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The Denver Nuggets is a professional basketball franchise based in Denver, Colorado, that operates under the auspices of Kroenke Sports Enterprises, which also owns the Colorado Avalanche, a professional hockey franchise, and the Pepsi Center arena.
The Nuggests franchise was born in 1967 as one of the original members of the new American Basketball Association (ABA). Denver's first owner was James B. Trindle, a partner in a large southern California engineering firm who put up $35,000 as one of the initial investors in an ABA franchise. Trindle and several of his business associates originally pooled their money to establish a franchise in Kansas City. When it proved difficult to secure a guarantee for scheduled playing dates at a large enough venue in Kansas City, ABA Commissioner George Mikan recommended locating the franchise in Denver, where his friend Vince Boryla lived. Boryla was a Denver business man who had played for the New York Knicks and had served as coach and general manager of the Knicks after finishing his career. After several meetings with Boryla, Trindle and his partners agreed to relocate the franchise to Denver and to hire Boryla as the team's general manager. The team's original name was to be the Larks after Colorado's state bird. Nonetheless, when the team soon ran into financial difficulty, Trindle sold two-thirds of the franchise to local trucking executive Bill Ringsby and his son Don for $170,000 before the team even played its first game. Ringsby named the team the Rockets, after the nickname of his trucking company's long-haul vehicles, the Ringsby Rockets, and put his company's logo on the team uniforms. In addition, he subsequently hired Dick Eicher, chairman of the board of the Ringsby System Trucking company, as the franchise's executive vice-president and new general manager. The franchise then recruited Bob Blass, who coached Oklahoma Baptist College to a national small-college championship in 1966, as head coach at a salary of $20,000.
In the Rocket's first season (1967-68), the team's roster was composed largely of unknowns, including forwards Julian Hammond and Willie Murrell, center Byron Beck, and guards Larry Jones and Willis "Lefty" Thomas. Nonetheless, the team played winning basketball and compiled a 45-33 record, third best in its Western Division. The Rockets, however, were eliminated early from the 1968 playoffs, a pattern that nearly all Denver teams have followed ever since. The club's early popularity drew nearly 4,000 a game to the Auditorium Arena. The team also led the league in ticket sales. To further increase attendance and revenue, Eicher negotiated radio and television deals to broadcast some of the games.
The team's second season was marked by controversy when Bass left for Texas Tech University over a contract dispute, and Eicher departed for undisclosed reasons. Ringsby hired his son Don as the new general manager and John McClendon was recruited to replace Bass as head coach. McClendon, a highly regarded coach within the AAU club circuit, became the first black coach in the ABA. Ringsby also signed McClendon with the aim of recruiting the highly touted Spencer Haywood, a young power forward who achieved national acclaim for leading the U.S. team to the gold medal in the 1968 Olympic games in Mexico City. As an influential member of the Olympic basketball selection committee, McClendon played a critical role in getting Haywood a spot on the U.S. Olympic team. In addition, the Olympic star figured prominently in the ABA's rivalry with the National Basketball Association (NBA) for star players and credibility. As a result, the ABA decided to pursue Haywood, handing the signing rights to the Rockets since Ringsby was the only franchise owner with the cash to recruit Haywood. Ringsby offered Haywood, then a 19-year-old sophomore at the University of Detroit, a lucrative deal of $450,000 over three years plus such perquisites as a penthouse apartment in the exclusive Brooks Towers, a high-rise apartment building in downtown Denver. By breaking the unwritten rule that professional teams would not recruit college players until they had finished school, the Haywood contract outraged the NCAA and the NBA, both of which subsequently sued the Rockets and the league to block the deal. Nonetheless, the courts allowed Haywood to turn pro and his signing led the way for other highly talented college players to enter the ABA.
