Sports

Nets, Barclays Center’s losses are costing Joe Tsai millions

Nets owner Joe Tsai cannot easily fire players after a disappointing season on and off the court, but he can sack the CEO, which officially happened this week.

The question is whether his demands are too high or the Nets should be doing better financially.

The Nets and Barclays Center lost between $50 million and $100 million combined in the 2021-22 season, giving Tsai perhaps the worst financial losses in the NBA, sources with close knowledge of the situation told The Post.

Tsai believed that after he bought the Nets and Barclays in August 2019 he could make it into a state-of-the-art operation like Alibaba, the Chinese ecommerce giant he co-founded and which made him worth roughly $10 billion.

Instead, his prior success has not translated to the hardwood.

Brooklyn Nets owner Joseph C. Tsai, left, had the NBA's second-highest payroll this season.
Brooklyn Nets owner Joseph C. Tsai, left, had the NBA’s second-highest payroll this season.
Anthony J. Causi

Tsai handed maximum contracts to stars Kevin Durant and Kyrie Irving, giving the Nets the second-largest payroll in the NBA. He’ll end up paying roughly $100 million in luxury tax, the second-highest bill in NBA history.

The Nets were swept in the first round of the playoffs by the Celtics this past week, a humbling end to an underachieving season.

Tsai also forced out John Abbamondi, the CEO of Brooklyn Sports Entertainment (BSE), the parent company of the Nets and Barclays Center, who announced in February that he would leave at the end of the season. Tsai is now searching for his third top business executive in under three years.

Though the Nets set records for attendance, ticket revenue and sponsorships under Abbamondi, Tsai’s huge investment led him to believe a good showing should have been great. The Taiwan-born billionaire felt Abbamondi was not innovative or data-driven enough, sources close to the situation told The Post.

The Nets' big three of James Harden, Kevin Durant and Kyrie Irving played just 16 games together.
The Nets’ Big 3 of James Harden, Kevin Durant and Kyrie Irving played just 16 games together.
NBAE via Getty Images

“Joe is hands-on, hard-driving, and if you don’t fit with that, then he will keep going until he finds the person that fits,” a sports banker said.

The inside numbers show how much the Nets have improved financially in a short time, but also that there is still a gap between them and the top-grossing NBA teams. Tsai might be more sensitive now to BSE losses after shares of the company he co-founded, Alibaba, have slid from $304.69 on Oct. 1, 2020, to Friday’s close of $97.09.

The Nets’ average gate receipts this season were $2.1 million per game, fourth in the league. That was better than a 100 percent improvement over the $1 million per game during the last full pre-pandemic season in 2018-19, according to an NBA source. It also was the biggest jump in the league (the Suns were the only other team with a similar increase).

Still, the Knicks brought in $3 million per game, a 9 percent bump over 2018-19, though they did not make the playoffs.

The Nets, after giveaways, sold about 15,000 tickets a game, a 26 percent improvement over 2018-19. The Knicks averaged just over 16,000, according to an NBA source.

John Abbamondi, the CEO of Brooklyn Sports Entertainment (BSE), the parent company of the Nets and Barclays Center, left at the end of the season.
John Abbamondi, the CEO of Brooklyn Sports Entertainment (BSE), the parent company of the Nets and Barclays Center, left at the end of the season.
AP

In other words, the Knicks were still the kings of New York basketball though the Nets’ payroll was $174 million, 48 percent higher.

To break even, considering the payroll, the Nets needed to drive revenue on par with the Knicks or Warriors — who have a similar payroll to the Nets, but are No. 1 in gate receipts per game at $4.2 million, which doubles Brooklyn’s average, the NBA source said.

Tsai wanted better results and became unhappy with Abbamondi for not hitting off-court numbers that were as robust as the Warriors’ despite spending like Golden State, sources said.

During the season, the Nets did not suffer from a lack of attention. They played in seven out of the top 25 games in national television audiences. Their Christmas game against the Lakers drew a league-best 5.8 million viewers, and the four playoff games against the Celtics averaged 4.8 million across ABC, ESPN and TNT, the most-viewed first-round series since 2016.

