Purdy cites Sharks’ TV deal as reason team could leave San Jose

It wasn’t that long ago that the Sharks were such a laggard in terms of TV ratings and revenue, they sold their own ads. With no competition to Fox Sports and its successor, Comcast Sportsnet, the Sharks always ended up the runt of the litter compared to the MLB and NFL teams, plus the Warriors. When CSN California was started in 2009, the Sharks gladly leaped to the fledgling network in hopes of better exposure and fewer time conflicts. While they got both of those goals realized, the actual contract terms severely favored Comcast, netting the Sharks only $7 million a year.

Mark Purdy mentions Sharks ownership’s exasperation with the deal, which was negotiated in 2010, years before Hasso Plattner assumed the throne at the Tank. The NHL hasn’t been affected as much by the TV rights bubble as the other three major sports, but there’s enough of a discrepancy that it’s problematic for the Sharks, who have the 4th highest payroll in the league. SoCal rivals, the Kings and Ducks, bring in $20+ million annually. Even the Florida Panthers rake in around $11 million per year. Toronto has the most lucrative deal at $41 million per year, which expires after next season. That said, Toronto’s deal is approximately the same as the middle-of-the-pack deal the A’s signed, ironically also with Comcast Sportsnet.

And it’s not like the A’s are a ratings powerhouse. Both the A’s and Sharks are in the 1.x ratings range on CSNCA. You’d think that would translate to similarly sized deals. Evidently not. Purdy speculates that former Sharks exec Greg Jamison lost his job after making the deal. Jamison had a long tenure dating back to George Gund’s time as the owner, so maybe Jamison was too fixated on how the deal compared in proportion to previous deals. Perhaps he didn’t see the bubble coming.

Current team CEO John Tortora is a former media lawyer, so renegotiating the contract should be right up his alley. Unfortunately, the team is locked in for another 14 years, and while Comcast may be accommodating to some degree, they’re not gonna give away the farm. I like the idea of NHL commissioner Gary Bettman getting involved and holding next winter’s Stadium Series game as a carrot, though I’m not convinced it’ll make that much of a difference. When Comcast files its annual financial statement, CSNBA and CSNCA are lumped with all of the other regional sports networks and non-sports properties like USA and Bravo. But it’s obvious that each network is its own unit and must perform up to par. Take CSN Houston, whose carriage situation outside its sister cable provider has been disastrous. CSN Houston is currently undergoing bankruptcy proceedings, and the two teams who have partnered to start the network, the Rockets and Astros, are feeling the pinch because of that mess. For Comcast, CSN Houston may be the canary in the coal mine that signals the end to the bubble.

Trapped for now with a poor TV contract, the Sharks could look elsewhere locally for revenue. Santa Clara has harbored ambitions of a huge Coliseum City-like entertainment complex, with Levi’s Stadium and Great America acting as anchors. An arena – presumably on the current Golf & Tennis Club – would complement the existing options, with a Santana Row-like development bridging the area between the arena and the stadium. Since the City is tapped out because of obligations for the stadium and redevelopment dead, the Sharks would be on their own the same way the Warriors can’t expect help from San Francisco for their Mission Bay arena. Even with free or cheap land, the arena’s price tag would be $600-700 million. Most franchises can attempt such a move if they have ballast in other areas like TV. The Sharks do not, so it’s hard to see how they’d take on such a huge debt obligation.

Attendance has been great for all 20 years the Sharks have been at the Tank, so the only motivation to reach for more is the premium seating segment. SAP Center has plenty of suites and club seats. The suites could be better situated, and the newer segments in between suites and club seats haven’t been addressed, whether you’re referring to 4-6 person loge boxes or outlandish accommodations like the “bridges” under the ceiling at MSG. Even standing room only seats have been turned into something of a premium experience in some arenas.

The cheapest solution would be to make improvements to SAP Center to match what’s being offered. There are only two concourses, main and club. The upper suite level above the seating bowl is too narrow to serve anything besides the suites and penthouse area. The ceiling is among the lowest in the NHL, which limits expansion to an extent but also contributes to making the arena very loud (compared to Staples Center and Honda Center it’s no contest).

tank-seatingchart

Recent Sharks seating chart

Knowing the Tank’s limitations, I have a short list of improvements that could be made to keep the place competitive:

