Jazz Basketball Investors, Inc.

views updated

Jazz Basketball Investors, Inc.

36 South State Street
Salt Lake City, Utah 84111-1401
U.S.A.
Telephone: (801) 325-2500
Fax: (801) 325-2562
Web site: http://www.nba.com/jazz

Wholly Owned Subsidiary of Larry H. Miller Group
Founded: 1974
Employees: 85
Sales: $87 million (2002)
NAIC: 711211 Sports Teams and Clubs; 711310 Promoters of Performing Arts, Sports, and Similar Events with Facilities; 448150 Clothing Accessories Stores

Jazz Basketball Investors, Inc., owns the Utah Jazz, one of the most successful franchises in the National Basketball Association (NBA). Led since the late 1980s by forward Karl Ma-lone and point guard John Stockton, the Jazz have appeared in the NBA playoffs every year since the 1985–86 season, including two trips to the finals in 1996–97 and 1997–98. More remarkably, the Jazz have consistently been among the NBA’s attendance leaders, despite the fact that Salt Lake City is one of the smallest markets in the league. In 2001-2002 Utah drew 766,108 spectators, tenth in the NBA and better than much larger cities such as Boston, Detroit, and Atlanta. As the 2003-2004 season got underway, the team’s popularity showed little sign of waning despite a rebuilding program anticipating the retirements of Malone and Stockton.

The 1970s in New Orleans

The Jazz basketball team was formed in early 1974 when the National Basketball Association awarded a franchise to the city of New Orleans. A group led by majority owner Sam Battistone and various local investors paid $6.15 million for the privilege of becoming the NBA’s 18th member. The team’s nickname was selected in a radio contest. The Jazz players who opened the 1974–75 season were largely veterans selected in the league expansion draft. However, they also included “Pistol” Pete Maravich, a player acquired in the Jazz’s first trade, who quickly developed into one of the flashiest, most exciting performers in pro basketball. The Jazz named Scotty Robertson head coach, with former Lakers star Elgin Baylor as one of his assistants.

New Orleans had little basketball tradition, and it was common knowledge that, rather than joining the NBA, many in the city would have preferred a major league baseball franchise. A New Orleans television station aired the team’s opening game—and was unable to sell a single minute of advertising. The Jazz lost that first game, and when the team finally played its home opener on October 24, 1974, it had a 0-4 win-loss record. Still, the town welcomed it with a celebration worthy of New Orleans. While jazzman Al Hirt blew his trumpet on court, 6,450 fans accompanied him on toy horns. Despite all the excitement, the Jazz lost its first home game too. The losing streak stretched out to ten games before the team finally managed a win against Portland in mid-November. A week later Robertson had been fired as coach and replaced by Butch van Breda Kolff, who for the next three years would be a popular fixture in New Orleans.

Coaching changes were not enough to make the young team a contender in the NBA. The Jazz’s losing record continued under van Breda Kolff and under Elgin Baylor who replaced him in 1976. In fact, the Jazz would never have a winning season while they were in New Orleans. They seemed to be aiming at the playoffs in 1977–78, until a late season slump ended their hopes. While the Jazz were among the worst performing teams in the NBA, New Orleans warmed to the concept of its NBA team, and Jazz games were well-attended, consistently over the league average.

Canny promotional offers also helped the team realize single-game attendance records. Beginning in 1975, the Jazz played in New Orleans’ mammoth Superdome, the largest venue in basketball. The team frequently attracted over 20,000 to the Dome and occasionally, against popular opponents like the Los Angeles Lakers or the Philadelphia 76ers, drew more than 30,000 fans.

However, playing in the Superdome also brought with it a host of challenges. Its seating capacity worked against the club in some ways. Because fans knew that tickets would virtually always be available on the day of games, the Jazz found it exceedingly difficult to sell season tickets. In its last season in New Orleans, the club had only 2,600 season ticket holders. Large numbers of discount tickets also helped win capacity crowds in New Orleans which further suppressed income, as did the lack of luxury boxes and club seats, which had not yet been introduced in 1979.

