust him a year into his ownership for, of all things, openly tanking. Stern, being the enabler he was, talked them off the ledge and the rest was history.