Dreaming of a Heat dynasty — and dollar signs
Championships can be a tipping point. Some teams become one-hit wonders. The Heat and its fans hope for something lasting.
06/23/2012 12:00 AM
09/08/2014 5:56 PM
A championship in hand, the Miami Heat faces a new challenge: establishing a dynasty, both on the court and financially.
In professional sports, champions rise and fall, only to be quickly forgotten. Quick: Who won the World Series two years ago?
But some teams obtain gold-standard status through sustained performance and national cachet. (Think Lakers, Yankees, Celtics and Patriots). It carries them past one year’s triumph or disappointing season to link the team’s name to a certain exalted era. A question for the Heat: Will the franchise be the Miami Dolphins of the 1970s (prolonged excellence) or the Florida Marlins of the 1990s?
“It could be like when the Heat won [the championship] last time. Demand for tickets went way down, because the thrill of the chase was gone,’’ said Miami ticket broker Michael Lipman. “Or, they could be like the old Bulls and Lakers, and become a dynasty. Brokers made millions on those teams.”
The time between now and next year’s playoffs will test the staying power of Heatmania. For fans, a question is whether they will have to pay even more for seats in an arena that already charges some of the league’s top prices.
The Heat’s bottom line also gets particular attention in cash-strapped Miami-Dade County, which has yet to collect any money in a profit-sharing deal with the team now playing its 12th season in the tax-subsidized arena.
For sure, the Heat’s second championship in six years will spark a windfall for the team. But the Heat’s championship victory over Oklahoma City offers a particularly tricky case, experts said, given the high expectations that followed LeBron James’ arrival in 2010 and the sense of destiny denied when the team lost last year’s finals to Dallas.
According to Forbes magazine’s annual ranking of professional sports teams, the Miami Heat saw its value increase from $363 million to $457 million since 2010, when James and Chris Bosh joined Dwyane Wade as the Heat’s so-called Three Kings.
Under Forbes’ formula, the Heat is the sixth most valuable NBA franchise, behind, in order, the Lakers, Knicks, Bulls, Celtics and Mavericks.
The 26 percent spike in the wake of the LeBron signing raises a question: How much higher can it go?
“This will be a more modest increase,” said Patrick Rishe, a sports business analyst and economics professor at Webster University. “The arena has been pretty full, and if local media deals and sponsorships are locked in for a few years, this lessens the size of the value spike.”
Still, the Heat has gone from a team playing below its potential to reaching it — and matching the haughty prediction James made shortly after defecting from Cleveland that “not five, not six, not seven,” but even more championships would be his.
David Samson, president of the Miami Marlins, said winning matters more financially than the hype surrounding a hot, newly assembled team — even one as grandiose as the Heat.
“The offseason buzz is when you sign LeBron and Bosh. It ends quickly if the team doesn’t win,” said Samson, whose Marlins won the World Series in 2003. (Their first title, in 1997, was under different ownership.) “But when you win a title, you have a much longer-lasting, almost permanent buzz. The buzz that Miami had when they signed LeBron is nothing compared to the buzz they have now."
On average, the NBA’s eight previous champions saw their value increase by 10 percent the following year, including the Heat’s 13 percent gain in 2006 to $409 million, according to Forbes rankings.
In 2005, Shaquille O’Neal’s first year with the Heat, the county-owned AmericanAirlines Arena reported a 22 percent spike in revenue to $37 million. The championship season brought another 18 percent bump. But the next year — which brought a disappointing first-round playoff exit — saw only a 3 percent gain, followed by four years of wobbly results. (Those figures dipped in no small part due to a poor on-court product after O’Neal forced a trade out of town).
Only when James signed in the summer of 2010 did revenues soar again — up 33 percent to a record $60 million. Miami averaged 19,935 people per regular-season game this season — or 102 percent of capacity.
One way to value the Heat’s win this year is to consider the reverse: How would fans and sponsors react if the Heat blew another championship — especially given Miami’s reputation as a sports town with little patience with underachievers?
“I have experienced the positives and negatives of fair-weather fandom since I am a native of Miami,” said Rick Horrow, host of Bloomberg Television’s Sportsfolio program and a key player in building the Heat’s original home in the Miami Arena. While another lost season might have soured Miami to the Three Kings, last week’s win secured their status.
“The pedestal is firmly established for the Heat now,” said Horrow, president of Horrow Sports Ventures.
The timing of contracts can play a large role in how much a team profits from that year’s championship. Fox’s television deal to air Heat games on its Sun Sports network expires in 2015, but reports emerged last week that the deal was being renegotiated for a higher price. Both Fox and the Heat deny those reports.
Furthermore, the Heat typically sells premium season-ticket packages in three-year contracts. Unfortunately for the Heat, ticket broker Michael Lipman said Friday that the latest triumph happened to fall early in the current cycle.
Still, Lipman said single-game and group ticket prices could rise some 10 percent next year. Sponsorship dollars also should be easier to come by, said sports lawyer Adam Chase of Washington, D.C.’s Dow Lohnes.
“They’re in a pretty strong position,’’ Chase said of the Heat. “Think of all the sponsors who want to have their pictures taken with LeBron and the MVP trophy.”
Even with the championship run, Heat executives say they do not expect this season’s revenues to top 2011’s, thanks to the shortened season caused by a labor dispute.
That means the arena, operated by a company owned by Heat owner Micky Arison, likely will not pay Miami-Dade any rent for the championship season. In a letter to the Miami-Dade Inspector General’s Office, which investigated the lack of payments, Heat President Eric Woolworth suggested profits may increase enough soon for the county to share in some of the team’s Three Kings bounty.
“Encouragingly, all of our business indicators are pointing up,’’ Woolworth wrote in the May 15 letter. “If we are able to maintain the current trajectory, it is possible that the county will see its first distribution [from the arena] sometime in the next several years.”
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