Since Let’s Go Oakland and the City of Oakland made their pitch to Bud Selig’s panel last year, there has been a curious talking point emerging from that camp, “We have enough corporate support.” The argument is that Oakland’s geographic placement between San Francisco and the growing East Bay (if not Oakland) makes it well suited to capture corporate clients for premium seating and sponsorships. To that end they’ve listed about two dozen companies, many of whom are not headquartered in the East Bay, who could sign on with a new Victory Court ballpark. It sounds reasonable on the surface. Scratch that surface a little and it looks a little weak.
For Oakland there is a “checkbox” problem. Oakland partisans frequently cite Clorox, Kaiser Permanente, Dreyer’s, and Cost Plus, plus Chevron if they extend the reach a bit. If Oakland has Cost Plus and maybe Ross Stores, San Jose has Orchard Supply Hardware and Fry’s Electronics – and those latter two companies have proven track records sponsoring sports in the South Bay. These are the low hanging fruit of the corporate game. Every team has official sponsors and partners for which there are exclusive deals. For instance, Kaiser Permanente would be a fantastic official health provider/insurance of the A’s and the new ballpark. It is huge, national, and is a major presence throughout the Bay Area. However, there are multiple available substitutes who would love to have regional market exposure, yet the exclusivity part restricts them to radio or something else. Right now the A’s have Washington Hospital Healthcare System, a Fremont-based partner whose deal goes back to the Pacific Commons concept days. Maybe the price of such a sponsorship will be too high to renew with a new ballpark, maybe the location (if it isn’t Fremont) won’t prove attractive given Washington Hospital being Fremont only. If Kaiser doesn’t sponsor Cisco Field it leaves a competitive opportunity for one of the other large HMO’s (PacifiCare, Aetna, Anthem Blue Cross, etc.) to swoop right in, along with another hospital network.
Along the same lines, there are numerous other official sponsors who should be there regardless of where the ballpark is. Chevron signed on with the A’s a couple years ago after several years with Valero instead. There will be an official fuel sponsor regardless. There will also be an official soft drink provider (Pepsi), beer (Budweiser), broadband provider (Comcast), mobile phone carrier (Verizon), and newspaper (BANG). These are the easy gets because in many cases there are other related deals in place, such as CSN’s broadcast rights or Pepsi’s pouring rights. Chevron could choose not to go with a San Jose ballpark, but that risks losing exposure in the company’s backyard.
It’s when you get past the checkbox deals that it starts to become difficult. It’s not going to be hard for the A’s to get those deals above. Nine-figure naming rights deals are hard. Suite deals can be challenging, especially if they don’t involve one of the vaunted sponsorship slots. That is where the comparison between what Oakland and the rest of the East Bay can muster up vs. what San Jose and Silicon Valley can provide ends.
The second problem is one of competition. The team will need to do more than just sign Company X to some deal. They need to extract maximum dollars upfront to pay down the large debt service that will come with new digs. That means that getting 32 or 33 companies, as Doug Boxer suggested, isn’t enough. There needs to be a real market situation that can propel those revenues. Without that demand and those commitments in place it’ll be harder to put together the financing piece. If you look at SVLG’s letter from last September, you see a lot of competitors in the same industries signing on. Wells Fargo and Bank of America. Cisco and Brocade. HP and IBM. Three different venture capital firms. Numerous competing chip manufacturers. It’s creating a situation where there have to be winners and losers, and that’s good because it should create mini bidding wars. That’s what you want – no, need – if you’re MLB and the A’s and you have $25-30 million in debt service every year.
The Mercury News has an index of local publicly traded companies called the Silicon Valley 150. The combined market cap for those 150 companies is $1.55 trillion, and well over $1 trillion just for the top 50. The list below (all figures FY 2010) omits companies outside of Santa Clara County and nearly every company beyond #60, yet it remains impressive.
