Boston Celtics Limited Partnership

views updated

Boston Celtics Limited Partnership

151 Merrimac Street
Boston, Massachusetts 02114
U.S.A.
(617) 523-6050
Fax: (617) 523-5949

Public Company
Incorporated: 1986
Employees: 60
Sales: $52 million
Stock Exchanges: New York
SICs: 7941 Sports Clubs, Managers & Promoters

Operator of the Boston Celtics basketball team, Boston Celtics Limited Partnership represents the financial, managerial, and broadcasting power behind arguably the most successful franchise in the history of sports, the Boston Celtics, a team that has won an unprecedented 16 national championship titles during the 1950s, 1960s, 1970s, and 1980s and counts among its players many of basketball’s legendary figures. Sixteen Celtics players were inducted into the Naismith Memorial Basketball Hall of Fame between 1960 and 1987, with Larry Bird, Kevin McHale, and others certain to add to that prestigious total once eligible for consideration. The team won 11 championship titles during a 13-year span, including eight in a row, accomplishing a feat unparalleled in American major professional team sports. Celtics players from the past included the best to ever play the game of basketball; its owners and coaches were among the most revered, most despised, and most controversial figures in sports history. By all measures, the Celtics represented a legacy of success and captivating lore. Its storied history, its decades of dominance in the National Basketball Association, and the idiosyncratic personalities who created the franchise’s success combined to create a unique Boston Celtics mystique—one that defied duplication and one that distinguished the organization from all others in professional sports. Yet the magnitude of the corporate entity behind the basketball team and the amount of revenue directly derived from the team belied the significance and wealth of success the Celtics represented.

Boston Celtics L.P. occupied a singular position both in corporate America and among the roster of team owners in the National Basketball Association. In terms of annual revenue the company ranked well below the thousands of medium-sized companies scattered across the country, generating less than $100 million per year in revenue. Paradoxically, yet indicative of the enormous business professional sports represented during the 1980s and 1990s, the company derived relatively little from the sale of game tickets, making the majority of its money—more than 70 percent—from advertising, television, cable, and radio fees. Financially, Boston Celtics L.P. was supported by much more than the Boston Celtics, yet it was nothing without the Boston Celtics and the widespread interest created by the team.

As owner of the Boston Celtics, Boston Celtics L.P. assumed its position of control relatively late in the team’s history, beginning its corporate life in 1986, 40 years after the team was formed. Considering that the Celtics recorded 16 league championships during the 40-year span bridging the team’s creation and the formation of Boston Celtics L.P., nearly all of what Boston Celtics L.P. represented during the mid-1990s was owed to the owners, players, and coaches who created the Celtics dynasty between 1946 and 1986, none of whom could have made the contributions they did without the dogged efforts of the team’s founder, Walter Brown.

Owner of the Boston Bruins hockey team and the fabled Boston Garden, Brown cared little and perhaps knew even less about the game of basketball when he and a small group of arena operators gathered in New York City in 1946 to organize the Basketball Association of America. Like others in attendance, Brown was primarily concerned with keeping his arena filled with paying spectators, something that had proven hard to accomplish during the winter nights in Boston. Brown had made various attempts to keep the turnstiles spinning at Boston Garden when the Bruins had the night off, booking the Ice Follies, Ringling Brothers and Barnum & Baily Circus, a Notre Dame football game, midget auto races, rodeos, women’s soft-ball games, and book shows, but he was in search of a steady attraction and went to New York to create one.

Basketball seemed an odd choice considering the game enjoyed little popular support, particularly in Boston, where the population was devoted to baseball and hockey. Basketball, in fact, had been eliminated from the Boston city school system in 1925, nearly two decades earlier. Nevertheless, Brown and his cohorts—all of whom, except one, owned hockey teams— organized the 11-member Basketball Association of America in the Commodore Hotel on June 6, 1946, and Brown left New York with a basketball franchise, as yet unnamed.

After considering several team names, including “Whirlwinds,” “Unicorns,” and “Olympics,” Brown opted for “Celtics,” hoping to grab the attention of Boston’s large Irish population. John Davis “Honey” Russell was hired as the first Celtics coach, and the team soon began its inaugural season, losing its first game 59-53 to the Providence Steamrollers, the first of many losses during the franchise’s fledgling years. The Celtics were 22-38 after their first season, and, despite Brown’s expectations of packing his arena with adoring fans, the team never filled half the seats in the Boston Garden, averaging only 3,608 people per game. The Celtics posted a losing record the following year yet made the playoffs. But more important to the team’s future was its financial condition, as the losses mounted for Brown and the company he led, Boston Garden Arena Corporation.

