I’m multitasking this evening. On the plasma is basketball, first the Warriors and their furious 4th quarter comeback victory over New Orleans, and then Lakers-Suns. On one LCD monitor I’m watching the Microsoft/Steve Ballmer keynote address at CES. Some graphics are being put together on another screen for this post and a special project I’m working on. I’m watching my Twitter feed regularly, and I’ve got dinner in the oven.
Now, thanks to commenter Vince, I have to follow some new rumor about Larry Ellison’s interest in the NBA-owned Hornets. A blog entry by Forbes sports business guy Mike Ozanian indicates that Ellison could pursue the team with the intent to move it to San Jose. There’s a possible revenge/rivalry angle to the deal, as Ellison failed to buy the Warriors while the Lacob-Guber group put up the winning (and on-time) $450 million bid.
First off, let’s synopsize the Hornets’ situation. The team has struggled to get decent attendance in the post-Katrina era, despite having a decent team, a new arena, and a bona fide superstar in point guard Chris Paul. In three full seasons since returning from Oklahoma City, the team has averaged only 15,402 per game. This season, the Hornets average only 14,086 through 19 home games. Worse, the team has an out clause in its lease at New Orleans Arena in which it can leave the Crescent City if the team averages less than 14,213 during a 13-game stretch from December 1, 2010 through January 17, 2011. So far, the results aren’t inspiring if you want to keep the Hornets in town.
Someone may have to go out of pocket and buy 1,000 seats for each of the next two games to reach the target.
Hornets fans tend to respond to the schedule in a similar way to A’s fans do: show up for “event” games such as the Lakers matchup in the table above. Tonight’s crowd against a mediocre Warriors squad was a poor 13,532. Fans will have to average 15,428 over the next two games to reach the minimum 14,213 over the 13 games. Orlando should bring in a good crowd, Toronto most certainly won’t. Fans have gone as far as putting together 2-for-1 ticket deals to help get the count over the hump.
Last month I described the NBA’s purchase of the team from George Shinn an Expos-style deal. With the team bought for $310 million, the league and the other 29 owners stand to make a serious profit if the team does sell for $400 million or more. The league’s intent is to keep the team in the Crescent City, or at least that’s how it appears. Previous minority owner Gary Chouest was supposed to put together a group to buy the team, but his livelihood may have taken a hit after the BP Deepwater Horizon disaster. If a local buyer can’t be found – a process that probably won’t last more than a year – the Hornets will be up for grabs.
Ozanian’s piece puts the figure to move the Hornets to San Jose at $450 million, though that includes an unspecified amount of compensation to the Warriors for invading their 75-mile radius. The last NBA team to encroach upon another’s territory was the Clippers in 1984, who moved from San Diego after six ho-hum seasons at the Sports Arena. While the Lakers were not adversely affected by the constant cellar dwelling Clippers, there’s no guarantee that the Warriors won’t be affected by a second NBA team in the Bay Area. It would be a shock if Lacob-Guber didn’t level a sizable lawsuit at the league, trying to protect their near half-billion dollar investment. The NBA may have the most hard-nosed commissioner in pro sports in the form of David Stern, but he doesn’t have an leaguewide antitrust protection in his back pocket as Bud Selig does.
And Ellison won’t be the only interested party. The aforementioned Ballmer (whose keynote at CES was not exactly riveting) is Seattle’s Ellison, a man expected to bring the Sonics back to life. Unfortunately for Seattle, the lack of what Stern considers an NBA-quality arena in place is a considerable hurdle for the Emerald City. At this point, Seattle is just as hostile to new public sports venue financing as California is. Kansas City remains a town with an arena but without a white knight to bring a team in.
The upcoming labor situation in the NBA could be a determining factor in terms of when and to whom the team gets sold. Both sides are gearing up for a lockout, and if it proceeds like the one that shortened the 1999 season to 50 games, the timeline could be stretched out a few more months. The league could wait until a new CBA is ratified, as the Hornets could be more valuable with greater cost certainty ingrained in the new agreement. Then again, they could try to sell the team as quickly as possible, though this isn’t a league that is hurting for cash.
