The Utah Jazz should be in limbo. A small-market team left directionless during a bitter NBA lockout that hit the 115-day mark Sunday. A rebuilding franchise that no longer has coach Jerry Sloan to rely on or All-Star guard Deron Williams to promote, entering an uncertain era made fragile by an unpredictable economy.
Instead, the Jazz are entrenched in Salt Lake City. Former owner Larry H. Miller's entrepreneurial vision has endured the worst American recession since the Great Depression, while the franchise is well-prepared for the effects of an NBA work stoppage that has left lesser organizations fighting for their existence.
Nowhere is the vitality of Miller's dream more visible than with the Jazz. The professional basketball team most of the world associates with Utah, along with the Mormon Church and ski-ready mountains, duals as a high-profile window display for the Larry H. Miller Group of Companies. Enter through the front door and everything from a Triple-A baseball team and a television station to insurance agencies and catering companies are on display, supported by 7,266 full- and part-time employees who help spread Miller's signature across the country.
In LHM's diverse business flowchart, the flashy Jazz are just one strong branch on an ever-growing multibillion-dollar tree, and the team is protected and supported by the businesses it feeds. Miller's vision in full-bloom: 45 auto dealerships in seven states that are on track to sell about 65,000 vehicles this year; 73 sports merchandise stores in 14 states; six Megaplex Theatres with 84 screens in Utah, including one that opened Oct. 14 in Centerville.
How large has LHM become? If the Jazz were based upon wheels and fenders instead of a basketball bouncing upon hardwood, the team would be only LHM's fourth-largest Toyota dealership in terms of revenue.
"And when it comes to profitability, it goes way down," said Greg Miller, LHM and Jazz chief executive.
That wasn't Miller's only revelation during a wide-ranging exclusive interview in late September with The Salt Lake Tribune. The CEO proudly described how the company he inherited in 2009 is stronger than ever more streamlined, efficient and modern than his late father could have imagined 32 years ago when he created the brand. Today, it is divided under the branches of automotive (president Tony Schnurr) and sports and entertainment (president Randy Rigby), but united under owner Gail Miller, Larry's wife and Greg's mother.
"Through the years of hard work and sacrifice that my dad put into building the foundation of this company, and through the employees that we have, we've been very fortunate to have a healthy and robust company," Miller said. "And I daresay that with the way we've managed the company all along but in particular the last let's say … 36 months that we are extremely healthy."
Carrying the flame • The LHM empire has expanded mightily since Larry bought the keys to Toyota of Murray in April 1979.
He initially added a dealership in Spokane, then acquired seven more businesses before he bought half of the long-struggling Jazz in April 1985. Fourteen months later, the increasingly ambitious salesman purchased the rest of the franchise.
As the Jazz soared, becoming a blueprint for small-market success in sports, LHM made its own mark in the business world. Larry continued to add to his auto holdings, moving into everything from retail and ranching to restaurants and hockey. He then built the Delta Center during 1990-91 later renamed EnergySolutions Arena giving the Jazz their own upgradeable 19,911-seat arena.
Larry died Feb. 20, 2009, due to complications from diabetes. He left behind a conglomerate that had operations in 10 states and was Utah's 11th largest private employer, while the auto division was the nation's 11th biggest in terms of revenue.
"The Millers have put Murray on the map as a premier city to come and buy cars," Murray Mayor Dan Snarr said, referring to the Murray Auto Mile.
Greg Miller, 45, was fully aware of the power he inherited. And he quickly became aware of the pain it could cause.
Miller took over LHM during a period of economic upheaval. Financial institutions were going under, personal loans were difficult to obtain, and both dragged down a struggling auto industry Miller acknowledged has long been and likely always will be the heart of LHM.
"It was an interesting time," Miller said. "A lot of the banks that we meet with point that out: Your dad died just going into the recession, and here you are cast into that."
Different times required different leadership, and Miller was not his father. Under Larry, LHM's management was strictly top-down. Greg Miller respected his dad's accomplishments, but the possibility of change enticed him.
"The culture in our organization was, you pretty much just do what you're told," Miller said. "And I'd sit in a room with these guys, and they'd just sit there with their hands on the table."
New ideas would have to wait. The recession forced Miller to trim payroll by about 16 percent. Two years after ordering layoffs, Miller placed his head in his hands while recounting a trying initial run as LHM's CEO.
"[The recession] was an unforgiving catalyst that forced us to take a hard look at every position, every expense line by line, check by check throughout the organization," Miller said. "That's never pleasant because those are real people with real mortgages and real kids to feed … I take that very seriously. But I also take the responsibility very seriously to keep the organization solvent, and to live to fight another day."
Thirty-two years after Larry bought his first dealership, LHM fights on. Staff reductions kept the company profitable, while LHM invested savings back into a company that started to focus more on its core assets. Grand openings and remodelings now decorate the company's calendar, while $120 million has been devoted to current and future construction costs on the auto side. All the while, a business that sold 54,345 new and used cars in 2010 balances its desire for financial profit with its importance to the community.
But LHM hasn't been untouchable:
• Larry Miller's beloved but unprofitable Miller Motor-sports Park has been a financial drain.
• His controversial decision not to screen the gay-themed "Brokeback Mountain" in 2006 on the family's theaters backfired, illustrating to some that the corporation was out of touch.
