Utah Jazz: Will Sagging Profits Drive Team Elsewhere?

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Utah Jazz: Will Sagging Profits Drive Team Elsewhere?
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From an attendance standpoint, there’s no reason for the Utah Jazz to leave Salt Lake City. Through the end of the 2010-11 season, the Jazz ranked seventh  in NBA home attendance, averaging 18,421 per game.

The 2011-12 season is off to an 18,980 average through four home games, ranking the team sixth  in the league. That’s about a three percent increase over last season.

Attendance, however, is but one factor which dictates where a sports franchise decides to call home.

From a revenue standpoint, however, the Jazz leaving Utah may be an eventuality.

These types of things happen when a sports team is sold, and selling the team might be the only solution for plugging the revenue hole sinking several NBA franchises, including the Utah Jazz.


Value

According to Forbes—based on numbers at the end of the 2009-10 season—the Utah Jazz franchise is worth $343 million, making the team the 16th-most valuable in the NBA.

The Jazz usually rank well on the annual Forbes report—which is due out later this month—for a small-market team that doesn’t share its arena with an NHL franchise. What also helps the team’s value is the fact that it owns the Energy Solutions Arena.

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In spite of those impressive figures, the team incurred a $3.9 million operating income loss during the same season. (Operating income is the amount of money made or lost after all the bills—including player salaries—are paid.)

If you think a $3.9 million is a huge chunk of change to lose, hold on to your wallets. In November, the Deseret Morning News reported the Jazz are expected to post a loss in the neighborhood of $17 million for the 2010-11 season.

How long can a business—which is what the franchise is, all things considered—continue to hemorrhage money before taking a drastic step to rectify the situation (like selling the team)?

If the current Jazz owners were forced to sell, would the new owners keep the team in Utah?

While Jazz fans would hope so, they probably shouldn’t hold their breath.


Legacy

The Jazz moved from New Orleans to Salt Lake City in 1979 and, in 1985, the late Larry H. Miller became part-owner of the franchise. In 1986, Miller became the sole owner and, according to the Deseret Morning News, considered the franchise a “community gift.”

Gifts can be—and, sometimes, have to be—returned.

Ezra Shaw/Getty Images
Losing the team would be tough on Jazz fans.

In early 2012, Larry H. Miller Sports & Entertainment still own the Jazz, but for how long?

With the team’s current value, LHMSE stands to make a huge profit by selling the Jazz, especially to owners who may plan to move the franchise to a larger market, like Southern California.

The Los Angeles area is a viable spot for the team to relocate. Not to the Staples Center, but to the Honda Center, in nearby Anaheim.


Anaheim Jazz?

Orange County has long hungered for an NBA team of its own. During the mid- to late-90s, the Los Angeles Clippers played about 10 games a season to packed houses in Anaheim, no matter how bad the team was.

Had it not been for the lucrative deal the Clippers signed with the Staples Center, “Lob City” might be playing in the shadow of Disneyland these days.

When the San Antonio Spurs were lobbying to get a new arena in the late-1990s, Anaheim was on the team ownership’s short list of relocation destinations.

Recently, there were (very) serious talks of the Sacramento Kings moving to Anaheim.

What does this mean? It means NBA owners see potential in the Orange County market—and the new Jazz owners will, as well.

Bruce Bennett/Getty Images
The Honda Center holds 18,336.

Sure, Jazz attendance is among the highest in the league, but the continuing loss of revenue is what could ultimately drive the team elsewhere.


Money

For an NBA franchise, there’s money to be made in Southern California. A lot of it.

As you might suspect, the Los Angeles Lakers are among the NBA’s highest-grossing franchises, pulling in an operating income of $33.4 million, ranking the team fourth in the league for the 2009-10 season.

The Los Angeles Clippersthe Clippers—ranked 10th in the NBA in operating income for the same season, reporting an $11 million profit. And that was before Chris Paul arrived and Blake Griffin was healthy.

That’s a combined $44.4 million of operating income between two teams that share the same fanbase and the same arena!

Because Southern California is so densely populated, there’s enough fans and corporate and merchandising potential to help three or more NBA franchises make money.

Orange County, which is about 25 miles southeast of the Staples Center, is virtually its own metropolitan area—one that is capable of supporting its own franchise (attendance- and revenue-wise).

Jim Rogash/Getty Images
Would the team move John Stockton's statue elsewhere, as well?

Orange County is a good fit for any financially-strapped NBA team. So why not the current Jazz ownership group?

Obviously, the Utah fanbase would not be happy about such a move. But business is business. Nothing personal, right?

If this were to happen, Jazz fans would be forced to join the long list of jilted fanbases that lost a beloved sports franchise to relocation.

The Los Angeles Rams, Baltimore Colts, Seattle Supersonics, St. Louis Cardinals, Cleveland Browns...the list goes on and on.

While sentimentality may lead Jazz fans to believe the team isn’t going anywhere, the fact remains that the franchise is a business, and, again, businesses don’t stay in business if they’re not making money.

You can take that to the bank.

 

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