If You Build It, Will They Pay?

Stadium development has come in waves, about every 30 years, beginning around the start of the second decade of the 20th century. Some 13 ballparks were built from 1909 to 1915, thanks to the advent of concrete construction, which was used to replace the rickety and unsafe wood-and-nail park, says Bill King, special projects editor with Street & Smith's SportsBusiness Journal. The 1990s saw a boom that ushered in the era of high-end stadiums. Often designed with a "retro" look of yesteryear's stadiums, they were crammed with suites and upscale seating, concierge services and in-seat food-ordering. Stadiums, King says, "were always a huge part of the business [of sports], the ticket sales and concessions."

As the sports economy has become more complex, the business of stadiums has come to rival sports television in financial significance. A new stadium can help keep a city from losing a team, and turbocharge the local fan base. Most critically, it can give a team a huge advantage in snaring top talent. All 32 NFL teams, from tiny Green Bay to the mighty Super Bowl champion New York Giants, share equally in national TV revenues. But their total incomes vary wildly based on attendance at the local ballpark, premium seating and corporate sponsorships, among other things. "You have teams that are grossing as much as $100 million more than other teams," says Pete Ward, senior executive vice president of the Indianapolis Colts, who opened a new stadium last month. That has implications beyond the owner's pocketbook. The league averages the gross revenues to calculate the salary cap, so the rising revenues of the rich teams drive up the cap, and the poorer teams have to play catch-up. "When you have such a wide range of revenues, the salary cap skews to the disadvantage of the low-revenue teams," Ward says.

Baseball's Minnesota Twins offer a stark before-and-after study of a stadium's financial impact on a franchise—and the greater demand a venue's economics can make on fans' budgets. Despite success on the field, the small-market team missed millions in potential revenues largely due to the shortcomings of its home field, the Hubert H. Humphrey Metrodome, the last multipurpose stadium for football and baseball. Fans seldom buy season tickets at the Metrodome, which is widely regarded as one of the worst venues for choice seats (the ballpark ranks near the bottom in baseball in that category). The Twins have captured virtually nothing from premium seating, while their co-tenant, the NFL's Vikings, has monopolized revenues from the 100 or so luxury suites. The local government has siphoned proceeds from parking, concessions and stadium ads. "And that's why we have been looking to control our own destiny, to control the revenue streams around our own games," says Dave St. Peter, the Twins' president.

It took 10 years, but in August 2007, the Twins broke ground on a 40,000-seat stadium in downtown Minneapolis. The team will pocket nearly all revenues, which include such sources as the naming rights (Target Field), premium seats and 55 to 60 luxury suites. Slated to open in 2010, Target Field will include 3,000 club seats averaging about $52 per game—on top of an upfront "membership fee" of $1,000 to $2,000. Most are already spoken for, says St. Peter, and the team has leased about 50 of the luxury boxes for up to 10 years for an unspecified sum.

Spectator sports ceased being about fun and games long ago. Now, in the age of the billion-dollar sports emporium, they're about financial life and death. Which probably explains why some teams have taken to scalping their fans.

© 2008