Tiger Geist

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:

1. Joe Louis Arena is crumbling, and the Red Wings can move out at any time.
2. Bill Davidson’s widow is unhappy and wants her cash
3. The NBA has a >50% chance for a lockout heading into the 2011 / 2012 season.
4. 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.

You may have noticed that my “good” posting about a Mike Ilitch / Pistons ownership didn’t sound that rosy.  Probably because i personally believe that, over a 10-20 year period, this is a bad move.

First, I think its a great idea for a shared stadium between the Pistons and the Red Wings.  The problem is they already have one; its in Auburn Hills.  Someone explain to me why its a good idea to continue to build stadiums where no one lives?  Without getting into the “green” movement, you’re building a stadium 15 miles from the nearest fans and without public transportation.  If Mike Ilitch is paying for it, he can build the stadium wherever he wants.  As a business man who would ‘own’ the Palace with the purchase of the Pistons, I’d be quite surprised if he paid for a new stadium himself, and essentially abandon the Palace.

Second, Mr Ilitch is 81 years old.  He could easily not live to see a new stadium built.  How comfortable are we as fans with his son Chris, or the Ilitch Holding company?  They can deliver a hockey championship, but the rest is unknown.  Let’s remember that Mike Ilitch bought the Tigers in 1992.  1992, not 2006.  Those super shitty Tiger teams were on Ilitch.  Here is what the Ilitch empire is founded on:

• Shitty Pizza
• Casinos
• Sports Franchises

Are those rock solid?  Maybe, maybe not.  Why do I bring this up?

As a San Francisco resident, I am constantly reminded of the great SF 49er teams… and the great demise of the franchise once Eddie Debartolo had to walk away.  His family partially lost their fortune in a real estate downturn (1987), and Eddie had some poor (IE illegal) choices that caused him to hand the franchise to his sister.  The franchise hasn’t recovered.

The Ilitch’s have seven children.  What if there is a divorce (Los Angeles Dodgers)?  What if one or more children want to diversify their shares?  What if Chris Ilitch wants to prove himself and step out from his father’s shadow, only to make poor choices?

The family issue is more important to fans then you might realize.  Who in Detroit has the ability to purchase one of the three franchises?  What if Ilitch Holdings had to diversify one or more of the teams to survive? If Ilitch Holdings needed to sell all three franchises in 15 years, what are the chances the owners of all three are local, and don’t want to pull a Seattle Supersonics / Oklahoma Thunder move?  Would the combination of three pro sports teams be a short term guarantee to the location of the franchises, but in reality a long term risk?

I feel the city of Detroit cannot support four pro sports franchises downtown.  Ilitch moving the Pistons downtown may threaten fan support, and in the long run threaten the support of all three franchises*.  While this may be a shrewd business deal if Ilitch Holdings can get a tax break or free money to build a stadium, Mike Ilitch has no experience running a basketball team.  And the Pistons don’t need a solid management style; Joe Dumars built a winner less then 10 years ago.  In fact, Bill Davidson won an NHL championship in 2004.

The Tigers?  As noted previously, all teams should be operated separately, similarly to how I imagine the Tigers are being run currently.  However, I’m extremely nervous about how successful four professional sports teams can be in a town where none of the fans actually live, especially when the pistons fan base has been in a northern suburb for the last 30 years.  A possibly unsuccessful franchise, coupled with any potential family strife / pizza sales issues, could threaten the Tigers stability.  Again, it should be noted:  the late Bill Davidson won a championship in both hockey and basketball; Mike Ilitch has not had a successful run as the Tiger’s owner.  How will diversifying his interest into another sports franchise help the Tigers?

I hate to be Debbie Downer on this issue, but I’m not sure I see how, long term, this is a smart move for fans or the city.

*NOTE:  I leave the Lions out of this because, as I’ve said before, I think Detroit is a football town and the Lions, if successful, can write their own ticket.

Here’s the good news about a possible deal with Mike Ilitch purchasing the Pistons.

First, a possible new dual-purpose stadium near Fox Town, Comerica Park, and Ford Field.  The Pistons move back downtown; the Red Wings are rescued from Joe Louis Arena.  What does this give us?

365 Days / years.  10 Football home games (8 regular season, 2 pre-season, god help us for the playoffs).  Possible Big 10 championship game in the future.  Bowl Game….

Baseball?  81 games.  Basketball?  41 games plus playoffs.  Hockey?  41 games plus playoffs.

Worst case, you have 174 nights of sports games.  174 nights of fans heading downtown to the same area.

Speaking of area, ever been to Philly?  All the teams sports stadiums are next to each other.  Public transportation?  Check.  Everything next to each other.  Detroit could mimic the Broad Street Sports Complex.  Minus the public transportation of course, because that will NEVER happen in Detroit.

What’s a big draw?  The Red Wings.  So why not sign a deal with Ford Field for a few games?  Build a new stadium downtown, and get a deal with the Lions.  Chicago coming to town for a big game in January?  Play it at Ford Field in front of 60,000 fans.  Why not?  Be flexible.

