If You Build It, Will They Pay?

Two diligent, if hapless, would-be sports entrepreneurs couldn't resist the pecuniary opportunity at hand. It was April 18, 1923—opening day of the new Yankee Stadium. A $2.5 million marvel (the equal of $30 million now) built on a 10-acre parcel in the Bronx, it was reputedly the first ballpark to be heralded a "stadium." No other sports venue rivaled the size of the "House That Ruth Built," as the place was soon known. And it was worth every cent of Babe Ruth's annual $52,000 salary. Swinging mightily on that chilly inaugural day before a festive crowd of 74,200, Ruth hit a home run to bring the Yankees a 4-1 victory over the archrival Boston Red Sox. But the luckless entrepreneurs missed out on the electrifying action: one had tried to sell his ticket for $1.25, 15 cents more than the official $1.10 admission. The other guy was holding out for $1.50. Police arrested both for scalping.

Next April 16, history's most storied franchise and most lavishly compensated players (2008 payroll: $209 million) will begin playing in a 21st-century, state-of-the-art Yankee Stadium that is, at $1.3 billion, one of the world's costliest sports venues. When the gates open, fans may have a tough time distinguishing between bona fide scalpers and the Yankees' management. The pin-striped team is charging, for example, $2,500 per game for each of the stadium's choicest seats, up from $1,000 in this dismal final season in Ruth's now decrepit shack. But the Yankees are hardly alone in finding new ways to gouge fans; their premium seats are a bargain when compared with prices in Dallas just for the right to buy a season ticket: as much as $150,000. In the latest sign of hyperinflation in the sports business, a slew of ultraexpensive venues are rising, or have been built recently, across the country from Dallas to Washington to New York—where not only the Yankees, but also the Mets, Jets, Giants and New Jersey Nets will all be getting new digs (the New Jersey Devils got a new arena last year). The total price tag for the New York-area building boom alone: more than $5 billion.

Of course, with the nation's financial system teetering, all this construction couldn't be coming at a worse time. Many of the sports industry's most golden gooses, including financial-services giants and automakers—might have a tough time scrounging up thousands of dollars for a seat these days, and might have to slum it with the hard-pressed masses in the cheap seats (meaning under $100 each at Yankee Stadium). These new sports palaces were conceived in a more conspicuous era, and as such they're replete with luxury suites, upscale club seating, catered food and any number of high-tech distractions. Each stadium has an economically stratified seating scheme that will have fans scraping their pocket bottoms or, in a few cases, even mortgaging their homes (if anyone can get a loan these days).

Take, for example, the new Dallas Cowboys stadium, scheduled to open next year in suburban Arlington, Texas. Topped off with a retractable roof and featuring the world's largest high-definition scoreboard, spanning 60 yards, the $1.1 billion facility is an amalgam of steel from Luxembourg, glass from England and other pricey materials. To partially pay for it, owner Jerry Jones is employing a long-controversial financing tool of the sports business called the "personal seat license." For an upfront fee of up to $150,000 a seat, fans get an exclusive long-term license that allows them to buy season tickets each year—for thousands of dollars more. The license may be sold on the open market, if the owner is ever squeezed for cash or sours on the Cowboys. "I could have built this for a third less," Jones recently told reporters. "But this is what the Cowboys fans and the NFL deserve."

Once ensconced in their pricey seats, fans are captive to corporate sponsors, whose multimillion-dollar ad and promotional efforts in stadiums are essential elements of sports-franchise and league economics. These corporations and others are the primary occupants of the luxury suites (they'll go for up to $500,000 a year at the new home of the Cowboys) that take up an increasing percentage of stadium real estate these days.

Sports has a reputation for being recessionproof, but the nearly unprecedented economic travails of the past month may crush that chestnut. Leagues and team owners say they are cautiously monitoring the economy, but they insist that, so far, there is little evidence that fans are scaling back on their spending. Corporate sponsorships and luxury suites "for the most part are long-term arrangements … not one-year deals," says Thad Sheely, the New York Jets' top stadium-development and finance executive. "Economic cycles don't immediately impact our results." Indeed, even as fans bemoan that their favorite sports have become nothing more than moneyball (and in some cases even protest the trend, as Giants and Jets fans did recently), they continue lining up at the shiny new stadium gates and checking whether their names have ascended on the season-ticket waiting lists. "It's just more corporate greed," says Ronald Freeman, a Jets season-ticket holder from Orange, N.J.