Building stadiums and arenas – but not for sports

Concerts are lucrative, lucrative enough to construct buildings with 10,000-18,000 seats primarily for shows:

Los Angeles-based Oak View Group, an entertainment and sports-facilities company backed by private-equity giant Silver Lake, is slated to develop eight new arenas over the next three years, six of which will forgo major-league teams, largely to keep their calendars clear for concerts.

An arena can generate twice as much net income from hosting a concert than a National Basketball Association or National Hockey League game, according to Oak View. Live music is expected to balloon to $38 billion industry by 2030, from about $28 billion currently, according to PricewaterhouseCoopers. Oak View said being able to schedule twice as many concerts as it would otherwise with a professional team in house is an attractive prospect in markets including Palm Springs, Calif., and Austin, Texas. And as streaming is helping artists develop larger international audiences, markets including Manchester, U.K., and Milan are ripe for more arena shows, too…

The company said the arenas are being designed with music as the primary focus, from acoustics to VIP amenities. They will include fewer suites – a pet peeve of musical performers, who typically aren’t able to sell tickets for those seats – and add more clubs within the venue to entice concertgoers to linger before or after a show.

Multiple thoughts in response:

1. The ability to tweak the venue for music in multiple ways seems like a big win for artists and audience members. Instead of being in cavernous arenas that need enough floor space for a playing surface, everything can focus on a stage. It will be interesting to see how sound quality in new arenas like this compares to multi-use facilities.

2. This is a reminder that the big money in sports is not necessarily in attendance to games but rather in television rights and other revenue sources. Could this lead to a future with smaller sports arenas that provide an upgraded experience (it is already difficult to compete with large HD televisions) and more emphasis on what is built around the stadium?

3. Sports teams often ask for public money for facilities. And many communities seem willing to provide it, even when the evidence suggests it is not a good investment. Will music arenas also be funded with public money?

4. Since many larger cities already have arenas or stadiums, it will be interesting to see what mid-sized markets get music-only facilities. Some of the locations mentioned above are places without major sports teams (like Austin). But, I could imagine some of these facilities within large metropolitan markets in order to cater to musicians (imagine such a facility in the southwest or northern suburbs of Chicago taking away business from the United Center, Allstate Arena, and the Sears Centre).

5. Just as sports stadiums and arenas have limited games, these facilities will have a limited number of concerts each year. What else could the arenas be used for?

Sports stadiums and white flight

How the Atlanta Braves and Atlanta United went about procuring their stadiums hints at the city’s racial divides:

Accompanying the announcement, the team released a map showing where, precisely, Braves Country was—and, notably, where it wasn’t. That view of the greater Atlanta area was speckled with red dots, each one indicating the home of a 2012 ticket buyer, including season-ticket holders. Only a smattering of red appeared to the east, west and south of Turner Field, while thousands of dots congealed into a ribbon above downtown that expanded into a wide swath in the half-dozen suburban and exurban counties to the north. The new stadium would be closer to the middle of that mass, which happened to embody an older, whiter and more conservative population than the city proper. Those northern suburbs were fast diversifying, yet many in Atlanta—particularly in its black population—felt slighted by the decision, their perspectives colored by decades of racial and political tension between city and sprawl.

Five months later MLS commissioner Don Garber, Falcons owner Arthur Blank and then-mayor Kasim Reed proclaimed in their own press conference that downtown Atlanta would be home to MLS’s 22nd franchise, and the new club, Atlanta United, would take the pitch in 2017, the same year the Braves headed to Cobb. The soccer team would play in the same new $1.6 billion stadium the Falcons would soon call home, but United would be no afterthought. The facility would be designed to accommodate the beautiful game from the start. Pushing back against skepticism and pointing to an influx of young professionals near Atlanta’s urban core, Blank assured MLS’s leaders he could fill the massive venue, even in a market known for lukewarm enthusiasm toward pro sports. Reed boasted that his city’s foreign-born (and, seemingly implied, soccer-loving) population was growing at the second-fastest rate in the U.S. Garber himself insisted these factors combined to make downtown an ideal MLS incubator. The city “embodies what we call a ‘new America,'” he said, “an America that’s blossoming with ethnic diversity.”

