James Dolan is enjoying a triple success story as chairman of the Madison Square Garden Co., less than a year after being vilified by New York Knicks fans.
MSG stock is up, corresponding with the Knicks’ rise to first place and a tie for the best start in the National Basketball Association, led by Carmelo Anthony, the player Dolan insisted stay in town.
The company’s namesake arena in Midtown Manhattan, less than a mile from the annual Christmas Spectacular at MSG’s Radio City Music Hall, has regained the buzz that surrounded championship seasons long past. Who needs the Rockettes? The holiday season in New York suddenly is filled with basketball wonder.
“They needed their own storyline, and winning is always the best storyline,” said Paul Swangard, managing director of the Warsaw Sports Marketing Center at the University of Oregon.
The Knicks lost last night against the Dallas Mavericks in Texas to move to 8-2 for the season, after winning their first six games.
New York hasn’t won a playoff series since 2000. The last two times the Knicks started 8-1, they won the NBA championship.
The emergence of the Knicks, led by Anthony, Tyson Chandler and Jason Kidd, to rival the defending-champion Miami Heat with All-Stars LeBron James and Dwyane Wade comes as the Brooklyn Nets play their first season in the $1 billion Barclays Center across the East River. The city’s older franchise hasn’t let the New Jersey transplant take the spotlight, even with the Nets’ own 6-4 start.
“The Knicks response is what New Yorkers have been wishing for for decades: a competitive team again,” Swangard said in a telephone interview.
The Knicks and Nets were scheduled to play in the season opener at Barclays Center on Nov. 1, before Hurricane Sandy forced a 25-day postponement.
In the weeks since the start of the NBA season, MSG’s shares have climbed 8.3 percent, and the company, spun off from the Dolan family’s Cablevision Systems Corp. (CVC:US), looks to further benefit from a $3 billion valuation of the YES Network, another regional sports television outlet network, according to analysts.
The company’s shareholders also will benefit from strong reviews of the $980 million overhaul of the Garden, which during the offseason completed the second of three phases, according to John Tinker, an analyst at New York-based Maxim Group LLC.
“You go back a year or two, there were a lot of people saying the renovations would be a disaster,” Tinker said. “Now, the only question is if there’s going to be a surprise dividend. That’s a huge turnaround in how investors look at the stock.”
The Knicks in July declined to match a three-year, $25 million offer from the Houston Rockets for star guard Jeremy Lin, instead adding veterans such as Kidd, Marcus Camby, Rasheed Wallace and Raymond Felton. The dropping of the Harvard University graduate who created what became known as Linsanity during a month-long run in February had fans snarling over Dolan’s tactics.
Now the oldest team in the NBA at an average age of more than 31 years, the Knicks have bought into Mike Woodson’s coaching philosophy, which emphasizes defense and minimizing turnovers.
“Every single night has to be our style of basketball,” Chandler said after the team’s 102-80 win against the New Orleans Hornets two nights ago. “You have to have your identity. You have to be able to lean on something when times get tough.”
Heading into last night, the Knicks had allowed 88.9 points per game, the fewest in the NBA, and committed 10.33 turnovers per contest, almost three fewer than the next closest team. The team’s 100.7 points per game offense was sixth best.
MSG, which was spun off from Cablevision in February 2010, has three main components: MSG Sports, which includes the Knicks, the National Hockey League’s Rangers and the Garden; MSG Media, which includes the MSG Network cable channels; and MSG Entertainment, which includes the Beacon Theater and Radio City Music Hall, home of the high-stepping Rockettes dance troupe.
MSG shares closed yesterday at $43.90, up from its $40.52 price when the NBA season began though below the 52-week high of $44.76, achieved at the close on Nov. 16, hours before the team’s first loss of the season. In the quarter ended Sept. 30, total company revenue increased to $204.2 million primarily on the growth of the media unit, a 15 percent increase over the prior year’s quarter.
MSG also stands to benefit from Rupert Murdoch-led News Corp.’s agreement this week to buy 49 percent of the YES Network, the cable channel that carries New York Yankees baseball games. The deal valued YES at about $3 billion.
“The valuation placed on the YES network shows the incredible value placed on regional sports networks,” Paul Sweeney, an analyst at Bloomberg Industries, said in a telephone interview. “It makes Dolan look smart to keep control of sports programming through the MSG Network.”
Neither Dolan nor Hank Ratner, chief executive officer of MSG, was available to comment on the Knicks, said Barry Watkins, a spokesman for the company.
MSG’s diverse business model prepares the company to weather the effects of the NHL lockout, according to Richard Peddie, who formerly ran Maple Leaf Sports and Entertainment, owner of the NHL’s Leafs, NBA’s Toronto Raptors and Air Canada Centre.
Though the Maple Leafs accounted for about 40 percent of company profit heading into the NHL’s season-long 2004-05 lockout, it didn’t lay off any employees, said Peddie, the company’s former chief executive officer.
“You hate to lose 40 percent of your profit but you still have 60 percent doing stuff, you still need people to service your other assets,” Peddie said in a telephone interview. “You hurt a bit on hockey nights, but the scale and synergy in the rest of the company really helps you get through it.”
Former coach and ESPN analyst Jeff Van Gundy said last week in an interview that the Knicks had established themselves in a group of Eastern Conference contenders alongside the Boston Celtics, one level below James and the Heat. New York’s odds to win its third NBA title have dropped to 16-to-1 from 35-to-1 before the season started, according to online sports book Bovada.lv.
“I love their energy and intensity and the unselfishness,” said Van Gundy, who coached the team to the NBA Finals in 1999. “There’s not a better place to play or coach than New York City when you have a chance to win a title.”
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