Category Archives: Football

06.24.12
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Clawback, Part I

As redevelopment agencies were threatened with extinction last year, the 49ers and the City of Santa Clara made a structural change to the stadium financing plan. Instead of using $30 million of redevelopment money set aside for the project, the 49ers loaned the funds to the City to get construction moving. The idea was that once the redevelopment situation was resolved and the money given back to the project, the 49ers would be paid back.

Of course, the best laid plans often go to waste. Santa Clara County, which has a board overseeing all redevelopment work  and funding countywide, decided yesterday to take that $30 million and use it for various county services, including education. The county has every right to do this, as City officials admit. The 49ers also have the right to sue to get the money back, though that money is anything but guaranteed. The team could say that the funds were “under contract” before last year’s June cutoff, which from looking at previous news, appears to be the case. They could also say that the County’s clawback move creates a breach of contract situation. I’m not clearing on what the best criteria would be, but if the 49ers wanted to, they could make it get messy. Perhaps they should call San Jose City Attorney Rick Doyle for some advice on dealing with the County.

A comment from the team’s front office indicates that the 49ers could also simply eat the loss. If the clawback happened last year, it could’ve jeopardized the deal. Now that the financing package is complete and construction is underway, there’s no way to stop the stadium from being built. It all goes back to the fundamental change in the deal last year which created the loan. Both the City and the 49ers knew that any redevelopment money could be subject to clawback and was subject to the discretion of the County. $30 million down the drain? Nonsense. Better the 49ers than the City or County.

06.21.12
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News for 6/21/12

Good stuff in this edition.

  • Save Oakland Sports is having one of its regular meetings next Monday, June 25 @ 6 PM, at the Red Lion Hotel, 150 Hegenberger, Oakland.
  • CBS Radio and Cumulus (parent of KNBR) announced a new sports radio network that will launch in January. The network is expected to feature talent currently on CBS Sports and CBS Sports Network. A key talent on the latter is Jim Rome, whose daily TV show launched in April. Rome’s radio show is syndicated by Premiere Radio Networks (a News Corp. subsidiary), so there’s some natural friction there. I have to think that Rome came to CBS-SN with the idea that he might jump to this new radio network too at some point, though at some $30 million per year, his radio persona doesn’t come cheap. Both of the KNBR stations were identified as future network affiliates for the CBS Sports Radio, which creates a bit of a juggling situation for Cumulus. Will Cumulus continue to pay decent money to be an ESPN Radio affiliate and carry some Fox Sports Radio programming on the side? If not, does that free up ESPN Radio to move to The Game? And how does an ESPN Radio relationship conform with The Game’s cozy relationship with Comcast Sportsnet? Fantasy radio operators, start your typewriters.
  • Oakland’s City Council approved a $1 billion plan to finally remake the Oakland Army Base. Unlike some of the more glamorous or controversial plans that have been proposed (movie studio, casino, big box retail, auto row), this one will stay true to the base’s largest neighbor: the Port of Oakland. The plan will include new infrastructure, warehousing by ProLogis, and a logistics center. Every so often the base has come up in discussion here as a potential stadium site, but it’s an idea that’s never had legs within City Hall.
  • Greg Jamison’s quest to purchase the Phoenix Coyotes has hit a big roadblock in the form of a lawsuit by the Goldwater Institute. Now there are questions as to whether Jamison, who is not a billionaire, can pull off the acquisition without the sweetheart deal approved by the City of Glendale that would subsidize the team’s continued operation at Jobing.com Arena. The franchise, which is owned by the NHL at the moment, is being forced to lawyer up to complete the sale. If that can’t happen…
  • The City of Seattle and Chris Hansen are getting ready to finalize their new SoDo arena plan. Hansen would pay around 60%, with the remaining 40% coming from public sources. The political minefield is being negotiated right now, as the City Council doesn’t want the plan to come to a public vote, and the Port of Seattle is objecting because it fears that the arena will adversely impact port operations. Any team (NHL, NBA) that relocates to Seattle would play temporarily at Key Arena while the new arena is being built.
  • This week’s cautionary tale about public stadium financing comes from Chester, PA, where not only has a MLS stadium not been a development catalyst, the stadium tenant Philadelphia Union missed a $500k PILOT payment in 2010.
  • The BCS will have a four-team playoff starting in 2014. Semifinal games would rotate among the four current BCS sites, with the championship game going to the highest bidder among them.
  • Jim Caple has another one of his ballpark column series, this time an elimination tournament of all 30 MLB parks. In the tournament, fans can vote online for their favorite ballpark in each matchup. We’re at the semifinal stage, with Fenway Park (seeded #2) facing off against AT&T Park (#3) and Camden Yards (#4) vs. tourney Cinderella Miller Park (#24). The Coliseum was seeded #28 and lost in the first round to Target Field (#5) by a whopping 91% to 9% with over 60,000 votes, which is about right. Don’t feel bad though. New Yankee Stadium also lost in a landslide. The Coli’s Mt. Davis was also awarded Worst View. Finally, Caple gets a shoutout to Shibe Park, which ended up #8 in his list of places he wishes were still around.