The Haywood deal also had an immediate impact on the Rockets. In his one season with Denver, Haywood led the ABA in scoring and rebounding, was named Rookie of the Year and Most Valuable Player, and sparked the Rockets to their first Western Division crown with a 51-33 record. His prowess on the court also considerably helped the Rockets financially at a time when most ABA franchises were struggling to make money. Nevertheless, the Rockets rise to the top was short-lived as Haywood left Denver after one season for a better contract with the Seattle Supersonics of the NBA. Without their star player, the Rockets became a mediocre club. Their record sank to 30-54 in the 1970-71 season, causing the team to fall from first to last place in its division. At the same time, the Ringsbys were growing weary of owning a basketball team in a struggling league that by 1971 was plagued by numerous law suits. With attendance lagging and burdened with a money-losing team, in the summer of 1972 the Ringsbys sold the franchise to Frank M. Goldberg and A.G. "Bud" Fisher, both of San Diego.
The 1970s and 1980s: Financial Struggles and Turmoil
The new owners aimed to base the future prospects of the franchise on a proposed new arena that could seat 18,500 for basketball. Planned to host figure skating and hockey as part of Denver's successful bid for the 1976 Winter Olympic Games, the new venue was scheduled for completion in time for the 1975 ABA season. In 1974, Goldberg and Fisher hired a new general manager, Carl Scheer, the former NBA deputy commissioner who had also been president and general manager of the successful Carolina Cougars. In turn, Scheer hired a new coach, Larry Brown, also from the Carolina Cougars. Together they worked to save the Denver franchise, which was suffering from poor attendance, declining revenues, and no broadcasting contracts. Denver's precarious state differed little from other ABA franchises, which existed in a league on the verge of extinction. When the founders organized the ABA league in 1967, they hoped to merge it with the NBA within three years. The ABA's lack of viable television deals increasingly proved highly detrimental to the league's continued survival.
After the 1974-75 season, the league continued to struggle financially more than ever. Nonetheless, in Scheer's first year, the Denver franchise compiled a remarkable 65-19 record, setting a club benchmark for success and achieving the finest season in ABA history. Scheer also made two other changes in his first year. First, he announced that the team would play the next season in the larger McNichols Sports Arena; second, he renamed the team the Denver Nuggets after an earlier Denver club that played one year in the NBA during the 1949-50 season. With Denver's winning season, ticket sales and attendance soared. Fans packed the old Auditorium Arena nearly every night, and the Nuggets' sold out the house twenty-nine times.
Despite the Nuggets' turnaround, Fisher and Goldberg were concerned about the league's losing prospects and their own investment in the franchise. When the owners proposed to Scheer that he find additional local investors to shore up the franchise, he decided to buy them out altogether. He made a stock offering at $35,000 a share and purchased the team in the summer of 1975. Ownership of the team came under the newly formed Nuggets Management, Inc., which comprised five general partners, including Scheer, and 18 limited partners. The purchase price was just under $1 million.
By the end of the 1975-76 season, the financial circumstances surrounding the ABA compelled the league's owners to seek a merger with the NBA. Several of the franchises had already disbanded or were in serious financial trouble, game attendance was poor, and the league failed to secure a national television contract. The league had dropped to only six teams and the prospects for another season appeared bleak. The ABA nevertheless held the rights to highly talented players and the NBA expressed interest in a merger with some of the stronger ABA franchises. Under the agreement, four ABA teams, including the Denver Nuggets, New York Nets, San Antonio Spurs, and Indiana Pacers, merged with the older league at an entrance cost of $4.5 million each. The merger agreement also provided that the four ABA franchises compensate the two franchise owners who were not accepted into the NBA. The Denver Nuggets were required to pay an additional price when, at the demand of the NBA, they had to unsign three college stars--Marquis Johnson and Richard Washington of UCLA and Quinn Buckner of Indiana University--before merger talks could proceed.
