Today, I am straying from the tech-focused theme of this blog to discuss Chase Center, the future arena of the Golden State Warriors, a team that I have followed since I was young and the “home” NBA team of Silicon Valley!

The Golden State Warriors have been a thing a beauty to behold these past few years.  As a parent, trying to teach children how to behave, it is a joy to be able to hold up the Warriors superstars as prime examples of how working as a team, placing the needs of the team above individual egos, leads to success.

After having watched the Warriors flounder since I attended Berkeley in the late 70s, I had given up hope of ever seeing them become a really good, much less a historically dominant, NBA team, just as I had (and still have) given up hope of ever seeing Cal in the Rose Bowl.  When Peter Gruber and Joe Lacob purchased the team in 2010, there was no apparent reason to suspect that Warriors would become the juggernaut they are today.

Many point to the smart (and lucky) drafting by Golden State as the secret sauce of their success.  I think that, other than a sprinkling of good fortune, the real secret to Golden State’s success is smart management–and I mean management, not coaching!  Management at the top sets the tone for an organization.  What Gruber and Lacob put into place was a philosophy that focused on building a successful team of off-court personnel, recruiting highly skilled people, giving them the latitude to provide input into how to best shape the on-court team.  This promoted building a team comprised of players who are super skilled and highly team-oriented from the top down with the end-result being a team that many believe to be among the best of all time.

Success comes at a price and one crude measure for the team’s success is the skyrocketing price of tickets.  In 2014-15 the cheapest season ticket seat price was $18 per game while courtside was $450 per game.  In 2018-19 the cheapest season ticket price is $69 per game (a 283% increase) and courtside $905 per game (a 101% increase.)  Despite the increase in prices, the Warriors still have a season-pass waiting list that numbers over 40,000.  With the demand for Warriors tickets at an all-time high, the management group had the confidence to take the leap and to build a completely self-financed new arena in San Francisco, the Chase Center.  It will open for the 2019-20 season and will cost more than one billion dollars to build.

The Warriors are the first team to offer memberships, similar to PSLs (Personal Seat Licenses) to season ticket holders, in which season ticket holders will pay a per-seat price, that varies depending upon the location of the seat in the arena.  This membership will provide the owner the right (and obligation) to purchase seasons tickets for that seat.  In a brilliant marketing move, the Warriors have announced that they will be the first team ever to pay back these per seat membership fees, but only after 30 years and with no interest.

This, in and of itself, does not sound too bad–a worst case of receiving back the entire principal on a 30-year interest-free loan!  At the historical long-term average for inflation (about 3.2%), members will still receive a net present value of about $0.39 for each $1.00 paid.  However, as a result of our unsustainable national debt and my confidence that the US will never default on its debt, I believe that we will manage our debt through inflation–devaluing the debt so it may be paid back with cheaper dollars.  As such, it would not surprise me to see average inflation of 6% over the course of the next 30 years, bringing the net present value of $1.00 30 years from to down to a net present value of $0.17–not a particularly heartening decline.

Yet, the biggest “gotcha” is a condition that a membership owner cannot sell their membership for more than the price they paid for it.  The Warriors say that they learned from the 49ers who sold PSLs at Levi Stadium in Santa Clara that quickly dropped precipitously in value and this scheme will provide that you get all of your money back, though after 30 years.  This is disingenuous at best and, in a less gracious light, could be considered taking advantage of people who are not very good at working with numbers.  If the membership prices drop precipitously then members who need to sell would still suffer a dramatic loss until they are made “whole” 30 years later, at which point, if they are still alive, they would still have suffered a dramatic loss due to inflation savaging whatever monies are returned to them.

If memberships merely keep pace with inflation, then members, as a result of not being able to sell the memberships for more than they paid for them, are losing out on any gain in value of the memberships–with that gain in value being realized either by the owners of the team of the new buyers of that member’s seats.  It is a bad deal, but if you want to continue to be a Warriors season ticket holder, you don’t have any other options.  Because it, at first blush, sounds good for season ticket holders, but is ultimately a really bad deal, I think it is an absolutely brilliant marketing move.

For those that have not been dissuaded from purchasing a membership, I will provide some exemplar membership seat prices and game prices.  Please note that per game prices, after increasing approximately 10% to 20% from 2018-19 to 2019-20 (more like 30% to 60% when factoring in the discounts that long-time season ticket holders receive), will “only” increase by a maximum of 7 percent per year for the following four years.

Memberships can be paid for in four installments with the final installment due on October 1st 2019, or in a payment plan with 10 percent of the total amount due in four installments, again ending on October 1st 2019 and the remaining 60 percent financed at a 7.5% rate over the subsequent 8 years.  To help understand approximately how much the Warriors are charging for memberships I have compiled a list of the some of the membership prices below.  Please note, that as of this writing, most of the more expensive memberships have already sold out.

The Warriors have set up a “lite brite” board which has a hole for each seat into which a plastic peg can be inserted that is lit from behind.  When a seat membership is sold a peg is inserted into the corresponding position in the board, so you can see how many seats have been sold.  At least that is the theory.  The picture below shows how the board looked on August 23rd, but there were appreciably fewer seats available on that date than shown.  This is likely a result of the approximately 5,000 seats for which memberships will not be sold and/or simply an oversight in keeping the pegs current.

I hope this is helpful to some of you who are contemplating memberships at Chase Center!