Happy reading.

06.18.12
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It takes more than a village to raise a village (update: AEG approved)

Update 8:18 PM – The Coliseum Authority board approved AEG 7-1, the only vote against coming from Ignacio De La Fuente.

Oh to be on the Coliseum Authority board these days. The board has two weeks to decide on a firm to manage the Coliseum complex, and the firm they’re grooming to take over, AEG, is getting a lot of unexpected scrutiny over their ability to take the Raiders away even as they manage the stadium for the next several years. The Trib’s Angela Woodall reports that AEG’s status as a potential “poacher” is hanging up approval of the facilites management contract.

The JPA/Authority has sought assurances that AEG would not try to lure any of the current tenant teams away, which is fine and dandy, except that the JPA’s counsel has said that such a stipulation has little teeth. The only thing the JPA could do is terminate the contract, which would entitle them to keep $4.5 million in money promised by AEG to manage the complex.

$4.5 million is a pittance for AEG, considering their claim that they’ve spent $27 million on studies and preparation for the Farmers Field project. They’ve promised to spend $10 million on badly needed improvements to a Metro Rail station near the LACC/Staples/Live!/Farmers complex. The Oakland-Alameda County Coliseum complex may be a nice item to put in their portfolio, but Farmers Field is AEG’s big bet. It’s a beautiful situation for AEG because they can play both cities against each other – they’re practically doing it now! They’ll be in bed with the JPA as Oakland pushes Coliseum City while getting cozy with the Raiders, who are considering LA to some extent, in the process.

The whole scenario puts the Authority in a bind. They need AEG to do consulting on Coliseum City (as farfetched as it is), yet they can’t have AEG poaching the Raiders. There’s no other competitor that has anywhere near the kind of real world experience handling single-site, multiple venue development as AEG. Chris Dobbins of Save Oakland Sports and Alameda County Supervisor Nate Miley were both in lockstep about their concerns.

And let’s get real about this, the only team AEG has any interest in is the Raiders. AEG is booked solid at Staples with its three teams and the company hasn’t expressed much interest in baseball. While Oakland has expressed interest in retaining the Warriors and Athletics, they’ve taken the most steps to keep the Raiders. AEG has Oakland by the short hairs, thanks to Mayor Jean Quan putting Oakland’s chips behind Coliseum City. Even when there is a big player involved, the City part of Coliseum City can be extraordinarily difficult to get off the ground, as the St. Louis Cardinals and developer Cordish can attest. Comparisons to Mission Bay/South Beach in SF are meaningless because that area and East Oakland are on different planets economically.

Alternately, the JPA could choose incumbent SMG, with whom they’ve had an up-and-down relationship, or Comcast’s Global Spectrum, which comes closest to AEG in that they operate the Wells Fargo Center and the newly opened Xfinity Live! in Philadelphia. The latter finally came to fruition several years after the two stadia and the WFC had opened, and after the old Spectrum was demolished to make way for Xfinity Live!.

If the Raiders went to LA, that creates a situation in which the Coliseum could be available for a new A’s stadium, which is probably the only solution at the complex that MLB would sign off on (assuming the ancillary development came in). The problem with that solution is that there would still be $100 million in Mt. Davis debt to deal with and either a demolished or decaying facility, and the A’s and MLB would want nothing to do with that. That brings us back to the question, What’s in it for the A’s?

It’s a tough situation to be in. Mayor Quan believes that Coliseum City is the best hope for retaining the teams and revitalizing East Oakland, yet it can be argued that bringing in AEG is akin to letting a fox in a henhouse, which could kill the vision of Coliseum City before it even gets started. I’d like to think that the City will make a prudent decision here, but by paving the way for AEG before the decision is made they’re almost locked into a specific path. It may well be a path to ruin.

