The business and politics of sports: roundup

1.  Olympics referendum in Boston.  The biggest news in the sports business at the moment is how the backers of a 2024 Olympics hosting bid for Boston have agreed to hold a statewide referendum on whether or not to bid on the event ("In Reversal, Boston 2024 Wants Vote on Olympic Bid," New York Times.  The backers have agreed to not go forward if the majority votes no, or if the majority votes yes and the city residents vote no.  According to WBUR-FM, the NPR affiliate in Boston, support for the bid is dropping and now a majority is opposed.

The current round of Olympics site selection has already been impacted by no votes in other cities such as in Krakow, Poland ("Krakow withdraws 2022 Winter Olympics bid," USA Today).

A big problem with such votes (I've been meaning to write about a transit funding referendum in Vancouver, BC) is that they usually take place on an overly accelerated timeline, leaving an inadequate amount of time to work through the issues in a reasonable way.

The selection process is problematic in how there isn't really enough time for preparing a bid, being selected to present a bid, presenting the bid and getting selected, and then building all the various facilities and infrastructure required, and organizing the hosting of the event in about 7 years.

Critics are concerned that problems with the uncertainty of the public process lead the International Olympics Committee are more inclined to pick authoritarian countries as hosts.

2.  Olympics and venues issues.  Besides the problem of having to create facilities that don't have good alternative uses, a problem which bedevils all Olympics host sites, second world nation sites may pose environmental complications.  The 2016 Olympics in Brazil/Rio de Janeiro pose a couple problems.

The Gil Hanse-designed golf course in Rio de Janeiro is complete, but still lacks a name. (Photo courtesy of Hanse Golf Design.)

The golf course has been constructed in part by remaking a section of the Reserva de Marapendi nature preserve ("Rio mayor unveils controversial Olympic golf course," USA Today); "Rio de Janeiro mayor unveils 2016 Olympics golf course amid environmental protests," AP).

Guanabara Bay, the site of the Olympic sailing events is significantly polluted and this won't be able to be successfully corrected by the time of the Olympics ("Rio admits it will fail to clean up 'open sewer' of 2016 sailing venue," Guardian).

Plus water levels at the site of canoeing and rowing events are being impacted by drought ("Waters running dry at Rio 2016 rowing and canoe site," Reuters).

Nationals Stadium.  Getty Images photograph.

3.  Professional sports teams are worth an increasing amount of money.  The Washington Nationals are valued at $1.2 Billion, according to Forbes and reported by the Washington Post ("Why the Nationals are now worth $1.28 billion").

The valuation attributes the main drivers of the increase as television rights and digital media, sweetheart stadium leasing deals can't hurt, especially as without a stadium there is no game.

Again, there needs to be a way for public entities that fund stadiums and arenas to be able to reap some financial rewards from how the value of the team is enhanced by the quality of the stadium-arena as an "entertainment platform."

-- Stadiums and arenas as the enabling infrastructure for "money-making" platforms

4.  College arenas.  Still, maximizing the value of the arena or stadium as an event space or as a commercial and entertainment district anchor is key, given the high cost of the facilities.

The University of Dayton provides an interesting example of how it has positioned its basketball arena and the city as a premier location for the "First Four" element of the NCAA's annual basketball tournament.  Residents of the city are big supporters of their tournament through their buying of tickets and attendance at the game ("For NCAA's First Four, Dayton's gym a tourney gem," USA Today).  (Detroit was known for this kind of support as the host for decades of the NCAA Indoor Track and Field Championships.)

Chicago's creation of a basketball arena (McCormack Place Event Center) for the very successful DePaul University team in Chicago's convention district could be leveraged similarly, although it's small by comparison, and probably because it is located in a "major league" sports city, doesn't have the same opportunity as it will be outspanned by the facilities owned by the professional teams.

5.  Creation of sports-anchored entertainment districts.  In Sacramento and Detroit, sports teams are developing wide ranging sports and entertainment districts around their facilities, in order to push forward a wide range of revitalization objectives and of course, to make more money.  I will be writing about these particular projects soon.

-- Sacramento Entertainment and Sports Complex
-- The District Detroit

The Chicago project including DePaul is being initiated as a way for the city to strengthen the entertainment district elements of the convention area ("McPier greenlights tweaked—and pricier—DePaul arena design," Crain's Chicago Business).

Probably the best example of an organization already doing this is AEG's Staples Center in Los Angeles, developed around 15 years ago ("History of AEG: The deal that almost wasn't," Los Angeles Daily News.  An economic impact study of the project, conducted by a normally skeptical academic, Robert Baade, found significantly positive returns.

You can argue that the same is true of the Verizon Center.  While I have come around on acknowledging a number of positive downtown effects deriving from the Verizon Center ("An arena subsidy project I’d probably favor: Sacramento"), I have remained skeptical because so many others ascribe all of the changes downtown to the arena, when the reality is that the central business district was moving east in search of new build out opportunities.