  • Install 40 loge boxes – As you can see from the chart above, the club seats begin where the club level vomitories (tunnels) provide access to the seats (near the 100-level numbers). The seats immediately next to the vomitories are non-club seats. If the Sharks want to add loge boxes, they can do so in those 4 rows. Doing so would displace a bunch of season ticket holders. Hopefully they can be relocated to comparable area.
  • Replace the wire/metal railings at the front of the upper deck – Currently the Sharks sell Ledge seats at a premium, as most teams do. If they remove the wires and replace them with glass, the views from the 2nd and 3rd rows won’t be as compromised, allowing the Sharks to sell those seats for more.
  • Redo the lower half seating bowl with dual-rise seating at the ends – Doing so will make the arena configuration more flexible and efficient. See this post for more.
  • Install rafters seats – Like the MSG bridges, these seats would be in the ceiling and would practically overlook the rink. The elaborate truss framework in the ceiling is designed to make various parts up there easily serviceable and accessible. Look up during a game and you’ll often see people scurrying along the catwalks. If the Sharks can figure out a way to properly provide fan access, there’s an obvious opportunity. The only question is whether the trusswork causes obstructed views.
SAP Center ceiling

SAP Center ceiling

All of this costs money. SJAA, the authority that manages the arena over the top of the Sharks, has a capital improvements budget that it negotiates with the City and the Sharks. Over time they’ve funded replacement scoreboards, the addition of new suites, and other changes. It’s through SJAA that future improvements will be funded, though the Sharks will have to pony up a lot of their own money to get it done. For the rights to operate the Tank and get a cut of concessions, parking and other revenues for all events at the arena (not just hockey), the Sharks pay San Jose $7-8 million a year – mostly for debt service. The Sharks have claimed paper losses for several years now, partly owing to that rent payment, the TV shortfall, and the team’s high payroll. Perhaps the Sharks will offer to make the improvements in exchange for lease concessions. Also, there’s still the deal struck in 2010 to build a garage north of the arena in case the A’s come to San Jose. The lease is up in a few short years, so both sides better get prepared.

Finally, there’s a much simpler market-related question to ask: Can the Bay Area support 4 arenas? With the W’s building their own in SF, Oracle Arena and SAP Center probably still standing for some time to come, how does a 4th arena (2nd in the South Bay) make any sense? Touring acts will play the 4 off each other, killing the arenas’ profitability in the process. LA and NY support 3 up-to-date major arenas, mostly because all the arenas have sports franchise tenants (the Forum is an outlier). In the Bay Area’s case, only 2 arenas would have sports franchises. Each arena would be specced out for their respective team, multipurpose being synonymous with compromise. From a demand standpoint it makes little sense. Plattner, Tortora, and their staff probably realize this and know how to move forward with the venue. But consider for a moment that the Bay Area could have 4 very nice arenas yet only 1 modern NFL stadium and 1 modern ballpark. Frankly, that looks more than a little skewed.

14 thoughts on “Purdy cites Sharks’ TV deal as reason team could leave San Jose

  1. Put the Sharks in an arena in Santa Clara. I’ll swap a 15-minute VTA Light Rail trip south for a 15-minute VTA Light Rail trip north. As long as they don’t end up in Mission Bay with the Warriors.

  2. Left out of ML’s post is the news that really has Sharks fans up in arms: Drew Remenda is not returning at TV color commentator.

  3. Isn’t the cash cow for NHL teams home attendance? I thought that each team received 100% revenue from home games and that is where most of the teams revenue came from. In my opinion only a long playoff run for a couple of seasons will help cure their money woes. They need to learn to manage their cap space better, and rebuild their team to compete against Chicago, Anaheim, and LA.

  4. NHL teams make money through deep playoff runs. Nothing further needs to be said when it comes to the Sharks and deep playoff runs.

  5. Oracle Arena isn’t going to survive without the Warriors. Oakland will probably try to use it as an entertainment venue but when there is going to be a brand new state-of-the-art arena just across the bay and the still quite nice SAP Center to compete with, it really just doesn’t stand a chance. I also don’t see an arena being built in Santa Clara over the short or medium term. Making prediction decades out is a crapshoot, so who knows after that.

  6. This seems like nothing more than a Purdy column filler piece. The Sharks have one of the strongest season ticket bases and strongest corporate bases in all of sports never mind the lowly NHL. They wouldn’t abandon that and the arena they not only have a sweetheart management deal at that the city is continually upgrading for them on the public dime. This is just the Sharks being pissed about the fact they signed their TV deal a few years too early before the TV boom went stratospheric and Purdy trying to generate fear in the Sharks fan base to put pressure on Comcast (who obviously have no interest in budging at present).

    The SF arena is no threat being a basketball only arena and Oracle is likely to be leveled in the next few years, and Santa Clara doesn’t have the stomach for any more publicly funded sporting venues (never mind the fact the neighbors would be up in arms if that was even suggested as 10 games a year already has them cranky).

