Rising Revenues, Record Spark New Interest in Clippers' Future
By DAVID GREENBERG
Donald Sterling has built his fortune by buying properties at fire sale prices and then sitting contentedly as their values increased.
As owner of the long-lamented Los Angeles Clippers, the strategy has made him an even wealthier man. In 1981, he plunked down $13.5 million for the then-San Diego Clippers. Today, the team is estimated to be worth more than $150 million.
But the formula has gotten a little out of whack. The Clippers are now more than just a buy-and-hold investment. Playing close to .500 ball and sporting an exciting, youthful roster, the team is bringing in fans.
Through last week, the Clippers were drawing an average of 16,460 fans per game, slightly above the league average of 16,314. The Lakers' per game average of 18,997 fans is sixth best in the league. Significantly, the Clippers per-game average at Staples Center compares with the 10,263 average in 1998-99, the last season at the rickety Los Angeles Sports Arena.
The team also boasts 12,500 season ticket holders five times the 2,500 season tickets sold during the team's final year at the Sports Arena and nearly twice the 6,700 sold last season.
"Every year we've been in the Staples Center, we've established new attendance records," said Andy Roeser, in his 16th year as the team's executive vice president for business operations. "If we don't sell another ticket this year, we've already broken last year's record."
Of course, the Clippers have a long history of decent starts, only to fall victim to winter and spring swoons that leave them at or near the bottom of the NBA standings and prey for jokesters like Jay Leno. Even after last Wednesday's impressive win over the formidable Minnesota Timberwolves, the Clippers stood next to last in the Pacific Division.
Nevertheless, this season might be different, especially if the team can win enough games say around 40 to stay competitive throughout the season. Not hurting is the relative affordability of tickets, which range from $10 for nosebleed seats to $400 courtside perches. The average per-ticket price this season run $42.96 compared with $89.51 for the Lakers.
"It's a better quality fan," said Century City attorney Dave Senior, who was attending the Timberwolves game last week with his 8-year-old son. "It's like going to a game in New York. Last year was 1,000 percent better than the year before and this year the expectations are even higher."
Switching to Staples, said David Carter, owner of Sports Business Group Inc., an L.A.-based strategic marketing firm, enhances the team's standing among sports fans. "Now corporate executives are more inclined to attend a Clippers game to entertain clientele and to see and be seen," he said.
The move two years ago to high-priced Staples was uncharacteristic of Sterling, who has developed a reputation of being the cheapest owner in the NBA a dubious distinction that landed him on the cover of Sports Illustrated. Sterling did not respond to interview requests.
The tight-lipped Clippers would not offer any financial information, but Roeser noted that leasing fees for 19,000-seat Staples are 10 times what they were at the 16,500-seat Sports Arena. Those Sports Arena fees, according to sources, are estimated to have been around $25,000 per game, or $1 million to $1.5 million per season. That might explain the hike in ticket prices over the past two seasons and the increase in revenues, which already stood at $61.8 million for the 1999-2000 season, according to Forbes magazine.
Roeser said additional leasing costs are "worth every penny. We play in the finest facility in the country with the best amenities and provide a great environment for our fans."
A thornier financial issue, however, is the amount of money that Sterling is willing to pay for his ballplayers.
The Clippers' player payroll this year is the league's lowest at $33.7 million far below the Lakers $53 million and the New York Knicks' league-high $85.2 million. There's an easy explanation: under its collective bargaining agreement that runs through June 30, 2004, the NBA restricts salaries for the first four years of a player's career. Sterling is notorious for bringing on young players and then casting them off when their early contracts run out and they demand more money.
The list includes two-time All-Star Danny Manning and Antonio McDyess, who reached All-Star status after leaving the team. Former Duke University All-American Danny Ferry opted to play in Italy rather than sign with the Clippers, who made the forward the No. 2 overall pick in the June 1989 draft.
"They've done a great job of acquiring talent through the draft and through trade acquisitions, so they have the ability to go into the higher echelon of NBA teams," said Bill Duffy, owner of Walnut Creek-based BDA Sports Management and agent for Clippers center Michael Olowokandi.
"Now it's (Sterling's) responsibility to the fans to retain the talent," said Duffy, whose client's $4.7 million annual salary is the team's highest. "I'm sure the fans would be cynical of the direction of the club if there is not a commitment to retain the current nucleus."
Clipper officials reject charges that Sterling is unwilling to pony up. They claim they are simply trying to rebuild the team by acquiring young players through drafts and trades. This way, they avoid free agent spending sprees similar to the Lakers' 1996 signing of center Shaquille O'Neal, who will make $21.4 million this season, second highest in the league.
Investing in the future
Still, the Clippers are unlikely to move up in the standings as long as its players' average age is under 25.
"(Sterling) has got his reasons for owning the team and winning a championship might not be one of them," said Carter. "For them to get any real notoriety in the local sports scene and become even more financially successful, they have to demonstrate over time that they are committed to building and keep a great team."
Is Sterling committed to building a winner?
"I don't think (Sterling) will be happy until we've won a championship," said Roeser. "In the short run, we benefit from the collective bargaining rules that establish rookie contracts at reasonable prices. But in the long run, it will be an expensive proposition. These players will be desirable in the free agent market if they ever become free agents. We will face our challenges to re-sign these players."
Mark McDonald, senior investment advisor in the L.A. office of Phoenix-based Hendricks & Partners, the nation's largest apartment brokerage firm, said Sterling's ambition can be seen in the way he handles his primary business real estate.
"He's like a good chess player," McDonald said. "He knows when to move and when not to move. He buys at the right time and has an eye for property that's undervalued (and) holds onto everything he has. It might look like he pays a lot for a property at the time but in hindsight it always seems to turn out to be an excellent acquisition."
News Editor Darrell Satzman contributed
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