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And while the $1.8 billion project will maximize the team’s competitive advantage and significantly grow its annual revenue, the NBA’s richest owner wants to make it clear that he spared no expense.
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“We put in more money than we needed to, I should probably emphasize that,” Ballmer said in an interview from the team’s office in downtown Los Angeles. “I’ll give you some examples. Does this kind of scoreboard cost a lot more than a normal scoreboard? Yes, it is several tens of millions of dollars. The fact that I wanted to see what we could do to be environmentally great, did that cost us more than it needed to? Yes, that’s many of tens of millions of dollars. Did we need to have all of this legroom? No. And that’s tens of millions of dollars.”
That’s one of the luxuries of running a private company as opposed to a public one (Ballmer spent nearly 15 years as Microsoft’s CEO)—you can spend an extra $500 million on your headquarters. “We made some design decisions that cost money,” Ballmer said, “because we care a lot about the environment and a lot about our fan base.”
The Clippers officially break ground on the building in a ceremony on Friday in Inglewood, and will do so with a big piece of the financial plans already locked in. The franchise has signed a new 23-year naming rights deal with fintech platform Intuit. While terms weren’t announced, someone familiar with the deal said it was the most expensive, in total dollars, in NBA history.
The deal continues a big year for Intuit, whose brands include TurboTax and QuickBooks. In December the company closed an $8.1 billion purchase of personal finance company Credit Karma; this past week it announced a $12 billion acquisition of email marketing platform MailChimp.
“We wanted a partner that was customer-obsessed and tech-obsessed,” Intuit CMO Lara Balazs said. “And we are able to use this as a platform to share our brands. To get all of our products—Credit Karma, TurboTax and QuickBooks—all in the hands of more customers.”
The Intuit Dome, as the arena will be called, has been a goal for Ballmer since he purchased the team in 2014 from the family trust of embattled real estate mogul Donald Sterling for $2 billion, at the time a record for an NBA team. It’s been an arduous process, including a lawsuit involving the owners of the Knicks, but on Thursday afternoon, Ballmer and CEO Gillian Zucker laid out their vision for the 18,000-seat venue, which will also serve as its practice facility and headquarters. The team plans to open the venue for the 2024-25 season.
“The building is super personal to Steve, to call it a passion project would be an understatement,” Zucker said. “By the time we are done with all of this, more than 3.5 million minutes (editor’s note: that’s more than 6 ½ years) will have been invested in the design, the redesign, and the redesign redesign.”
NBA teams typically make about half of their revenue from local and national media, with 40-45% coming from arena sales and sponsorships. For the Clippers those numbers are currently skewed more towards media. The team plays in a big market, which helped fuel one of the NBA’s largest local TV deals, and has spent the last 20 years as the third-wheel tenant in the Staples Center, owned by AEG, an investor in both the NBA’s Lakers and NHL’s Kings.
With a team-owned arena, that percentage will likely change dramatically. Sportico’s most recent valuations pegged the team’s revenue in 2018-19 (a pre-COVID number) at roughly $300 million, a number that will increase when the team has its own arena. At Staples Center, Ballmer said, the Clippers only saw a “small percentage” of revenue streams like suite sales.
Asked how big the difference was between owning a stadium and being a tenant, Zucker said: “What is the largest measurement that you can possibly think of?”
Arenas generate revenue in fairly obvious ways—tickets, merchandise, concessions, parking, sponsorship, etc.—and modern buildings are designed to maximize those opportunities. For the Intuit Dome, that includes an outdoors plaza with bars, restaurants and an 8,000-square-foot team store, plus a regulation-sized court that could host AAU tournaments and local youth leagues.
Inside, concession stands will let fans grab and go without waiting in line, a convenience that Ballmer took from Amazon’s Amazon Go stores. There are also twice as many toilets per person as any other NBA arena.
“People thought I was crazy,” Ballmer said of the bathrooms. “Why don’t people do it? It makes the building bigger, which makes the building more expensive to build, and it doesn’t necessarily generate any more revenue. But again, there are smart business reasons to make that decision.”
Beyond the Intuit deal, the most critical part of the arena’s revenue is likely premium seating. The team is selling four tiers of premium club seats in its lower bowl, and the Intuit Dome will feature 60 suites, with 14 on the court level. (Ticket prices are yet to be announced).
Then there are the non-Clippers events. Owning a premier arena in the country’s second largest market should make the Intuit Dome a destination for concerts and other live events. Los Angeles already has two of the 15 highest grossing arenas in the country for touring events, according to data compiled by Pollstar, including the Ballmer-owned Forum, also in Inglewood. Ballmer said it was too soon to make a decision about the Forum’s future, but said that between the two, he expects his Inglewood venues to be hosting more than 100 non-basketball events per year.
“Those events are very important,” he said. “It’s important to the value of the sponsorships, it’s important to the value of the suites.”
Another consideration—revenue sharing. The NBA has a complex formula for creating some financial parity, but at its core, the high revenue teams pay money to teams at the other end of the spectrum. The Clippers were a minor net payer prior to COVID, and that will certainly increase when the Intuit Dome opens.
A Ballmer-backed developer bought the Intuit Dome land, a 22-acre plot of mostly-vacant lots, from the city of Inglewood for $66.25 million (The team has promised that 1/3 of the arena’s permanent jobs will go to Inglewood residents). The building is right around the corner from the new $5 billion SoFi Stadium, home of the Los Angeles Rams and Chargers, as well as the NFL’s new west coast headquarters, making it part of what many hope will be a new hub of activity and commerce south of downtown Los Angeles.
Most important, however, is how the team performs on the court. The Clippers have made the playoffs in all but one season of Ballmer’s ownership, but have only reached the conference finals once. And while a new arena might not seem like a major boost for a team owned by the world’s eighth-richest man, Ballmer is anticipating benefits. For starters, the team can schedule games whenever it wants, unlike at Staples Center, which means fewer games on Saturday and Sunday afternoons or Monday night when the NFL is in season.
“All of that means more fans in the building, which means more excitement, more chance to win,” he said. “It also means more revenue, quite frankly. But competiveness is first and foremost.”
With assistance from Kurt Badenhausen.