There are some companies who I wouldn’t expect to be involved in a major way with Cisco Field, such as Google and Apple. Neither company has done much in the past in terms of sports sponsorships, and their focus tends to be global instead of local. Maybe they’ll get a suite or club seats to use as employee perks, maybe not. Whatever they do, it’s reassuring to know that so many other companies stand ready to fill in the gap. Interestingly, many of the companies will have a motivation that only applies to the Valley and has since the dot-com boom. Top tier software engineers are in extremely short supply, and competition is so fierce among various tech companies that they are throwing crazy money at the so-called rock stars of the industry – not just to sign, but to stay. The market has effectively exploded after a DoJ investigation that uncovered a “no poaching” gentleman’s agreement among the biggest, most well funded tech companies. Now that there are no restrictions, self imposed or otherwise, the market for engineers and C-level talent is unfettered and extremely competitive. The billboards along Highway 101 aren’t selling for millions as they did in the 90’s, but they still serve an important purpose for tech companies looking to catch the attention of talent. Signage at HP Pavilion and commercials on Sharks broadcasts serve the same purpose. Even now, Rambus has an aggressive ad campaign running during Sharks games on CSN California. Rambus doesn’t sell anything to consumers. It barely sells things to companies. Much of Rambus’ revenue comes from patent licensing and awards from lawsuits against patent violators. What the company wants is new engineers to create the next big advance in memory technology that could create the next patent licensing gravy train. Those engineers are predominantly in the Valley.
Multiply Rambus’ efforts by 100 and you have the potential for Cisco Field. The A’s are well positioned to take advantage, as they could lock a high bidder into a 10-year deal if the market is competitive enough. Those long-term agreements are what made China Basin possible. It’s what Oakland will need to get a ballpark built, since they and we know that the A’s would have to pay for it in the end. For Oakland it’s a much bigger challenge because its accessibility from the Valley and the Peninsula is not great and will be worse if they move to Downtown Oakland. Oakland simply cannot replicate those market and network effects. There are burgeoning industries, such as green tech, where several Oakland companies are out in front. Unfortunately, few of those companies are as yet profitable and many require massive government subsidies to keep them going, which is not a bad thing for the nation moving forward towards energy independence but puts those companies in a position where bidding wars for suites and signage doesn’t make much sense. Another indicator is media coverage. The East Bay Business Times, which contacted me almost six years ago shortly after this blog was started, folded in 2008 and was merged with the SF Business Times. Sister publication San Jose/Silicon Valley Business Journal remains in print and relevant, and is one of the companies in the SVLG letter.
Let’s be clear. Oakland and surrounding East Bay cities have corporate strength. Some of it is homegrown, some of it is from subsidiaries of larger companies. To compete with the South Bay it will need every bit of that strength. Since we don’t know what LGO’s list of commitments consists of, we can’t say whether it makes Victory Court more or less feasible. As long as the there is such a vast disparity between the East Bay and the South Bay, questions about that feasibility will linger, fair or not. The campaign needs to be much more than “We’ve got enough.” Because what you consider enough may not actually be enough for those who make the loans and the others who have to pay them off. Sacramento put together $10 million in commitments in the span of a few weeks. Sacramento is coming strong. That’s what needs to be done to convince MLB that Oakland can work in the long run. That’s not hate. That’s reality.
And as you can see not a single Oakland or for that matter East Bay company rounds out the list of the top 90 corporations in the Bay Area……
ML – I can see where selling suites to south bay companies becomes much easier with a San Jose stadium. Proximity matters in that case. But when it comes to sponsorships, why wouldn’t SV companies want to buy them if the A’s move to a shiny new stadium in JLS? I would think the real value in team sponsorships comes from radio and television mentions and promotional opportunities more so than in-stadium signage because it’s a much larger audience. If so, the sponsors would get the exact same play anywhere the stadium happens to be in the Bay Area. If in-stadium is more important, then I can see where location makes a difference to the sponsoring company. I guess my question boils down to which of those is most pertinent?
It amazed me that Sacramento leadership was able to come up with 10 million in a short period of time while Oakland leadership hasn’t come up with a penny. The responsibility of proving Oakland viable has rested on the shoulders of LGO. That alone says a lot. Oakland leaders should take notes from Kevin Johnson’s polaybook. As far as the sponsorships are concerned, I believe south bay companies would participate in a new Oakland ballpark but you won’t see any commitments until MLB says no to San Jose and Oakland proves it can get a ballpark built.
