This week in “Last Week in BizBall“, the retro ballpark era enters a new phase, ticket price integrity plus the weekly tidbits.
RETRO BALLPARK ERA NEARING ITS END, WHAT NOW?
LWIB saw an article by Ken Belson of the New York Times reporting on architect and urban planner Janet Marie Smith’s task of updating Baltimore’s Camden Yards (see the 2004 Biz of Baseball interview with Smith). The debut of Camden Yards in 1992 is a seminal moment in the recent history of the biz of baseball. The Oriole’s new ballpark was an immediate hit with fans and spurred a wave of imitators across MLB. Eighteen years later and only four MLB franchises remain housed in the multi-purpose stadiums that were the pre-Camden norm. Once the Marlins move in to their new “baseball only” stadium in 12, only Toronto, Oakland and Tampa Bay will be housed in an anachronistic multi-purpose facility.
Ms. Smith is widely credited as the visionary responsible for creating Camden Yards and the retro ballpark era that followed. Retro ballparks provided an enormous boost to MLB revenues, contributing to both soaring ticket prices and attendance. Fans were enamoured of the improved sightlines, Americana aesthetic, more intimate (fewer seats) setting and natural grass fields (artificial turf unnecessary in a baseball only facility). Although the retro ballparks were a continuation of the popular baseball idealism/fantasy/romanticism/nostalgia of the 80s (WP Kinsella, Field of Dreams, The Natural etc.), they were also popular with local corporations and businesses who eagerly snapped up the greatly increased amounts of premium seating and luxury suites. And to varying degrees, more so in the early years of the building boom, local governments footed the bill (many still paying) and handed the keys and revenues to the franchise owner. MLB owners received billions of dollars of public investment, a combination of real estate, infrastructure, financing and construction. Politicians often (particularly in economically depressed regions) justified their support of these projects by arguing that they would generate new wealth in the local economy and/or rejuvenate blighted neighbourhoods. The retro ballpark building boom is indisputably one of the key factors resulting in an increase of MLB revenues from approx. $1.2 billion in 1992 to approx. $6.5 billion each of the past two years.
News that the architect of Camden Yards - Ms. Smith - is now faced with the challenge of updating the same brings to mind the question of what is next for MLB stadiums? The Orioles are the first in what will be a quickly forming line of MLB owners looking to upgrade their not so new retro ballparks. LWIB, Robert Mankin of architecture and planning firm NBBJ noted in the SportsBusiness Journal that, “The presumed useful life of a typical office building is 50 years, whereas sports venues are rendered obsolete within 20. As technologies change and tastes in club amenities transform, these buildings will quickly become outdated in 10 to 15 years and abandoned within 25.”
Much has changed economically, politically and sociologically since Camden Yards debuted in 1992. The profligate spending of corporations on “sports entertainment”, critical to boosting in-stadium revenues the past two decades, may never return to pre “Lehman Brothers” levels. During good times corporations needn’t question their motivation for spending on “sports entertainment”. Decisions that were once justified on the basis of “exposure”, “branding” or simply corporate ego are now scrutinized at higher levels within these same organizations and more precise and measurable returns on the investment are demanded. With many of their customers facing dire circumstances, some corporations are loathe to be associated with the perceived excess of professional sports, fearing a “Main St.” backlash. Forbes reported in December, “In 2009 spending on sports sponsorships shrank by $100 million to $11.3 billion, in line with weakness in marketing outlays generally…..For years sponsorship spending rose dependably by more than 10% a year, says IEG, a Chicago trade publication that follows the sponsorship industry. That's over. Says IEG Senior Editor William Chipps, "Companies are really stepping back and asking themselves if they're getting a return on their investments."
SELECT READ MORE TO SEE DETAILS ON RETRO BALLPARK DESIGN, MLB TICKET PRICE INTEGRITY, PLUS THE WEEKLY TIDBITS
In his aforementioned report for the New York Times, Ken Belson pointed out that the diminished corporate demand for “sports entertainment” is one of the challenges facing Ms. Smith as she devises the plans for the Camden Yards renovation.
The club levels at Camden Yards will get a second look because the corporate appetite for expensive suites has diminished. It hasn’t helped that the Orioles last had a winning record in 1997 and drew their smallest crowd ever at Camden Yards earlier this season.
The Orioles are not the only team thinking about makeovers. The Cleveland Indians, who opened Progressive Field in 1994 (it was Jacobs Field then), are among the 10 teams looking at ways to revive their parks, said Earl Santee, a senior principal at Populous, the architectural firm that designed Camden Yards, PNC Park in Pittsburgh, Coors Field and other retro stadiums.
