Like countless other Knicks fans, I sat in front of the computer screen until the wee hours of the night waiting to see how July 1, 2010, the first night of NBA free agency would play out. Like many, I thought our chances of Lebron were good. I was wrong. Yet, as I sat praying for a tweet or a post letting me know who might sign with us, the wheels in my head started turning. Everyone knew the Knicks had cap room, enough for 2 max guys in fact. Everyone also knew the lure of the bright lights of NYC and the appeal NY Knicks basketball had on many of the NBA’s elite talent. So with Donnie Walsh at the helm, whether it was Lebron, Wade, Bosh, Amare, Joe Johnson or Carmelo, Paul, Deron Williams etc in subsequent years, I was confident that the Knicks days of purgatory were finally set to come to an end. So you know what I did in between refreshing tweets? I put a buy order in on MSG’s stock, which opened the morning of July 1, 2010 at $19.73 a share.
Now, I’m a lawyer not a stock analyst, but I have followed the market as a hobby since my high school days and I felt confident that analysts weren’t giving MSG stock the coverage and respect it deserved. Number crunching financial gurus (i.e. those who don’t truly understand the business of sports) point out that the Knicks in fact make up a relatively small portion of MSG revenue. However, it’s all in how you read the numbers.
A good Knicks team directly reflects not only actual “Knick game revenue” but directly or indirectly reflects season ticket renewals, the ability to increase ticket prices, merchandise sales, the opportunity for playoff revenue, MSG TV ratings, MSG advertisement sales, MSG corporate sponsorship agreements…etc A good Knicks team also attracts more patrons to the Garden, who can then be lured into other Garden events (i.e. Little Tommy has a way better chance of convincing his Dad to take him to the circus when his old man is leaving the Garden after a Knicks victory against the Heat then after leaving the Garden dissatisfied after watching Nate Robinson shoot 6 of 19 in a loss to the Raptors.)
Additionally, something else these so called “stock analysts” didn’t take into account when evaluating MSG stock – Knick fans are hungry and New Yorkers are rich. Let me say that again….. Appetite+ $. Isn’t that the clientele that every company yearns for to buy its products? A built-in base that is craving a good product compounded by the willingness on the part of the consumer to spend top dollar for it. Knicks fans have largely been on the sidelines for the last ten years just waiting to spend their money. We haven’t bought jerseys (Nate Robinson? Steve Francis? c’mon), we haven’t had playoff games, we stopped watching games on MSG by January, we didn’t buy Garden merchandise, and corporate executives were favoring taking clients for a nice piece of steak rather than spending premium dollars on Garden box seats.
First with the addition of Amare and now with the recent acquisition of Melo, all of that has changed…..and MSG stock is (and I believe will continue) to reap all the benefits!
Don’t believe me? Let’s look at the numbers
- The addition of Melo has caused the secondary market of Knicks tickets to rise by 91%. (Economics 101….your product is in good shape when demand > supply)
- Melo’s Knick debut against the lowly Bucks drew the highest rating for a regular-season game on MSG network since Michael Jordan’s famed 55 point game after his first retirement 16 years ago.
- Melo NY Knicks jersey’s are sold out for the next month (but fear not – the Garden will have replica’s – thus taking market share away from the likes of Modell’s, Sports Authority and others).
And you know what the best part is? These numbers won’t be reflected in MSG’s latest quarterly earnings which are set to be released this morning before the market opens. Neither will playoff revenue, increased ticket prices for next year, increased sponsorship money, and increased cable ad money. Oh yeah….. and 1 more thing….the Garden is set to begin an $800 Million renovation next year to increase the number of seats and corporate boxes (good timing eh?)
Yesterday afternoon MSG stock closed at $29.71, a 51% increase in the eight month span since free agency began on July 1, 2010. Who wouldn’t take those kind of returns?
Check out this article and others at Kalmanson’s Korner