January 30, 2010
The San Diego Chargers have been in the news at Pro Football Talk and The San Diego Union-Tribune this week because of a meeting in San Diego between members of the board of the agency in charge of redeveloping downtown San Diego. In these meetings, Mitchell Ziets, a stadium financing expert gave a presentation which discussed the general findings of his study on the public financing of stadiums for NFL franchises. Findings indicated that of 11 select NFL stadium construction projects which have occurred in recent years, on average 54% of these stadiums costs were funded with public money. Notably, this study did not include the New Meadowlands stadium, which is being built entirely through private investment (though it was found that about $300 – $450 million of public money were used to retire the debt on the old Meadowlands stadium as well as build infrastructure to the new facility).
The findings of Ziets presentation seemingly hint at San Diego having to cough up around $400 million for the new stadium the Chargers are planning to build, which is estimated to be in the $700 to $800 million range. Sounds like a pretty good deal for the Chargers to me, especially considering they have been looking for a new stadium since 2002. The Chargers have already said they will be back at Qualcomm for the next year, as leaving for the next season would have cost them around $50 million because of their current contract with the stadium. The buyout in the following year for the Chargers would drop to $26 million, and this will probably be the time frame the team will push for having a new stadium completed so they can leave for newer confines.
Once the Chargers do leave, Qualcomm (formerly known as Jack Murphy Stadium, or just “The Murph”) will host only San Diego State football and two bowl games (The Poinsettia and Holiday bowls). A final curious note is that stadium financing has in many situations been partially paid for by redevelopment agencies in California. Petco Park, also built in San Diego, received similar assistance from a redevelopment agency. As California seems to be a state of large debt and financial issues, it seems rather worrisome that stadiums in the state are being heavily funded by public money with the hopes of redeveloping certain locales.
The winner in all of this: Mr. Ziets, who has been retained by the development agency, and paid Mr. Ziets’ company $160,000 for his services. A financing plan is in the works, and is said to be ready within a few months.
Hap Tip to Shawn in North Dakota for the article links.
January 29, 2010
In this week’s Arizona Republic, there is an update on the allegations of the Fiesta Bowl making political contributions.
For people who were not aware, the Arizona Republic alleges in an investigation late last year that employees of the bowl were told to make contributions to certain political candidates and were then reimbursed by the bowl itself. The bowl then hired a former Arizona Attorney General to examine these claims but he did not find anything improper. Now the state is not convinced of those findings after receiving a written letter from Playoff PAC (a political action committee wanting a football playoff). As a result, the state is now launching its own investigation into the matter.
An ESPN.com article this week states that non-BCS conferences received a record bowl payout amount from the recent bowl games. This comes after Brad’s post on each bowl’s TV ratings. Proponents of the current system tout this as the system is working and is getting better. However, critics point out that most of that non-BCS money went to the Mountain West and WAC due to TCU and Boise State playing in the Fiesta Bowl. In addition, the figures still do not compare to the BCS conferences.
January 28, 2010
And it has nothing to do with Gilbert “Agent Zero” Arenas and gun play in the locker room. Abe Pollin, the beloved long-time owner of the Washington Wizards and the Verizon Center (nee MCI Center), passed away. Pollin had an agreement with Ted Leonsis, owner of the Washington Capitals of the NHL and Mystics of the WNBA (who also play in the Verizon Center) to purchase the rest of the Wizards and the arena. Leonsis currently owns 44% of the Wizards and the arena.
The problem is that Pollin’s estate and Leonsis disagree on the value of the team and facility. In a battle of dueling appraisers, the Pollin estate reportedly says $600 million and Leonsis says $500 million. For what it’s worth, Forbes valued the Wizards at $313 million last month, and the Verizon Center cost $260 million to build in 1997.
In the latest development, Pollin’s estate claims that the Leonsis’ exclusive negotiating period is over and they can put the Wizards and the Verizon Center up for sale to the highest bidder. Leonsis, of course, disagrees. That sounds like a lawsuit to me.
The NHL, who also happens to be the current owner of the Phoenix Coyotes, are reportedly following this situation closely, since this will be an important indicator of the value of NHL franchises and arenas in the new economic environment. There are a number of factors affecting the value of the franchise and facility, including the popping of the real estate bubble, the length of the current economic downturn, and the effect of the downturn on the revenue streams generated by professional sports teams.