@Sampson – To be fair, the SV 150 does not include companies north of Union City because that’s not considered part of Silicon Valley.
@Dude – Both matter. The approaches are different. As part of the sales pitch to a tech company, the A’s are going to provide all relevant demographic info. TV is less targeted than the new forms of advertising that will be present inside Cisco Field. TV is more dependent on ratings. Rambus’ strategy runs somewhat counter to that, yet it makes sense since ratings are highest in the South Bay. If you look at the ads for W’s and A’s broadcasts, that strategy isn’t evident.
@Bay Area A’s – LGO has accumulated $500k. Definitely not $10 million, but it’s something.
@ML Great post. However, you neglected to mention one other important business segment in which San Jose has a big edge over the East Bay – large law firms (also large accounting firms and the like). They are a major buyer of club seats and suites, and there are WAY more of them in the South Bay/Peninsula than in the East Bay. Particularly in the Palo Alto area, which as I’ve posted before, is one of the least convenient places in the Bay Area from which to try to get to Oakland during rush hour.
The $500K number is so inadequate in the big scheme of things that if I were LGO I wouldn’t even have published it. I think the small size of that number tells exactly the opposite story of the one they’re trying to tell about the possibility for corporate support in the East Bay.
@bartleby – Good point, though I have a quibble about the law part (you’re the expert). Aren’t law firms pretty well represented in all three of the big Bay Area cities? As for accounting firms, you’re right on the money. All of the Big Four have large offices in Silicon Valley. Ernst & Young, PricewaterhouseCoopers, and Deloitte are in downtown SJ, KPMG is in Mt. View. None are in Oakland.
For general sponsors like soft drinks and beer companies, location doesn’t matter. For other types of companies that are local like high tech companies, location does matter.
Look at the Bay Area News Group. The Contra Costa Times has more news about Cal and the Oakland teams than the Mercury News. The Mercury News has way more local coverage about the Sharks. If the A’s move to San Jose, the Mercury News will increase there coverage greatly. Sponsorships in Oakland would have less impact on the high tech audience than a sponsorship in San Jose.
Part of the reason for the sponsorships like Rambus would be to target potential employees. Many more engineers would be going to games in San Jose than for Victory Court. The other part would be to show off suites and stuff during games for customers and such. It is much harder to do that in Oakland due to the hassle of trying to get to Oakland Colosseum or Victory Court up 880 or across the Dumbarton or San Mateo bridges.
@ML “Aren’t law firms pretty well represented in all three of the big Bay Area cities?”
In a word – no. Well, at least not large law firms (which are the key buyers of premium seating).
Large law firms are EXTREMELY address conscious. You may recall, a few years back one of the big firms got into trouble for trying to use “Palo Alto” as its address even though it was actually located in that new development in East Palo Alto (the one with the Four Seasons hotel). This made the papers, and the firm backed off and changed the address.
For marketing purposes, large law firms tend to gravitate toward Class A office space in the downtowns of cities with the most name recognition in a region, and more glamorous cities generally. If you looked at who occupies Class A space in downtown Detroit you’d find law firms disproportionately represented, even though there is cheaper space elsewhere, Detroit is not exactly a glamor destination, and that’s not where most of their clients are. A presence in the flagship city for a region tells clients “we are one of the big-deal firms in this area.”
I don’t have specific figures to hand, but I believe if you checked you’d find San Francisco with by far the highest percentage of large Bay Area law firms, and Palo Alto second (many firms have offices in both San Francisco and Palo Alto). San Jose has a good number, though not as many as Palo Alto. Many of the large firms I’ve dealt with in my career have offices in Walnut Creek, but I don’t recall ever dealing with any firms that had offices in Oakland.
Not directly on point, but you get the gist.
And by the way, the fact those big law firms in SF found it so important to be in “name” skyscrapers in the region’s glamor city that they were willing to pay huge premiums to do it, is the exact same reason there is zero chance they will choose to cross hideous bridge traffic and buy suites at Victory Court rather than AT&T Park, no matter what TPS tells you.
