Sport Management Chapter 12

Arenas

-1927: hockey owners followed lead of baseball owners and built arenas to host teams -needed to fill empty seats in arenas on non-hockey nights so hosted boxing matches on some nights -ice capades put together fill nights -basketball enters arena picture, and arena owners earn revenue from two tenants

IAAM

-International Association of Auditorium Managers -leading professional trade association for facility management field

marketing

-account for location of venue, culture of community and production of events -internet allows easier booking of events -saturated markets (markets with several venues in local vicinity) -clauses (some acts have 50-mile radius clause-can be difficult and confusing based on geographic market) -local economy will be driving force for ticket sales

types of public facilities: convention centers

-almost always built and owned by public entity -built to lure conventions and business meetings to particular municipality -publicly financed because rents and fees they charge do not always cover costs -economic impact convention/business meeting has on municipality can be large

Modern Era

-baseball only stadiums becoming obsolete during 1960s -team owners could make money by having their host city build their stadium rather than building it themselves -cities built new facilities to keep teams enthusiastic about hometowns (Veterans Stadium, Three Rivers Stadium, Riverfront Stadium) -city leaders believed publicly built stadiums were good investments and added to quality of life -trend toward one purpose stadiums again (soccer specific stadiums)

types of public facilities: arenas

-built to accommodate one prime sports tenant or to lure prime tenant to facility -intercollegiate facilities financed by private donations, endowments, student fees, fund-raising campaigns, and in case of public institutions, public grants -public owner may manage its own facility or contract out for private management -recent trends include adjacent practice facilities for primary tenants to increase event bookings

promoting

-co-promotional model: facility and promoters split and risk and revenue -rental agreements: promoters pay specified amount up front and other costs covered by promoter -majority shows brought up by outside companies (AEG Live, Live Nation, Feld entertainment) -usually big time artists sign for set free and all inclusive deal for merchandise, branding and tour dates given to promoter for agreed upon fee

facility financing

-federal government allows state and local government to issue tax-exempt bonds -tax exemption lowers interest on debt thus reduces amount that cities and teams must pay for stadium -public vs. private financing -team owners have to look for additional revenue to compete for, and pay, their players while maintaining profitability -building public assembly facilities meant other services had to be neglected

History

-gain in popularity of professional baseball and intercollegiate football launched construction of stadiums -constraints of urban space limitations dictated irregular sizes and shapes of older ballparks (Fenway Park) -early NFL teams played in baseball stadiums until new stadiums built

facility financing mechanisms: bonds

-money to build facilities usually obtained by issuing bonds -promise by borrower to pay back lender specified amount of money, with interest, within specified period of time

types of public facilities: stadiums

-outdoor/domed facilities for baseball, football, and outdoor soccer teams -stadium managers try to maximize bookings, but it's more difficult with stadium than arena -fewer non-sport events can play in stadiums, primarily because stadiums significantly larger than other venues and most other events cannot attract stadium-sized crowds -stadium managers have become increasingly effective in creating events for venues that take advantage of all available spaces

facility financing mechanisms: facility revenues

-personal seat licenses (PSLs): down payments on luxury suites and club seating (used to pay up front costs) -ticket tax -revenue from other sources: parking, rent, concessions

Joe Robbie (Miami Dolphins)

-privately financed new stadium using stadium revenues as collateral -team owners then looked for city/state willing to build new facility but let team control stadium revenue streams, thereby allowing owner to maximize revenue without heavy debt service expenses (Baltimore and Cleveland)

facility financing mechanisms: taxes

-property taxes: paid by homeowners, who are often long-term residents of city -occupational tax: anyone who works in community (more likely to pass in vote) -hospitality tax: forces visitors to pay directly for facility -general sales tax: affects both local and out-of-town visitors

types of public facilities: theaters

-public assembly facilities primarily utilized for presentation of live artistic entertainment -house prime tenants like symphony orchestras, opera and dance companies, and resident theater groups -profits rare, but spinoff business from theater attractions justifies public subsidies -provide culture and entertainment for community, enhancing quality of life

facility financing mechanisms: corporate investment

-sale of naming rights for stadiums and arenas current trend -facility pouring rights: being facility's exclusive soft drink/beer distributor -outright corporate donations: defray costs in exchange for publicity and public relations benefits that may result form such donation

types of events

-sport: specific seasons, dates determined by league -family: disney, nickelodeon, and sesame street shows (also ice shows) -concerts: typically booked months in advance -trade shows: multiple day events -religious events: mass worships -convocations: graduations, speaking events -seasonal: summer tours, holiday shows

revenues

-ticket sales offer lion's share of revenues -ticket rebate: surcharge on ticket that goes to facility -ancillary revenue: sale of food, beverage, parking, fees, sponsorships -marketing fund: profits from other shows put aside to invest in future programs

types of public facilities: other types of venues

-university venues: stadiums, arena, theaters focus on students -metropolitan facilities: large city venues seen as must play (Madison Square, Staples Center) -local/civic venue: smaller capacity, focus on smaller events, minor league sports

sports facilities thought to improve local economy by:

1) building facility creates construction jobs 2) people who attend games or work for team generate new spending in community, expanding local employment 3) team attract tourists/companies to host city 4) new spending has multiplier effect as increased local income causes still more new spending and job creation

general obligation bonds

backed by local government's ability to raise taxes to pay off debt (safe)

revenue bonds

backed specifically by facility's ability to generate revenues (risky)