January 19, 2010
The TV ratings for NCAA bowl games were released this week. I wish that these ratings numbers were available every year. Overall, the ratings were up 8%, which is consistent with the idea that consumers undertake less expensive leisure activities, like watching more TV, during economic downturns. That increase is good for ESPN, who broadcasts that lions share of the games. Some other interesting patterns emerge from the ratings:
- Ratings for all the BCS games were up substantially, except for the Fiesta Bowl. The BCS title game was up 9%, suggesting that the BCS system is popular with many football fans. The TV ratings increase stands in sharp contrast with the critics of the BCS system, who complain that it’s a bad system. If the BCS was a bad system, it would generate lower TV ratings. Note that I am not saying that the BCS system is superior to a playoff system – just that TV viewers seem to like the BCS system.
- About that Fiesta Bowl, which matched TCU and Boise State. -21% relative to the 2009 Fiesta Bowl between Ohio State and Texas. Ouch. That underscores why the BCS may be reluctant to expand participation. The likely effect is to reduce TV ratings, which could lead to lower rights fees in the long run.
- Other big losers include the Poinsettia Bowl (-25%), the Hawaii Bowl (-35%), the Music City Bowl (-29%), and the International Bowl (-39%). Those declines are probably a result of less attractive match-ups and scheduling quirks, including other bowls scheduled at the same time.
- The big increases were for the Texas Bowl (+2,000%), the Orange Bowl (+26%), the Alamo Bowl (+23%), the Chick-fil-A Bowl (+24%), the Liberty Bowl (+65%) , the Outback Bowl (+30%), the Sun Bowl (+50%), and the Independence (nee Weedeater) Bowl (+150%). The Texas Bowl went from the NFL Network last year to ESPN this year. That tells you all you need to know about how many people get, and watch, the NFL Network. The Match-up for the Independence Bowl last year was Louisiana Tech vs. Northern Illinois. This year it was Texas A&M vs. Georgia. Again, those pesky BCS people know what they are doing when they limit participation. The potential TV audience for teams in BCS conferences, even middle of the pack BCS conference teams, is much larger than for non-BCS conference teams.
Critics often claim that there are too many bowl games. I don’t think that the 2009-2010 TV ratings support that idea. If there were too many bowl games, viewership would be down for the lower tier games. But bowls like the St. Petersburg Bowl and the Independence Bowl had sizable increases in viewership, and the two bowls with the lowest viewership had the same TV ratings as last year.
January 16, 2010
There have been many posts discussing the economic impact of the Olympics, with economists pointing towards the massive debt which cities and others governments are forced to deal with after hosting the Olympic games. One of the more popular cases is the 1976 Winter Olympics in Montreal, where the Olympic stadium nicknamed the Big O (and subsequently the Big “Owe”) took 30 years to be paid off. Initial costs for the stadium were estimated around $125 million (Canadian), but Montreal and Quebec ended up paying over a billion Canadian dollars for the stadium construction, renovation, debt servicing and emergency repairs. This debt was not fully paid off until 2006, a full three decades after the Olympics had ended.
While the Olympics has been a financial detriment to governments, cities, and municipalities, it has been the source of big payoffs for media outlets. NBC is reported to have sold around $930 million of advertising time space during the 2006 Turin Winter Olympics. However, on Michael Ozanian’s blog on Forbes online, he is reporting that NBC paid $200 million more for the rights to the Olympics this time around, however they are predicting they will not even sell $800 million in advertisements. From this, it is estimated that NBC will lose about $200 million from the Vancouver games, this is a large amount especially considering NBC turned a $100 million profit from the 2008 Beijing Olympic games. With such high costs to get the media rights for Olympic games which only last a few weeks, combined with the potential for less advertising revenue, I wonder if media companies will continue to bid such high amounts to get the rights for games in the future.
January 16, 2010
I recently came across a very interesting article that originally appeared in the Chronicle of Higher Education last fall. A significant increase in the construction of new sports facilities occurred at U.S. colleges and universities over the past 10 years. Athletic facilities at top universities tend to be lavish because NCAA regulations prohibit schools from competing for athletes on a price basis, leading schools to compete on a non-price basis, including investing in facilities. On top of this, the last few years featured above average increases on the revenue side, in terms of attendance, media rights revenues, donations, etc., and many athletic administrators believed that the good times would continue far into the future.
The result was a large number of expensive new facilities (the University of Minnesota built a new $289 million football stadium) and renovation projects (the University of Michigan renovated the Big House for $226 million, the University of Illinois renovated Memorial Stadium for $100 million). These large construction projects are paid for by issuing debt. The NCAA doesn’t track capital spending by athletic programs, but anecdotal evidence indicates that a significant amount of new debt was issued all over the U.S.