All of this leaves San Jose is a strange situation. With the specter of another redevelopment fund raid looming, San Jose has to pick and choose where it spends. The quest for baseball has spanned over five years in this attempt alone and there is still no light at the end of the tunnel. While the land investment for a ballpark would have greater potential (2+ million visitors per year vs. 750k for hoops), an investment in the arena and land for a Hornets practice facility may be a more prudent way to spend RDA funds. Even in better fiscal times, I can’t see San Jose having the resources available to attract both the Hornets and A’s simultaneously unless Ellison or SVSE footed the bill for all necessary HP Pavilion renovations and the practice facility (around 3 acres) as well.
The corners are vacant due to an older, less flexible seating configuration
As for the state of HP Pavilion, I’ve said before that it’s a good arena, but as it stands currently it wouldn’t be in the upper half of venues in the league. The seating bowl ends would need dual-rise seating tiers to maximize capacity and sightlines for basketball. The technology would also help change from hockey/arena football configuration to basketball more quickly. Yes, I said arena football, as the Sabercats are due to return to the AFL this March.
The biggest change may be in the area most fans don’t get to see. NBA standards don’t just include seats and suites, they include locker rooms and related amenities. The arena’s facilities are good, but they’ll have to be expanded just to accommodate an NBA team properly. While the Hornets won’t need everything listed in the plan below due to a degree of overlap, you get an idea how much space is required to house a team.
Note the size difference between the home and visitor locker rooms
It’s hard to say where and how an arena expansion could occur. It’s been 15 years since I was last in the bowels, covering the Warriors as a stringer while the team played its lone season at then San Jose Arena. I fondly remember one preseason game in which press row was placed in the hockey benches for some reason. Anyway, while there is some flex space at event level, it’s unclear whether that would be enough to make all of the necessary renovations.
In the long run, the biggest winner could be San Francisco and the Giants. If the Giants are intent upon building a new arena in SF, they’d be able to play Lacob-Guber and Ellison & Co. against each other in order to get a good deal for themselves, whatever that may be. Of course, by the time they’d get to make the deal they probably won’t have RDA to help with cheap or free land. You can’t win ’em all, I guess.
P.S. I would be remiss if I didn’t note how ironically bizarre it would be for the Ellison to send the Hornets to Oakland to play twice a season at the arena named after his company, while playing home games at the arena named after the company he just blew up publicly.
Also, Ellison has clarified (via the Merc’s Brandon Bailey) what his intent was with the Hornets:
“I did offer $350 million” for the New Orleans Hornets, Ellison told reporters, adding that he was “slightly outbid” by the National Basketball Association when the league bought the bankrupt team last month from owners George Shinn and Gary Chouest.
Ellison’s comments put a damper on the hope floated in a Forbes blog post that he planned to buy the team and move it to San Jose.
The prospect was warmly greeted by San Jose officials, intrigued with the notion of another pro franchise moving to the city, but Ellison flatly said the report was “not true.”
More grist for the mill.
P.P.S. An expansive article by the Merc’s John Woolfork about San Jose’s RDA just became available. The agency, which is the second largest in the state, pulls in $185 million in property tax receipts yearly.
newballpark.org 
Well, this Merc article clears things up…
http://www.mercurynews.com/warriors/ci_17020210
I saw the Merc article today too and it was fascinating how much the valuation of bay area territorial rights was worth ($150 million). I think that Ellison would rather go to SF than SJ personally, but the W’s would put a stop to that. However, I think Lacob and his partners would be open to getting bought out for the South Bay and keep SF and East Bay to themselves. However as ML pointed out, there is no AE in place in the NBA so if Ellison were to entertain any notions of invading the W’s TR, i think he would do it through legal first and then make the W’s negotiate on the side.
I’ve been a lifelong Warrior fan living in San Jose. I can’t get my head wrapped around the idea of the Hornets moving to San Jose, even if it is just a rumor. I would want to root and support the Hornets if they do make it to San Jose but at the same time, I have years invested in the Warriors. I think my head just might blow up if I keep thinking about this.
