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Lockout Effect Is Uncertain for Spurs

San Antonio Express-News, July 08, 2011

By William Pack

Tim Duncan and Manu Ginobili jerseys are still being sold at the Spurs Fan Shop. Spurs sales executives are working hard to get season ticketholders to renew, and corporations are being courted to join the Spurs sponsorship team.

The business side of the city's NBA franchise is back to typical offseason form with the knowledge that this probably won't be a typical year. The NBA owners have locked out the players over labor issues, and the cloud that throws over upcoming basketball games also dims the economic outlook of teams.

“There will be impacts financially,” said Taylor Hamilton, senior research analyst with IBISWorld, an international market analyst. “The majority of the problems up front will be with sponsorships and season tickets.”

David Carter, executive director of the Sports Business Institute at the University of Southern California, said the league has a little time to resolve its problems, but sponsors and fans will want to know in the upcoming months if a full season will take place and what their teams will look like before plunking down cash like they have before.

“Corporate dollars could be most at risk,” Carter said.

If the collective bargaining agreement is resolved quickly, teams could find that finances don't change much from last season, officials said. But if it drags out past the start of the regular season in October, revenue losses will mount and will keep growing as more games are scrubbed.

Hamilton said he does not believe the ramifications will put any teams out of business, but some of the teams that were struggling going into the lockout could be in much weaker condition if it isn't resolved quickly.

Neither the Spurs nor the NBA would discuss the financial ramifications they foresee from the lockout. This is the first NBA lockout since the 1998-99 season, the only one that left the league with a shortened season. The Spurs won the championship in that 50-game season but also absorbed a record loss of more than $12 million.

The team since has moved its arena from the Alamodome to the AT&T Center with more luxury suites and revenue-generating capabilities. Forbes reported that the Spurs lost money in the 2009-10 season because a high payroll forced it to pay luxury taxes of $8.8 million.

But the magazine still ranked the Spurs as the ninth most valuable team in the league, worth $404 million, or $35 million more than the league average.

Rankings are not available on last year's performance, but attendance at Spurs games increased by about 1 percent in 2010-11 to 750,879.

NBA spokesman Michael Bass said the league has instituted a policy this year to safeguard investments of season ticketholders.

If the lockout lasts long enough to reduce the game count, season ticketholders will have the option of receiving a refund and interest for the missed games on a monthly basis.

Hamilton said the lockout might irritate some existing season ticketholders enough to keep them from investing again. But he believes teams will face a bigger problem concluding new season ticket sales because the lockout keeps them from using existing players in their marketing programs.

The images of those players also have been placed off limits to teams, which has changed the way team websites appear. But they are available on jerseys, posters and other merchandise at team stores and should remain available through the lockout.

Securing sponsors for an uncertain season is likely to be harder for teams, and some might not pursue new deals aggressively until more details about the season are known, said Jim Andrews, senior vice president of IEG, a sponsorship consulting and research firm.