  7. I’m having a hard time seeing how the loge suites could be incorporated into the current seating bowl without screwing up some views.
    .
    I agree on the upper bowl barriers (I’ve been saying this for about 15 years). That was just a design error, pure and simple. Why they had to make the landing areas so high (and thus the barriers so high) I’ll never know. I’m not sure glass is much of an improvement however: I’ve sat behind glass barricades in the premier level in LA and that’s no picnic either.
    .
    Currently, I think a lot of the non-obstructed rafter areas are used for overflow media (that appears to be who is up there during games). So they’d presumably need to find somewhere else for them to go as well as figuring out how to get fans up there concourse-wise. I suppose they could build something that hangs from the current rafters (there is plenty of space) if you could structurally do that.

    • @Brian – A loge box will probably take up 2 or 3 rows, 6 regular seats wide. There’s no need to severely modify the bowl to make it work.

  8. @Dan- Levi’s Stadium is not publicly funded. The 49ers are responsible for a 30M a year rent payment and any shortfall on debt service year to year.

    The Stadium Authority holds the debt because it is a “tax sheltered government entity”.

    The money Santa Clara pledged went away with redevelopment. All SC did was move the electric substation where the site is and a few other things that were minor.

    As for the Sharks; According to Forbes they have the 3rd most loyal fan base in the NHL. Of course missing the playoffs just once since 1997-1998 helps.

    @ML- Is it possible for the Sharks/SJAA to dig deeper into the ground at the SAP Center and create another layer of suites and a new concourse that way?

    It is not like the arena sits on landfill or is below sea level like the Coli and Oracle arena.

    Then again this suggestion may very well be easier said than done.

  9. If they were that worried about milking the cash cow of ticket sales, they could start by putting the seats back in at the portal where they skate out of the shark head. They don’t use that for anything else, sacrificing seats on the glass ($206 each) and sideline club ($139 each) just for 60 seconds of introductions.

    They could also reconfigure the glass area on the 107-109 end; there’s some underused space there, and the opposing back-up goalies no longer have to sit in front of 112 (since the glass replacement enlarged the bench area slightly.) Put in some risers and have 2-3 rows there (keeping the disabled seating), or add an on-the-glass mini box with bar stools and tables.

    The loge box idea is genius, but messing with the lower bowl sideline seats is a tough proposition. Talking with the people around me in 115, the standard line is “had these seats from day one” or “had tickets since the Cow Palace days. You rarely see vacancies on select-a-seat nights; if you displace long-time STH, you have nowhere equivalent to put them.

  10. If the A’s were given rights to Santa Clara county within the next couple years, is there any chance they’d consider building near Levi’s instead of downtown SJ? Maybe there is a possibility of rezoning land entitlements in the area in a similar deal to what was planned in Fremont Pac Commons? I have no clue because I know little of this area. I just assume an entertainment complex would prefer a ballpark to an arena.

    • @gojohn10 – Schott would’ve tried it. He wanted some land north of the golf course. If Wolff were to be interested I don’t know how far it would get. Considering how the Niners shortcut through CEQA to get Levi’s built, it’ll be much harder to get an EIR passed for an 81-game ballpark at the golf course.

      @Mark – I figured that might happen. The better option might be to take the upper club rows, or the top of the lower deck.

  11. Sid, actually over 100 million of Levis stadium was directly publicly funded. And 400 million more is guarenteed by the city run stadium authority. Don’t let the Niners fool you, there was a substantial public contribution to their new pleasure palace and it would not have been built without the taxpayers.

  12. @Dan- You are incorrect and you need to do more research on this.

    If the 49ers are paying 30M in rent and any debt service shortfall that means Santa Clara is not on the hook despite “holding the debt” in a tax sheltered stadium authority.

    100M? Most of that went away when redevelopment died. Measure J stated no money would be used from the general fund period and that has held true.

    Only a hotel tax is driving some revenue and that has nothing to do with the taxpayers of Santa Clara…..only the business people who stay at those hotels are charged and they can have their corporations expense it anyways.

    Santa Clara got the best deal for a public entity in history. The 49ers are the ones in charge of paying of all the debt.

    Not to mention the Stadium Authority kept all revenue from SBLs and naming rights which totaled 600M-700M alone.

    Santa Clara came away like bandits on this deal. Unlike Sacramento who got screwed with a 255M subsidy from parking that will no way ever come close to the projections Kevin Johnson is spewing from his ass.

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