Finally, the Superdome presented a greater challenge. It was a multipurpose arena that served a number of other events, such as major conventions and Mardi Gras celebrations, which tended to take precedence over Jazz basketball. Mardi Gras events, for example, would take over the Dome every year for over a month, forcing the Jazz to play on the road during that time. “A month on the road would put a crimp into anybody’s won-lost record,” Battistone told the Time s-Picayune, “and we were facing that every year.” Real problems would have developed had the Jazz gone into the playoffs while in New Orleans. There was no contingency plan at the Superdome, the team would have had to find another “home” court on which to play. “Teams have much more leverage today where they play,” Lee Schlesinger, one of several local minority investors in the Jazz told the Times-Picayune. “We had no leverage. We had nowhere to go. I don’t think the teams at that time, particularly in New Orleans, had any leverage. It was very difficult.”

By the end of the 1978–79 season, the Jazz’s difficult position in New Orleans was compounded by additional issues, including ticket taxes that were the highest in the nation and lukewarm support from government and business leaders, who—Jazz management sensed—were still hoping for a baseball franchise for the city.

In summer 1979, when majority owner Sam Battistone announced the decision to move the team to a new home in Salt Lake City, Utah, some New Orleans boosters felt that Battistone had sold the city out. Detractors maintained that the owner, who almost never visited New Orleans, simply wanted to move the team closer to his home in California, and that Salt Lake City, the capital of his Mormon faith, was a convenient choice. On the other hand, the team’s proposal for the move, submitted to the NBA, claimed operating losses during its five-year tenure in New Orleans that totaled approximately $5 million. Other questions remained about the wisdom of the proposed move. At question was whether Salt Lake City, much smaller than New Orleans and home of another team (the Utah Stars) that had folded in 1975.

Moving to Salt Lake City in the 1980s

When the newly-christened Utah Jazz opened their first season in Salt Lake City’s Salt Palace in 1979–80 few of the questions that surrounded the move had been answered. If anything, there were more. Pete Maravich would soon end his remarkable career. Elgin Baylor had been replaced by Tom Nissalke as head coach. The most important move made by the fledgling Utah team did not involve a player or coach, but rather the appointment of general manager, Frank Layden, who would prove instrumental in transforming the Jazz into a championship contender.

One of the first of Layden’s inspired moves was to trade recently-acquired Spencer Haywood to the Los Angeles Lakers for versatile Adrian Dantley, who would soon fill Maravich’s shoes as the team’s scoring leader. Adding Darrell Griffith in the 1980 college draft, the Jazz put together a deadly scoring combo that averaged 51.3 points a game in 1980–81. The 1983 addition of Thurl Bailey and Bobby Hansen finally put the Jazz over the top—the team enjoyed its first winning season and its first trip to the NBA playoffs in 1983–84. Frank Layden, who by then was also coaching the Jazz, was named the NBA Coach of the Year.

After that season, the Jazz would rarely be absent from the playoffs, thanks in great measure to All-Star guard John Stockton, signed in 1984, and power forward Karl Malone in 1985.

Despite its steadily improving performance on the court, a significantly better arena lease, and a larger base of season ticket holders, the Utah Jazz remained in a precarious financial situation.

By 1985, after 11 years in the NBA, the team had lost a total of $17 million, and Sam Battistone began entertaining offers to sell the franchise. The most serious came from investors in Minnesota who planned to move the team there. The possibility of losing its second pro basketball team in a decade mobilized Salt Lake and its business community. In April 1985 Battistone’s company, S trat America, announced that it had sold a 50 percent interest in the Jazz to Utah auto baron Larry H. Miller. Although the $8 million Battistone was asking was “well in excess of my net worth” Miller later recalled, he managed to raise the money in nine days. As part of the agreement, Miller also assumed 50 percent of the club’s deferred compensation debt, which bailed the team out financially for a time. Through S trat America, Battistone continued to manage the team’s day-to-day business for some time.

A year after the partial sale, Miller formed Jazz Basketball Investors, which acquired a loan package worth $3.6 million, and in October 1986, he bought the Jazz in full for $9 million and the assumption of all the team’s outstanding debt. At the time Miller and Battistone turned down another offer from Minnesota buyers to purchase the Jazz for $25 million. One of Miller’s first priorities upon assuming ownership was to put the team’s business on solid ground. Using every tax loophole in the book and putting an end to questionable practices such as giving away thousands of free season tickets to area businesses every year, Miller managed to turn a $123,000 profit in 1987.

