Renting stadiums puts dent in soccer teams' finances

[AreliusII]

http://www.mercurynews.com/mld/mercurynews/sports/12310695.htm?template=contentModules/printstory.jsp

[Aerick]

Subscription based news service. Can you post the text of the article? Or is that illegal?

[Stucki]

Thanks Aurelius. That has been stated elsewhere many times, but it is always good to see it again. Hopefully some of our politicians will read it and understand why Uncle Dave is pushing so hard for a stadium.

[Stucki]

Originally Posted by Aerick

Subscription based news service. Can you post the text of the article? Or is that illegal?

The subscription is free. I registered and found out that one of my other subscriptions got me in. I'm guessing it was my LA Times one.

[Stucki]

BY STEVE DAVIS
The Dallas Morning News

DALLAS - (KRT) - MLS commissioner Don Garber gets lots of mileage from his "ill-fitting suit" analogy.

That's how he describes soccer games that are swallowed up inside cavernous stadiums or played on fields burdened with ugly football markings: like a dashing young man who's not at his best because he's laden with an ill-fitting suit.

But for all the importance of creating an intimate atmosphere inside cozy stadiums, and for all the symbolic perks attached to venues dedicated to soccer, there is a hard economic reality that underlines the ultimate importance of soccer-specific venues: Major League Soccer - any pro soccer for that matter - simply cannot work economically without its own facilities.

Soccer officials grow ever louder as they trumpet the virtue of ownership vs. renting; simply put, soccer stadiums mean everything as the pro game reaches for that elusive financial solvency and staying power.

Only through continued development of facilities like Pizza Hut Park, FC Dallas' new 145-acre complex, set to debut Saturday in Frisco, Texas, can the sport flourish financially.

"MLS would not be viable without its own stadiums to play in," Hunt Sports Group president John Wagner said. "And that goes for any sport. It doesn't matter whether you're talking about the NFL, the NBA ... any sport. If you don't have your own facility, it's going to be a tough business to be profitable in."

HSG, which owns FC Dallas, kicked in $25 million of the vast facility's $80 million price tag. The remainder of the costs for the complex, unique in its integration of spectator and participant assets, is split among the city of Frisco, the Frisco ISD and Collin County.

HSG holds the long-term lease and controls the stadium. And that ownership is essential in a bid for profit that has generally eluded the sport domestically since the North American Soccer League gave it a 17-year go before folding in 1985.

Garber said the original MLS blueprints called for such stadiums, where league owners could reap the benefits of critical ancillary revenue from parking, merchandise sales, concessions, sponsorships and suites. When teams play as tenants in someone else's building, much of that revenue spills into the property owners' pockets.

That detrimental formula has a lot to do with a reported $300 million-plus in combined league losses over 10 years. (MLS officials decline to publicly discuss the losses.)

MLS organizers recognized long ago that a league full of property tenants, as opposed to property owners, was an egregiously flawed business model. They knew so back in 1994, when packed stadiums for the World Cup energized efforts to launch Major League Soccer.

But as the league started with 10 teams in 1996, start-up costs were enormous even without the substantial investment new stadiums would have required. Garber said it simply took time to stabilize operations enough to move into aggressive facility mode.

That began in 1999 when HSG opened no-frills Crew Stadium in Columbus, Ohio. The Crew immediately reached a break-even point financially, HSG chief Lamar Hunt said. It did so again for the 2000 season, although slightly waning attendance since then has resulted in a drift back to red ink.

Those first two years of positive financial movement helped persuade reclusive sports industrialist Phil Anschutz to be bullish on the country's second major soccer stadium. The glitzy Home Depot Center opened just outside Los Angeles in 2003.

So developers at HSG weren't just designing a 21,193-seat stadium and surrounding soccer fields. Instead, they were creating a business model that weans the club from its risky reliance on a single revenue source: ticket sales.

Playing at the Cotton Bowl for most of its previous nine seasons, that's exactly what FC Dallas was doing. In Dallas, at least, the rent was reasonable at less than $50,000 a game.

In New Jersey, Garber said, the MetroStars spend more than $200,000 a game to play at Giants Stadium. That's $3.2 million over 16 regular-season home games - and that's not counting exhibitions or playoff games.

Just like rent payment for a house, that's money the soccer club is never going to recoup.

FC Dallas general manager Greg Elliott said the financial difficulty of existing as a tenant lies not just in the unrecoverable expenses going out, but also in the revenue that's not coming in.

Consider these examples:

The new stadium's 18 suites were priced at $35,000 each - and all sold quickly. That's $630,000 annually the team simply left on the table at the Cotton Bowl, which had no such suites.

The new stadium's 5,385 parking spots could generate $30,000 or more per match, depending on attendance. All parking revenue went to Fair Park previously.

And the team forfeited another $1.25 million annually in naming rights while playing elsewhere as tenants. That's what locally based Pizza Hut paid ($25 million over 20 years) for naming rights in Frisco.

Add those amounts, and FC Dallas has easily covered its entire player payroll, which is about $2 million annually. And that's before accessing the only significant revenue stream available previously: ticket sales, which is never a sure proposition anyway.

"Teams win, teams lose, the weather changes, there are lots of variables," Elliott said. "Until soccer has a tight vise grip on the ticket-buying public, the need to have an ability to attract other, significant revenue is critical for the business model to be viable."

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OWN OR RENT?

OWNING

_Total control of scheduling; teams aren't bumped to less favorable dates or times.

_Access to diversified revenue. For example, concerts and other events will generate revenue that would have gone elsewhere.

_Revenue from signage, sponsorships and suites unavailable to teams saddled as tenants.

RENTING

_Payments of as much as $200,000 a game (Giants Stadium) just to open the stadium.

_Shared revenue from parking and concessions, often with unfavorable splits for teams.

_Little control over customer service; at the Cotton Bowl, ushers, security personnel and parking attendants were controlled by Fair Park.

---

© 2005, The Dallas Morning News.

[Merrill]

Maybe somebody should get a list of all the different legislators and so forth out there, and email that article to them. Maybe it would open their eyes to the necessity of a good stadium situation for long term viablity.

[Stucki]

Originally Posted by Merrill

Maybe somebody should get a list of all the different legislators and so forth out there, and email that article to them. Maybe it would open their eyes to the necessity of a good stadium situation for long term viablity.

I would hope Uncle Dave has already shown them that data.

[Merrill]

Yes, but I think some fan might need to remind them. They seem to have forgotten recently, and become more worried about other less important crap. It's kind of like this :bigfinger <---Hello, I'm a Utah Politician! I just care about screwing Rocky, and it doesn't matter at all what's best for my state, city, or county. If I didn't know better I'd say they were all still in High School.