06.10.12
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News for 6/10/12

We’re overdue for one of these.

  • Matier and Ross reported on the contents of the Wolff-Knauss summit two weeks ago. Wolff laid out his 1 hour, 45 minutes case, Knauss and other East Bay execs made their case to work in Oakland – or sell the team. When the latter came up, things apparently got a little testy.

The only flare-up came when Knauss suggested that the business execs had deep-pocketed investors who would buy the A’s if Wolff and his ever-silent co-owner, John Fisher, weren’t interested in keeping them in Oakland.

“You can’t buy what’s not for sale,” Wolff told the group, according to Knauss. “I’m surprised you brought that up.”

  • In the same article, contractors at the Cal Memorial Stadium retrofit indicated that the project may not be ready in time for this fall’s football opener. Not that big a deal, same thing happened at Stanford.
  • Prices for the non-premium seats at the 49ers stadium have been revealed. The per-ticket prices aren’t bad, but some fans may bristle at the required seat license fee (which can be financed). The pricing structure looks very similar to that employed at Cowboys Stadium, which makes sense considering that the firm marketing the seats is partly owned by the Cowboys.
  • If Farmers Field begins construction next year, it’s likely that the E3 convention, held last week, would have to be moved out of the LA Convention Center. San Diego, anyone?
  • Chelsea F.C., which has seemingly won everything this season in the Premier League other than the outright league championship, lost out to other developers in its bid to redevelop the hulking Battersea Power Station into a new, 60,000-seat stadium.
  • KNBR’s Damon Bruce tweeted on Friday that the Warriors’ Piers 30-32 deal was dead. So far the story hasn’t been corroborated, and other sources indicate it’s incorrect. Seems odd to say something’s dead when it the process hasn’t yet started.
  • The Arena Football League suffered its first ever forfeited game when players on the Cleveland Gladiators went on strike before the scheduled Friday game against the Pittsburgh Power. The strike is part of an ongoing CBA negotiations.
  • Marlins manager Ozzie Guillen joked that he’d contribute “a couple million” towards a new Tampa Bay Rays ballpark.
  • Keeping the Astrodome running and up-to-date could cost $270 million or more, even though the dome wouldn’t have a tenant team.
  • The Glendale, Arizona City Council approved a deal that would bail out incoming Phoenix Coyotes owner (and former Sharks exec) Greg Jamison to the tune of $325 million over 20 years to stay in the desert suburb. Jamison has not yet been fully approved to take over the Coyotes by the NHL’s Board of Governors, pending a review of the Jamison group’s finances. The conservative Goldwater Institute wants a temporary restraining order to see if the deal violates the state Constitution.
  • In another cautionary tale about public dollars being spent for sports facilities, the Chicago suburb of Bridgeview is in debt up to $250 million for its MLS stadium. What’s paying for the shortfall? Property taxes.
  • Update 6/11 12:19 PM – Numerous sources are reporting that (near) billionaire and Ubiquiti Networks founder/CEO Robert Pera is buying the Memphis Grizzlies. The sale price has not been disclosed. Pera is only 34 years old and is partly based out of San Jose. Update 4:00 PM – The price is in the $350-375 million range. The buyout for the FedEx Forum lease is $105 million as of next year.

Happy reading.

05.27.12
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A city’s predicament

I fear for Trib reporter Matt Artz’s email inbox, because it’s about to get pummeled.

In today’s edition, Artz tries to explain why Oakland’s three teams are varying shades of noncommittal with regards to staying at the Coliseum, or even in Oakland in general. For most of us who follow the situation closely, the information is pretty much old hat. Still, it’s good to read someone in the local media deal it as plainly as Artz did, even if the truth is unpleasant.

As Oakland fights to keep its teams, industry leaders say it’s hampered by the fact that its main lure was a site more attractive 40 years ago than it is today.

“I think that’s a real problem,” Smith College economics Professor Andrew Zimbalist said. “The times have passed it by.”

Exactly. No one questions how devoted or hardcore Oakland and East Bay fans are, they are among the best in the nation. Unfortunately, the business of pro sports has become such a high-stakes affair that economically, Oakland is practically a AAA market while San Francisco and San Jose/Silicon Valley are major league markets. Nowadays money trumps hardcore seven days a week.

