The Business Behind The Blazers Shakeup

The NBA just wrapped what may be the greatest Conference Finals week in history.

Yet the team dominating the business press wasn’t one of them.

On Tuesday, Portland Trail Blazers owner Tom Dundon reportedly laid off 70+ employees – or roughly a quarter of the franchise’s business operations staff – ranging from senior vice presidents to public relations employees to content producers. 

The immediate fan backlash was stark, given how impulsive social media can be. 

But from a business perspective, Dundon’s moves are a big leap toward bringing proper efficiency and lean operations to sports.

And that business rigor brings one main focus that fans should care about most: winning. 

Dundon made that clear on Rich Paul and Max Kellerman’s podcast in April:

“I want to run the business properly, but I want to win more than I want to make money… I hope we're in a position where going in the (luxury) tax means we have a chance to win. And if we have a chance to win, the tax is irrelevant."

In this newsletter, we’ll break down why cost-cutting and business efficiency can actually improve fan experience, how it contributes to winning, and why Dundon’s playbook can set a precedent for how sports teams operate in the future.

Dundon’s first major sports franchise investment came in 2018, when he acquired a majority stake in the franchise and PNC Arena (now Lenovo Center) for $420M.

His first move was to cut unnecessary overhead outside of roster spend that wasn’t moving the needle on the two most important things for a sports team: winning and fan experience. 

While there was initial pushback on a few firing choices – primarily on the broadcasting side – the restructuring allowed the organization to focus on improving the overall fan experience at the stadium, including slashing parking and beer prices.

The results speak for themselves:

The Hurricanes ranked 29th out of 31 NHL teams in attendance the year Dundon bought the team, averaging 13.3K fans per game. Last season, they ranked top 10 and sold out every home game, averaging 18.8K fans per game.

Corporate sponsorship revenue is up 168% from when Dundon bought the club in 2018 to last season.

And ultimately, the strategic refocus made winning the biggest priority.

The Hurricanes were perennially missing the playoffs before his reign – the team has made the playoffs in every single year of his tenure, and are currently in the NHL Conference Finals.

Here’s where Dundon is moving the needle for the Blazers.

If you look at the Blazers’ financial profile, Dundon’s logic becomes a lot easier to understand.

We had Endex rank NBA teams by “profitability margin” – operating income / revenue, since net income data isn’t publicly available – using recent CNBC NBA valuation data.

The Blazers ranked 25th out of 30 teams.

Bottom quartile.

And according to The Oreganian, a  high-ranking official in the Blazers organization said the franchise had become “one of the largest organizations in the NBA, an unsustainable reality considering they fetch the league’s lowest sponsorship revenue and rank near the bottom in ticket revenue.”

Almost identical to the Carolina Hurricanes pre-Dundon. 

Another important business question every pro sports ownership group is thinking about: how much are certain employees tangibly driving revenue?

The biggest piece of an NBA team’s revenue comes from the league’s national media rights deal – the NBA’s $76B, 11-year agreement – which is pre-negotiated, recurring, and distributed across the league. On average, media rights represent roughly 41% of total team revenue across the NBA.

A major portion of the revenue is effectively locked in, decoupled from the impact of team operations.

So if a large portion of revenue comes from league-level distributions, and the team is underperforming in local revenue categories like ticketing and sponsorships, naturally, the internal cost center will be put under a microscope.

Now to how Dundon can improve Blazers operations.

His three biggest focuses are arena renovations, efficiency improvements, and winning.

Area 1: Arena Renovations

He’s been clear that the arena is one of his main priorities:

“Today, the problem we’re trying to solve is just to get a lease extension and get the building renovated… Making the building better and adding some energy to that building, those are things I enjoy doing.”

Oregon recently signed Senate Bill 1501 which will allow the state to contribute $365M towards renovations. That’s a clear revenue driver that could expand seating, parking, luxury amenities, and sponsorship integrations, while also removing the inconveniences that come with a  30-year-old arena.

Area 2: Efficiency Improvements

And the other priority is efficiency:

“All this other stuff – I think about being efficient. You know, like I’m worried about parking spaces and getting in and out of lines. All I think about is our fans want to come in and how do I get them in quicker?”

We expect Dundon’s ownership group, and many others, to leverage AI and technology to not only eradicate fan inconveniences, but also accelerate ticket sales and sponsorships with a leaner headcount.

We broke down what AI stack we’d use if we were sports team owners here.

Greater cost efficiency → more focused on improving what’s tangible for the fan.

Area 3: Winning

What Dundon said on Rich Paul’s podcast, and what he’s already shown with the Hurricanes, is clear: when it comes to the roster, he’ll do everything possible to put the team in a position to win – luxury tax or not.

And this is where cost-cutting gets misunderstood.

Resources eventually get redirected towards basketball operations that can directly contribute to the team’s win column: think player development, scouting, analytics, facilities, coaching, and even pure roster spend. 

As sports fans, we all understand why fanbases get sensitive when new ownership comes into the mix.

Change is expected. And sometimes, the shakeup is bigger than people anticipated.

But let’s be real. 

The #1 reason owners are willing to pay a serious premium for a sports team is because they believe they can build a winner.

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