Speaking of the new dual-purpose stadium, the Ilitch’s wouldn’t have to rush it.  The Red Wings could easily upgrade to the Palace for 2 – 5 years as the new stadium is sorted out.  Fans win.  Pistons are unaffected.

Second, it guarantees the Pistons will be a local team with solid ownership.  This would be a great thing, but again I’m not convinced the Pistons would move with any new owner.  And while Mike Ilitch knows how to build a hockey winner, the jury is still out on his baseball skills.

How does this affect the Tigers?  It doesn’t.  All good businesses are operated separately.  The Tiger’s payroll shouldn’t be affected by how the Motor City Casino is doing.  Of course, this isn’t always the case, which I’ll discuss in “The Bad”.

Is there a big win with a possible Detroit sports television network?  I’m undecided.  There are a few things that, as a current non-resident to the state, that I find to be true:  1) Fox Sports Detroit overpaid for the rights to the Tigers, and 2) Detroit and the state of Michigan is a football hotbed;  A successful Lions team could overshadow the rest of the major sports.

#1 is a gigantic revenue source for the Tigers; can it be replicated with a local network?  I’m not sure.  Outside of Michigan, you have Chicago and Cleveland, both of which have baseball and basketball teams.

#2 has certain factors:  NFL controls its own contracts, and the Big 10 network controls the University of Michigan and Michigan State.

With those noted exceptions, the YES network is a huge money maker for the Yankees, and the Atlanta Braves have been on the forefront of TV and the related money revenue for years.  I’ll give Ilitch the benefit of the doubt that owning three local professional sports teams could be a financial windfall for TV revenue.  And I’ll be honest that the Lions may suck until I die, which makes the other three pro sports teams better draws.

Quick Tangent:  A three part post.  The Truth, the Good, the Bad.  No ugly. 

Mike Ilitch, the Pistons, and Detroit:  The Truth

Here’s what we know:  Mike Ilitch has indicated an interest in the Pistons (via the Detroit News):

“Marian and I grew up here, we raised our family here, and we built our businesses here. Detroit is our home. When I read in the paper there was the chance that this great sports town could lose one of its professional sports franchises, I just didn’t see how we could let that happen. The Pistons, just like the Red Wings, Tigers and the Lions, have a rich and storied tradition in this community, and they’ve brought pride to fans and our community. You all know I love sports — all sports, from amateur sports to the various pro sports we’ve had the privilege to be involved with, and like a lot of others I’m sure, I really want to see the Pistons remain the Detroit Pistons.

“We talked about it internally, and when you take our 33 years of experience in professional sports, our commitment to this community, our passion for winning and pursuing championships, and you couple that with the opportunity to have a local, engaged owner for the Pistons, we decided to take a run at it. We believe we could bring a lot to the table that could be tremendously positive for the Pistons franchise, the NBA, and the fans of this community. So, today, we formally notified the Detroit Pistons that we have interest in purchasing the team. This is a required first-step and we look forward to the opportunity to move forward in the process.”

The way this is worded, it sounds like Mr & Mrs Ilitch woke up last week and decided the Pistons would be something they’d like to own.

No.

This has been in the works for a while now.  The Red Wings need a stadium to play in.  The Pistons need a new owner.  No local Detroiter can afford the Pistons (sans Ilitch), and Bill Davidson’s widow needs to sell.  Someone has been buying up land locally.  Tom Wilson is employed by Mike Ilitch.  I’ve been talking about this with friends since Mr. Davidson’s death; this is a slam dunk for Ilitch.  They didn’t think of this last week; this is a business move.  The final straw?  The Golden State Warriors sale.

The Warriors went for ~$450 million.  For the team only.  A team stuck in Oakland for 8 – 10 more years.  The pistons will draw less than that in their sale, even with a stadium to go with it.  Why?  Larry Ellison isn’t bidding on the Pistons.  And contrary to any belief, the Pistons aren’t going to Las Vegas;  if there is a team moving to Vegas, it’ll be the Kings.  So what happened?  Mike Ilitch waited for the Warriors to be sold to get a value on the franchise, but more importantly, who was bidding.  Two different teams, different potential owners.  The Pistons are Ilitch’s to lose.

The possibilities are exciting for the state as well as fans:  the Red Wings could move to the Palace while a new stadium is built; the Pistons are guaranteed to stay in the area.

But the reality is this:  The Pistons aren’t going anywhere.  Too many NBA teams have financial issues and little fan support (New Orleans, Charlotte); the Pistons aren’t going to be sold and moved.  I applaud Mike Ilitch’s thoughts and statement on possible ownership, but he doesn’t need to save the Pistons from a diabolical owner looking to move the team to Hong Kong.

The Truth:  This was a strategic financial decision, not something that was made to appease the Detroit sports fans.  And its been in the works for months.