Yesterday I was looking into how Orlando’s Amway Center was built, hoping to understand how it surpasses Oracle Arena in terms of amenities. Oracle does well in having four premium seating options: courtside seats, suites, and two different club options. Amway Center has an astounding seven options: courtside seats, founders suites, presidents suites, legends (party) suites, MVP tables, 4- and 6-person loges, and club seats. All seven options are priced specifically to target certain well-heeled demographics, whether they are big corporations, prominent small businesses, or rich people who simply want more elbow room. A future post will go into how all of this works. For now let me tell you that there’s no going back. All four North American pro sports leagues are multibillion dollar outfits. So are NASCAR and NCAA football.

Oakland Mayor Jean Quan talked Thursday about having a huge Cowboys Stadium-like facility in the Coliseum complex, to be co-anchored by a convention center. One thing she didn’t mention was the price tag for such a complex, or even just the stadium itself. Lest we forget, Santa Clara’s Stadium Authority is on the hook for $700 million of the 49ers stadium costs. Zygi Wilf and the Vikings will be paying 49% of the Metrodome’s $1 billion replacement, leaving the rest to public funding sources. Even if you buy the somewhat dubious argument that the 49ers are paying for the lion’s share of the cost (who runs the Authority, again?), Santa Clara had to put up $144 million in hard dollars initially. What price will Oakland/Alameda County have to pay to stay in the game? $200 million? $500 million? Quan cites the $200 million NFL G-4 fund, but that’s available to every team, every market. Any new stadium will cost at least $1 billion.

Also today, a sobering analysis by the Atlanta Journal-Constitution shows how cities struggle to make their money back even with glistening new stadia, characterizing these efforts as an “arms race”. Good thing that the leagues appear to be bedrock solid for the foreseeable future, because if they weren’t municipalities would be wading into their own “mutually assured destruction”. So dream big, people, because it’s not your money! Until there’s a price tag. Then it’s definitely your money.

05.19.12
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Asking for the moon

Thanks to a spectacularly bad lease negotiated by St. Louis pols, the Rams have the right to a “top tier” stadium as long as they stay near the Gateway Arch. This week, St. Louis found out just what “top tier” (top eight) means. The City gulped and tabulated just how much it’ll cost for the Rams to stay there: $500-750 million.

A PDF of the proposal was acquired by the St. Louis Post Dispatch. It’s worth viewing if you want to follow along with the rest of the post. The St. Louis Convention and Visitors Commission put together its own $124 million proposal (PDF), which mostly touts the incremental improvements that have been made over the past several years.

Mind you, that won’t pay for an entirely new stadium. Instead, two-thirds of the Edward Jones Dome would be blown out, including the roof. Only parts of the upper deck and one side of concourses would remain. The field would be moved slightly to accommodate new seating, and completely new seating decks and concourses would be built in the other two-thirds of the stadium.

Old Edward Jones Dome cross-section compared to new dome roof/seating deck arrangement

Edward Jones Dome sits in a very tight block in downtown St. Louis, hemmed in by the America’s Center convention facility to the west and N. Broadway to the east. Expanding the footprint of the stadium would wipe out N. Broadway, which happens to be half of a major thoroughfare. The extra space consumed by the fattened stadium would be used for new team locker rooms and premium amenities. The cross-section of the stand looks a little too much like Mt. Davis for my liking, especially the enormous upper deck. Field suites and field level clubs are a must-have.

Amazingly, the Rams’ proposal doesn’t include either a retractable roof or a Dallas-style center-hung scoreboard. The roof will have a panel that can slide open to let in more light, like a sunroof on a car. New scoreboards would be placed in the corners, replacing the end zone scoreboards that are not even three years old. I’m surprised by this. The team has the city over a barrel. They’re already asking for the moon, why not get some asteroids on the side while you’re at it?

I’ve never seen a game in person at the Trans World/America’s Center/Russell Athletic/Edward Jones Dome, so I can’t directly speak to how good a stadium it is. I’ve heard the field is poorly lit for some reason. I know it can get very loud inside. The concourses are wide, and the amenities fairly plush, befitting a $280 million stadium built in the mid-90’s. The top tier clause allows the Rams to escape the Gateway City after the 2014 season, which means the race is on to figure out a solution, or else owner Stan Kroenke could easily look elsewhere – like LA. The only thing that may give Kroenke pause is AEG’s insistence that it get a minority share of any relocated franchise in exchange for building the downtown LA stadium. Regardless, LA poses a significant threat, even though Kroenke is a born-and-bred Missourian.