Fast-forward five years, and Atlanta United’s ticket-sales map, while not a direct inverse, is considerably more centralized than Braves Country (or even, says United president Darren Eales, a depiction of the Falcons’ fan base). United, meanwhile, aided no doubt by winning the 2018 MLS Cup, has led MLS in attendance in each of its three seasons, averaging 53,003 fans in ’19, among the highest in the world. This echoes the success the Braves found when they chased their audience to the north, the farthest any MLB team had ventured from its city center in 50 years. The Braves’ average home attendance, aided too by on-field success, reached 32,779 fans this season, up 31% from their last year at Turner Field…

Kruse, the Princeton history professor, is blunt in his assessment of such feelings. “These ideas about downtown being a dangerous place are really about the people downtown,” he says. For years he thought that “suburbanites want nothing to do with the city except to see the Braves.” But today? “That last connection has been severed. I see this movement of the stadium as the culmination of white flight.”

Trying to connect with particular fan bases or contributing to decades-long processes of residential segregation and white flight? How about both?

Three additional thoughts:

  1. More could be made here of the public money the Braves received from Cobb County. Plus, they could develop land around the new stadium, now a common tactic to generate more revenue beyond fan attendance. Yes, fan attendance is important but the long-term money may be in investing money in land surrounded by whiter and wealthier residents. Stadium development then just continues the process of limited capital investment in neighborhoods that could really use it and concentrates it in places where wealth is already present.
  2. Baseball is widely regarded as having an older and whiter fan base. Soccer is said to have a more diverse and younger fan base. In addition to the demographics of the Atlanta area, the sports themselves try to appeal to different audiences (even as they might work to reach out to different groups).
  3. It will be interesting to see how many sports teams in the next few decades move to more niche locations while still claiming to be from the big city. Civic identity is often tied to sports teams as most metro areas can only support one team from the major American sports. Can big city politicians still lose when the team from the area decides to move to a suburb (see a recent example in the Las Vegas area) but takes that revenue out of the big city? Can a team that locates in one particular area of the metropolitan region still easily represent the entire region?

Baseball teams going with smaller stadiums, more mixed-use development

As fewer fans may be willing to go to baseball games, teams are moving toward focusing on development around the stadium:

The Atlanta Braves and Texas Rangers, leaning significantly on public funding that came without taxpayer referendums, ditched parks built in the 1990s for smaller digs framed by the game’s new revenue engine – mixed-use developments at least partially controlled by the team. The Braves are in their third season at SunTrust Park (capacity, 41,000, replacing Turner Field’s 53,000) while the Rangers in 2020 will open Globe Life Field, a retractable-roof facility that will seat 40,000 compared to its predecessor’s 49,000-seat capacity…

For the Diamondbacks, A’s and perhaps a significant number of clubs that may replace – or revamp – their Camden Yards-era parks, finding the sweet spot of atmosphere, accessibility and inclusion will be paramount in a sport with an aging and occasionally alienated fan base.

The primary focus of the article is on how teams are trying to attract more fans to altered ballparks that offer a more exciting in-game experience. But, I find the passage above more interesting: as fans become fickle regarding attendance, the big long-term money may just be in the real estate surrounding the park. Even at high levels of attendance, a sports stadium only generates revenue a certain number of dates a year. Baseball has a lot more dates than football but the stadium still sits empty for more than 75% of the year.

Many teams and park owners have already shifted toward stadiums as concert venues as well as homes to other sports in the off-season. But, imagine the sports stadium more like an exciting shopping mall where people come to hang out in an exciting and safe space and they consume. Just like the shopping mall that features food, entertainment, and retail, the stadium could become a year-round home for entertainment, food, and shopping that has a great draw at the center: a professional sports team that happens to play there for part of the year.

One piece that may be missing from a number of ballparks as well as shopping malls: adding residential units near the facility could help boost the customer base and create a neighborhood feel. A number of stadiums are surrounded by parking lots. At least a few are located right next to other stadiums of professional teams so the stadiums can share parking lots. Instead, imagine apartments and condos right near stadiums: some residents would be excited to live right near the energy of a stadium and these residents also would partake of local businesses. This does not have to look like the neighborhood around Wrigley Field but there is certainly a lot of room for more neighborhoods to generate revenues for tams long after the games are over.

And then there can be conversations about whether public money should be used to finance real estate development in addition to sports stadiums. Do communities benefit from mixed-use developments around stadiums or does the money line the pockets of owners?