Now, of course, athletic departments are operating in a different environment. Financial markets are in turmoil and the recession is dragging on. These factors are affecting both the general fund and athletic departments at colleges and universities. And the additional debt taken on during the construction boom is becoming a problem. In some cases, athletic debt is so large that universities are close to their borrowing ceiling, and other non-athletic related construction projects are not being built. Nobody has defaulted yet, but the economic recovery is sputtering and another bad year or two could lead to problems.
January 14, 2010
Aspiring economists are taught in microeconomic theory lectures that it is unwise to judge an agent on a noisy metric, or one not fully under their control. Of course, in soccer management, the only metric a coach is judged by is results, something over which he has only marginal influence.
If we travel back in time to last March and April, Rafael Benitez was coach of a team that hammered the mighty Manchester United 4-1 in their own back yard, Real Madrid 4-0 at home, and Aston Villa 5-0 at home. Liverpool came mightily close to honours both home and abroad, and their near miss seemed to set the club up for another assault this year on the major prizes in English and European soccer.
Defeats to Lyon and Fiorentina dumped Liverpool out of the Champions League prematurely, and last night new depths were sunk to when they limply lost 2-1 at home to Reading in the FA Cup (the only domestic honour still available to them), who themselves are in deep relegation trouble at the bottom of the Championship, the division below the Premiership.
How fine are the margins though? All the goals that humbled Liverpool in the Champions League came in the dying seconds of matches, and Liverpool were 1-0 against Reading into injury time last night. Furthermore, to what extent can a manager be held responsible for the folly of his players? Yossi Benayoun foolishly clattered into a Reading player to give away a penalty kick that Reading scored to level matters and take the game into extra time, and multiple Liverpool players conspired to miss easy opportunities to put Liverpool back in control in the match.
Nonetheless, the feeling today is that Benitez in living on borrowed time. Only so many freak events can happen under the stewardship of a coaches it seems. The implication is, of course, to what extent is a good coach a lucky one?
January 12, 2010
Odds on, according to David Sullivan, who used to own Birmingham City.
I’m not in the slightest bit surprised about this, and given all the recent goings on at Portsmouth, mentioned by Nick here a few days back and continuing with the transfer embargo placed on them by the Premier League due to their ongoing debts to other Premier League and UEFA clubs.
January 11, 2010
The African Nations Cup has kicked off yesterday, with tragedy striking a few days earlier when the Togo national squad was attacked by gunmen in the Angolan province of Cabinda. Unfortunately, two officials were killed, and the teams backup goalkeeper was shot and had to be airlifted to South Africa for emergency surgery. After withdrawing and then changing their minds and choosing to stay, the Togo national team finally decided to fly back to Togo on a government plane. Because of this, CAF, the continental football association for Africa has disqualified Togo from the tournament. There is a lot of debate revolving around this issue and why the incident happened in the first place. As Professor Simon Chadwick of the University of Coventry posted on his twitter account: “Still not sure why Togo team arrived in Angola by coach, driving thru dangerous territory, but left the country by plane.”
From a financial standpoint, I was wondering how the attacks and withdrawal of a nation from such a tournament would effect the attendance at matches. Angola kicked off against Mali, and were leading 4-0 with 15 minutes left, before crashing to a 4-4 draw in front 45,000 home supporters. While it was pretty obvious Angola would have a strong backing being the home team in the tournament, the big question would be whether anyone would show up to any of the other games, especially those in Cabinda where the attacks took place. Ivory Coast drew 0-0 against Burkina Faso in Cabinda earlier today, with an attendance of 5,000. Probably the biggest surprise was World Cup bound Algeria losing 3-0 to Malawi. The attendance for the Algeria-Malawi match: 1,000.
While the African Nations Cup is suppose to be the great celebration of African football, the attendance numbers so far seem to indicate that fans in Angola just aren’t interested in attending matches, or possibly can not afford to go. In either case, it would seem that this tournament may go down in history as being a disaster both because of the lack of security leading to the attacks on Togo, as well as the disinterest of fans in Angola. It’ll be curious to see what CAF does in the next few days to try and boost attendance, maybe even lure Togo back to play some matches as a sentimental favorite.
I wonder if these attendance numbers would have been any different if the attacks hadn’t taken place. It is possible that Angola was just the wrong choice for hosting a football tournament.
January 5, 2010
Phil Miller has an interesting post on college sports facilities over at The Sports Economist (where I also blog occasionally). The financing and impact of new and upgraded sports facilities at big-time colleges and universities in the US are interesting, and present a completely different set of issues and research questions than professional sports facilities.