Following the Nugget's entry into the NBA, the team captured first place in the Midwest Division with a 50-32 record in the 1976-77 season. Nevertheless, the team continued its unbroken tradition of losing early in the playoffs. By the end of the 1980-81 season, the team sank to a losing record of 37-45, missing the playoffs altogether. The next season (1981-82) proved pivotal for the franchise. Although the Nuggets compiled a winning season record of 43-31, the team was again ousted early in the playoffs. The Phoenix Suns upset the Nuggets 124-119 before a sellout crowd of 17,443 at McNichols Arena in game three of the series. The early defeat was devastating for Scheer's ownership group, which needed the cash that would have come from the best-of-seven series in the conference semi-finals. Scheer needed to raise additional capital from his owners and outside interests to keep the franchise running. Many of the owners, however, preferred to sell the team. At the recommendation of Denver's coach Doug Moe, who replaced Larry Brown starting with the 1978-79 season, Scheer approached B.J. "Red" McCombs, a Texas businessman who had made a considerable fortune selling cars. McCombs agreed to assume Denver's debt and pay the shareholders limited cash. McCombs later negotiated steep discounts on the team's debt service, making the total purchase price slightly less than $2 million. After the 1983-84 season, McCombs replaced Scheer as president and general manager with Vince Boryla, whose association with the team dated to the very first days of its existence. In the 1984-85 season, the Nuggets again won the Midwest Division and made a post-season run all the way to the conference finals before losing to the Los Angeles Lakers.
On May 30, 1985, just days after Denver's defeat, McCombs announced that he had sold the franchise to a group of investors headed by Sidney L. Shlenker, a friend and business associate from Houston, for $20 million. Shlenker's tenure as owner, however, was marked by numerous failures. In his first year, Shlenker negotiated a new 15-year lease at McNichols Arena that tied the team to the venue until 2001. He also planned on spending $7.5 million in renovations, including the construction of luxury boxes, an elaborate VIP lounge and dinner club, three themed restaurants, and a futuristic scoreboard that would feature instant replays. By the time the renovations were completed, Shlenker had paid $12.5 million in construction costs with a heavy debt service, more than the original $10 million that it cost to build McNichols ten years earlier. The restaurants also proved failures as did his investments in other sports prospects, including an arena football league team and a major indoor soccer league franchise that folded even before he could field a team. He also tried to make a public offering of Nuggets stock, but his prospectus revealed that his broadcasting company had gone broke.
Shortly before the 1987-88 season, which proved to be the best in the team's NBA history, Shlenker put the franchise up as collateral on a $25 million loan from Heller Financial Services of New York, a specialist in leveraged buyouts. Finally, in November 1989, Comsat Video Enterprises (a subsidiary of Comsat Corporation, a publicly held satellite and telecommunications company) bought a majority 67.5 percent stake in the franchise. Two African American businessmen, Peter C.B. Bynoe of Chicago and Bertram A. Lee of Boston, held the remaining 32.5 percent stake. Under Robert Wussler, a former president of the CBS television network, Comsat Video financed nearly the entire deal, approximately $45 million plus assuming the debt service for the renovations made to McNichols Sports Arena in 1987 and 1988. The buyout agreement also provided that Bynoe and Lee would serve as managing general partners, with Bynoe in charge of the day-to-day operations. Soon after assuming ownership of the team, tensions emerged between Bynoe and Wussler over the franchise's operations. At the same time, there was frequent turnover among top personnel in the front office. In the corporate suite, an acrimonious split occurred between Bynoe and Lee, the latter of whom had failed to provide his ten percent of the cash needed to purchase the franchise in 1989. With the aim of keeping his group's investment alive, Bynoe recruited other partners, including real estate developer Jerold Wexler and hotel owner Jay Pritzker. In addition, Bynoe mortgaged a 12 percent share of the team to Drexel, Burnham, Lambert, the junk bond investment house. When Lee missed calls for additional capital for the money-losing franchise, he was forced out of the organization. The continuing friction between Wussler and Bynoe concerning the team's day-to-day operations also took a heavy toll on staff morale. The team fared little better on the court in 1990-91, losing 62 of 82 games, the league's worst record. As losses were anticipated to reach $10 million for the year, speculation arose that the franchise would again be up for sale.
The 1990s: Ownership Turnover Continues
The franchise soon made a turnaround, however, due to a series of fortuitous events. In May 1991, Tim Leiweke, a 34-year-old marketing star who had helped launch the Minnesota Timberwolves expansion franchise, was hired as senior vice-president of the Nuggets in charge of reversing the team's business fortunes. Together with Bernie Bickerstaff, a former NBA coach who had been brought in as general manager, Leiweke worked to rebuild the credibility of the franchise with the Denver public. In January 1992, the new chief executive officer of Comsat ousted Wussler from Comsat Video, replacing him with Charlie Lyons, a business executive with experience in the ski and hotel industries in Colorado. Under Lyons, Comsat Video bought out both Drexel, Burnham, Lambert and Bynoe and his partners, assuming 100 percent ownership of the team by the end of summer 1992. Lyons also created a new entity--Comsat Denver, Inc. to manage the franchise's business operations.
