The NBA, while big business, is also entertainment. And Indiana Pacers Sports & Entertainment President and CEO Donnie Walsh knows how to keep his entertainment conglomerate profitable.
“We are set up like any other company, with a mission statement and organizational chart,” says Walsh. “Our job is to put together teams, sell tickets, sponsorships and merchandising and book the arena with as many events as we can to produce revenue.”
At the end of the day, it all comes down to making sure the fans have fun, says Walsh. To accomplish that, each moment of a game — aside from the actual play — is scripted, from the minute the doors open through the final buzzer.
“Everything that happens is timed down to the second,” says Walsh. “It’s all about putting on a show. We want people to say, ‘Well, they didn’t win, but we had a great time.'”
Peaks and valleys
Walsh, who received his law degree in 1965, never became a practicing attorney. Instead, he became an assistant basketball coach at the University of North Carolina — which he had previously attended on a basketball scholarship — and never looked back.
“I’ve always been in basketball — college or professional,” Walsh says.
During that time, Walsh has seen a lot of changes in professional basketball.
“In the ’80s and ’90s, the NBA was one of the most successful leagues in the world,” he says. “It grew in popularity and excitement. We enjoyed 10 years of growth in all areas — attendance, television ratings and merchandising.”
But all growth eventually peaks. Says Walsh, “The last five years have marked the end of that growth cycle.”
Walsh attributes this slowing down of the league, to the fact that many of its star players have retired in recent years.
“We’ve lost a lot of the players that caused that excitement,” he says. “This is a transition period toward new players. The teams are getting better and better each year, and the players are maturing.”
Walsh says another factor contributing to the slowdown is the fact that many young players are jumping to the NBA directly from high school.
“These younger players weren’t exposed to a national audience because they didn’t play college ball, so they didn’t have the appeal,” says Walsh. “I believe these young players are starting to live up to their potential, and the future is exciting and bright.”
Long-term strategies
As with any business, Walsh says you have to spend money to make money.
“What I’ve found is that you have to come into this prepared to spend a certain amount of money and time doing the right things as far as how you treat the team,” from paying players a fair market value to maintaining the arena, he says.
Balancing this with the budget Walsh is given can be a challenge, he says.
“When you get players young, you can pick them at the right salary,” he says. “Once they become successful, keeping them is harder than getting them.”
That means once a team develops a superstar, his salary is expected to rise to sometimes uncomfortable levels, Walsh says.
“You have to decide whether they are worth it or let them go,” he says. “If you don’t, you can find yourself in tough financial straits.”
To avoid difficult financial times, at the end of each season, Walsh sits down to make decisions for the coming year.
“As soon as the season ends, we begin marketing for the following year based on how we just did,” he says. “When we win, it’s a more positive atmosphere to market.”
Selling tickets is easier when the team is doing well, but even if it’s not, the seats need to be filled, says Walsh.
“There’s no proper way to market throughout the summer, but we try to sell as many season tickets as possible,” he says. “We look at our season holders and know at a minimum what our revenues will be.”
Additional revenue is dependent on the team’s success as the season gets underway.
“We need to know the minimum of how much is coming in so we can budget,” Walsh says. “And we never budget for the playoffs. We have expenses whether we win or lose.”
But no matter how the economics play out, Walsh keeps his focus on success. For him, that means winning an NBA championship. And there’s no one thing by itself that provides a better chance of achieving that goal.
“You have to make the right decisions and spend the money, as long as it doesn’t hurt the franchise,” he says. “In that area, no one has a crystal ball.”
To help balance the budget, Walsh focuses on the team, rather than on a few star players, and that strategy has worked well for the Pacers.
“You produce a better team and it puts you in a better position to win later in the season,” he says. “It doesn’t help you in terms of media interest. Even a star player on a poor team draws interest.”
However, a potential player may not want to join a team where there are many good players versus a team with few star players. And, says Walsh, having a Shaquille O’Neal on your team can make a difference in the playoffs.
“You can have great players, but a team with a Shaquille will beat you in a final game,” Walsh says. “He’s the difference.”
And winning is important, because a consistently great team keeps fans coming back.
“People are attracted to players that score a lot of points, but if the team continues to win, the fans take a closer look at the each player and come back around,” he says.
And although a free-agent player looking for stardom may not consider joining the Pacers organization, Walsh says his team-focused strategy does help attract players.
“When it comes to recruiting, beyond the financial, we try to brand ourselves by focusing on what makes us different from the other teams,” he says.
One of those things is the team’s — and Indiana’s — legendary approach to the game.
“Basketball has a gigantic history and tradition specific to the state, different from any other state I’ve been in,” Walsh says. “I grew up in New York and went to college in North Carolina, and basketball is big in both states, but I’ve never seen anything like what we have here.”
Walsh says that from a very young age, most Indianans are either players of the sport or spectators.
“The movie ‘Hoosiers’ didn’t happen by accident,” he says. “If you want movie stars, you won’t come here. If you are really focused on basketball, that’s what we’ve got.”
That’s entertainment
In the NBA, it’s all about image, and with that in mind, Walsh asked Hall of Famer and Indiana native Larry Bird to return to the organization in a senior executive role.
Bird coached the Pacers from 1997 to 2000 and returned last year as president of basketball operations. Walsh says he has bigger plans for Larry Legend.
“I am confidant he is exactly the right person to run the franchise when my days are over,” Walsh says. “He is a man of great ability and an icon. He stands for the sport and ensures our success.”
Beyond Bird’s wealth of knowledge, he has entertainment value with regard to drawing fans’ attention to the Pacers, and Walsh relies on his expertise to keep the team on track.
“Clearly, we have a great partnership,” he says. “He makes the team better and I have confidence in delegating big decisions to him.”
And with strong management in place, Walsh can focus his attention on the entertainment value.
“The goal is to produce an exciting team and be No.1, but that’s not always going to happen,” he says. “So we have to plan an exciting game and provide good entertainment, and we’re getting better at that.”
How to reach: Indiana Pacers, (317) 917-2500 or www.nba.com/pacers