That passage from Mr. Belson’s report caught the attention of Neil deMause of Baseball Prospectus. Mr. deMause weighed in:
What do you do with modern stadiums designed for the luxury market when that market evaporates? In olden times, it was easy enough to just rejigger ticket prices, reclassifying a level from "box" to "reserved." Today's class distinctions, though, are cemented in concrete and steel — you can't easily take a chunk of glassed-in seats with their own restaurant and private entrance and turn them back over to the great unwashed. Cleveland in particular is going to be an interesting test case for this, with that vertical wall of club seats that separates its lower deck from its upper. Given the team's current attendance woes and the dismal local economy, they're going to need to find some way of redemocratizing their architecture, but it's not likely to be easy.
It is difficult to criticize MLB for catering to the corporate sector the past few decades. Revenues from luxury seating were readily available in a booming economy while local governments paid to construct it. Not only did governments pay for the new ballparks but they also subsidized the corporations’ purchases of luxury suites and premium seating via tax write offs. In a New York Times Op-Ed earlier this month, Duke Law Professor Richard Schmalbeck and Rutgers Business School Professor Jay Soled lamented the change in MLB.
UNTIL the 1970s, Major League Baseball was a populist sport. Bleacher seats cost as little as a dollar, meaning middle- or even working-class fans could afford to take their families to a game a few times each season.
But in the years since, tickets to baseball games — along with other professional sports events — have skyrocketed in cost.
While baseball parks built in the 1960s and before held as many as 56,000 seats, the modern trend is toward smaller-capacity parks, with a higher percentage of total space dedicated to skyboxes. The new Yankee Stadium, the only major-league park built since 2000 with more than 44,000 seats, has 3,000 fewer seats than its 1923 predecessor but almost three times as many skybox suites.
Who (public or private money) will pay for the upgrades desired (necessary?) by franchises as the oldest of the retro ballparks approach their 20th anniversaries? Most ballparks are owned and maintained by local quasi-government stadium authorities (again to varying degrees, most or all of the revenues flow to the baseball franchise) but with local governments (city, county, state) crying poor will politicians pour more money into the stadiums that house their professional sports franchises? Now that the end of the retro ballpark building boom is near complete, many question if the urban renewal, job creation and increased tax revenues promised by stadium proponents ever materialized? The worst critics argue that the new ballparks delivered on none of those promises and instead have become sinkholes of wasted public dollars. In December, Ken Belson reported for the New York Times:
Years after a wave of construction brought publicly financed stadiums costing billions of dollars to cities across the country, taxpayers are once again being asked to reach into their
From New Jersey to Ohio to Arizona, the stadiums were sold as a key to redevelopment and as the only way to retain sports franchises. But the deals that were used to persuade taxpayers to finance their construction have in many cases backfired, the result of overly optimistic revenue assumptions and the recession.
MLB has diversified their revenue streams. MLB Network, MLBAM, RSN revenues, national TV contracts, licensing, etc., all contribute to the annual $6.5 billion in industry revenues. And while local in-stadium revenues account for a smaller percentage of industry revenues than in previous eras, ticket sales remain MLB’s single largest source of revenue. But does the end of the retro ballpark cycle combined with a possibly permanent change in the corporate sector’s spending on “sports entertainment” signal that in-stadium revenues have peaked? Monitoring the changes that Janet Marie Smith and her sports architect peers make to MLB stadiums in the near future will reveal much.
TICKET PRICE INTEGRITY
If the collapse of Lehman Brothers in September 08 marked the beginning of the recession (is it over?), then MLB was the first of the “big 4” to face the off season challenge of selling tickets in the face of it. When the final attendance numbers for the 09 season were calculated, MLB proudly announced a decline of 6.7% over the 08 season. Efforts to persuade scared, and in many cases, cash-strapped fans to purchase tickets included widespread ticket discounting. Ticket discounting does move inventory but it also presents a challenge to clubs in preserving the integrity of their ticket pricing. Complicating ticket pricing for the clubs is the large inventory of secondary tickets available to fans and the quandary that “variable” aka “dynamic” pricing presents.
Toronto Blue Jays/Rogers Centre President and CEO Paul Beeston has been much criticized this season for maintaining his opposition to ticket discounting despite plummeting attendance at Blue Jays games during this early part of the season. It has been noted in the Toronto sports media that according to the annual Team Marketing Report survey of MLB prices, the Jays are the 12th priciest of 30 clubs. Many are asking how a team expected to win in the range of 70 games (although they are presently 13-13) and setting record-low one game attendance marks twice inside of one week this season can not afford to reduce prices. The answer is simple as Mr. Beeston recently explained to Jeff Blair of the Globe and Mail, “We’re trying to put some integrity back into our ticket pricing.” Mr. Beeston’s strategy is geared for a future which he anticipates will include competitive Blue Jays teams creating abundant demand for tickets at Rogers Centre. Dave McGinn reported LWIB for the Globe and Mail, “But while Mr. Beeston’s refusal to discount tickets may infuriate some fans, industry analysts say it is wise to hold one’s ground. Lowering prices may work in the short term, but it makes it much harder to increase the price down the road.”