Henderson, NV: do not go all in with public money for a baseball stadium

The large Las Vegas suburb of Henderson is interested in acquiring a major league baseball team and willing to use a lot of taxpayer dollars to do it:

Renderings show a retractable-roof baseball stadium near St. Rose Parkway and Bermuda Road in rapidly growing west Henderson, which city officials envision as a hub for sports and entertainment. The proposed site, one of four floated by the city, sits behind the future headquarters and practice facility of the NFL’s Raiders.

According to the presentation, Henderson hired a consultant to conduct a financial analysis, assuming the ballpark would have 32,000 seats and space for 4,000 standing-room-only ticket holders. The Diamondbacks would serve as the primary tenant for a 30-year term and the stadium would be publicly owned and exempt from property tax.

The consultant estimated the ballpark would cost about $1 billion to construct…

The Diamondbacks expressed interest in creating a development at a potential new home, pointing to the entertainment district near the Atlanta Braves’ SunTrust Park as inspiration, according to documents that detailed the team’s wish list for prospective suitors.

The city said it ultimately views itself as capable of drawing major sports franchises because of a business-friendly approach, attractive demographics, socioeconomic characteristics and available land.

It sounds like the suburb of over 300,000 residents sees at least three benefits of such a move:

1. It would boost the status of the suburb. Few suburbs could boast of a collection like this with an MLB team, an NFL practice facility, and an ice rink connected to an NHL team. This could then help attract businesses and residents.

2. The potential for development around a major league stadium. Imagine restaurants, retailers, and residences near the stadium.

3. Becoming a unique location with a growing metropolitan region. As suburbs compete for corporate headquarters, residents, retailers, and entertainment centers, a stadium would stand out. It is easy for critics to stereotypes as collections of subdivisions and strip malls but Henderson would have a different collection of sites.

Yet, the research is clear: sports stadiums enrich sports teams, not communities. Suburbs that have tried this tend to run into problems (see recent examples of Glendale, Arizona and Bridgeview, Illinois). Teams will use cities and suburbs against each other to get better deals – just as big companies like Amazon do – and also leave those places behind if they can get better deals.

So before Henderson throws up to a billion dollars at a major league team, they should think twice. Can the suburb handle that amount of debt if it does not work out? Could that money be spent elsewhere on development and/or amenities that would benefit a broader swath of their residents? Is being a high-status suburb more important than being a quality place to live?

Minor league baseball stadiums are not good for economic development

Camden, New Jersey just decided to tear down a baseball stadium that is less than twenty years old. The stadium did not lead to economic development and no team has played there for several years:

Taxpayers spent more than $18 million to build the stadium that would eventually be named Campbell’s Field, as part of a minor league ballpark-building frenzy across New Jersey that saw similar stadiums erected in Newark, Atlantic City, and Somerset—all part of redevelopment schemes that attracted independent minor league teams (that is, minor league teams not affiliated with the Major League Baseball farm system)…

The sad saga of the Camden Riversharks—the Atlantic League team for whom the stadium was built prior to the 2001 season—will come to an official end more than three years after the team picked up and moved to New Britain, Connecticut, leaving Campbell’s Field vacant. The city tried to attract a new team, but after those efforts failed, the Camden County Improvement Authority signed off on a plan to demolish the stadium, according to NJ.com. The Riversharks and Campbell’s Field were supposed to revitalize the impoverished city by being the centerpiece of an economic development plan along the edge of the Delaware River. Now, the demolition of the stadium is the first step in a new $15 million economic development scheme that will turn the site into a complex of athletic fields for Rutgers University’s Camden campus, NJ.com reports…

In the team’s final two seasons, the Riversharks averaged about 3,000 fans per game—which is actually not bad by the standards of independent minor league baseball—but the team never turned a profit and abruptly skipped town in 2015 when negotiations on a new lease stalled.

By then, the ballpark was so deep in debt that it faced foreclosure because the team had missed several lease payments. To bail it out, Camden paid off $3.5 million in outstanding debt and purchased the property. The city planned to impose a new ticket surcharge to cover those costs, but the city only received one payment from the team before it moved away, NJ.com reported last year.

