Sports Business: STADIUMS
TOO MANY SPORTS STADIUMS?
Seattle and other cities may be overbuilding sports facilities
When Paul Allen, co-founder of Microsoft and owner of the Seattle Seahawks, forced a special referendum on a $425 million football stadium last spring, the odds seemed stacked against him. Taxpayers were being asked to subsidize a team that had never won anything, had been losing fans for years, and was owned by one of the world's richest people--"the accidental zillionaire," as Wired magazine has dubbed him. And it didn't help that Allen made his pitch on the heels of contentious negotiations with the Seattle Mariners over their newly approved $417 million ballpark. Still, the stadium measure passed.
Seattle is like that these days--a place where anything seems possible. The economy is up, crime is down, the sun is out (take a bow, El Nino), and the biggest problem for the area's leading company, Microsoft Corp., is that it is too dominant in its industry. Given the chance to erect a spectacular football palace next to the ballpark, voters figured, what the heck, let's build our own little mountain range between the Olympics and the Cascades.
The football complex is the most expensive in the sport's history. The retractable-roof ballpark also sets a record for baseball stadiums. All told, with a $100 million overhaul of the SuperSonics' arena and $50 million in planned upgrades to the University of Washington basketball facility, close to $1 billion has been dumped into Seattle sports in the past two years.
When all the buildings are finished after the turn of the century, Seattle will have one of the most enviable sets of sports facilities in the world--all within a 10-mile radius. And with a new rail system on the way, the city seems well-positioned in its bid for the 2012 Summer Olympics. But amid all the feel-good boosterism, there's a pesky question that's starting to demand an answer: Can we afford all of this?
More specifically, is Seattle's corporate community big enough--and motivated enough--to gobble up the luxury suites and other high-end seating that help make the new generation of stadiums so profitable? When the last dab of paint has dried on the new facilities, there will be 194 luxury suites available--at $50,000 to $125,000 a year--in a market that currently has only 146 companies with 500 or more employees.
Seattle is not alone. There are currently nine U.S. markets-including Dallas, Detroit, and Tampa-St. Pete-with more suites and skyboxes available than there are large companies to fill them. That number will grow in the next few years as 16 stadiums and arenas in 13 cities open for business.KEEPING UP. Today, teams desperately need corporate support, says Mark S. Rosentraub, an Indiana University professor who studies the impact of sports on urban areas. Rosentraub says if a team can't sell luxury seats, "everything drops. The club cuts [highly paid] players, and it gets worse. It becomes a spiral." And when the going gets tough, owners get going--right back to City Hall. There, they threaten to break leases and take teams out of town unless they get a sweeter deal.
The pressure is intense to keep up with the Joneses--Jerry or otherwise. No league requires clubs to share money generated by luxury seating, so teams such as Jones's Dallas Cowboys, with its 380 skyboxes and $50 million a year in nonshared revenues, gain a competitive advantage. It's no coincidence that three of the four contenders for a baseball pennant last season--Cleveland, Baltimore, and Atlanta--are among the high-revenue teams.
Still, observes Chicago investment banker Paul Much: "The real competition is between leagues." Clubs in markets with more than one pro team must compete with the other franchises for the local corporate dollar. That is partly why Seattle's 20-year-old Kingdome, an otherwise fine facility in which to watch football on rainy fall days (thanks to a new $60 million roof) will be torn down and replaced. It was deemed economically obsolete by Allen, who will be trying to sell 70 suites at the same time the Mariners are looking to fill their 66. Can they do it? "I don't think anyone knows the answer for sure," says Seattle Chamber of Commerce official Michael Campbell.EGALITARIANS. Bay Area franchises, which rely on the same technology-fueled wealth, offer little encouragement. The Oakland Coliseum Arena reopened this NBA season with $100 million in upgrades and 72 new suites. Many of them remain empty. It's the same story next door at the Oakland-Alameda County Coliseum, where the mediocre Raiders play. And at the Kingdome, only 22 of 54 suites have been sold on a year-round basis. "The [business execs] here want to be part of the crowd rather than separate from it," says Virginia Anderson, the Seattle official who oversees city-owned Key Arena.
Egalitarian as that corporate ethic may be, it will have to change if Seattle is going to support the sports facilities that are about to change its skyline. When building your own mountain range, it's not enough to merely gaze at the wonder you just created.By Tom Farrey in SeattleReturn to top