Best Solution for Heisley Might Be Two in the Pond

Vancouver Grizzly owner Michael Heisley is expected to visit Anaheim next week, sources said Thursday night, making the city the fourth stop on his cross-country tour to find a new home for his financially ailing NBA team.

Heisley returned to his Chicago office Thursday after visiting Louisville, St. Louis and New Orleans within the past week. He said Wednesday he had narrowed his search to “three, maybe four” cities but declined to identify them.

As the NBA works with Heisley to evaluate the pros and cons of the cities competing to lure the Grizzlies, a nationally recognized sports business expert predicted the team might well end up in Anaheim.

“It is clearly the most logical solution for the Grizzlies,” said John Moag, former chairman of the Maryland Stadium Authority and the man credited with brokering the deal that brought the Cleveland Browns to Baltimore.

Andy Dolich, the Grizzlies’ president of business operations, met Wednesday in Anaheim with City Manager James Ruth and Pond General Manager Tim Ryan, the latest of several discussions among representatives of the Pond, the Grizzlies and the NBA. If Heisley wishes to move his team next season, he must apply for league permission by Thursday, although a deal need not be completed by then.

Questions surround each of the presumed leaders in the Grizzlies’ sweepstakes. Louisville is basketball-mad, but the city lacks a new arena and the population base would be the smallest in the NBA. New Orleans has a new arena, but the corporate base is almost nonexistent, with the city’s lone Fortune 500 company packing for Florida. St. Louis is sports-mad, but the Grizzlies would be the fourth major league team in an area with fewer people than Orange County. Also, Heisley would have to share revenue with Blues’ owner Bill Laurie, who controls the local arena and who tried to buy the Grizzlies in 1999.

In Anaheim, the Grizzlies would move into an relatively new arena--the Pond opened in 1993--and a large and wealthy market in which to sell season tickets and corporate sponsorships. If Heisley bases his decision purely on where he can get the best deal, the most pressing question in Anaheim is one neither Ruth, the city manager, nor Ryan, the arena manager, can answer.

“What it comes down to is, how much does Disney want them in the building?” said Jeff Phillips, senior vice president at Houlihan, Lokey, Howard and Zukin, a specialty investment banking firm that works extensively within the sports industry.

Disney owns the Mighty Ducks. Under the Ducks’ lease, any NBA team moving into the Pond must split millions of dollars in revenue with Disney, which controls luxury suites, club seats, corporate sponsorships, advertising and naming rights for the arena.

“I think there’s an upside for Disney if we can share revenues arising from an NBA team that is not there now,” Ruth said.

While Disney has expressed its willingness to renegotiate to accommodate an NBA team, the company faces a dilemma. With the Ducks languishing in last place and playing before the smallest crowds in franchise history, and with the Grizzlies likely to enjoy a honeymoon playing in front of Orange County fans, Disney would risk shrinking its income twice, first from renegotiating the lease and then from ticket buyers and sponsors that might shift their allegiances--and dollars--from the struggling hockey team to the new basketball team.

But Max Muhleman, whose North Carolina sports marketing firm has surveyed the local market, said there are enough people and dollars in Orange County that the Grizzlies need not cannibalize the Ducks’ fan base.

“It’s a big enough market,” Muhleman said. “I don’t think it would be as likely to rob the NHL ticket base as much as it would in a smaller market.”

The Grizzlies would struggle to attract media attention and air time in Southern California, with the winter broadcast market already crowded with the Lakers, Clippers, Kings, Ducks, UCLA and USC. But the NBA’s national television contracts guarantee the Grizzlies $23 million per year, far more than the team would generate from agreements with local radio and television stations. If the Grizzlies can reach a favorable lease deal with Disney and the Pond, they also would generate far more money from that agreement than from local broadcast revenue.

The Grizzlies’ current discussions with Disney involve only the potential restructuring of the Mighty Ducks’ lease, sources said. However, in order to maximize his chances for success in Anaheim, analysts agreed that Heisley ought to buy the Ducks, eliminating the need to share revenue with Disney.

In 1999, Disney negotiated to sell the Ducks and Angels to a group led by Orange County high-tech billionaire Henry T. Nicholas III. While Disney would consider a bid for one or both teams, the company is not now shopping them, said Sandy Litvack, who retired Dec. 31 as Disney vice chairman but remains a consultant to the company.

“If someone came along and made us a great deal and assured us the teams would stay in Anaheim, we’d listen. Beyond that, there’s nothing,” Litvack said.

Heisley, a billionaire industrialist, bought the Grizzlies for a reported $160 million last year and claims losses of about $40 million this season, so he might not hurry to spend more than $100 million to buy a money-losing hockey team. In December, Forbes magazine estimated the Ducks’ franchise value at $117 million.

Given Thursday’s deadline, Moag said Heisley’s best move might be to relocate the Grizzlies to Anaheim now and consider buying the Ducks from Disney later.

“It’s probably in Disney’s interest as well as the Grizzlies’ interest,” Moag said. “It could be a very good marriage, even if divorce is in the offing soon after the marriage.”