A coaching change was made before the 1948-1949 basketball season, with Alvin “Doggie” Julian taking over for Honey Russell, but his impact was negligible and the Celtics again recorded a losing season, winning 25 games and losing 35. By this point the financial condition of the team was grave. During its third season, the Celtics lost $100,000, bringing the total loss for its first three seasons to $350,000. Shareholders of the Boston Garden Arena Corporation wanted out and urged Brown to fold the franchise, but Brown persevered, convincing the disgruntled stockholders to give the Celtics franchise one more year to prove its financial viability. The following season was the worst in the franchise’s short history, as the Celtics posted a dismal 22-46 record; the team’s record was 89 victories and 147 losses during the first four years. As a result, attendance had declined and the franchise lost another $100,000, bringing its total loss for four years of operation to nearly $500,000. Boston Garden Arena Corporation stockholders were no longer receptive to Brown’s pleas after the fourth season and they sold their stakes in the franchise to Brown, leaving the disheartened founder saddled with debt and in charge of the failing Celtics.

To stave off a complete collapse of the franchise, Brown sold his home and other private investments, keeping the Celtics in business for another season. As later became apparent, Brown’s decision to keep the team afloat, despite no obvious sign that the team’s future would be any more successful than its past, was an immensely beneficial one. Two new faces arrived for the 1950-1951 basketball season: coach Arnold Jacob “Red” Auerbach, who was hired as the Celtics third head man in five years, and guard Bob Cousy, who would convert his harshest critic—his new coach—into one of his staunchest supporters. Red Auerbach, age 32 when Walter Brown named him coach of the Celtics, would be chiefly responsible for creating the celebrated Celtics mystique that would intimidate opposing players and draw legions of Celtics fans into the Boston Garden for generations to come. With his ever-present victory cigar clamped in his mouth, Auerbach would guide the Celtics through the team’s much heralded glory years, orchestrating the action from courtside for the next 16 seasons, then wielding his managerial control for decades afterward. Under Auerbach’s glare, the other new arrival—Cousy—would develop into one of the game’s greatest players, transforming the Celtics organization from a perennial loser into the most successful franchise in the history of professional basketball.

Together, Cousy and Auerbach righted the floundering Celtics, who posted a 39-30 record during the 1950-1951 season—the team’s first winning season—and advanced to the playoffs. Perhaps more important, average attendance rose 2,000 per game during the season, enabling Brown to begin recouping his losses and beat back the financial pressures that threatened the franchise’s existence.

The Celtics advanced to the playoffs each of the next five years, but a championship title—the hallmark of a sports organization’s success—eluded the franchise. In retrospect, the Celtics were missing one key player, and that player, Bill Russell, arrived in camp in the autumn of 1956. The acquisition of the 6’10” Russell took the Celtics franchise over the top; during his rookie year (1956-1957) attendance rose by an average of 2,500 fans and the Celtics won their first league championship. After losing the championship series the following season to the St. Louis Hawks (whom Boston had defeated to take their first championship), the Celtics captured an amazing eight titles in a row, ranking as the National Basketball Association’s preeminent franchise between the 1958-1959 and 1965-1966 seasons.

Walter Brown died in 1964, near the end of the Celtics’string of championship titles, marking the end of one era and the beginning of another as the reins of ownership, which had remained with Brown for nearly 20 years, passed from hands to hands. The connection between Walter Brown and the Celtics franchise had been resolute; when the bond was severed, it was not long before a series of owners took over and dissolved the familial nexus between owner and franchise. Following Brown’s death, Lou Pieri, who had been co-owner with Walter Brown since 1950, and Marjorie Brown took charge of the Celtics organization for a year, then a succession of corporate owners, incongruous with the Celtics-Walter Brown era, assumed control: National Equities, 1965-1968; Ballantine Brewery, 1968-1969; Trans-National Communications, 1969-1971; Investors’ Funding Corporation, 1971-1972; and Leisure Technology, 1972-1974.

Two years after Brown’s death, another Celtics era ended when Red Auerbach relinquished his coaching duties and Bill Russell took over, becoming the first African-American to either coach or manage a major professional sports team. Under Russell, the Celtics won two more championship titles (1968 and 1969); the team went on to win two more league titles during the 1970s with Tom Heinsohn, a former Celtics player, coaching the team. Ownership of the franchise during the mid- and late 1970s had devolved to Los Angeles film producer Irv Levin, who, in 1978, traded the Celtics franchise to John Y. Brown and Harry Mangurian in exchange for the Buffalo Braves franchise, which Brown and Mangurian owned. Aside from the peculiarity of trading one franchise for another, the deal between Levin and Brown/Mangurian was notable for another reason: the arrival of John Y. Brown to the Celtics organization put in place an owner who would ignite a bitter, intrafranchise feud and engender the Celtics’ most contentious year in its history.

Auerbach, who continued to embody the Celtics mystique and direct the franchise as its general manger, disliked John Y. Brown intensely, particularly because Brown had ignobly obtained the revered Celtics franchise through a swap. Even more irksome to the longtime Celtics coach and general manger was Brown’s disregard for his authority. As part of the franchise swap, several Celtics players were sent to the Braves franchise, the first time a player transaction had been made without Auerbach’s knowledge since his arrival in 1950, nearly 30 years earlier. Angered, Auerbach began discussions with the New York Knicks about a job with the franchise and was offered a four-year contract as president of the rival organization for a salary that would make him the highest paid National Basketball Association executive ever.