ML, if Ellison is willing to purchase the Hornets, would he then be willing to purchase the A’s and keep them in Oakland should a deal in SJ fall through? I know you have mentioned before that his focus right now is on the Americas Cup, but after this story, you have to think that possibility is there, no?
He’s shown no interest in any team outside basketball. This white knight talk is just wishful thinking.
@NT–true, but maybe he should switch sports to MLB (A’s) and he may have better luck. Oracle Park at Victor Ct. works for me,
Victory Ct., that is.
He’s looking for a hobby and can afford to have particular tastes. There are many franchises across all sports that he could have bought by now, but it’s always the NBA that piques his interest.
A half billion dollar hobby, or about 2% of his net worth. 2% of my net worth may get me a nice dinner somewhere!
“would he then be willing to purchase the A’s and keep them in Oakland should a deal in SJ fall through?”
No. Ellison has shown 0 interest in baseball. And there certainly isn’t anything stopping him from making an offer for the A’s or being linked to the A’s. However he hasn’t made any offers and he hasn’t been linked to them, and for a very good reason. He’s not interested in buying a baseball team. The guy wants a basketball team or a football team. He’s obviously a fan of those sports, basketball in particular. He wouldn’t then buy a baseball team just because it’s a team, he’s trying to buy something he likes, and the A’s aren’t it.
So enough with the Ellison talk about the A’s. It’ll happen the third thursday after hell freezes over.
Ellison’s had every opportunity to directly declare his interest in the A’s or allow backchannels to hype up his interest, which is what happened with the W’s. Either he doesn’t care much for baseball, or he doesn’t care for the A’s in particular.
Aside from the cost of gutting the lower level of the HP Pavilion (and who’ll pay for it), there’s also the loss from displaced events.
.
On another note, both the Hornets and Sharks use teal.
@ML–Hmm, don’t know about this Ellison guy. If money is no object, and this guy has plenty: A’s over Hornets any day; W’s over Hornets is a given; and A’s over W’s is a no-brainer, but that’s just me.
@jk-usa – Yes, it is just you. It’s been proven that Ellison doesn’t throw his money around at just anything.
Even if Larry were to buy the A’s, what makes people think he’d keep them in Oakland? He would have moved the W’s to SF and he would have moved the Hornets to SJ.
Ellison has no interest in buying the A’s. He’s a huge
basketball fan and is a pretty good player from what I hear. He
wants a basketball team.
If Ellison moved the Hornets to San Jose, it’d be hilarious if the NBA resolved their T-rights issue before MLB did.
Briggs. If the Hornets moved to SJ first it just proves Ellison knows what it takes to get it done, $$$. If Wolff offered the Giants $150 million today, the A’s would be in San Jose as quickly as the owners could be assembled to vote on it. Wolff is playing hardball on the price (or trying to avoid it altogether), but that’s not the way to get this done quickly.
It makes sense on why the NBA did not sell the W’s to Ellison last year. In the bidding a 150M dollar relocation fee was written in just in case a 2nd NBA team came to the Bay Area.
Why would the NBA do that? It is because they realize the Ellison is the 6th richest man in the world and given his ultra-competitive nature why not take advantage?
The NBA wrote the 150M dollar relocation fee because they figured by selling the W’s to Lacob and Gruber they could then in turn sell another struggling team in a bad market (Kings, Hornets, Bucks, Grizzlies) to Ellison and then have him send 150M for the Warriors…This way lawsuits could be avoided by involving this in the sale with the W’s upfront. Lacob and Gruber knew this in advance hence that is part of the reason why the price for the W’s was so high (450M)…makes sense.
Now the NBA has put themselves in perfect position…By buying the Hornets for 300M plus they can turn around and sell the team to Ellison for $350M,, turn a profit, Ellison then sends $150M fee to the Warriors so they are happy, move the team to a better market (San Jose) where there are affluent fans and a strong corporate base….Two areas New Orleans has struggled with since Katrina.
If they had sold the W’s to Ellison in the first place then who would buy the Hornets for example and pay $500M like Ellison would?? There isn’t anyone local in New Orleans to make this happen but in the Bay Area Ellison will do “anything” to own an NBA team.
