Madison Square Garden Is Finally Playing To WinBruce Hager
To New York sports fans, Madison Square Garden is the epicenter of disappointment. The Knicks last ruled the basketball roost in 1973. As for the Rangers, it has been over 50 years since they won hockey's Stanley Cup.
Both the Knicks and the Rangers are owned by entertainment giant Paramount Communications Inc. through its Madison Square Garden Corp. unit. And for New York's long-suffering basketball and hockey fans, the real issue is whether a large corporation can focus on championships as long as it has other, more profitable priorities.
The perennial pessimists who haunt the Garden may have cause for hope this year. Paramount has invested more than two years and $200 million to spruce up the arena and its teams. The Knicks have hired Pat Riley, who led the Los Angeles Lakers to four National Basketball Assn. championships, and traded for the Phoenix Suns' star forward, Xavier McDaniel. Not to be outdone, the Rangers on Oct. 4 traded for Mark Messier, a star center who helped the Edmonton Oilers win five Cups. "You've got to think championship, not just playoffs," says Stanley R. Jaffe, Paramount's president. A good omen: Messier led the Rangers to a thrilling 2-1 overtime win over the Boston Bruins in New York's home opener.
TRIPLE PLAY. Whether this is the long-awaited big year for either team won't be known until spring. But there's no doubt that Paramount is finally serious about making the Garden a winning venture. Despite its high visibility, the Garden has been a breakeven performer since Paramount--under old name Gulf & Western Corp.--bought it in 1977.
The mediocrity is baffling, since MSG boasts a triple play that's rare in sports. Besides the Knicks and the Rangers, MSG owns the arena where they play. It also runs the network that televises the Knicks, Rangers, and Yankees. MSG Network, the nation's largest regional sports cable network, with 4.6 million subscribers, contributes 43% of the Garden's estimated $200 million in revenues. That's more than twice what the Knicks and Rangers contribute (chart).
Despite skimpy earnings, overall results improved under MSG Chief Executive Richard H. Evans, who was lured from Radio City Music Hall in 1987 to oversee the Garden's renovation and make it profitable. "The operation has become much more efficient," says Allen Bloom, executive vice-president of Ringling Bros.-Barnum & Bailey Combined Shows Inc., whose circus is an annual visitor. Jaffe added MSG to his portfolio after Evans left in August.
Unlike Evans, Paramount's president is a native New Yorker and an ardent sports fan. He's also a successful film producer whose credits include Fatal Attraction and The Accused. Davis is relying on him to complete the turnaround--and earn a big return on that $200 million. The Garden will probably net less than $1 million this year. That's a pretty thin margin, and Paramount Chairman Martin S. Davis knows it: He told Wall Street analysts that MSG has the potential to contribute from 15% to 20% of the parent company's annual entertainment profits--or $30 million to $40 million.
To do so, MSG is wooing well-heeled corporate customers. Eighty-eight new skyboxes, fetching up to $180,000 each, will boost revenues from luxury seating by 650%. The Garden has also assumed all in-house catering operations. But the crown jewel is the 5,600-seat Paramount--a new name for the old Felt Forum. Combined with the 20,000-seat Garden, MSG Corp. will be able to stage 500 events a year and lay claim to being New York's premier entertainment emporium. "Radio City Music Hall is in for a rude awakening," predicts John Scher, a New York concert promoter.
RED TAPE? Now, it's time to field a champion--and silence skeptics who blame the guys in pinstripes for the Knicks' and Rangers' woes. "You can't name too many teams that have been real successful that have been owned by major corporations," says an executive of a rival arena and team. "I think sports teams need entrepreneurial spirit."
Knicks and Rangers brass deny Paramount seeks profits before victory. "I've never been shackled by red tape or charts that say we want to get revenues up," says Neil Smith, the Rangers' general manager. And Knicks President Dave Checketts insists Paramount didn't get in his way when he signed Riley.
Knicks and Rangers fans tend to be a cynical lot. But even jaded Garden regulars are starting to think that maybe, just maybe, a championship fits into Paramount's big picture.
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.