• VIP season ticket holders in 2010 sued the corporate parent of the Jazz, accusing team ownership of causing their courtside seats to plummet in value by taking away exclusive rights. The case is pending.
But records from Utah's 3rd District Court show 214 cases involving the Miller companies from 1988 to the present in which the company was a plaintiff 182 times and a defendant just eight.
Meanwhile, the Jazz have been criticized by some agents who have requested anonymity before railing against what they say are the team's tightfisted ways. But many more players say the organization represents the best of what the NBA has to offer.
Then there's Salt Lake City Mayor Ralph Becker, a longtime Jazz supporter who hears two questions when he travels across the country: Are you Mormon, and wasn't John Stockton great?
"The legacy of Larry Miller is going to live on forever … in this community," Becker said.
Small market, big money • Jazz President Randy Rigby has been charged with keeping the franchise's legacy alive in the fast-moving 21st century.
With NBA owners and players battling for a new collective bargaining agreement (CBA) and the sides recently turning to federal mediation in the attempt to end the lockout, the competitive and financial futures of teams in Salt Lake City, Sacramento, New Orleans, Charlotte and Memphis are at stake.
The plight of small-market franchises rose above the surface during the 2010-11 season. The Kings nearly relocated to Anaheim, Calif., and still aren't a lock to stay in Sacramento. Cleveland lost superstar LeBron James to Miami. The NBA took control of the Hornets. Indiana, Sacramento, Memphis and New Orleans ranked in the bottom five of 30 franchises in average home attendance.
The Jazz? No. 7, with 19,511 fans per home game. Utah also posted the league's No. 2 local television rating by earning a 5.6-percent market share, according to the Sports Business Journal. Rigby said the organization ranked No. 3 in the NBA in sponsorship revenue, setting an all-time franchise high.
Despite the big numbers, Miller told The Tribune earlier this year that the public face of LHM still lost money. The Jazz were weighed down by a $75 million roster, which paid out an average of $5.8 million per player, making Utah the No. 11 highest-paying professional sports team in the world, according to sportingintelligence.com. In addition, rising expenses that the NBA says contributed to 22 teams losing a combined $450 million last season helped sink the Jazz into the red.
While the team's devoted fanbase focuses on a rebuilding project highlighted by NBA draft lottery picks Derrick Favors, Gordon Hayward, Enes Kanter and Alec Burks, Jazz executives say LHM's diversity and the franchise's ownership of EnergySolutions Arena are crucial to the organization's long-term stability in Salt Lake City.
"We don't have to jump through answering to another entity that is going to affect the experience," Rigby said.
Streamlining is also paramount. Much like LHM's cross-branding on the auto side, Rigby has attempted to fine tune LHM's sports-and-entertainment division since he was promoted to president in July 2007, more closely uniting everything from the Jazz and the Salt Lake Bees to Miller Motorsports Park and the annual Tour of Utah bicycling event.
Strong sponsorships with Zions Bank, ROOT Sports, EnergySolutions and Coca-Cola provide the Jazz with a consistent monetary base, while Larry's founding vision of owning and controlling all aspects of game-day production are equally essential.
"We [felt] very close to Larry Miller when he was running the team, and now with Greg Miller and certainly Randy Rigby," said Tim Griggs, general manager of DirecTV's ROOT Sports "In just the years that we've been able to work together, we found that we provide them with a much-needed source of revenue … and the Jazz have become really the pillar that holds up the network over the region."
Despite Miller saying the Jazz are the smallest market in the NBA by one measure, Forbes ranked Utah No. 16 in the league last season in overall franchise worth at $343 million. The Jazz were valued higher than teams in Philadelphia, Washington, D.C., and the Los Angeles Clippers.
A CBA based around improved parity and a stricter salary cap should allow the Jazz to better compete with perennial powerhouses such as the Los Angeles Lakers and Boston. But Utah has proven it has the ability, if necessary, to survive on its own.
"Because of us being involved with TV, radio, the [ad] signage … we can really go to [sponsors] and offer them a complete marketing plan," Rigby said. "Whereas many teams have to go back and just say, 'We sell away our rights for the TV or the radio,' … or the arena owns the rights to the signage, i.e. Staples Center. The Lakers [are] very limited [in] what they can offer in the way of ... promotional or sponsorship elements."
New era • No matter how tightly Rigby runs the sports-and-entertainment division, a few extra millions made by a pro basketball team are secondary to LHM's ability to successfully emerge from the recession.
The largest change occurred under the radar, and it could be the biggest key to the company's continued success.
Miller said a 20-month plan to pay off LHM's capital and revolving debt was expected to come to fruition six months early. The company was prepared to be debt free in both areas by the end of September, leaving real estate as the only remaining negative. Moreover, LHM has significant capital reserves, allowing the majority of its future growth to occur without leverage.
That allows Miller to dream. His state-of-the-art convenience store is in sight one that allows him to navigate his 40-foot gooseneck trailer and three Toyota Land Cruisers, and will soon sell tickets to Jazz and Bees games while advertising car manufacturers' latest sales. There are auto dealerships to open and retool, and everything from movie theaters to sports-merchandise establishments in need of new locations.
The LHM brand builds and expands, and Larry's trademark signature like his vision just keeps growing. Spreading across cities, reaching across states, working its way through America.
"We're running our businesses better today than we ever have," Miller said. "But I will say the same for others, our competition. Anybody who's survived the last three years understands how to run a business very well."
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