Crain’s Detroit reports that the Detroit Pistons doubled their corporate sponsorship revenue in 2017-18, thanks in part to the move into Little Caesars Arena. Without specific numbers, we can’t say for certain how much money that is, but their on-the-record source is the Chief Marketing and Revenue Officer for the Pistons (Charlie Metzger), so it’s safe to say their information is solid.
If you recall, ESPN reported that the Pistons were one of the least profitable teams in the NBA in 2016-17 - the team lost a reported $63.2 million. That had ostensibly been the state of affairs for the Pistons since Tom Gores purchased the team; it made sense that a combination of low attendance, a moderate local television deal, and low corporate sponsorship cash would result in losses.
If you’re still wondering why Tom Gores bisected the fan base by moving the team downtown, this news highlights part of the reason why. Again, without hard numbers we don’t know how profitable (or unprofitable) the team is right now, but the combination of higher corporate sponsorship revenue and slightly higher average attendance numbers (I know, I was surprised by that one, too) leads one to reasonably believe the Pistons are doing better financially.
Imagine if people were actually coming to the games.
The report from Crain’s also illuminated some of the more nebulous benefits of bringing the team downtown: In economics, there’s a concept of psychic costs and psychic benefits - the stress (or lack of stress) associated with a particular transaction. Having the Pistons downtown offers a psychic benefit to other businesses.
You know what, I’m just gonna let the guy Crain’s quoted explain:
“The Pistons move to Little Caesars Arena appears to have been a tipping point for companies to further their commitment to the resurgence of the city,” said Victor Chiasson, an assistant professor of sport management at Eastern Michigan University. “Their investment in sponsorship also buys consumer and fan attention, which is the primary challenge facing their business and the sports industry today.”
To digest that word salad: The move downtown helped businesses, and the people who run them, buy into the narrative of Detroit’s revitalization. You never know how much stock to put into that narrative (especially if you are, say, a Detroiter who stuck through the low points only to find that the rising tide isn’t lifting your boat), but that’s why it’s a psychic benefit, not a physical one.
Lastly, although we don’t know if the team is profitable, decreasing financial losses off the court has on-court implications. Plainly, an owner who is making money is more likely to pay the luxury tax, and being willing to do so means you can acquire more talent.
This Pistons team is currently squeezing under the edge of the luxury tax blade - if the team is running a profit, maybe Gores gives the go-ahead to bring in that extra free agent, or retain an important rotation and locker room piece...
I highly encourage you to go read the report from Crain’s. There are some other good nuggets in there, like how future sponsors might being conflating team success with the amount of money they’re willing to spend on marketing, or how the team plans to use Blake Griffin to promote the team.