With a new management team in place, the franchise began rebuilding the team. Bickerstaff fired Nuggets coach Paul Westhead after his second season produced only 24 wins, four more than his first. In his place, he hired former Nuggets forward Dan Issel. By recruiting new players, including center Dikembo Mutombo and point guard Mahmoud Abdul-Rauf, the Nuggets scored one of its most notable moments in the 1994 playoffs. After earning the last playoff spot in the Western Conference, the Nuggets faced the Seattle Supersonics, holders of the NBA's best record. Seattle won the first two games, but Motombo's dominating play in the next three games led Denver to produce one of the greatest upsets in NBA history. With its impressive winning season, the team also boasted increased revenue and publicity.
By 1997, however, the Nuggets ranked among the NBA's worst teams after losing several of its leading players, including Motombo, who went to the Atlanta Hawks. Comsat's diversification into sports franchises and entertainment also proved to be significant money losers. The $850 billion communications company had entered the media production and distribution business with the aim of producing content for distribution and broadcast by satellite. In addition to the Nuggets, Comsat bought the Avalanche, winners of the 1996 Stanley Cup, movie maker Beacon Communications, and in November 1997 broke ground on a new multi-million dollar sports arena to replace the aging McNichols venue. The company organized its Denver franchises and entertainment businesses under a separate subsidiary, Ascent Entertainment Group Inc., which went public in 1995. Comsat bought 80 percent of the stock and the remaining 20 percent became available on the NASDAQ exchange. Nonetheless, in the first quarter of 1997 alone, Comsat lost $18 million due exclusively to the lackluster Nuggets and its companion team the Colorado Avalanche, which lost its bid for a second Stanley Cub. In addition, construction costs for the new sports arena, the Pepsi Center, were climbing precipitously, adding to the company's financial woes and helping to spark a shareholder revolt.
The Late 1990s and Beyond
As a result, in 1997 Comsat sold Ascent Entertainment to AT&T's Liberty Media Group of Englewood, Colorado, for $755 million. Liberty immediately put Ascent's sports assets--the Nuggets, the Avalanche, and the Pepsi Center--up for sale while retaining control of the video movie component. In July 2000, after considerable intrigue, false bidders, and failed negotiations by other bidders, St. Louis real estate developer and Wal-Mart heir Stan Kroenke purchased the Denver Nuggets, the Colorado Avalanche, and the Pepsi Center in a deal valued at $450 million. The agreement included $268 million in cash to buy 93.5 percent of the teams and arena, plus $136 million for the assumption of debt on the Pepsi Center. In addition, Kroenke paid $27.3 million in advance ticket sales that had been earmarked for the next season's operations. Liberty retained a 6.5 percent stake worth $18.7 million. Kroenke's bid for the teams and arena came after failed talks with Denver billionaire Donald Strum, who offered $461 for the sports assets but could not reach agreement with the city over whether the teams would remain in Denver for 25 years if he died before that term expired. Other bidders included Kroenke's brother-in-law, Bill Laurie, who offered $400 million for the sports assets, and a three-way partnership that comprised investor John McMullen, Denver Bronco's owner Pat Bowlen, and Bronco's quarterback John Elway. Alan Cohen, owner of the NBA's Boston Celtics, and David McDavid, a Texas auto dealer who sold his share of the NBA's Dallas Mavericks with the aim of buying the Nuggets and the Avalanche, also bid for the sports franchises and sports arena. Nonetheless, Kroenke's winning bid stemmed in part from his willingness to open his books to Liberty executives, plenty of cash, no financing, and a guarantee to the city of Denver that he would not relocate the team for 25 years. After the deal was consummated, Kroenke organized the sports assets under Kroenke Sports Enterprises. With Kroenke's enormous fortune, the Denver Nuggets appeared for the first time to have gained a semblance of long-term stability.