@barleby in total agreement on this. My dad was based in Oakland for the past decade, but took a chance to move laterally with a firm based in SF because he knew it would be easier to land clients with the Tier 1 city – they assume you’re better & more reputable if you can afford the rent.
@ML while i thoroughly enjoy the article, I felt the one aspect you didn’t bring up in the glowing review of all that money waiting to be sponsored: it’s that same list the Giants ownership is claiming.
It’s great that SJ could add the A’s and pour a lot of money into them, but the Giants have shut down Selig (so far) because they claim that money for themselves.
I just see that big potential as a double-edged sword that keeps the A’s from getting any word from MLB, and why i feel they should continue with the Victory Court process till MLB gives the up-or-down.
@bartleby – FWIW, according to Lawyers.com, there are quite a few firms represented in each region. Obviously I don’t know what the precise requirements are for “Big” law firms but, nevertheless, here are the numbers below. I tallied the 5 counties indicated and calculated the number of firms relative to population, i.e. 1 law firm for every x.x person in the county. Below that list, I took the largest representation of law firms in a city in each county based on the lowest number of population per firm. I also included the three major bay area cities to see how they stack up. For all I know, the 263 law firms in Oakland are all mom-and-pop shops and the 257 in SJ would be considered huge.
County Firms Pop./Firm
San Francisco 616 1,307
San Mateo 388 1,836
Contra Costa 475 2,208
Alameda 664 2,275
Santa Clara 673 2,622
Tot/Avg: 2,816 2,074
City Firms Pop./Firm
Palo Alto 136 474
Walnut Creek 132 504
Menlo Park 39 789
Pleasanton 79 842
San Francisco 616 1,307
Oakland 263 1,486
San Jose 257 3,681
Tot/Avg: 1,522 1,557
The result didn’t appear as I thought it would, i.e. with spaces (I tried spacing before I submitted it). It looks like a jumbled mess. If you look closely, though, you will see spaces like for SF there are 616 firms with 1 firm for every 1,307 in population.
The Giants have shut down Selig? Any proof of this? If the recent news from the
Dodgers is any indication, Selig is the one in charge of the A’s situation, not the Giants (see AT exemption).
This is really quite simple: SJ/SV corporate support trumps Oakland, SJ/SV corporate support has vowed to make Cisco Field a reality and
Lew Wolff wants to be in SJ. End of discussion.
@ Columbo Thank you for pulling that data together. However, I think it doesn’t really tell us too much without knowing the size of the firms. Big firms and small firms/solos operate in different universes; the latter are not really part of the primary target market for suites or club seats. Also, I think the “per population” numbers are meaningless for our current discussion; the question is really the absolute number of large firms that would be convenient to either of the proposed sites.
I’m tied up with a project at the moment, but I’ll see if I can find more data to back my contentions later on.
As a long-time A’s fan (I was quoted in the Trib after we swept the Giants in ’89), I have to say that the Oakland option is pretty much dead. I dont see a new ballpark being built in the East Bay. Economics, demographics, and other “intangibles” tells me that the South Bay is the only true option.
The Raiders destroyed one of the best baseball fields in the US. The political and economic power simply does not exist in the East. Money, population, growth, etc has all been centered in the South for almost two decades now.
ALL energies should be put towards the San Jose option. Even if a new field is built in the East (other than Fremont or Milpitas), the team will continue to face attendance issues. San Jose is it folks.
@Tony – Its not that simple. If it were only about corporate support, then why would the SuperSonics leave Seattle for OKC? Green Bay Wisconsin is a small city; why haven’t the Packers moved to San Antonio?
…the Sonics left Seattle because they needed a new arena and one was not forthcoming. In the A’s case, the owner is convinced he can make a privately funded ballpark (the only option for the Bay Area) work in San Jose but not in Oakland. Green Bay maintains its Packers because of the fanatic support the team has in the region. Not many empty seats at Lambeau Field, unlike the acres of empty seats found at each A’s game at the Coliseum.