But the Nets’ Big 3 of Durant, Irving and James Harden played just 16 games together, making it hard to cash in fully on their names. During missed a quarter of this season due to a knee injury, Irving missed nearly two-thirds due to his refusal to get vaccinated, and Harden demanded a trade — one that brought back Ben Simmons, who still hasn’t played.

Tsai will need to personally invest about $30 million this year for Barclays to make its municipal bond payments after paying $52 million the prior year, Moody’s said in a March analyst report.

Tsai hasn’t meddled in Nets general manager Sean Marks’ basketball decisions. But when it comes to managing his money from him, Tsai has demanded either success or replacements.

Jonathan Vanica, the chief investment officer of Tsai’s investment vehicle, Blue Pool Capital, left Blue Pool toward the end of 2021 after being there only a year, according to Bloomberg Law.

It’s all up to interpretation, a source who works closely with the Nets said, on whether Abbamondi did well under the circumstances or is to blame for the team’s financial performance not living up to very high expectations.

The Nets have increased overall revenue by about 40 percent since 2018-19, but that only puts them in line with teams in similarly sized markets and not among the league’s best, the NBA source said.

Barclays also expected this season to increase its percentage of revenue that came from non-Nets events from 36 percent pre-pandemic to 48 percent, according to the Moody’s report. Instead, there are projected to be just 147 Barclays Center events for the year ending in June, compared to 194 in the last pre-pandemic year.

Part of that is due to the Islanders moving from Barclays to UBS Arena in Elmont. Tsai was hoping to replace their games with higher-margin events but has failed to do so, according to sources.

Lingering pandemic fears are somewhat to blame, sources said.

Tsai paid a record $2.35 billion for the Nets — the most ever for a sports team — and $1 billion for Barclays Center, so he has a lot on the line.

The Yale University graduate, who has a BA in economics, viewed buying the Nets as getting a one-thirtieth stake (and, better yet, one based in New York City) in the NBA, an internationally growing media company, a source with knowledge of the situation said.

Problems arose quickly.

Tsai first hired as CEO former Turner president David Levy, whom NBA commissioner Adam Silver had recommended. But Tsai did not agree with Levy’s hands-off style of delegation. Levy was a relationship person, who was charming at dinners or drinks events, but did not roll up his sleeves, sources said. He also deferred too much to Silver.

Tsai pressured Levy to resign after less than two months on the job.

“Most owners would not have fired Levy,” the source with knowledge of the situation said.

Tsai turned on a temporary basis to Oliver Weisberg, the CEO of Blue Pool Capital. But Weisberg had no real experience in sports or media, and at one point was flying back and forth from the US to China.

After eight months, Tsai hired Abbamondi — a former Navy pilot (call sign: Eggplant) — while leaving Weisberg as the team’s alternate governor to the NBA.

Abbamondi came to the Nets with a solid résumé, albeit an unorthodox one for an NBA CEO. He had spent four years as Madison Square Garden’s executive VP of ticketing, suites and hospitality — overseeing the Knicks and Rangers.

Tsai worked to get the Nets more data-driven. The team, for example, sent emails promoting ticket offers using Marketo automation software, which tracks who opened the emails and who clicked on the links. Salespeople would quickly be alerted, then would call those who opened their emails and links, knowing they already had shown interest, a former Nets executive said.

In January 2021, Abbamondi pushed out 18 longtime Nets salespeople, including Senior VP Dan Lefton (now SVP of business strategy for the Pistons) and Senior VP of Sales John Baier, the former exec said.

Abbamondi believed that because more people were buying tickets online, the Nets didn’t need as much staff, sources said. Other NBA teams too were operating with smaller sales teams, a source said.

It created some bad blood, however, when in addition to cutting staff he adopted new technology, so sales managers could more closely monitor their employees.

“They started to listen in on sales rep calls,” the former executive said. “This was big micromanaging.”

The Nets saw that as common practice in technologically advanced sales organizations, sources said.

Tsai and Abbamondi declined comment for this story.

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