This is a consistent story with sports stadiums: they primarily benefit the teams and their owners, not communities. Local officials and politicians want to be the ones who can say they helped keep a sports team in town or they attracted a new franchise but using public dollars for this effort is not a good investment in the long run.

While the story is not quite the same with tax breaks for corporations, there are some parallels. Communities often want to jumpstart economic development. New businesses, particularly headquarters or large office buildings, as well as stadiums can appear to be good ways to do this. They bring jobs, something every local leader supports. They bring increased status for a community, a less quantifiable feature but still important as communities jockey to attract additional firms and residents. Thus, communities are willing to offer tax breaks in a variety of ways – sometimes to help construct infrastructure, sometimes provided per job created, sometimes to construct the stadium – to beat out other communities. The question of whether the community benefits in tangible ways in the years to come is not often raised.

A related earlier post: championships won by sports teams do not necessarily lead to better outcomes in cities.

No, the Milwaukee Bucks’ new arena will not solve residential segregation in Milwaukee

The CEO of the Milwaukee Bucks says their new arena may or may not help the city:

Perhaps no NBA city is in greater need of a melting-pot meeting point than Milwaukee…

Feigin told the Wisconsin State Journal in 2016 that Milwaukee was “the most segregated, racist place I’ve ever experienced.” While he didn’t want to revisit those comments this week, Feigin said the new arena could help transform the city’s downtown.

“I don’t think this (arena) is a solution for racial harmony,” he said. “But Milwaukee doesn’t have a centralized meeting place. There are no parks in the middle of the city. By building this plaza, you’ve kind of orchestrated a meeting place.

“There are certainly obstacles and certainly a long way to go, but our message is this is a wonderful city. We are an organization that will speak out about injustice, and we are also an organization that is focused on how we can solve problems.”

It sounds like the Bucks CEO hopes the stadium becomes a cosmopolitan canopy site where people of different backgrounds can gather together and find common ground around the city’s basketball team. I am generally skeptical of claims that sports teams can help revive cities or heal cities. See this earlier post about whether the Cleveland Cavaliers winning an NBA championship would revive the fortunes of Cleveland. For an arena, will a few hours of watching basketball help fans truly cross race and class boundaries? A general civic pride might develop but I would guess many sports fans can compartmentalize their love for a winning team and their relationships, abstract or otherwise, with the other.

Las Vegas willing to pay record public subsidy to have NFL

How much power does the NFL have? Enough to have major cities commit incredible sums of public monies:

Las Vegas appears poised to claim the mantle of World’s Most Expensive Stadium from East Rutherford, New Jersey, where the Jets and Giants play in the $1.6 billion MetLife Stadium. (Los Angeles Stadium, Stan Kroenke’s project that will host the Rams and Chargers, is estimated at $2.6 billion—but that cost includes parts of the surrounding entertainment district.*)

Clark County taxpayers will contribute $750 million to the new arena, a record for a sports facility—about $354 per resident, taken from an increased tax on hotel rooms. That tax currently pays for schools and transportation, in addition to tourism-related expenditures.

Stanford economist Roger Noll said it was the “worst deal for a city” he had ever seen…

The state’s figures to justify that new tax are… ambitious. Its forecasts suggest 450,000 new visitors every year drawn by the 65,000-seat stadium, spending an average of 3.2 nights per visit. About a third of tickets are supposed to be purchased by tourists, although no other city manages 10 percent. Why half a million people would fly across the country to watch a team that no one wants to pay $20 to see in Oakland is not clear.

Even with the studies that show stadiums don’t contribute anything to cities, it seems that someone is always willing to pay. In this case, it wasn’t just Las Vegas: Oakland tried to put together a last-minute deal that they claimed would require even less of the team:

Schaaf told ESPN Friday she believes Oakland’s new stadium plan is viable.

“At the end of the day, this is the decision of the Raiders and the NFL,” Schaaf said. “What I am confident about is, if the Raiders want to stay in Oakland, we have a viable plan to build them a stadium with no upfront money from them, in financial terms that I believe are more favorable to them than the terms in Las Vegas — what we know of them.”

I’m still waiting for a city mayor or other big-name official to publicly bid a major sports franchise good riddance when they ask for a lot of local money. Perhaps that would be bad form – local officials are usually in the business of trying to attract everyone they can – but it could also send a strong signal about how private interests cannot overrule the long-term public interest.