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March 6, 2009
Luxury Strikes Out
The Wall Street Journal
by Ben Casselman
In a case of monumentally bad timing, this year three of the biggest names in pro sports -- the Yankees, New York Mets and Dallas Cowboys -- are opening three of the most expensive stadiums ever built, filled with premium-priced seats and luxury amenities. At a combined cost of more than $3.5 billion, the stadiums were conceived and financed in a vastly different environment, a time when corporations and municipalities were flush with cash. Now they're opening just as corporate America is going through a massive belt-tightening -- and trying to avoid the appearance of extravagance at all costs.
"Let's face it, if you're taking TARP funds, it's really hard to justify getting a [luxury] box," says Neal Sroka, a luxury real estate agent hired by the Yankees to help sell the team's premium seats, referring to the funds distributed to banks under the Troubled Asset Relief Program.
...Between corporate sponsorships, naming-rights deals and luxury suites, two-thirds or more of teams' revenue comes from corporations rather than ordinary fans, estimates David Carter, executive director of the University of Southern California's Sports Business Institute. Over the years, luxury boxes, once just a few glass-enclosed rooms high above the regular seats, have become as integral to a new stadium as concession stands -- more so, because companies pay for them up front, guaranteeing profits regardless of the team's success on the field. As team owners crammed in ever-more premium seats, corporations, eager for new ways to entertain clients, happily bid up the prices.
All that corporate money, Mr. Carter says, has created what he calls the "sports ticket price bubble." Now that bubble is in danger of bursting.
Posted by eric at March 6, 2009 2:29 PM