The Rams don’t quite have the Mayflower trucks at the loading docks yet. Their proposal and one from the CVC will go to arbitration in the next year or so. Whatever the arbiter decides is the winning proposal, the County will have the option to commit to that package of improvements. If they do, the Rams will be locked in through at least 2025. If not, the Rams will have those trucks idling and ready to go.

As large and unnecessary as the Rams’ proposal sounds, it would be at best a top-four NFL stadium, surpassed technically by Cowboys Stadium and MetLife Stadium, and the AEG stadium if that comes to fruition. EJD and the Georgia Dome (1992) kicked off the boom era of new NFL stadia construction, so it’s not surprising that both were the first to be considered outdated by the league.

My question about any kind of NFL stadium expenditure, as usual, is How can anyone justify the cost? Let’s say that the project costs $700 million. Over 30 years at 7%, that’s $52 million per year in debt service. To make it worthwhile, the Rams and St. Louis would have to get an additional $100 million in new direct revenue every year. The stadium will compete with other domes for Final Fours and will continue to function as an extension of America’s Center, so that helps a bit. But most of the steady revenue will come from football games and related activities. To put it in perspective, the Rams are 30th among the 32 franchises in revenue at $228 million in 2011, according to Forbes. If they get another $100 million and apply it to 2011, they would catapult to #4 in the league, ahead of both New York teams. Does that seem likely, given the tiny St. Louis market and the Rams’ second banana status within the market? I doubt it.

05.11.12
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The no-threat threat

As of yesterday’s Minnesota legislature-approved stadium plan for the Vikings, Minnesotans have approved some $1.85 billion in new venues since 2005-06. Only a year ago it was believed that the Vikings drew the short straw as the University of Minnesota’s football program (TCF Bank Stadium) and the Minnesota Twins (Target Field) got funding before the recession kicked in. Maybe it’s a sign of a recovering economy, or merely another successful negotiating session by the NFL. In any case, from the looks of things the Vikings will be in Minneapolis for decades to come.

HKS-penned Metrodome replacement. Retractable roof optional, to be paid for by team.

Not that it wasn’t without some 11th-hour heartache. As the plan stalled in the legislature, Vikings owner Zygi fueled up the jet and took a meeting in Los Angeles, which was exactly the panic-induced catalyst the issue needed to move forward.

Three venues. $1.8 billion and counting. All three took enormous amounts of horse-trading in the legislature, and some politically iffy maneuvering to avoid public votes. Ugly as it was, it got done. That’s a major difference from how things are done in California, which is to say that here things are either done relative smoothly or not at all.

The Vikings’ staying leaves four teams with some kind of stadium project on the table:

  • Buffalo. No new stadium is being requested at this point, only a $200 million renovation to Ralph Wilson Stadium. Results from a recent phone poll suggest that the Bills should by ponying up a major share of the cost, which is permissible within the NFL’s new G-4 program. A study being readied by Populous which explains the costs and options in detail is due out later this year.
  • Jacksonville. With new ownership, talk of stadium changes or a new stadium has ceased. It’s not hard to see it ramp up again after the honeymoon period ends, probably after the 2012 season.
  • San Diego. The Chargers have absolutely nothing going on regarding a new stadium anywhere in the metro area. The region is immersed in grief over the tragic death of Junior Seau, and it’s going to take a while to recover. A capacity crowd may show up today at Qualcomm Stadium to honor former Charger great. As this subsides, the drama over what the Spanos family will or could do with the team will start up again.
  • Oakland. The Coliseum City study continues for now, and Mark Davis has indicated that he’d like for Dublin to be a backup plan, which is not a bad idea if Dublin is interested – which is questionable at this point. Past talk about the Raiders running out of money appears to have died down. Al Davis was always good about getting the best lawyers working for him, so it shouldn’t be any surprise that he would have a well-conceived succession and estate plan. After all, if there’s one thing Davis had in spades, it’s foresight.
  • St. Louis. The Rams have released a 15-item list of upgrades that will be required to put Edward Jones Dome in the “first tier” of NFL stadia, per their lease. The upgrade list, whose price tag could run $200-450 million, is expected to be released Monday. The onerous lease terms have the City by the short hairs, though it’s expected that the NFL will provide some G-4 funds to the Rams to sugarcoat the deal. At the top of the list is a retractable roof. To accomplish that goal, St. Louis should look to the Vancouver’s BC Place renovation project, which included both a novel retractable roof and a curtaining system for CFL and MLS games, plus a Cowboys Stadium-like centerhung scoreboard. The price for that project was $563 million, though it should be noted that as an older venue BC Place required far greater scope of work, especially because it was done in two phases sandwiching the 2010 Winter Olympics.

