The Revenue Revolution : When Playing Money Game, Owners Readily Mutiny If They Don’t Get a Suite Deal

They say it’s too old.

They say the neighborhood is too dangerous.

They say the concessions are subpar.

But don’t try telling Roger Holmes of Westchester why the NFL bigwigs refuse to consider the Coliseum as a home for a future team.

An hour before the USC-UCLA game in November, Holmes’ car stalled in heavy traffic within walking distance of the stadium. Many in his predicament would have feared for their lives.

“But I got better treatment there than in my own neighborhood,” Holmes said.

Residents near the intersection of 41st and Figueroa streets helped Holmes get his car off the street and into a parking garage. As a Trojan fan, his only lament was UCLA’s upset victory that day.

With $115 million in public funds spent to renovate and improve the Coliseum since the 1994 Northridge earthquake, Holmes and others wonder why city and NFL officials are considering four possible sites--Anaheim, Dodger Stadium, El Segundo and Hollywood Park--and not the stadium that was home to two Summer Olympics and two Super Bowls.

But even the most nostalgic fan can appreciate the simple arithmetic applied to today’s professional sports: Cutting-edge stadiums generate financial windfalls for team owners.

As Financial World magazine said, a team that can’t maximize its venue revenues--luxury suites, special seating, concessions, advertising signage, parking and non-team events--can’t expect to see its value grow significantly.

Halfway through the ‘90s, there is an urgency to have the latest, greatest facility to support the local team. In a recent survey, the Pittsburgh Post-Gazette found that 25 of 30 NFL teams, 22 of 26 NHL teams and 16 of 28 major league baseball teams have either had facilities built or renovated since 1991, or want new venues or improvements to existing sites.

The St. Louis Rams and Oakland Raiders deserted L.A. for better stadium deals. The Cleveland Browns are headed to Baltimore, the Houston Oilers to Nashville, Tenn., all for the sake of stadium revenue.

“Remember 30 years ago, the Houston Astrodome was considered the eighth wonder of the world,” said Robert Baade, chairman of the economics department at Lake Forest College in suburban Chicago. “Now it is considered a disaster.”

That is easy to understand when the year-old Jacksonville Jaguars earned as much through the sale of 10,000 club seats as the venerable Pittsburgh Steelers made by selling all 59,600 seats at Three Rivers Stadium in 1995.

The reason there is such a thirst for new facilities is the NFL’s economic structure. The largest source of revenue--a billion-dollar television contract--is divided equally among the 30 teams. Franchises also share profits from licensing team names for merchandise. Although Dallas Cowboy items account for 21% of the sales, the team gets only as much as every other team gets.

Between 1980 and 1990, the San Francisco 49ers had the league’s best winning percentage, .705, and the Tampa Bay Buccaneers the worst, .307. Yet, Tampa’s cumulative operating profit was almost $2.2 million more than San Francisco’s for the decade, according to evidence presented in the Freeman McNeil-NFL trial.

Until the NFL restructures its profit-sharing system, stadiums are the only avenue to an economic advantage over rivals. For instance, in 1994, the Cowboys earned $37.3 million in stadium revenue, whereas Atlanta, Denver and Detroit earned nothing, according to Financial World. Thus, the Cowboys were able to attract the best players through free agency to keep their juggernaut rolling.

The latest trend is personal seat licenses. The St. Louis Rams charged fans $250 to $4,500 for the right to buy season tickets for the next 30 years. The one-time fee does not include the cost of the tickets.

The Carolina Panthers used the same method to raise $100 million for the $180-million stadium erected in Charlotte.

Cowboy owner Jerry Jones inherited an established stadium when he bought the team in 1989. So he did not use personal seat license fees to turn Dallas into sport’s most valuable franchise. Instead, he took advantage of the Cowboys’ nationwide popularity to gain corporate giants Nike, Pepsi and American Express as stadium sponsors. Now there is talk of changing the name of the facility for even more money.

“That’s what this is all about,” said Paul Much, a Chicago economist who analyzes NFL finances. “If there aren’t significant stadium economics, you aren’t going to get a team.”

As city officials scramble to provide sweetheart deals for club owners--even at the expense of their constituencies--some economists are questioning their motives.

After studying the economies of many cities with pro franchises, Baade concluded that teams do not stimulate the kind of economic growth that many politicians advertise when selling them to their communities. He said a single retail company, such as Sears, generates 30 times as much revenue as major league baseball.

“From a city’s perspective, we’re talking about an industry that contributes about what a medium-sized department store might contribute to a community,” he said. “But we’re spending a significant fraction of city capital budgets in order to build infrastructure for what provides negligible economic impact.”

With government services diminishing, some suggest that spending public funds for luxury seats used mostly by wealthy fans makes little sense.

In sports-crazy Dallas, the City Council has offered owner Don Carter of the NBA’s Mavericks a deal worth $131 million to build a downtown arena. The city is willing to pay $42.9 million for the land and construction as well as giving the Mavericks an $88-million tax break over 30 years. The team would get to keep all arena revenue, and after 30 years the Mavericks could buy the new facility or Reunion Arena for $1 each.

All Carter has to do is agree not to leave Dallas without the city’s consent for 30 years.

City officials offer the world because they view teams as identifiable exports that attract business and tourists, besides offering a cultural dimension unavailable in many other towns.

“I believe it has to do with a city’s attitude about itself through the success of its sports franchises,” said Dennis Wellner, senior president of HOK Sports Facilities Group, a Kansas City architecture firm that designed Camden Yards in Baltimore, Jacobs Field in Cleveland and Coors Field in Denver.

Baade, who also coaches basketball at Lake Forest College, said this is the only rationalization for having franchises. He is even skeptical of the promise to revitalize blighted neighborhoods.

“It is just nonsense because the area is considered unsafe and you surround the stadium with a concrete moat,” he said. “People get off the expressway and drive to the game and when the game’s over, they get back in their cars and go home. Where’s the economic impact?”