“It Still Hurts When You Lose”

In this economy, an NBA CFO has to make all the right moves. An interview with Charlie Mierswa, SVP and CFO, New Jersey Nets.

Charlie Mierswa is all over the court — or, more accurately, the arena. He’s talking with fans, backslapping security guards, visiting with VIPs, even wiping up a coffee spill. He’s highly visible, but then, so is his company: the New Jersey Nets of the National Basketball Association. The Nets played a preseason game in London this season; they have a seven-foot player from Guangdong Province, Yi Jianlian, who has grabbed the interest of Chinese fans and corporate sponsors alike; and the team boasts rap-mogul Jay-Z as one of its owners.

But that glamour is balanced by some harsh realities. Consumer demand for big-ticket entertainment is down, and the Nets haven’t helped themselves by missing the playoffs for the second straight season. Mierswa wants to boost ticket sales, stretch the marketing budget, and cut costs, all while preparing to rebrand the team. In two years the franchise says good-bye to New Jersey and heads for a Frank Gehry–designed arena in Brooklyn — a move long-delayed by legal wrangling. Once rechristened, the Nets expect to become one of the most valuable teams in the NBA. As Mierswa says, “It will change everything.”

You’ve gotten creative in how you price tickets and lure fans, but is it working?
We thought sports was recession-proof, but clearly it’s not. We offered season tickets as low as $299 this season, but people weren’t even buying those. Then we offered to fill people’s gas tanks, which basically offset the price of the ticket. We still couldn’t get people to buy. We’ve introduced value pricing and payment plans. Season tickets for 2009 [next season] are as much as 30% less than last year. We have a 10-month payment plan where the Nets will actually make the 10th payment on the fan’s behalf. We also have prepayment incentives for those who want to save 5%. On the plus side, while it’s early in the game, we’re outpacing last year’s numbers.

It must be a delicate balance, given how expensive some tickets are.
Like any economic model, it’s either volume or pricing. Typically in a recession you’re looking for market share, which is volume. You end up in the same place economically; you just get there by a different path. That said, ticket prices range from $10 to more than $1,000, so if I’m going to properly manage the numbers, I have to split the population into tranches. In lower-price seats I’m trying to maximize attendance, whereas in the higher-price seats I’m making sure those people enjoy the experience enough to come back season after season. I have to serve the wants and needs of the value shopper and the “experience” shopper.

What’s the financial impact of not making the playoffs?
As you can expect, in seasons when we’ve made the playoffs it’s a lot easier to sell tickets. But the fans come out for a fun evening — a lot of them are not necessarily distracted by the playoff hunt. On any given night there is so much happening at the arena, between the dancers, the entertainers, T-shirt tosses, and hospitality rooms. If we don’t make the playoffs, it’s unfortunate, but I don’t think it’s going to cost us fans. Because of the economics of the playoffs themselves, it doesn’t kill you. They are not as profitable as one would think. I mean, if you go to the finals, that’s awesome. But in the early rounds it’s more the prestige of making the playoffs.

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