Auerbach relented, opting to remain in Boston after listening to advice from his wife and gaining assurances from Brown that he would not be excluded from future decisions affecting Celtics players. Less than a year later, Brown traded three first-round draft picks to the New York Knicks for Bob McAdoo without consulting Auerbach, bringing the running feud between the two to a climatic tumult. Enraged, Auerbach approached Brown and informed the Celtics owner that if he did not sell the team within two weeks he—Auerbach—would leave. Two weeks later, Brown sold his interest in the team to Harry Mangurian; Brown then went on to successfully run for governor of Kentucky.

Against the backdrop of this public dispute between Brown and Auerbach, the Celtics franchise had drafted a 6’9” forward from Indiana State University named Larry Joe Bird in 1978. Bird would establish himself during the 1980s as one of the greatest players in the history of the game, and with the addition of Kevin McHale and Robert Parish (both of whom were acquired through a complicated trade involving Bob McAdoo), the Celtics franchise had formed the nucleus of a team that would win three national championships during the 1980s, extending the winning tradition into a fourth decade.

As the drive toward winning three championships during the decade gained momentum, ownership of the franchise once again changed hands when, in 1983, Harry Mangurian sold the team to Don Gaston, Paul Dupee Jr., and Alan Cohen for $17 million. The new owners were intent on transforming the Celtics franchise into a major, profitable business, rather than treating it like a prestigious, self-aggrandizing asset, as many of the owners who followed Walter Brown had done. Gaston, Dupee, and particularly Cohen wanted more from their acquisition and began looking for a way to substantially build on their investment. Ticket prices were raised, but the three owners were in search of a way to realize more dramatic financial gains. In 1985 Cohen learned of such a way from David Stern, commissioner of the National Basketball Association.

Following Stern’s suggestion, Gaston, Dupee, and Cohen formed a master limited partnership named Boston Celtics L.P. that enabled the three owners to avoid paying a substantial percentage of taxes on revenue the franchise generated and provided for the distribution of shares of Boston Celtics stock to the public, a first for a professional sports franchise. In 1986, 2.6 million Celtics shares, representing 40 percent of the team, were offered to the public at $18.50 per share, from which the three owners earned $44.74 million in proceeds. After the public offering, Gaston owned 32.5 percent of the Celtics, Dupee owned 14.7 percent, and Cohen owned 11.8 percent, more than enough to continue with their ownership unchallenged by all others.

The formation of Boston Celtics L.P. and the sale of Celtics stock had given the three owners much, yet the proceeds gleaned from the public offering were not sufficient to keep Gaston, Dupee, and Cohen from searching for other ways to capitalize on their investment. In 1985 the Celtics franchise sold its television rights in a five-year deal to an independent UHF station, WLVI-TV, which immediately increased the station’s estimated value from $50 million to $75 million, giving the three owners tangible evidence of the financial worth of their organization and the magnitude of revenue others were earning from their franchise. In order to redirect the broadcasting revenues into their pockets, Gaston, Dupee, and Cohen began hatching plans to acquire their own broadcasting entities, and in late 1987 the opportunity arrived.

After WFXT-TV became available the Celtics franchise purchased it for $10 million and formed Boston Celtics Communications Limited Partnership, a sister company to oversee the broadcasting business of the Celtics organization. The Celtics then sold their own station the broadcasting rights to air Celtics games for $30,000 per game during the preseason, $150,000 per game during the regular season, and $200,000 per game during the playoffs. When WEEI-AM was acquired by Boston Celtics Communications L. P. in 1989, the three partners worked out a similar arrangement, giving the Celtics franchise radio broadcasting fees ranging between $1.4 million and $2.5 million per year.

By the beginning of the 1990s, as the Celtics’ dominance on the basketball court began to wane, Gaston, Dupee, and Cohen stood over a genuine sports empire, with revenue pouring in from the Celtics on the court and the Celtics over the airwaves. When Mangurian sold the Celtics in 1983, the team was generating roughly $8 million in revenues per season. After going public in 1986, the franchise’s annual revenue volume rose dramatically, more than tripling as the team’s coffers swelled from broadcasting and licensing contracts and increased ticket prices. Financial growth continued into the next decade, thanks to the formation of Boston Celtics Communications L. P. and its two primary assets, WEEI-AM and WFXT-TV, boosting Boston Celtics L.P.’s annual revenues to $30 million in 1990. By 1993, the company was generating more than $80 million annually.

By the end of the 1993 fiscal year, both Larry Bird and Kevin McHale had retired from the team, with Bird making his exit before the 1992-1993 season and McHale leaving after the 1992-1993 season. Their departures marked the end of yet another era in Celtics history, raising concern over the team’s future and its ability to win additional championship titles. In 1994, the company sold its radio station, and the following year it sold the television station WFXT for accumulated proceeds of about $105 million.

There was no doubt where future Celtics teams would play their home games, however. The franchise played its last season at the Boston Garden during the 1994-1995 basketball season and began its 1995-1996 campaign at the new and larger FleetCenter, where both the Celtics and Boston Celtics L.P. hoped to establish a winning and lucrative tradition.