Blazers grasp bottom line
Player payroll could follow in-house cuts to make team profitable
This week's Portland Trail Blazer layoffs represent the first step toward their goal of turning a profit three to five years from now.
That's the bottom line, says Erin Hubert, the Blazers' executive vice president who wielded the ax that chopped 88 jobs this week.
Hubert is trying to design a future in which the team, which has been in the red during the last three years, will turn a profit.
'In three to five years, we want a team that fans can feel proud of both on and off the court,' Hubert said.
'We want to continue to be extremely active, involved and contributing to our community, and we want to run our company in a responsible manner that turns a profit for our owner, which means we are also a strong business partner in our community.'
Hubert was asked if Allen, who's lost billions in cable television-related investments in recent years, is downsizing to create a leaner operation that's more attractive to a potential buyer. 'Our owner is really committed to this team in Portland,' she responded. 'He loves this team and is very passionate about it, and he's committed to it.'
Hubert said she made the call to eliminate 88 of the organization's 290 employees. The team lost around $100 million during the 2002-03 fiscal year, she said. Much of that loss was attributable to the team's player payroll, the highest in NBA history, and the approximately $50 million the team is expected to pay in luxury taxes.
Sources close to the team said 40 of the full-time positions eliminated were with the Blazers and 48 with the Allen-owned Oregon Arena Corp., which operates the Rose Garden and the Memorial Coliseum. Team representatives said the cuts are estimated to save around $4 million.
Hubert wouldn't discuss the bloated team payroll, deferring to Blazer President Steve Patterson, who wasn't available for comment at press time. But Patterson has said he wants to slash about $20 million from the team's payroll for 2003-04.
The payroll was $105 million in 2002-03, and the team is committed to at least $87 million with its current roster. Of that, the team is paying nearly $15 million to forward Shawn Kemp, whom the Blazers released before last season.
Times are changing
The layoffs and potential player payroll cuts hint that the days of signing starters from other teams to fill the Blazer bench, as well as fill out the three-player disabled list slots, are over.
'I think the free-spending era is over,' said Paul Swangard, managing director of the University of Oregon's Warsaw Sports Marketing Center. 'My hope is that some of these people who've been sitting down the food chain have the autonomy to make good decisions on behalf of the team. Inherently, all of these people believe that this is a salvageable situation.'
Added Hubert: 'Our owner loves this team; that hasn't changed. We just need to be more responsible in running it as a business for him, especially in a soft economy.'
While the team lost money because of the post-Sept. 11 economy, Hubert said the team's image, with multiple arrests and on-the-court controversy, hasn't helped.
'Most people think we're losing money because of the image issues we have, and it certainly is a factor in our business and affects things,' she said. 'But it's really economy-driven. In a robust economy, our revenues would have grown despite our image issues.'
Hubert said sponsorship-based revenues dropped 15 percent in 2001-02 and between 5 percent and 7 percent last season.
Hubert said she told staff members last spring that job cuts were possible. She said the cuts were made across the board, with little regard to tenure or background. Many of the employees held jobs that Hubert said other teams treat as seasonal or contract positions.
'Plus, we now only have two tenants (in the Rose Garden),' she said. 'When we had four or five, when we had the (WNBA) Portland Fire and indoor soccer, a lot of positions were related to those. But we didn't need them anymore because we're dark during the summer.'
Hubert wouldn't disclose terms of the employees' dismissal but said they received 'generous' severance packages.
The most notable names on the list were those of television announcer Pete Pranica and community ambassador Nick Jones, who'd worked with the team for 13 years.
Hubert said the team, in light of Pranica's departure, is still determining how it will cover televised games. She said she doesn't support simulcasting the radio and television coverage.
Before making the moves, Hubert and employees of Vulcan Inc., the parent company for Allen's various businesses, researched other teams' operational levels and found that the Blazers employed about twice as many full-time workers as other teams.
The Blazers have no plans to make further cuts, Hubert said.
'I hope we never do this again in the history of the company,' she said.
A former Blazer management employee said that while Hubert is taking the blame for the cuts, the real directive could be coming from Allen himself.
'The people here have to take the bullets for Paul and make sure none of the mess splatters on him,' the source said.