Company Perspectives:

The company’s mission is to enhance the quality of life in Utah. As an organization we believe we must be part of the community and that we must give back to the community. We believe this can be accomplished through superior customer service and by our employees and players being of service and involved in charitable and community efforts. Winning on the court is what basketball is all about... but lifting and strengthening the community that supports you is what business should be about.

A key part of Miller’s turnaround involved getting Salt Lake to see what a valuable asset it had in the Jazz. He warned community leaders that if the city lost a second basketball team it would likely never get another one. Salt Lake City, led by the chamber of commerce, responded. Corporate sponsors were signed on; season ticket sales soared.

A Basketball Powerhouse in the 1990s

The city helped the Jazz again two years later. When NBA player salaries soared following a new contract in 1988, Miller found that in order to meet his payroll, he needed the Jazz to play in a larger arena. With a waiting list of some 12,000 fans every game at the Salt Palace, Miller knew he could fill a larger venue. In 1990 the Salt Lake Redevelopment Agency floated $20 million in bonds to purchase the site. Miller, eschewing a trend in the 1980s and 1990s that saw communities footing the bill for private stadium and arenas, financed the construction of the Jazz’s new Delta Center out of his own pocket, with $5 million of his own money and $66 million in funding from Japan’s Sumitomo Trust and Banking Company Limited, which he borrowed. “I am against public subsidies of private enterprises,” he later told the Salt Lake Tribune. The Jazz played their first game in the 19,000 seat Delta Center October 4, 1991.

As owner, Miller put together an exemplary front office organization and showed an unusual ability for retaining talent. Miller forged solid relationships with stars Karl Malone and John Stockton, two of the all-time greats at their positions, proved himself a genial boss, and made Utah a pleasant enough home that neither Malone nor Stockton were tempted to test their true value on the free agent market. Nonetheless, the early 1990s tested Malone’s resolve to stay. With the Jazz as playoff perennials, Malone took offense at the astronomical salaries commanded by phenoms new to the NBA. Miller was willing to renegotiate the veteran’s contract to keep him in Utah, giving him in 1993 a package worth $28 million over a seven-year period. Miller extended Malone’s contract again in 1999, a deal reportedly worth $16.5 million a season for Malone. In 1996, John Stockton—a two-time Olympic basketball gold medalist and the NBA’s career leader in assists and steals—signed a new contract reportedly worth $15 million. With its no-trade clause, the deal seemed to guarantee that Stockton would finish his career with the Jazz.

The end of Jazz’s 1996–97 season took on a storybook quality. Playing in the sixth game of the semi-final playoff round, Utah fought back from a 12-point deficit late in the game to tie it with just seconds remaining. John Stockton took the inbounds pass and put the ball in the basket as the buzzer sounded, sending the team to the NBA Finals. Unfortunately, there they faced Michael Jordan’s Chicago Bulls then at the peak of their form, and lost the last series. The Jazz made it to the Finals the following year as well, only to see the Bulls defeat them in six games once again.

Into the 2000s

In October 2002, the NBA approved the transfer of the Charlotte Hornets franchise to the Jazz’s old home of New Orleans, and Larry Miller announced that he would be willing to sell the Jazz name back to New Orleans, a possibility of which Hornets management expressed interest.

In December 2002, Miller added another sports complex to his Jazz holdings. The club purchased an old furniture warehouse and converted it to a state-of-the-art training facility that included two NBA-sized courts with bleacher seating for more than 700 at each. The structure also included office space for some of Miller’s other businesses. The cost of the renovation was $7 million.

The Utah Jazz’s Larry Miller drew praise from NBA commissioner David Stern as an “A-plus” owner, who bought the club for $17 million in the mid-1980s and grew its value to about $200 by 2000. “He’s not afraid to take chances, to follow his instincts,” Jazz president told the Salt Lake Tribune. “That’s what puts the Larry Millers of the world ahead of everyone else.”

Principal Competitors

Utah Grizzlies Hockey Club; Utah Utes.

Key Dates:

1974:: A group of New Orleans investors pays $6.15 for a franchise in the National Basketball Association.
1975:: The New Orleans Jazz move from Municipal Stadium to the Superdome.
1979:: The team moves to Salt Lake City.
1984:: The Jazz have their first winning season.
1986:: Larry H. Miller becomes the new owner of the Jazz.
1991:: The team moves from Salt Palace to the new Delta Center.
2002:: The company opens a state-of-the-art training facility in Salt Lake City.