The NBA has played this perfectly and played Ellison so that he would eventually bail them out of a bad situation in a city like New Orleans.
Ellison has so much $$ he would not mind paying $500 plus some renovations to the HP Pavilion to own a team.
Now the NBA will have 2 franchises thriving in a big market instead of having one franchise thriving beyond belief while another bleeds money left and right despite a good product on the court.
It is about the overall health of the league and New Orleans is sucking money big time now from all the owners just like the Expos did to MLB. Now they will carve up a big market like MLB did with Baltimore-Washington with the Bay Area.
NBA is smarter than I ever thought they were….WOW.
@Dan- LE said he offered $350M for the Hornets—considering the NBA paid around $310M you could estimate that he offered $40M to take care of the territorial issue—pretty much what has been suggested as a fair price for opening up SJ to the A’s-I’d be blown away if he was willing to pay $450M knowing that $150M was going back to the W’s–he’s too shrewd of a business man for that-
@Go A’s- Ellison offered more than $450M for the W’s but the league and Cohan said his last offer came in too late.
Therefore why would he care if $150M goes to the Warriors? He wants a team as his “pet project” and for fun…Not necessarily to make $$.
Ellison hates losing and the NBA are playing that against him perfectly.
@Dan- The A’s offered the Giants 100M back in 2004 from Steve Schott and Ken Hoffman for T-rights to Santa Clara County but the Giants said now (Magowan)….Tells you something right there…
@Sid– you may be right about what motivates him but he is a shrewd business man—if money was really no object he could have thrown $500M at the W’s and priced the others out of contention. Throwing $150M bones the W’s way would in essence make their purchase price $300M while he pays $450M. While there is no doubt that $150M out of his pocket is like buying a nice dinner for you and I the bottom line is that it wouldn’t be viewed as a good business move—something that he prides himself on–
Does anyone have an idea of how long it’d take to renovate the HP Pavilion’s level level?
@Briggs – It would have to scheduled in a manner that doesn’t disrupt either team’s schedule. Assuming that the Sharks made the playoffs and lost in the 1st/2nd round as is custom, that would leave 3-4 months to complete the work, which is feasible. It really all depends on the amount of new concrete construction that would have to occur. This document from Oklahoma City details what was to happen with their arena. Coincidentally, OKC Arena was designed and renovated by Sink Combs Dethlefs, the same company that architected San Jose Arena.
@Go A’s
If Ellison knew that he was being outbid he would have made it happen. He doesn’t want over pay beyond belief for the team itself as you pointed out but even he realizes he needs to something drastic to make this happen at this point.
He is taking the high road by stating he would have bought the Hornets and would have then decided what to do.
He doesn’t want to happen to him what happened to Blackberry founder when he tried to move the Coyotes to Hamilton immediately and alienated the rest of the NHL owners.
I say the NBA is toying with Ellison until he just shells out the dough they know he has to save the league from being in a dreadful market. It is a good business tactic by the league as well know Larry hates losing and it will finally show.
Sid @ 1105,
Actually, the figure was $50 million and it was Magowan who approached Schott about dealing the T-Rights to the A’s for a Great America ballpark.
For reasons unknown, Magowan pulled the offer and later denied he had an interest in dealing the rights.
Somewhere I have The Merc/Skip Bayless article which details the story; I’ll cite it if I can find it.
“It would be a shock if Lacob-Guber didn’t level a sizable lawsuit at the league, trying to protect their near half-billion dollar investment. The NBA may have the most hard-nosed commissioner in pro sports in the form of David Stern, but he doesn’t have an leaguewide antitrust protection in his back pocket as Bud Selig does.”
Not sure I understand this comment. The absence of an antitrust exemption should make it harder for the W’s to enforce territorial rights and bring this type of lawsuit, not easier, for the same reason the NFL was not able to keep the Raiders out of LA.
@bartleby – There’s nothing within the NBA’s CBA that disallows lawsuits between teams, unlike the ML Constitution which does.