Nets, Barclays Center losses cost Joe Tsai millions
Nets owner Joe Tsai can’t easily fire players after a disappointing season on and off the court, but he can fire the CEO, which officially happened this week.
The question is whether his demands are too high or whether the Nets should be better off financially.
The Nets and Barclays Center lost between $50 million and $100 million combined in the 2021-22 season, giving Tsai perhaps the worst financial losses in the NBA, sources familiar with the situation told The Post. .
Tsai believed that after buying the Nets and Barclays in August 2019, he could turn them into a tech-savvy operation like Alibaba, the Chinese e-commerce giant he co-founded and which has earned him around $10 billion. dollars.
Instead, his earlier success didn’t translate to the hardwood.
Tsai has given maximum contracts to stars Kevin Durant and Kyrie Irving, giving the Nets the second-highest payroll in the NBA. He would end up paying around $100 million in luxury tax, the second-highest bill in NBA history.
The Nets were swept in the first round of the playoffs by the Celtics last week, a humiliating end to an underperforming season.
Tsai also ousted John Abbamondi, CEO of Brooklyn Sports Entertainment (BSE), parent company of the Nets and Barclays Center, who announced in February that he would leave at the end of the season. Tsai is now looking for her third corporate executive in less than three years.
Although the Nets set attendance, ticket revenue and sponsorship records under Abbamondi, Tsai’s huge investment led him to believe that a good performance should have been great. The Taiwan-born billionaire felt Abbamondi was not innovative or data-driven enough, sources familiar with the matter told The Post.
“Joe is practical, hard to drive, and if you don’t fit that he will keep going until he finds the right person for him,” said a sports banker.
The indoor numbers show how much the Nets have improved financially in a short time, but also that there’s still a gap between them and the top-grossing NBA teams. Tsai may be more sensitive now to BSE losses after shares of the company he co-founded Alibaba slid from $304.69 on Oct. 1, 2020 to Friday’s close of $97.09.
The Nets’ average entry fee this season was $2.1 million per game, fourth in the league. That was better than a 100% improvement over $1 million a game in the last full pre-pandemic season in 2018-19, according to an NBA source. It was also the biggest jump in the league (the Suns were the only other team with a similar increase).
Still, the Knicks made $3 million per game, a 9% increase from 2018-19, despite not making the playoffs.
The Nets, after giveaways, sold about 15,000 tickets per game, a 26% improvement from 2018-19. The Knicks averaged just over 16,000, according to an NBA source.
In other words, the Knicks were still the kings of New York basketball even though the Nets’ payroll was $174 million, or 48% higher.
To break even, given payroll, the Nets needed to generate revenue on par with either the Knicks or the Warriors – who have a payroll similar to the Nets, but are No. 1 in gate revenue per game at $4.2 million, which doubles Brooklyn’s average, the NBA source said.
Tsai wanted better results and became unhappy with Abamondi for not hitting off-the-court numbers as robust as the Warriors despite spending like Golden State, sources said.
During the season, the Nets did not suffer from a lack of attention. They played in seven of the top 25 games by national television ratings. Their Christmas game against the Lakers drew a league-best 5.8 million viewers, and the four playoff games against the Celtics averaged 4.8 million on ABC, ESPN and TNT, the first-round series. most watched since 2016.
But the Nets’ Big 3 of Durant, Irving and James Harden have only played 16 games together, making it difficult to fully capitalize on their names. Durant missed a quarter of this season due to a knee injury, Irving missed nearly two-thirds due to his refusal to get a shot, and Harden demanded a trade – one that brought back Ben Simmons, who didn’t. still haven’t played.
Tsai will have to personally invest about $30 million this year for Barclays to make its municipal bond payments after paying $52 million the previous year, Moody’s said in a March analyst report.
Tsai has not interfered with Nets general manager Sean Marks’ basketball decisions. But when it comes to managing his money, Tsai demanded either success or replacements.
Jonathan Vanica, the chief investment officer of Tsai’s investment vehicle Blue Pool Capital, left Blue Pool in late 2021 after staying there for only a year, according to Bloomberg Law.
It’s up to interpretation, said a source who works closely with the Nets, whether Abbamondi did well under the circumstances or is to blame for the team’s financial performance not living up to expectations. very high expectations.
The Nets have increased their overall revenue by about 40% since 2018-19, but that only puts them in line with teams in similarly sized markets and not among the best in the league, the source said. NBA.
Barclays also expected this season to increase its percentage of revenue from non-Nets events from 36% before the pandemic to 48%, according to Moody’s report. Instead, there are expected to be just 147 events at Barclays Center for the year ending June, down from 194 in the last pre-pandemic year.
This is partly due to the Islanders moving from Barclays to UBS Arena in Elmont. Tsai hoped to replace his games with higher margin events but failed to do so, sources say.
Lingering pandemic fears are somewhat to blame, sources said.
Tsai paid a record $2.35 billion for the Nets — the most ever for a sports team — and $1 billion for Barclays Center, so he has plenty to gain.
The Yale University grad, with a BA in economics, saw the Nets’ purchase as a one-thirtieth (and, better yet, a New York-based) stake in the NBA, a media company growing international, a source of knowledge of the situation said.
The problems appeared quickly.
Tsai first hired former Turner chairman David Levy as CEO, whom NBA commissioner Adam Silver had recommended. But Tsai disagreed with Levy’s hands-off style of delegation. Levy was a people person, who was charming over dinner or drinks, but didn’t roll up her sleeves, sources said. He also deferred too much to Silver.
Tsai pressured Levy to quit after less than two months on the job.
“Most owners wouldn’t have fired Levy,” the source familiar with the situation said.
Tsai temporarily turned to Oliver Weisberg, the CEO of Blue Pool Capital. But Weisberg had no real experience in sports or media, and at one point was back and forth between the United States and China.
After eight months, Tsai hired Abbamondi – a former Navy pilot (call sign: Aubergine) – while leaving Weisberg as the NBA team’s alternate governor.
Abbamondi came to the Nets with a solid, if unorthodox, resume for an NBA CEO. He had spent four years as executive vice president of ticketing, suites and hospitality at Madison Square Garden – overseeing the Knicks and Rangers.
Tsai has worked to make the Nets more data-driven. The team, for example, sent out emails promoting ticket deals using Marketo automation software, which tracks who opened emails and who clicked on links. Sellers would be alerted quickly, then call those who opened their emails and links, knowing they had already expressed interest, a former Nets executive said.
In January 2021, Abbamondi kicked 18 longtime Nets salesmen, including senior vice president Dan Lefton (now vice president of business strategy for the Pistons) and senior vice president of sales John Baier, the report said. ‘former director.
Abbamondi believed that because more people were buying tickets online, the Nets didn’t need as many staff, sources said. Other NBA teams were also operating with smaller sales teams, a source said.
It created some bad blood, however, when in addition to cutting staff, he embraced new technologies, so sales managers could monitor their employees more closely.
“They started listening to calls from salespeople,” the former executive said. “It was great micromanagement.”
The Nets have seen this as common practice in technologically advanced sales organizations, sources said.
Tsai and Abbamondi declined to comment for this story.