Of the four teams in “flux”, only St. Louis is in any kind of advanced stage of negotiations. Even then there’s still time as their window to vacate doesn’t open until 2015. The Raiders could leave after 2013, and I expect that they’ll use Santa Clara, Dublin, and maybe LA as leverage against Oakland/Alameda County to get the concessions they’re looking for, even if it doesn’t make any sense from the NFL’s perspective (loaning $400 million for two Bay Area stadia).

In other words, there are no immediate crises. One or two are somewhat looming. None of these situations requires the kind of effort that was made for the Vikings. The team’s lease expired after the 2011 season, creating a crisis scenario that propelled talks. As the other teams’ scenarios advance in the next year or so, we can expect to see more action on their plans.

04.29.12
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News for 4/29/12

Good stuff:

  • The Kings arena deal was officially declared dead on Friday. Perhaps they were waiting for rigor mortis to fully set in. The team will stay for another year, after that? Who knows? I’m not generally a fan of boycott efforts, but if Kings fans really wanted to stick it to the Maloofs with both a fiscal and PR nightmare, they should boycott ALL games. The family may be struggling enough that a loss of $30-50 million in revenue could really hurt them, and force them to sell the team. That’s what the fans want, right?
  • Many readers are getting a buzz off the news that Angels’ owner Arte Moreno met with AEG recently. As Bill Shaikin writes, they’d have a long way to go before they started doing anything. Moreno’s a good businessman, and as a good businessman should he has to at least hear AEG out and get some kind of dialogue going. It won’t force the City of Anaheim to do anything, so the leverage play isn’t there – at least not right now. I wrote last week about AEG’s business model and goals for the LACC expansion-cum-NFL stadium, and how baseball isn’t really on AEG’s map. AEG has its own somewhat weak leverage play in that they want to push the NFL to make a move on their behalf, but as recent discussions between the two parties have revealed, the league is not easy to budge. The NFL can at any time revive the Roski/City of Industry plan and favor it over AEG’s concept, and it would have every right to do so. The NFL doesn’t care about AEG’s desire to hold the Final Four or BCS championship game there, or about AEG’s interest in expanding LACC. All they want is a new, Super Bowl-ready venue. AEG, on the other hand, would have to strain to make a downtown ballpark work within its convention center plans. Since AEG wants an indoor convention hall, the ballpark would require a retractable dome instead of open air. The field would have to be moved out like University of Phoenix’s field, yet there’s no space for such a field-on-a-tray. Because of the rather bespoke nature of a ballpark, it would be difficult to put in the flexible seating system AEG would need to hold the Final Four. Plus there’s the issue of not having enough seats for large football events. Baseball may provide 81+ annual events, but you can bet that the revenue share for AEG will not be beneficial enough to cover the debt service on the venue. There are few compatibilities between what Moreno wants and AEG’s goals. That makes a downtown ballpark a non-starter.
  • Minnesota lawmakers continue to work throughout the weekend on the tenets of a Vikings stadium plan. The big obstacle may be rank and file Democrats, many of whom who appear to have pledged to vote down any stadium proposal. Financing would come from a appropriations (state) bond, which means that debt would be serviced by an annual appropriation, to be paid back by gambling tax revenues and other sources. It’s certainly a “creative” public financing solution, though one that would never leave the budget committee in California.
  • Barclays Center in Brooklyn putting on an exhibition in October between the Islanders and Devils to test out the hockey configuration, which is suboptimal.
04.24.12
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AEG looks to add NorCal to its empire

A very clever strategy is emanating from facility operator Anschutz Entertainment Group. It’s a two-pronged affair based in Sacramento and Oakland. The movement draws upon what can be considered serious deficiencies in both markets in their inability to attract certain types of events and visitors. Most importantly, it offers hope to both cities, which are both in danger of losing their respective pro sports franchises.

For San Jose Earthquakes fans, AEG may as well be a four-letter word. The company owned the Quakes franchise as part of its initial MLS holdings. When AEG was unable to forge a new stadium deal in San Jose, the team was abruptly moved to Houston in 2006, making the parent company persona non grata in the South Bay. AEG came back in 2008 with a small move, taking over for Live Nation as the operator of The Warfield in SF.

