Ilitch, Tigers, Pistons: For love of the money.
A few days after Mike Ilitch surprised nobody with his announcement on his intention to buy the Pistons, I still doubt his motive about keeping the Pistons in Detroit. It comes down to one thing: strengthening the financial stability of Ilitch Holdings. In the long run, this probably helps the Tigers; the 2011 / 2012 outlook might be a little more grim. Let’s discuss.
Here’s what we know:
- Joe Louis Arena is crumbling, and the Red Wings can move out at any time.
- Bill Davidson’s widow is unhappy and wants her cash
- The NBA has a >50% chance for a lockout heading into the 2011 / 2012 season.
- The music industry in consolidating (Ticketmaster & Live Nation), and live entertainment is now a significant portion of musician’s deals (called 360 deals).
How are these connected? The Red Wings need a better stadium with better amenities… which generate more revenue. The Wings aren’t going to pay for a new stadium on their own (no reason to invest in Joe Louis either). Ilitch buys the Pistons, he gets the Palace. This is a no-brainer. But it connects to the rest of the story…
Karen Davidson is extremely unhappy about her deal and not happy about her dead husband’s philanthropic endeavers. She wants to sell the pistons and do whatever it is rich people do. However… the Pistons aren’t moving. They have a strong fan base and a solid stadium; the owners would never approve a new owner who would move the team to, say Vegas. Is this speculation? Maybe… but Joe Dumars turned down a job offer from the NJ Nets and their new russian billionaire owner. If the Pistons were on shaky ground in the Detroit area, Dumars would have bolted.
I’m not positive the Golden State Warrior sale price will be much of a factor in determining the Piston’s value; Larry Ellison isn’t bidding this time. The league probably won’t approve a move, so there would be limited non-local interest. From interviews with the new GSW owner, the league owners will vote on the new ownership in September time frame, and they would take over soon after. (Thoughts: You’re looking at January 1st, at the earliest, that Ilitch could take control of the Pistons.) Also from interviews, it sounds as if very few of the old coaching / front office will be fired this year at Golden State. Why? The lockout.
Players don’t get paid during the lockout. But team management does. If GSW fired Don Nelson and hired, uh, Tom Izzo, they have to pay Izzo. And the GM. And the GM’s secretary…. etc. Golden State had to sell because the clock was ticking; they were losing value the closer they got to the lockout. Its very very difficult to get financing, and it appears a new owner is staring at a $10-20million loss in your first year due to a lockout. Karen Davidson has the same problem, but without the interest of a man worth $37 billion. She has Mike Ilitch.
So Mike Ilitch can swoop in with a low ball offer, and he gets the Pistons and the Palace. Maybe he can make a small profit at the end of the 2010/2011 basketball season. The following season there’s no basketball. But wait! The Red Wings suddenly move into the Palace and generate even more revenue then previous years. Part of the lost revenue can be mitigated; other potential owners don’t have this revenue stream.
Mike Ilitch may not even like basketball; maybe he turns the team over to his son Chris. But let’s not forget an increasingly profitable business: Palace Entertainment. With the purchase of the Pistons, Ilitch Holdings now controls the south eastern lower michigan entertainment industry. Big big business. You want to play the Detroit area? You have to deal with Olympia Entertainment (oh yes, that’s Ilitch Holdings).
With the purchase, Ilitch Holdings would control the following venues (via Olympia Entertainment and Palace Entertainment):
- The Palace of Auburn Hills
- Pine Knob DTE Energy Music Theater (they changed the name? Damn it)
- Meadowbrook
- Comerica Park
- Fox Theater
- Cobo Arena
- Masonic Temple
Bill Graham would be very jealous; that’s quite the lineup. And quite the income. Ilitch is the one person who could purchase the Pistons solely for Palace Entertainment, only to spin the team off in 5-10 years. (Speaking of Bill Graham, the one venue Ilitch wouldn’t control would be where he made his name, the Fillmore auditorium, formerly the State Theater… and we’ll note that Graham’s Fillmore auditorium(s) were in San Francisco and New York).
One factor that I won’t rule out in this investment: Talent acquisition.
Tech Writer Robert Cringely has written previously about why Microsoft needed to acquire Yahoo (a deal which ultimately fell through): MS needed Yahoo’s talent base, talent it didn’t have internally. Bill Davidson built a winner in both basketball and hockey; he was the first to build the modern NBA arena. Mike Ilitch has already hired Tom Wilson; what other talent from either the Pistons or Palace Entertainment could benefit Ilitch Holdings? Again, Dumars stuck around. There has to be a solid support system in Auburn Hills.
And back to the Tigers blog.. how does all of this affect the Tigers?
There is a lot of question as to how Detroit can be a mid-market team with a big-market payroll. The assumption is that Mike Ilitch (or Ilitch Holdings) is pitching in some extra cash; of course this can’t be verified because no one is talking. But if sports financing is indeed harder to obtain, and if Ilitch buys the Pistons with the understanding they’re going to have to lose money immediately due to a strike year, the 2011 and 2012 Tiger payrolls may ultimately suffer.
Based on what the Pistons and Palace Entertainment has to offer, Mike Ilitch would be crazy not to jump on it. But it is an acquisition that would only improve Ilitch Holdings, not the city of Detroit, the Pistons, nor the Tigers.




