Knicks $core Big With Carmelo
Knicks likely to add to riches with Carmelo Anthony on-board.
by Kyle Stack / @KyleStack
Much has been made about the on-court implications of the New York Knicks acquiring Carmelo Anthony. Far less has been written of the financial ramifications, which seem to go hand-in-hand with the team’s future success on the hardwood. Yet it appears as though the ‘Bockers might have scored a win even before ‘Melo gets a chance to don the blue and orange.
The Knicks are already a revenue juggernaut given their ultra-high average ticket price of $88.66, which trails only the Los Angeles Lakers‘ $95.25 figure for the highest in the League. They have a slew of corporate partners, including a deal with JPMorgan Chase signed in September which reportedly will pay them $300 million during 10 years. They pulled in $226 million of revenue last year, tops among all NBA teams. And according to a series of e-mails with sports economists, the Knicks’ bank account will likely get fatter now that they have added Anthony to form a superstar duo with Amar’e Stoudemire.
“I can see [Anthony] having an impact across the board,” wrote Gabe Feldman, Director of the Sports Law Program at Tulane University. “He will likely put more butts in seats, which will help with everything from concessions to local broadcast fees to sponsors and to increased exposure on national television.”
Television is where a real financial benefit can be discovered, according to Robert Baumann, an associate professor of economics at College of the Holy Cross. The Knicks rank fourth in the NBA in number of household viewers per game (115,000), but their 1.5 ratings on MSG Network don’t even rank in the top five. Still, Baumann claimed they should hold a greater ability to sell advertising space for a higher price.
“My hunch is that revenue makes acquiring Carmelo profitable, even if he signs the extension,” wrote Baumann. To complete the trade, Anthony signed a three-year, $65 million extension that will begin with the ‘12-13 season. His salary for the balance of this season is $5.1 million, and he will pick up the $18.5 million in his contract for the ‘11-12 campaign, bringing his total future earnings as a Knick to $88.6 million.
Fans are also likely to scoop up Anthony’s No. 7 jersey at team stores. He has placed 15th and 10th in top-selling jerseys the past two years. Combine that with the Knicks’ finish last year as the fifth-most popular choice for NBA team merchandise, and there is likely to be a significant amount of home and away Anthony jerseys sold, as well as other Knicks gear which may not have sold if not for the excitement of the Anthony trade.
Robert Boland, a sports business professor at New York University, said the Knicks may not derive a notable financial benefit from jersey sales since all merchandise revenue is pooled and split among all NBA teams. He did acknowledge that the potential drive of Anthony’s jersey sales could help the NBA as a whole, which hasn’t had many stars to market in a Knicks uniform for the past decade.
Then there is the advantage of having a second face — aside from Stoudemire — to sell fans on season tickets and companies on luxury suites. Madison Square Garden is amidst an $850 million renovation to be completed for the ‘13-14 season. With a glut of stadiums in the New York metropolitan area either having opened recently or set to open in the next several years, the Knicks could use their acquisition of Anthony to set itself apart from others.
“The market for luxury boxes and clubs seats in New York City has become extraordinarily competitive,” wrote Boland. He cited the recent openings of Yankee Stadium, New Meadowlands Stadium, Citi Field and Prudential Center and the expected opening of Barclays Center in 2012 as direct competition to MSG. “It doesn’t take an economist to understand that a five- or a six-fold increase in supply of luxury boxes and club seats without a similar increase in demand could negatively affect price.”
The addition of more lower bowl luxury amenities and boxes in the renovated Garden could entice prospective clients to choose Knicks tickets over those from other New York-based teams, Boland explained. “MSG already has an edge in total events, having the highest profile lineup from the Rangers to concerts to the Westminster Kennel Club dog show to the NIT,” Boland continued. “The Knicks having the expectation of a dozen or so more Playoff games annually, along with high-profile regular-season games, would enhance MSG’s ability to maximize all of its luxury amenities.”
The Knicks are selling game tickets at near capacity, and a Playoff run led by Anthony and Stoudemire should keep fans venturing into MSG. Allen Sanderson, an economist at the University of Chicago said a potential match-up with the Chicago Bulls — or another rival — in first round of the Playoffs could also ensure more monetary support from fans.
Whether or not the Knicks gave up too much for Anthony is a discussion for another story. The team’s reign as a money-maker will probably continue, and they can thank their newest and boldest acquisition for that.