In Sacramento, AEG is seen as the facilitator for the Railyards Entertainment and Sports Complex. The backing out by the Maloof family has for now killed the plan, though it’s possible that AEG could resurface as a key driver with or without the basketball Kings. Should Sacramento lose the Kings, they’d have the option of building an on-spec arena, similar to former Kings home Kansas City when it built the Sprint Center. That’s a far different scope from Oakland, which is looking to keep three franchises at home via at least two new venues plus a convention center and hotel. Oakland’s model is the AEG-run LA Live complex and LA Convention Center.

AEG is the premier arena operator in the country, with Staples Center as its crown jewel. It has the experience to make cities listen when they come calling, and the weight to make cities cower when threatening to attract a team, as evidenced by AEG’s NFL pursuits. While dangling its own success in front of potential suitors, it forges ahead with its plans to expand its SoCal empire by working on a football stadium-cum-convention hall. While not a short-term likelihood, the threat and possibility remains into the future, and would hugely benefit AEG in two key ways: it would make LACC more competitive with San Diego and Las Vegas for conventions, and it would create the ultimate flexibility for all of its LA venues, which happen to be within blocks of each other.

AEG's Downtown LA operations provide great flexibility and huge traffic

To understand what make LA Live unique, it’s important to look beyond Staples Center. LA Live has two venues of its own: the 7,100-seat Nokia Theatre and 2,500-person Club Nokia, both of which are essentially auditoriums. They slot in below Staples Center for booking concerts, which is necessary because Staples is home to three pro teams and at least 126 home dates per year. In most other cities an arena operator would use a curtain system to reduce capacity at a large arena. AEG doesn’t need to do this sort of “half house” setup with Staples much, instead it can push a show to the Nokia Theatre. Staples famously hosts the Grammys every year, while Nokia hosts the Primtetime Emmys, MTV VMAs, and the finale of American Idol. Club Nokia mostly serves as a venue for up-and-coming and smaller acts. The Convention Center churns plenty of day business and drives demand to local hotels. Both convention and entertainment visitors benefit local restaurants and bars, some of which are in LA Live. It boils down to the equivalent of the population of the Bay Area visiting downtown LA every year, spread out among 2.5 events per day.

Oakland wants this kind of traffic, so they’re looking to drop SMG like a bad habit then partner up with AEG now and into the future. It’s going to be difficult to pull off. A third of AEG’s visitors come from the convention center. To build a competitive center in Oakland, the facility would have to surpass Moscone, San Jose, and Santa Clara in terms of space. It would require at least one, probably two anchor hotels attached to the convention center. A thriving commercial and retail district wouldn’t hurt attracting people and conventions. Oracle Arena is a good, modern arena thanks to the 1996 renovation, and AEG is promising to maximize utilization of the arena to its full potential and provide consulting for the Coliseum City concept.

The inherent risks are timing and cost. AEG built Staples Center prior to the 1999-2000 NBA and NHL seasons. The Nokia Theatre didn’t open until 2007, after Staples as AEG responded to market conditions. Club Nokia opened the following year. For AEG to be that involved and willing to invest in Oakland, it would have to recognize similar market potential and a chance to dominate the market the same way it does in LA. The arena part will be difficult to pull off as Sharks Entertainment will always be competitive with HP Pavilion. The Warriors could build an arena in SF, relegating Oracle Arena in the process. Another Planet Entertainment controls several smaller theaters throughout SF and the East Bay, providing natural competition in the process. There is no proper 7,000-seat auditorium in the Bay Area, pushing shows of that size to the arenas unless AEG sees fit to build one (the Bill Graham Civic, as historic as it is, is really a gym). Plus there is no shortage of 2,500-seat venues in the Bay Area: Fox Oakland, Paramount, Warfield, SF Masonic Auditorium, and the San Jose Center for the Performing Arts. AEG isn’t going to bring a fully-formed Coliseum City on Day 1. It would have to be phased in over many years, with no guarantee that much of what’s being promised will be built.

