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February 21, 2006

Sonics: Let 'em Go

These last few weeks, the Seattle press has been abuzz about Howard Schultz's hard-core arm-twisting of the state legislature to get a $200M rebuild of KeyArena for the Sonics (and the Storm). In the latest development, Schultz has begun channeling his inner Ken Behring, saying, in effect, that if Seattle fails to build him a new arena, well, he might have to take his ball and go home.

Given how much I love the Storm, it pains me to say, but ... if these teams can't stay solvent without a massive government handout, maybe we should think about what that means. Take the team someplace where you can turn a profit, Howard. God bless.

Look, I've benefited enormously from Mr. Schultz's presence in the Seattle community, so I'm not chalking this one up to "tell the rich guy to go pound sand." However, this is a one-sided bailout of a private company with public dollars. If the only corporate-welfare test we're asking for these days is that there be a nebulous "public good" to having Groups X, Y or Z in town, I suspect we'll have one hell of a lineup outside City Hall in the morning - every arts group in town should be able to get on that gravy train. (And I'd like to personally propose a $100,000 subsidy - just 0.05% of the money Mr. Schultz is asking for - for John Kaufmann's "Date Of Birth." A modest proposal.)

My problem with handing the Sonics a new arena is twofold. First, there's the philosophical problem of subsidizing private interests with public dollars. While this happens all the time (the USDA, for example, helps firms like Monsanto, while the State of Washinton is busily building new freeway ramps for my employer), these public/private partnerships often are justified by the economic value of the whole transaction. There's more pie for everyone (gross receipts for the business, taxable revenue for the people), so the partnership is a good investment. The Sonics deal clearly doesn't meet that test - there's no possible way that the Sonics are worth $200M to the city of Seattle. In fact, it turns out that we can let them go and potentially do just great at KeyArena ("KeyArena could be profitable without Sonics, study finds"):

[City counciman Nick] Licata isn't alone in thinking KeyArena could survive the Sonics' departure. The city-owned arena could turn a profit without an NBA team by hosting more concerts, ice shows and college and high-school games, according to a study by a city consultant.

"Non-Sonics options pencil out, and that's the finding of sports-industry experts," Licata says of the recent study funded by Seattle Center.

Sonics Vice President Terry McLaughlin, who has been stressing the Sonics' economic value to the city while pressing for a $200 million subsidy to expand KeyArena, doesn't dispute the study's conclusions. (Emphasis mine)

This is why, if you read Howard Schultz's recent op-ed piece in the Seattle Times (and you should), you'll see that the primary thrust of his argument is that the Sonics are a cultural good for the city, something that brings us together:

Culture isn't just about art galleries, performance halls and museums. Culture is also about the amateur and professional sports that help define who we are.

I agree with this. Totally. But it's one thing to say, "sports help define who we are," and quite another to say, "and therefore we need to define ourselves by giving $200 million to the sports team I own and operate." (As a point of perspective, the Puget Sound Business Journal reported in April 2004 that the value of the Sonics franchise is $196M.)

And this is the second part of my problem. I mean, if we're valuing sports as part of our culture, shouldn't we also ask whether or not that $200M would be better-spent on other cultural pursuits? Or heck - even other sports teams?

The Storm are a great case in point. The Storm operation is reported to run on just $3M a year - barely a blip on the balance sheet of the Sonics. Yet, for that $3M, the Storm field an impressive 20-some home games per year, plus another 20-some on the road. The games aren't very expensive ($10 gets you a seat, and a good one at that), and thus seeing a Storm game is something that can be done by a modest-income family on a semi-regular basis.

Or what about hockey? We have an NHL team, here - the Thunderbirds - but we're not proposing a $200M handout to them. Yes, they'll benefit from a new KeyArena, but so will Coldplay when they come to town. Nobody is kidding themselves about who this new arena is really for.

This is not complicated. The Sonics are losing money. That means their revenues aren't sufficient to cover their costs. As a manager at the Sonics, I'm faced with three choices.

First, I can raise revenues. This can be done by changing prices on current offerings, coming up with new offerings (think "corndog" or "t-shirts"), increasing the volume of stuff I'm selling, or some combination of the these.

Second, I can cut costs. This means I get rid of perks (flying coach instead of first class), make my operations more efficient, or find a way of holding the line on my labor costs (like, you know, maybe not paying my players so much).

Or third, I can do nothing and close up shop.

The Sonics seem to want Option Four, which is "change nothing, and get the public to pay for our business." Again, I understand their motivation (heck, I'd like a $200M handout, too - GavArena, anyone?), but it seems unconscionable that our political leaders are taking this seriously.

And yet they are taking it seriously. The Times had a great piece about "The 5 major hurdles Sonics face in Olympia", and the upshot is this: the sin the Sonics committed is not asking for $200M. No, the sin is that they didn't bow and scrape enough in front of The Right People before getting all up in our faces about things:

They haven't sweated enough. Much like the team's sluggish defense on the court, some legislative insiders say the Sonics front office has not moved its feet quickly enough in the political arena.

"Frankly, I don't think they've worked members very much, and then all of the sudden we get an ultimatum," said Marty Brown, legislative director for Gov. Christine Gregoire. "It just doesn't feel to me like there's been enough groundwork done."

So here's my prediction: the arena upgrade is going forward. There's going to be some political theater, some last-minute negotiations, some hand-wringing in the press, and, when it's all over, the Sonics will get the new-and-improved KeyArena in 2011 or 2012 or whenever. And we'll all like it, the way we like Safeco or Qwest Field. Tickets will be more expensive, and so will concessions. And the Sonics (and the Storm) will stay happy for a while.

But still, I wonder - isn't there something better we can do with $200,000,000?

UPDATE, February 25, 2006: It's been pointed out to me by several folks that, while the Seattle Thunderbirds do use Key Arena, they are not an NHL franchise. I regret the error, and thank everyone who wrote in to correct it.

Posted by Gavin Shearer at February 21, 2006 11:52 PM. Posted to Politics | Seattle Storm.

Comments

Posted by: ginawallace at February 22, 2006 7:19 AM

Posted by: tony at February 22, 2006 11:24 AM

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