Paul Beeston is not alone in MLB in attempting to balance the realities of attracting fans to the ballpark without alienating the fan base which pays full freight for full and partial season ticket plans. LWIB, John Lombardo reported for the SportsBusiness Journal on a new venture “…looking to profit from the industry’s age-old dilemma of how teams can market unsold tickets without cannibalizing their brand.” More from Mr. Lombardo’s report:
Teams and leagues for years have struggled to find ways to effectively move unsold tickets at prices that do not hurt the brand or alienate their season-ticket customers. ScoreBig, founded last year by former NBA executive Adam Kanner and backed by Bain Capital Ventures, is betting big that it has developed a new model that addresses the issue. The company is testing its ScoreBig.com site, which is designed to offer brand protection while marketing unsold ticket inventory in professional sports and other live events. The site is expected to launch in a few months.
Among the key differences from other secondary ticket sites is that ScoreBig will not disclose to the customer how the ticket was acquired, providing brand protection to teams selling tickets on the ScoreBig site.
“The reason why it is so beneficial is that every team is concerned about the integrity of the product,” said Mike Tomon, vice president of sales and service for the Cleveland Cavaliers. Tomon recently was briefed by ScoreBig executives, but the team has yet to decide whether to make a deal with the company.
“I think every team has concern for the integrity of their product value,” he said. “If a team puts a discount out in the market through an e-mail blast or with a promotional partner, there is concern for erosion of value for the brand. It appears their model is attempting to better protect the brand’s value.”
Maintaining the price integrity of full and partial season plans has been complicated in recent years by the emergence of online secondary ticketing, much of it involving the clubs themselves. (Online secondary ticketing giant StubHub and MLB are partners) In February LWIB reported on the state of ticketing in MLB, including reports that there were a glut of tickets available last season at below face value prices. Clubs are learning that while there is easy money to be made in facilitating the resell of their primary tickets for high demand games, secondary ticketing has also lowered the value of tickets for many games.
The same LWIB instalment on the state of ticketing in MLB included mention of the introduction of “variable pricing”. After limited use last season, the San Francisco Giants this season are the first MLB club to use “variable pricing” for all ticket inventory. In the “variable pricing” model, ticket prices for the same seat are continually adjusted according to a broad range of factors including (but not limited to) day of the week, weather forecast, opponent, starting pitcher(s), standings, in stadium promotions, etc. While the Giants were obviously pleased with the results of “variable pricing” last season, (they increased sales of their least desirable inventory in the outfield bleachers and upper deck) not everybody in MLB shares their enthusiasm. “Variable pricing” was amongst the subjects discussed in a SportsBusiness Journal “ticketing roundtable” in March. The following exchange involved Pittsburgh Pirates CMO Lou DePaoli and sports marketing consultant Bill Sutton:
DePaoli: ….Variable pricing, for baseball, I don’t think is economically viable. I’d rather just increase my ticket prices across the board. I’ve been working on models for 10 years, and I don’t think it works.
Sutton: I think it works. … I saw the Braves do it when I was at a game in Atlanta. The interleague games, there was a plus. And then when the Yankees came in it was a plus-plus. So I think we’re looking at that. But on the other side of the coin, what do you do when the Kansas City Royals come in?
DePaoli: That’s my concern with variable pricing. That’s why it doesn’t work in baseball. Too many games. For an 81-game schedule, 39 of them on weekends, we actually have 42 non-weekend games. Roughly half your schedule is on days you don’t really want to play. Then you have to look at opponents. So variable pricing, you would see more down than up. But, premium pricing for the bigger games, that’s a different story. Like when the Yankees come in.
- The Tampa Bay Rays have the best record in MLB, 18-7. Last season they won a respectable 84 games. In 2008 they were a World Series team. Nonetheless, as John Romano described LWIB for the St. Petersburg Times, Rays attendance continues to be very poor. Seemingly everybody has concluded that MLB in Tampa/St. Petersburg is only viable if a new ballpark is constructed. LWIB Ballpark Digest provided an update on the Rays efforts to secure a new stadium. BD points out that because the Rays Tropicana Field lease with St. Petersburg doesn’t expire until 2027 that “…any solution has to address the financials of the lease (paying off debt service, basically) and appease St. Pete officials. In other words, the road to any Rays ballpark solution runs through downtown St. Petersburg -- which is why the serious part of the discussions are beginning there.”
- Ameet Sachdev reported that Cubs owner Tom Ricketts met with the Chicago Tribune’s editorial board and was harshly critical of both politicians and Wrigleyville “Rooftop” owners opposed to the Cubs installation of an illuminated Toyota advertisement in the left field bleachers. Mr. Ricketts “…suggested that the family's future investment in projects in the Wrigleyville community hinges on the approval of the sign.”
- TV ratings for professional sports have recently been boffo. The World Series, NFL, NHL, etc., etc.,. However the Sports Media Watch blog reported that after the first 3 Saturdays, ratings for MLB on Fox are down substantially from last season.
Pete Toms is senior writer for the Business of Sports Network, most notably, The Biz of Baseball. He looks forward to your comments and can be contacted through The Biz of Baseball.
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