For AEG, the best part is that in making these deals, it’s getting exclusivity for usually a year or more for a very small price while making a little money to boot. AEG has been willing to invest in venues to some degree as it did with Sprint Center. However, Phil Anschutz is not about giving away the farm, as witnessed by his hardball dealings with the NFL and the contribution cap AEG paid for Sprint Center. Maybe something will happen, maybe not. Either way AEG is the first one in and keeps competition out, while getting a better understanding of how to exploit a particular market. As great as LA Live is, it shouldn’t be considered easily repeatable. Sprint Center is a more realistic and perhaps cautionary example. The arena is the second busiest in America according to Pollstar and is highly profitable by AEG’s standards, though it’s a $13 million annual drain on the city’s coffers. Sprint Center is well integrated with KC’s $850 million Power and Light District development. There remains no major pro team. AEG appears to be happy with whatever business model works best for it whether it’s three teams or none, civic pride not being a great priority.

One other curiosity about AEG: as interested it is in the NFL and as extensive as its holdings are in hockey (LA Kings), basketball (Anchutz’s minority share of the Lakers), and soccer (LA Galaxy, Houston Dynamo), there’s one glaring omission on its resume: baseball. Does AEG care about baseball at all? It doesn’t operate any ballparks, nor does it own a minor league team. It doesn’t seem to have any relevant experience with baseball. Its new AEG Sports division has no baseball interests at all. Judging from AEG’s track record, I have to think its priority list would look like this:

  • Concerts
  • Soccer
  • Conventions
  • Hockey
  • Football
  • Basketball
  • Baseball?

Judging from that, maybe AEG would be more interested in bringing a MLS team to Oakland than in keeping the A’s there. In regards to the A’s, AEG’s presence is similar to Larry Ellison in that certain factions would love for either of them to be interested in the A’s, but neither has shown any sign of interest to date. A clause in the Coliseum management contract dictates that AEG can’t talk to teams about moving, which I suppose might have teeth if a team were bound to a long-term lease (only the Warriors are). It gives a new twist on the Coliseum City exercise being a feasibility study.

04.21.12
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What the NFL wants, it gets

You have to hand it to Roger Goodell. He has a playbook for getting stadium deals moving, and by God it works. Goodell lets the team owner come up with a proposal, and if it stalls he comes in with Goldman Sachs in tow and/or a threat to move, implied or otherwise. As a result, Santa Clara put up $900 million in public loans and cash for the 49ers stadium project, while the Vikings – after much debate – are getting a deal crafted in the Minnesota legislature that could provide up to $800 million in public assistance for stay home.

In the Vikings’ case, all it required was a little open-ended discussion about Los Angeles and a sighting of owner Zygi Wilf’s private jet in SoCal. LA Mayor Antonio Villaraigosa has become the Oscar Goodman of football, an outsider but serious power player whose city’s existential threat to other cities forces them to the table. The Vikings deal is by no means complete, but it’s further along than any talks to date, so that has to be encouraging for both Vikes fans and Wilf.

On Thursday, the 49ers officially broke ground on their new home as of the 2014 season. The stadium will undoubtedly be impressive and significantly better than Candlestick Park in just about every way imaginable, except affordability. (I thought I was going to get some pictures of the event but that fell through, sorry.)  Now we can talk in earnest about the Bay Area hosting a future Super Bowl or World Cup matches. It’s pretty exciting, despite my misgivings about the finances.

And it’s with that news that I can sit back, somewhat detached from the plan and say that I’m jealous of the 49ers right now. I don’t want a major handout for the A’s or Goldman Sachs waiting in the wings. I don’t need a stadium that costs more than a billion dollars. I just want a new place where I can take friends, where it doesn’t feel like pulling teeth to ask them if they want to go. A place that celebrates baseball, not merely hosts it at best adequately. Despite what some readers think, I don’t care where it’s built. If that’s Oakland, great. If it’s San Jose, so be it. Even Sacramento I wouldn’t mind so much at this point. My stance has always remained steady all this time – as long as it’s privately financed and I can get to it locally, I’m all for it. On this blog and elsewhere we have these endless debates about what it will take, territorial rights, what resources specific cities can offer, and there will be plenty of time for that later. For now let’s simply look at the leagues.

Mostly, I’m jealous that the NFL can get its stuff together on stadia so much better than MLB. It doesn’t matter that on the whole NFL stadia cost twice as much. The projects should be far riskier because of the expense and the inherent lack of utilization. In the post-downturn, post-redevelopment California, the toughest market to build anything new, the NFL will have beaten MLB by at least two years, maybe more. In the time that Bud Selig has had his panel discussing what to do about the A’s, we could’ve had a fancy (or not) groundbreaking. We could be talking about the future. Instead, we’re treading water as usual. No one can tread water forever.