London's benighted Millennium Dome has been suddenly and spectacularly reborn. The massive 28-acre complex in the gritty Docklands area east of the city achieved notoriety for its cost overruns and vague purpose even before it opened on New Year's Eve, Dec. 31, 1999. A year later, it closed to the public—and then languished for six years as government and business leaders fought over what to do with the ungainly white elephant.
Now, with surprisingly little fanfare, the Dome is back. American billionaire Philip Anschutz, through an investment vehicle called Meridian Delta, obtained a 999-year lease for the property in 2001, and in 2005, his Anschutz Entertainment Group (AEG) rolled out an ambitious plan to convert it into a multiuse entertainment complex. The Los Angeles-based company, which also owns sports teams and L.A.'s Staples Center, has plowed more than $700 million into its first European venture.
Built and Booked
At the heart of AEG's investment is a 20,000-person stadium that will host everything from music concerts and NBA games to Disney on Ice (DIS) performances. The facility will also host gymnastics and basketball events during the London 2012 Olympic Games, and has landed a contract to hold the ATP Tennis Masters Cup starting in 2009. Adjoining the main stadium are a smaller arena and an 11-screen cinema complex, plus a ring of restaurants, and even an indoor beach studded with palm trees.
The initial reaction to the new center, dubbed "The O2," thanks to a $12 million-per-year naming deal with British mobile phone carrier O2 (TEF), has been downright delirious. It reopened to the public on June 25 with a sold-out Bon Jovi concert, and even the cackling British press, which lambasted the Millennium Dome for years, positively purred over its reincarnation.
AEG has already booked a stellar lineup of artists for the center, including Prince, The Rolling Stones, Barbra Streisand, and Andrea Bocelli, and has sold some 1.2 million tickets for 84 events scheduled over the next six months. Overall, it expects 150 event dates before the end of the year. And more than 70% of the retail space has been leased, primarily to upscale restaurants.
Holding Its Ground
Having aced the reopening, the challenge for AEG now is to prove that it can make the O2 a lasting success. "The critical factor will be what they actually put into the space this time," says Rita Clifton, chair of global brand consultancy Interbrand in London. "First and foremost you have to have a good product."
AEG's track record in leisure and entertainment augurs well. In addition to owning the Staples Center and the Los Angeles Kings hockey club, it operates other facilities such as the Nokia (NOK) Theater Times Square in New York. The O2 is just the first of several investments AEG is making in Europe. A multifunction entertainment center in Berlin will be finished by the fall of 2008, and David Campbell, chief executive of AEG Europe, says further entertainment complexes are planned across the continent.
But first, AEG must reestablish the former Dome. According to Richard Cope, leisure analyst with London-based market research firm Mintel, the O2 is playing into a renewed public interest in live events. "People are more interested in spending for experiences than they were previously," he says, adding that success for the O2 could pave the way for other all-in-one complexes.
Liability No More
Such optimism is a far cry from the pasting the Millennium Dome took when it first opened.
"A doomed Dome" howled The Times of London, while the Observer called the project a "disaster." A $400 million construction overrun, as well as public cynicism over what the Dome was actually supposed to be, didn't help. The Dome even became a political liability for former Prime Minister Tony Blair, who had ordered it up as part of his Millennium Project to showcase Britain's revival at the turn of the century.
Ironically, all the bad publicity may have helped the O2 project, says AEG's Campbell. "People had such a low perception [of the Dome] that we didn't have to do an enormous amount to start to turn them around," he says.
A Good—If Not Easy—Bet
Not everything has gone smoothly, though. AEG had also hoped to open Britain's first Las Vegas-style casino on the site that could have attracted an estimated 1.7 million visitors per year and generated $206 million per year in revenues, according to estimates from PricewaterhouseCoopers. But in January, the city of Manchester was awarded the rights for the casino—and even that is now in doubt, as new Prime Minister Gordon Brown has ordered a review of the super-casino plan.
The loss was a setback for AEG, which had already earmarked a large section of the Docklands site for the casino. But Campbell says the company hasn't given up hope of offering gaming someday. In the meantime, it's shifting emphasis toward other ways to entice lucrative overnight visitors, especially via cruise ships and conferences. The company is already in talks with the London port authority about building a dock and hotel for cruises. "In terms of the economics of the business, overnight visitors are the people who really drive it," says Campbell.
As AEG sets out on developing the site's second phase, which should be complete in time for the 2012 Olympics, it's still unclear whether the public will regard the complex as more than just a novelty. AEG is doing everything it can to avoid that, landing exclusives such as the British premiere of The Simpsons Movie in late July. But no matter what happens, it's clear that AEG's first foray into Europe has changed the fortunes of one of London's most controversial landmarks.
View a slide show of the transformation of the Dome.