OAKLAND -- For now, the Oracle Arena has two things going for it: The Golden State Warriors and the fact that the nearest competitor for major shows is 40 miles away in San Jose.
But that soon will change, and the arena, which already fails to turn a profit, will have to change too if it is to survive, sports facility experts said.
The Warriors' owners, Joe Lacob and Peter Guber, delivered a body blow to the publicly owned facility last week when they announced they were purchasing land in San Francisco to build their own arena, scheduled to open in 2018.
The Warriors accounted for nearly half the 110 events staged at the arena during a recent 12-month period -- and even with the team still around, the arena is forecast to post roughly $6 million in operating losses this year and next, according to budget records from the Alameda County-City of Oakland Joint Powers Authority.
The nearly 20,000-seat facility in East Oakland isn't just losing its anchor tenant, it's gaining a glitzy competitor that will need to be filled night after night if its owners are to recoup the hundreds of millions of dollars it will take to build it.
"Without a major tenant, it's going to be tough for Oracle to survive," said Don Muret, who covers stadiums for Sports Business Daily. "San Francisco is by far the largest market in the country without a modern arena. All the top acts will want to go there."
Alameda County Supervisor Nate Miley, who heads the board that oversees the arena, last week broached demolishing it should the Oakland A's and Raiders want to build an adjacent sports and entertainment facility and need additional land.
One pitfall to demolishing the arena, however, is that there is projected to still be $62 million in debt on the facility when the Warriors leave in 2018. While there is already a legal dispute brewing as to whether the team must help Oakland and Alameda County taxpayers retire the debt, a clause in the Warriors' lease would free them from debt payments if the arena ceases operations, leaving the public with the remaining cost.
The arena has benefitted over the years from its nearest competitor, the SAP Center at San Jose, being far enough away that top performers will book both venues, said Bob Gutkowski, the former president of Madison Square Garden and a partner in the firm Innovative Sports & Entertainment.
That likely won't be the case when the San Francisco arena opens.
"I think it's going to be difficult for Oakland on the entertainment side to compete and have the same schedule that they've had in the past," Gutkowski said.
Oracle already hosts fewer than the 200 annual events generally sought by arena operators -- even with the Warriors playing 41 regular season home games plus preseason and playoff games.
"If you are losing 50 dates a year," you've got a hole, Smith University economics professor Andrew Zimbalist said. "And it makes it more likely that you're going to have an operating loss on the arena."
Filling dates that currently go to the Warriors will be a major challenge, Zimbalist said. "You can't bring the circus in three times. You can't bring the Ice Capades more than once."
To compete with a big new San Francisco arena, Oracle might need to shrink or be subdivided, said Robert Boland, academic chair of the Preston Robert Tisch Center for Hospitality, Tourism and Sports Management.
Boland pointed to The Forum in Los Angeles, which has been repurposed into a successful concert venue after the Los Angeles Lakers and Kings moved into the newer Staples Center.
"There is generally a dearth of midrange assembly spaces," Boland said. "Think about all the Silicon Valley events that maybe it could be used for, particularly if it was reconfigured to 14,000 or 15,000 seats."
Gutkowski cautioned that reconfiguring arenas is often difficult and that many acts don't like the final product.
"In Oakland, (the arena managers) have to get really tight with one of the concert promoters so it's in the promoter's interest to bring their acts to Oracle even though there is a newer and shinier arena that has opened," he said.
The arena is managed by AEG, the nation's second-largest concert promoter, but that contract expires shortly before the Warriors are expected to leave.
Deena McClain, the interim director of the board operating the arena, said she expected the arena, which was fully remodeled in the mid-1990s, to remain competitive for major events. "It's a question of who is going to offer the best deal," she said.
McClain wouldn't speculate on how big an impact a new San Francisco arena would have on her bottom line.
"I don't think we're going to be able to answer those questions until the Warriors move out," she said, "and there is actual reality as to the competition."
Contact Matthew Artz at 510-208-6435