Friday, March 6, 2009

Stadium schadenfreude

Talk about profoundly bad timing.

In a case of monumentally bad timing, this year three of the biggest names in pro sports -- the Yankees, New York Mets and Dallas Cowboys -- are opening three of the most expensive stadiums ever built, filled with premium-priced seats and luxury amenities. At a combined cost of more than $3.5 billion, the stadiums were conceived and financed in a vastly different environment, a time when corporations and municipalities were flush with cash. Now they're opening just as corporate America is going through a massive belt-tightening -- and trying to avoid the appearance of extravagance at all costs.
Sure, it's fun to mock these teams, especially the Yanks, but the truth is, when all of these architectural masterpieces, the economy wasn't a concern. The mammoth egos of the owners fueled the drive for newer, bigger, shinier... all driven by significant corporate sponsorship and participation. Now, not so much:
"Build the most expensive stadium, charge high prices and have the worst economy. It's called lack of sleep," says Lonn Trost, the Yankees chief operating officer.
At least he's being honest. But sponsorships are drying up, as is the interest in high end seats and luxury boxes:
Bank of America recently ended negotiations with the Yankees over what would reportedly have been a $20-million-a-year sponsorship deal.
With just weeks before their new $1.1 billion stadium opens, the Cowboys still have 2,000 premium seats and about 50 of their 300 luxury suites left to sell. The Yankees have hired Mr. Sroka to drum up buyers for the hundreds of premium seats still in their inventory. The Mets, who once had deals for all 49 of their luxury suites, say they've had to go back to the market after one customer, whom they declined to name, backed out.
Cowboys owner Jerry Jones held out for an even bigger naming rights deal -- some experts thought he could get as much as $1 billion, though team executives says they never expected that much -- but instead saw the naming-rights market dry up. Mr. Jones said he was a victim of bad timing, but expects the market to recover.
No team has hitched its star more closely to the corporate market than the Cowboys. The $1.1 billion Cowboys stadium will hold up to 100,000 fans, the most in the NFL. Fans will enter and exit through 120-foot-tall retractable glass doors at either end zone. The scoreboard alone -- a mammoth, 160-foot-long high-definition screen -- cost more than $35 million, as much as the entire Texas Stadium, the team's former home.

Paying for it all are the more than 15,000 premium seats, costing as much as $340 per seat, per game. When the team broke ground in April, 2006, the stadium was designed to have 200 luxury suites; Mr. Jones added another 100 during construction.

Don't forget, either, that the Yanks and Cowboys decided that paying someone else to provide high end concessions wasn't good enough; they teamed up to create their own concessions business (or as I called it, a new Axis of Evil): Legends Hospitality Management.

The bottom line is while the initial reports aren't glowing for the sales teams at these stadiums, over the long term, they will continue to be a huge cash cow. The Cowboys' stadium, for example, will seat 100,000. Can you imagine the financial disparity between their gate/concessions take as compared to the desperate times at Detroit's stadium? Times will indeed improve. Corporate suits will once again fill the best seats in each stadium. And each team will continue to spend as if this current Recession/Depression never happened.

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