Jets stadium plans put squeeze on Dolans
BY HARRY BERKOWITZ AND STEVE ZIPAY
April 3, 2004, 9:15 PM EST
Cablevision top executives Charles and James Dolan often try to wield their influence behind the scenes and on their own timetable.
But the Dolans' usual gameplan hit a brick wall last week when Mayor Michael Bloomberg publicly declared they were "scared to death" of a $2.8-billion plan for a new Jets Stadium and expanded Jacob K. Javits Convention Center on the West Side of Manhattan.
"It is an outrage that you let your own personal economics, or economic interests, stop a major project in this city," Bloomberg said, disclosing telephoned pleas from James Dolan, who is Cablevision Systems Corp. chief executive and chairman of Madison Square Garden.
For the Dolans and their 36-year-old Garden, the timing could not be worse.
The premiere venue has been in a slump for years, as its two main sports teams, the Rangers and the Knicks, have failed to make the playoffs. The Garden's MSG cable network lost Yankees games to the YES Network, cutting MSG's advertising and subscriber revenue.
The Garden's finances are slumping so badly that it axed 80 employees in February and dropped a half-billion-dollar line of credit because it could no longer comply with financial covenants of its loans.
"They are under siege from a lot of different directions," said Andrew Zimbalist, a professor of economics specializing in sports at Smith College in North Hampton, Mass. "I don't think there are easy answers."
The plans for competing arenas, including one for the Nets in Brooklyn, threaten to rob Madison Square Garden of many of the events that are its lifeblood, and to put pressure on how much the Garden charges ticket buyers and event sponsors.
In an interview four years ago, Dolan said the Garden was in urgent need of replacement and a decision needed to be made on where to rebuild within a year. No apparent progress has been made and now it could get harder.
"The region is heading into an arena glut," said Brian Hatch, a former Salt Lake City deputy mayor who heads the Web site newyorkgames.org, which follows the city's bid for the 2012 Summer Olympics. "Everyone is looking at the same U2 concert to make their arena pay off, and I don't think there are enough concerts and enough circuses for all these arenas to make sense."
Sports analysts said a crowded market, with potential new arenas also in Nassau County and Newark, will make it much harder for the Garden to function without drastic changes.
"Madison Square Garden is an operationally obsolete facility," said Marc Ganis, president of Sports Corp., a consulting firm based in Chicago. "The Garden operates in a relatively inefficient manner and it has for decades. But because it is the only facility for events of its type in New York City, they have been able to get away with it."
It is not big enough to house such events as the Final Four of the NCAA Men's Basketball Championship. It does not have the number of luxury skyboxes that have proved lucrative to new arenas. And the Garden's expensive labor contracts compound the problems, industry experts say.
Among the logistical and security problems, its performance level is five floors up, requiring tractor-trailers to unload contents for shows on the ground floor and have them hauled up elevators. That cannot be solved by the kind of $200 million renovation the arena had more than a decade ago.
Bloomberg accused the Dolans of "dithering around" for years over the question of building a new Garden.
The Dolans have said little publicly. "We continue to explore all possibilities regarding a new or renovated Madison Square Garden," said Garden spokesman Barry Watkins.
At least three proposals for a replacement have emerged over the years, including one for a Madison Square Garden tied to the Jets Stadium.
"MSG didn't want to be a subordinate tenant in that facility, and they don't want to have to share various arena revenue streams," Zimbalist said.
An executive close to Cablevision said, "The evaluation process is just enormously complex and time-consuming. You have to look at mass transit and parking at a new location, the cost of renovating against the cost of a new building." Another question is what happens to the 5,400-seat Theater at Madison Square Garden, where concerts and other performances are held. "Is it worth duplicating it at another site?" the executive asked.
Building a new Garden is an expensive task, especially without public financing. Ganis estimated the cost at $500 million or more, not including land and demolition costs.
Dolan has considered building a replacement on the existing site, but that would mean finding temporary facilities for the teams and events and foregoing the huge value of selling the real estate to developers for another type of building.
A New York executive who has dealt closely with Cablevision and the Dolans said that, although they realized that deciding on a replacement had to be a top priority, they got distracted by myriad events and conditions.
"Three or four years ago, it was a better economy, financing was easier, the teams were faring better," the executive said.
Among the problems that arose, Marc Lustgarten, the Garden chairman and Cablevision executive who helped guide the company through dilemmas, died of pancreatic cancer in 1999 and was replaced by Dolan. The new vice chairman, Robert Lemle, was not as adept in sports issues and has been replaced by Hank Ratner.
In recent years the company faced major financial woes whose resolution included shutting The Wiz retail electronics chain. The economy slumped, especially after 9/11. Mayor Rudy Giuliani, a key ally, went out of office. Cablevision chairman Charles Dolan focused on launching a satellite TV service. And his bid to buy the Jets, which would have made finding a solution to the Garden question much easier, lost to one by Robert Wood Johnson IV in 2000. Further complicating matters, the Knicks and Rangers built up huge payrolls, swelled by star players with long-term contracts.
The Garden, including the teams, posted operating income of $4.5 million for 2003, down 92 percent from $56 million in 2002.
Prospects may be slightly brighter this year. Knicks attendance is up and the team appears to be headed for the playoffs. The Garden will host the Republican National Convention in August.
But Richard Greenfield, an analyst at Fulcrum Global Partners, said Cablevision should just sell the Garden and teams because the justification for owning them has faded.
"They are trophy assets that could realize greater value outside of Cablevision," he said.
Which explains the main reason that Woody wants our stadium in Manhattan & why he will not move us anywhere else...