Gates of Hell

Over the last ten years during the Kevin Garnett era, the national media continually branded the Timberwolves as a small-market team, and frequently opined to their big-market readers that the Wolves would send KG to their team for pennies on the dollar, since MIN really needed those pennies. 

Fortunately, Minnesota fans have dismissed this idea for several reasons.  Minnesota is hardly a small media market.  A quick look at the US TV Household Ranks puts us at #13 among 30 NBA cities.  While three teams are significantly bigger (2x CHI, 3x LA, 4x NYK), there are several teams that are far smaller.  Memphis, Oklahoma City and New Orleans are only about a third our size.  The Twin Cities are affluent, so their are plenty of potential customers.

However, the Timberwolves have little market penetration, and are one of the lowest revenue teams in the entire NBA.

The Timberwolves were #29 in net gate receipts last year, averaging $350,118 per game.  The top team, the Lakers, average $1.96 mil/game.  After 42 home games, the Lakers have cleared over $68 million more than the Wolves.  The Lakers plow a lot of this money right back into their payroll, and even after paying $43 mil in salary and luxury taxes over the threshold, they are still making $25 million more than the Wolves -- almost twice our annual gate receipts!  The league average is $912,953, so clearly the Wolves have a long way to go.

The biggest problem is attendance.  The Wolves were dead last in average tickets sold (7,372), which is only about half the league average of 14,095.  The Wolves were #29 in actual attendance too, so nobody's there to purchase parking, concessions and souvenirs.  Ticket prices are low (MIN can't set prices as high as places like New York), but they are affluent enough to stay out of the bottom five, so the potential to make money is there, if they can provide a product that will fill seats.

The Timberwolves aren't the only team to be suffering in a battle of the "haves" and the "have-nots."  MEM, MIL, IND and CHA all withstood major losses.  Teams like New Orleans, who are in a market that can't charge a lot for tickets, will lose money when they aren't selling out their venues with play-off runs.  Small OKC may suffer as their payroll rises and attendance dwindles as the newness factor wears off.  These are certainly potential trade partners, if Glen Taylor is willing to absorb bigger contracts despite the losses.

Fortunately, this may be the case.  The Wolves are better able to withstand these losses with the sixth richest owner in the NBA, who has also shown he is willing to spend money for a winning team.  However, no owner wants to pour millions each year into a business that doesn't create returns or increase in value.  The franchise's value has been flat, and there are worries that there are no more buyers left anyway -- particularly for the have-nots.

So why are gate receipts so important?  The NBA evenly divides the revenues from digital and national and international broadcasting among its 30 teams, and the luxury threshold provides some additional revenue sharing.  However, for local broadcasts and arena revenues, these huge discrepancies may mean the difference between spending the money on a free agent, extending a talented player or trading him for cheap future assets, or even selling a franchise or contracting.  The widening gap threatens to create a system without talent parity.

As players and owners begin to consider the next Collective Bargaining Agreement starting summer of 2011, these are issues that must be addressed.  Glen Taylor now leads the Board of Governors, so the "have nots" will certainly be heard, but it will be difficult.  How much should big-market teams need to subsidize less successful franchises?  Shouldn't the Lakers be able to give a player like Andrew Bynum an expensive extension over the luxury threshold if they can afford it?  And do they want to rule out the likelihood of another Pau Gasol-like acquisition?

In Minnesota, things are grim, but there is light at the end of the tunnel, because other teams have turned things around financially.  Portland rebuilt with talented youth through draft and trade, and with a patient owner, they now have an exciting team that fans will come and see.  I believe David Kahn and Glen Taylor are on the right path with their rebuilding.  The wins may be rare right now, but they are trying to add exciting players like Flynn and Rubio.  Al Jefferson and Kevin Love can already put on a show, and our young team continues to develop.  Our new running style will help fans see more exciting basketball and eventually more wins that will, hopefully, spin the turnstiles.

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