17 November 2009

SVSE negotiating with A's over Diridon

December's Forbes magazine has a feature piece on the Sharks and Silicon Valley Sports & Entertainment, the umbrella organization that owns the team and runs HP Pavilion. The magazine praises SVSE for keeping debt manageable while expanding its holdings, making the company not beholden to a single income source.
Of SVSE's revenue of $155 million, NHL hockey brings in $84 million. The rest comes from things like a chain of ice rinks, three professional tennis tournaments, a mixed martial arts circuit and an apparel company. Last year the team's hockey operations lost $5 million, but the profits from the other businesses cut that loss to an estimated $2 million. Gregory Jamison, a Sharks co-owner who's in charge of day-to-day operations, sees the combined businesses turning a profit in two to three years.
Much has been made over the NHL's floundering expansion ventures in the Sun Belt, especially the efforts in Phoenix, Atlanta, and the state of Florida. The Sharks/SVSE have defied the Sun Belt pattern of attendance and cash flow problems, partly by controlling its own venue. It has also stayed out of the scandal-ridden front pages, something that can't be said for ownership in Anaheim, Phoenix, and Nashville.

The article also touches briefly on SVSE's other major sports dealings:
The Sharks' owners have been pursuing a National Basketball Association franchise for years, too. San Jose Mayor Chuck R. Reed tells FORBES that the arena lease will be amended this month to outline contingencies in case their efforts are successful. The group is also in discussions with the owners of baseball's Oakland A's to find common ground on a proposed ballpark in the area and to possibly buy into their Major League Soccer team, the San Jose Earthquakes. Even without these acquisitions SVSE officials expect the nonhockey side of the business to surpass the hockey side next year.
In the past I described the "common ground" as a deal to run an A's ballpark, creating a monopoly position for SVSE with regards to large venues in the South Bay. Considering how tight many of the SVSE players and members of A's ownership have been historically, the next logical step may be for the A's to sell a minority position to SVSE, say 10-20%. Such a deal could be consummated fairly easily and would make sense in the long run, since there's a precedent given that venue monster AEG operates in a similar fashion. For now, the discussions are probably more about how to figure out parking and develop the six blocks between the ballpark site and the arena, but it's not a stretch to think that the talks may be even deeper. It's a far cry from when the original ballpark EIR came out in 2006. At the time, the Sharks expressed disapproval over the concept due to parking concerns. Now that the team is no longer "hypothetical" and includes political and business friends, SVSE is looking for ways to take advantage of the situation.

All of this can be summed up in three simple words: Follow the money.


Anonymous said...

Interesting. Next thing you know, you'll be telling us that the Giants ownership group has a vested interest in the SVSE, or some other variant machination. Tangled webs they weave, these capitalist entities.

Looks like the heavy hitters are lining up to play ball in SJ. The pols are playing along, so I guess they have their pound of flesh, whilst the silence from MLB is deafening. Wonder who their money in on? Never bet against the house. It's a losing proposition.


Tony D. said...

Follow the money indeed!

R.M., how do the Sharks pull in $84 million in revenue yet somehow loose $5 million (operations)?

Aren't the Sharks/SVSE and the A's already partners with the Earthquakes?

Jeff, last year I theorized that SVSE would buy Peter Magowan's stake in the Giants; as long as they privately dropped their territorial stance to SJ. As R.M. alluded to, a SVSE-run Cisco Field in downtown SJ would be a win $$$ win for them, and big money infused into the Giants organization would be better than money constantly going out (cash calls to investors, debt payments).

Tony D. said...

Kind of related to my last post R.M. Is it legal for a single entity to have stakes in two teams from the same league? Just curious.

Marine Layer said...

Player costs are high. Nearly $60 million is in this season's payroll, or 71% of revenue. That's really high and is a function of how much Sharks ownership wants to win. SVSE might be "hiding" revenue as part of how they run things, but it's still a really high percentage.

Last I checked, multiple team stakes are not allowed in MLB, NBA, and NFL. I don't think it's supposed to be allowed in the NHL either, but I think there's at least one case where it happens.

FC said...

Isn't all this negotiating on the part of the A's sort of putting the cart before the horse, or is it just a way of showing MLB the South Bay's commitment to the A's.

Regarding SVSE and the NBA, how great would it be if they purchased the Warriors from Cohan. Seriously doubt that would happen though, as Cohan seems to want top dollar for the team he's run into the ground, and SVSE doesn't seem like a buyer that would overpay.

Dan said...

Or perhaps SVSE knows something we all don't yet. For all we know MLB has made their decision and are just waiting to announce it during or after the winter meetings.

Anonymous said...

SVSE buy the Warriors? YES! Considering they along with Larry Ellison nearly bought the Supersonics a few years back, such a thought isn't illogical.
Dan, I think you hit the nail squarely on the head.

Anonymous said...

You guys are crazy if you think the Warriors would be moving to the South Bay. They just spent millions in renovating the Oracle Arena a few years back and the Coliseum is already an ideal location for fans from all over the Bay Area to attend since they're the only NBA team in the area.

SVSE really needs to quit trying to buy up every frickin' franchise that may or may not be available to begin with. Greed will only get you so far in life.

Brian said...

I think the Warriors are on the hook for the Oracle Arena improvements via a long-term lease, so it wouldn't be feasable for them to go to SJ. Whether they should have gone there in '96 before they re-did what is now the Oracle is debatable, but that ship has sailed.

Jeffrey Loria said...

Last I checked, multiple team stakes are not allowed in MLB, NBA, and NFL. I don't think it's supposed to be allowed in the NHL either, but I think there's at least one case where it happens.

Not too many years ago, the Montreal Expos were owned jointly by the other 29 MLB teams. Was that legal, and is such an arrangement still possible?

Marine Layer said...

Loria - It's not a matter of legality. It's a matter of whether or not it's allowed by league charter. The leagues have been known to bend their own rules on occasion.

Anunamous said...

Another piece being moved into place. The A's and their friends in SJ are getting everything set, while Bud works behind the scene to get the owners on board (a very slow process I'm sure, which is why we'll continue to hear nothing about the blue ribbon committee). This will all come together in the coming months, then MLB's decision becomes a slam dunk. Just the way Bud likes it.

Anonymous said...

"SVSE really needs to quit trying to buy up every frickin' franchise that may or may not be available to begin with. Greed will only get you so far in life."

Some of you need to stop acting like this is one big coup by San Jose to be a supercity which crushes all others. It's not about greed or egos or anything childish like that. Business is done by businessmen, not politicians or cheerleaders. That's all.

FC said...

Anon 9:13

No one said anything about the W's moving to the South Bay. All I was saying was that it would be nice if they purchased the team from Cohan, who has no idea what he's doing.

If you ever wanted to own Warriors season tickets, this off-season will be the time to buy in, because I can guarantee you there will be a lot of STH non-renewing their seats.

Tony D. said...

For the record, the Warriors lease at Oracle is up in 2017, which isn't to far off in the future. And if (and it's a big IF) Cohan ever decided to sell his interest in the W's, SVSE would have every right to make a bid on the team; business is business.

And FC is right: no one ever said anything about the W's moving to SJ. But I'll be honest; it would be nice.

Anonymous said...

It's not the W's who may be coming to SJ. There is a lot more going on behind the scenes than meets the eye.

Anonymous said...

Are you alluding to the Sacramento Kings, 1:11?