Celtics owners say title, not just money, drives them
Entrenched in the Celtics war room in Waltham, Steve Pagliuca is analyzing the finances of possible trades and running through various scenarios for tonight's NBA draft.
Pagliuca isn't a coach. He isn't a scout. He's one of the group of Bay State investors who bought the Celtics from Paul Gaston a year-and-a-half ago for $360 million. The new owners say they're intent on winning the 17th NBA championship that's eluded the team for nearly two decades -- even at the expense of profits.
The ownership's mantra, coined by team owner and chief executive Wyc Grousbeck, runs counter to what you'd expect from a group of venture capitalists, leveraged-buyout artists, and investors: ''We're in it for banner 17, not for a 17 percent return on investment."
That doesn't mean the owners are turning a blind eye to the business of basketball. Building a championship team means spending more money on everything from players to cutting-edge digital video technology.
The team's owners say they aren't looking to line their own pockets. (Grousbeck is the only owner on the payroll, and though he won't say what he earns, he says his salary is a significant step down from his last job as a venture capitalist.) But they don't want to lose money either.
Since taking over, the owners have funneled profits back into the basketball operation, spending $20 million more a year than the previous ownership.
That means the budget is now about $80 million a year -- right at the industry average but a little less than a big market team, according to sports economists and consultants.
So is their strategy a slam dunk? The new owners bought a team that finished second in its division. Last season, the Celtics finished fourth. Attendance remains flat. The team, despite being in the nation's sixth-largest market, ranks 11th in the league in revenues, according to Forbes Magazine's team valuations in 2004.
''If we keep spending at this level, we'll build a championship team," Grousbeck said. ''It may take five, 10, or 15 years, but I'm confident we'll give Boston its 17th NBA championship."
Much of the investment in the team amounts to playing catch-up with top NBA teams. The Celtics added two scouts in Europe, bringing the tally to about 15 people who are actively involved in spotting and developing the team's future talent. The Celtics now carry 15 players on its team -- the maximum allowed -- as opposed to the 12 players in the last season under Gaston's ownership.
Gaston was traveling abroad and could not be reached for comment.
Grousbeck said the new ownership, the team's first hometown owners in 40 years, will invest all their profits into the team -- this year, next year, even the year after the Celtics win a championship. Multimillionaires with sterling business records, the owners say they want to win more than they want the money.
To be sure, on-court success is not without its financial benefits. Win a championship or sell out the FleetCenter game after game, and the value of the team increases.
''Certainly, there are NBA teams that break even or lose money in the short run in an effort to build up the team," said Andrew Zimbalist, a sports economics professor at Smith College. ''But I don't think anybody plans to break even over the long run."
Money alone won't guarantee a winning team. The Detroit Pistons, which ranked 16th in the league in payroll, beat the Los Angeles Lakers, which ranked sixth, to take home the past season's NBA championship, cited InsideHoops.com, an online site that reports on professional basketball.
That said, winning isn't a cheap proposition.
''You can't be miserly," said Marc Ganis, president of Chicago sports consulting firm Sportscorp Ltd. ''You need to plan to spend at the salary cap," which was about $53 million last season. ''You need to hire smart management almost without regard to what they cost you, and you need to pay whatever is necessary for a good coach."
Within months of buying the Celtics in late 2002, the new owners hired former Celtic player Danny Ainge to run the basketball operation. They added five players through the draft, free agency, and a trade with the Cleveland Cavaliers.
The owners boosted the payroll to $59.1 million for the 2003-2004 season, up from $53.8 million for the 2002-2003 season and $47.5 million in the 2001-2002 season. Now the Celtics' payroll ranks 10th out of 29 teams, up from 22d in the 2001-2002 season.
Off the court, the owners have more than doubled the team's spending on non-player expenses. This April, they hired Doc Rivers, one of the hottest names on the NBA coaching market, paying a generous $5 million a year for the former Orlando Magic coach.
With an eye to the future, the owners also increased spending on scouting prospects for the draft and potential trades. They added two scouts in Europe, increased the travel budget, and invited nearly 50 potential recruits (compared to 15 in previous years) to practice at their Waltham facility.
Their chief information officer, a Massachusetts Institute of Technology MBA, applied regression analysis to former draft picks to identify which measures are the best predictors of future success in the NBA.
''It's a science and an art," Pagliuca said. ''We're trying to bring more science to it."
But to pour more money into the team, the owners must make more money. Their goal is to grow revenues by 5 percent a year. Short of raising ticket prices a second time, the Celtics must sell more tickets and attract more sponsors. Last year, the team's average attendance at the FleetCenter was about 16,200 in an arena that seats more than 18,600.
With ticket sales representing half of the team's revenues, the new owners are reaching out to fans and season ticket holders, hosting conference calls and question-and-answer sessions with Grousbeck, Ainge, and Rivers. At each home game last season, the team dropped a hundred small parachutes into the crowd -- some bearing coupons for an autographed basketball or other Celtics gear.
Sponsorships, which account for about 10 percent of the team's revenues, represent another area for growth. Grousbeck hired Rich Gotham, a former executive at Internet service firm Lycos, to head its corporate development efforts. Instead of simply selling ads and signs at games, Gotham tries to leverage the team's assets to craft different kinds of sponsorships.
For example, Gotham struck a sponsorship deal with Harvard Pilgrim Health Care. The Celtics invited the insurer's top prospective clients to watch a Celtics practice at its Waltham center, featuring talks by Grousbeck, Ainge, and Rivers.
''I know it's a business cliche to say we're trying to think outside the box," Gotham said. ''But we are literally trying to think outside the FleetCenter to reach fans and sponsors we wouldn't typically reach."
Naomi Aoki can be reached at firstname.lastname@example.org.
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