I do think that it is important to distinguish between the scale of economic impact, at the level of the local jurisdiction versus the metropolitan scale. At the metropolitan scale, sports as entertainment drivers have minimal effect because of the substitution effect.

But in terms of reshaping economic activities and flow between jurisdictions, it can make a big difference, especially in terms of a connected in-city location versus a disconnected suburban location, although the impact is dependent on the nature of the event.

Interestingly, while there are more examples of professional teams moving from suburban locations back to the city, the Atlanta Braves baseball team is moving to the suburbs, to an edge city location that has the potential for the creation of leveraged development opportunities.  So the real lesson is connection vs. disconnection rather than suburban vs. center city location necessarily, although the likelihood is that there are more built in opportunities for connection in center city locations.

 Arenas used by basketball and hockey--as opposed to one or the other--and baseball stadiums host a minimum of 80 events per year, while a football stadium hosts a maximum of 15 events.

The following characteristics are the start of such a framework:

• isolation or connection of the facility to the urban fabric beyond the stadium site;
• size of the facility and its ability to be integrated into the urban fabric;
• frequency of events held by the primary tenant;
• the number of teams using the facility, maximizing use and utility of the building;
• whether or not events are scheduled in a manner that facilitates attendee patronage of off-site businesses;
• use of the facility for non-game events drawing additional patrons;
• how people travel to events: automobiles vs. transit. 

Thinking in terms of those factors which impact positively the economic return from such facilities, I am more inclined to be in favor of some proposals over others, and generally disfavor public funding of football stadiums.

6.  Transit effectiveness and use by sports fans.  One of the attractions of locating sports arenas and stadiums in the center city, in a region that has a good transit network, is that attendees can get to games without driving to the city, which reduces traffic congestion and the demand for parking facilities.

Anecdotally, some people say that the decreasing effectiveness of weekend transit on DC's WMATA system--trains may come only three times per hour, partly out of budget cuts, but also becuase of maintenance-related reconstruction--fewer people are taking transit to weekend events at Verizon Center.  If that is the case, this is a real problem, although at least on the weekend, road-traffic in the city is less problematic than during the work week.

Washington Capitals fans at the Gallery Place Metrorail station, Youtube.

7.  Football themed hotel in Manchester, England.  One element of a entertainment district could be sports team themed lodgings.  Owned by former players, Hotel Football, a soccer- themed hotel has been created to appeal to fans of the Manchester United soccer team and is situated to provide views of the Old Trafford Stadium ("Manchester's new football hotel," Financial Times

The hotel is small, 133 rooms, but according to the FT, there should be enough demand to keep the rooms full:

Procter insists that Old Trafford is enough of a draw, even when there is no match on, to make the hotel a success. Visitors come year round to sightsee and take a tour of the stadium and the nearby National Museum of Football. The development of Salford’s MediaCityUK, a mixed-use site which includes offices and studios of BBC and ITV Granada, as well as the University of Salford, has also increased demand for places to stay in the area.

While it seems as if there would have been a lot of opportunity to have more team-related ephemera on display in the rooms, they have a soccer field on the roof of the hotel, and have team/soccer-related graphics and images on walls in the public areas of the building.

8.  Los Angeles and Professional Football.  For a couple decades, LA has been without a professional team as the Rams moved to Saint Louis and the Raiders moved back to Oakland.

While LA is the number two population center and media market in the US, so it seems crazy that there isn't a football team there, it is advantageous for the owners of National Football League teams to not have a team in Los Angeles, because the threat of moving a team there "encourages" localities elsewhere to pony up big money for new stadiums, out of a fear that the team will move.

The new roofed Vikings stadium will have many digital screens and will host the 2018 Super Bowl soon after its opening.

For example, half the $1 billion cost of a new stadium for the Minnesota Vikings football team is being paid for by the State of Minnesota and the City of Minneapolis.

But now at least three teams that have experienced resistance to funding new stadiums are pushing forward plans to move--Oakland Raiders, Saint Louis Rams, and the San Diego Chargers--promoting stadium development projects outside of the city in two different suburban locations.

-- "NFL's L.A. future a high-stakes dance for 3 franchises," USA Today
-- "New NFL stadium in St. Louis, Los Angeles for Rams, Raiders," Sports Illustrated
-- "After 5 Years, AEG Abandons Plans for Downtown L.A. NFL Stadium," KTLA-TV

One proposes a facility shared by two teams, like in New Jersey, where the New York Giants and New York Jets play in the same stadium, justified because the cost of a stadium is so high that having two tenants makes it financially feasible,

Each of these teams have previous connections to Los Angeles.  These plans have led AEG to drop its separate LA city stadium proposal, which was based on one team moving, or the awarding of an expansion team.

If football teams move to Los Angeles, likely that will create a push for replacement teams in the abandoned markets and more pressure on localities to fund stadiums there and elsewhere.