@David Seattle left OKC because OKC put in sizable public subsidies and because Clay Bennett wanted to be a home town hero. The Packers haven’t moved to San Antonio because they are publicly-owned. Absent these unusual factors, in the context of a for-profit business trying to build a privately-financed ballpark, it’s largely, even primarily, about corporate support.
None of these unusual factors apply to Oakland, BTW.
fyi – at this point in the season, the A’s are ranked 23rd out of 30 teams in average attendance, a number that is actually skewed high because three of the nine dates include the marquee opener and Red Sox games. Once the Royals, Indians and Blue Jays of the world, etc start coming in, the ranking is sure to drop.
Great post ML.
Your analysis is fair and right on.
The recession changed the model these teams use now to sustain profitability. It used to be if you sold out games nightly your team would make money. With the Great Recession occuring corporate support is what is needed to sustain profitability as the common fan does not have the $$ as they used to.
Hence why teams like the Phoenix Coyotes and New Orleans Hornets are coming off great seasons on the court but lose money all day long. While the Sacramento Kings are trying to move to Anaheim.
The A’s would be losing money if it was not for revenue sharing amongst all the teams. In the A’s case they need to built privately and Oakland just is not happening because of the lack of corporate support.
San Jose with the list ML provided above is full of corporations who would love to have a team in the backyard to take clients/employees to.
In Oakland they would be competing head to head with the Giants for sponsors and ticket sales. By moving to the South Bay it would create a balance in the market as only 25% of companies in Silicon Valley do biz with the Giants.
That means 75% are untapped completely and that is why I believe Townsend is right that the 3/4 vote is secured but Selig cannot get the Giants to agree to anything hence the delay.
In any case the analysis ML makes is right on….Its about “show me the money”….San Jose is showing it all day long while Oakland like Bud Selig sits and twiddles their thumbs in circles….Unbelievable this is possible in 2011.
The Packers are owned by the people of Green Bay. No way they’re moving. Also, they have a very high season ticket holder number.
During the super bowl, one of the commentators joked:
‘A lot of GB fans made the trip to Dallas because they said it was an easier ticket than Packers’ home games.’
Pjk, hasn’t every other team had a home opener to skew their attendance higher (and they probably drew more for that opener because they didn’t make the idiotic decision to tarp 40% of their seats)?
By Sean Webby and John Woolfolk
Posted: 04/26/2011 07:45:49 PM PDT
Updated: 04/27/2011 05:39:08 AM PDT
After months of nervous anticipation, 106 San Jose police officers are getting notices this week that they may be laid off as the reality of the city’s dire financial picture cast a gloom over police headquarters and City Hall.
An additional 20 more cops learned they may soon be demoted. And overall, the city could lose about 9 percent of its police force in what could be the first layoffs of officers in the city’s history.
City officials have been threatening layoffs for months, and City Manager Deb Figone last week broadcast a total of more than 600 city employees. But that doesn’t make the layoff-warning letters any easier to accept.
“I was sold a bill of goods and the city did not hold up their end of the bargain,” said J.P. Bottega, a former New York City cop who was recruited by the San Jose Police Department three years ago. “They asked me to make a lot of sacrifices. They asked me to go all in with this city. And I did.”
Bottega blames Mayor Chuck Reed and the City Council, which, he said, “doesn’t have the intestinal fortitude to make the tough decisions” to protect the city’s public safety.
@Brian – It’s more like 20%, but who’s counting?
@ru155 – You’re right about it being a double-edged sword. I agree that Oakland should stay in the game, nowhere did I say they shouldn’t. Still, I maintain that it will come down to which entity can get it done and done the quickest. T-rights are out of SJ’s and the A’s hands. We don’t know if compensation will be $100 million, $50 million, or $0. We don’t know if it has to be paid upfront or over time, or if there are performance clauses associated with it. It could be crippling or inconsequential. The other big market owners may look at it as a risky precedent or as an anomaly inapplicable to their circumstances. The fact that the subject could be up for so much debate at this late stage is a testament to how obtuse and opaque MLB is.
@David – Tough talk considering Mayor Quan hasn’t even released her budget proposal yet and appears to be afraid to make the tough decisions.
Here’s an article from last year, David:
By Terry Collins, AP / July 17, 2010
Despite last-minute negotiations Tuesday, one of the nation’s most crime-ridden cities had to lay off almost 10 percent of its police force.
Oakland city leaders and its police union failed to agree before a 5 p.m. deadline, leaving 80 officers without their badges. The dismissals leave the embattled department with 696 officers in a city of more than 400,000 residents.
The sticking point was over job security. The Oakland Police Officers Association said it would give concessions and contribute 9 percent of their salaries to their pensions only if the city guaranteed a three-year moratorium on layoffs.
The city, however, said it could only offer a one-year freeze.
“I think we’re all disappointed that we couldn’t come up with an agreement at this time. But we tried really hard,” City Council president Jane Brunner said Tuesday, adding that talks could resume at a future date.
The layoffs are yet another blow for the police force still reeling from four officers being gunned down by a parolee last year.
@ML — Oakland’s budget problems are are as bad as SJ’s. I posted to remind Pro-SJ ballpark supporters, that SJ is not the land of milk honey. That this far from a done deal. That SJ has a vote to deal with, if they want to take the next step. And that many voters in SJ (Oakland too) may want to prioritize public safety over a ballpark. Oakland gets destroyed on this site. SJ is a city. SVLG is not.
@LS — Not looking for a tit-for-tat session, just balance.
@David – You’re confusing the public sector with the private sector. The public sector is broke, which is the case for every city, county, and state. The private sector is flush, is practically sitting on money. That’s what Silicon Valley has. No amount of deflection is going to change that. As for the vote, let’s put it this way: it’s not going to happen during a budget battle and the pro campaign will be exceedingly well funded.
I know the difference. Thanks. Just adding the City of SJ’s budget woes to the discussion, since Oakland’s are Overstated.com 😉
@David – You’re the one that chose to interject budget into this discussion. You reap what you sow.
re: because they didn’t make the idiotic decision to tarp 40% of their seats)?
…if the A’s were selling out the bottom two decks, then the decision to tarp off the top deck is dumb. But since they charge economical prices and still don’t come close to selling out the bottom two decks, tarping off the top deck makes sense. The game I was at a couple weeks ago was at 43% capacity. Take fhe tarps off and it would have been something like 25% capacity. How does it help the A’s to have even more empty seats for the seagulls to rest?
I wish there were no luxury suites, but I know they pay the bills, the ridiculous salaries and padding the profits of the owners.. Fat cats wining and dining and aren’t even watching the game.
@jk-usa – I’m with you there. Sadly that’s today’s MLB.
@pjk–I know it’s early but attendance is down all over the league by about 2%, and the last 3 years are down. 19 of the 30 are down from last year. 14 teams are under 25k, where as only 9 for all of last year fell below 25k. Mets, Dodgers and Seattle are way down, and so are the Yanks by about 2800/game. Toronto, Colo, Tex, SD and SF are up, just like our A’s. Cleveland in first place only got 9k today. They had all those sell outs in the late 90’s. What the hell happened? You give the A’s a Jacobs Field anywhere in the bay area (hopefully in their rightful home in Oakland), they would get way more than 9k even in a bad year, and even after the novelty of a new park wears off in a few years.
@tony d. – ML saw my point – it’s about the Territorial Rights, and how SF has made it their focus to lawyer up over it.
I can only speculate that Selig doesn’t want to broach the T-Rights issue and hope an answer falls from the sky to avoid it. Would a precedent for the Athletics to SJ allow the Tampa Bay Devil Rays to relocate to New Jersey, cutting into the Phillies, Mets, and Yankees market share? I can’t say, but if the big market club owners are nervous, they may just subsidize the A’s staying in Oakland to avoid another T-Rights confrontation.
As a casual follower, all i know is it’s been about 2 years and we’re nowhere on the announcement of the blue ribbon panel’s findings. I assume this must be influenced by the Giants and their unwillingness to sacrifice such a prosperous (i.e. potential corporate sponsorship rich) region to their market competitor.