New Stadiums, Higher Prices, No Remedy

I. Introduction

It seems like every sports franchise is building a new stadium these days. In New York alone, four franchises (the Yankees, Mets, Giants, and Jets) will be moving to three new facilities within the next two years. [1]. By 2011, other area teams including the Rangers, Liberty, Knicks, Nets, Devils, Islanders, and Redbulls will all be playing in new or renovated stadiums. [2] The allure of a new stadium cannot be denied: more luxury seating, refined amenities, state of the art technology on and off the field, attracting free agent athletes and corporate sponsors, and last but not least, the bragging rights to say "my home town ball park is better than yours!" Sadly, with new stadiums come new costs to fans of their sports, not the least of which is increased ticket prices. Additionally, apart from increased ticket prices, there are additional costs that come with new stadiums.

In the current economy, where necessities such as gas, power, and food prices are on the rise, can the average fan afford to pay for season, or single game tickets, to their team's home games? This article will examine the trend toward new stadium building, the related costs, and potential remedies to the economic effects.

II. Newer, Bigger, Better & More Expensive

It goes without saying that team owners will always say that building a stadium will have a positive economic impact on a city. Stadiums create new jobs during and after construction, and they have the ability to increase tourist spending. [3] Further, increased foot traffic to games will also generate increased spending, which could create new jobs, and give rise to the "multiplier effect"; which essentially means that increased income creates new jobs and spending. [4] Team owners also want to attract the best free agent athletes. Part of the ploy in getting these free agents is displaying the seeker team's brand new, or newly renovated, state of the art facility.

However, when it comes right down to it, a new stadium means increased revenue streams for team owners. For example, Dallas Cowboys owner Jerry Jones is in the final stages of completing the new $1.1 billion Cowboys stadium. [5] With a standard 80,000 seats that can be expanded to 100,000, and an additional 300 suites, the revenue from ticket prices will only be the beginning for Jones. [6] The most expensive seats in the new stadium are expected to go for approximately $340 a game. [7] Naming rights for the new stadium will likely yield an unprecedented amount, and various sponsorship deals will also pad Jones' pocket. Further, with new stadiums, owners are able to increase the proportion of non-shared revenue. [8] Additionally, owners generally believe that with a new stadium comes increased attendance, and with increased attendance is increased income. [9]

The most significant increase to fans specifically will be the costs of seat options or personal seating licenses (PSLs). A PSL is essentially the right to buy seats; it gives its owner the right to purchase specific seating in a team's stadium. A PSL can last as long as the team and buyer agree to, and it does not include the cost of actual game tickets. PSLs are a way for owners to pass along costs for rebuilding or renovating stadiums to fans. In the Cowboys case, the PSLs will range from $16,000 to $150,000, which allows fans "to reserve the right to renew the seats for 30 years."[10] Even assuming that a small fraction of the stadium, say 2,500 seats, have to pay the maximum seat option, extrapolated, that total amounts to $375 million for the 2,500 seats.

New stadiums also have the benefit of an increased value for team owners. Substantial public construction subsidies and lease terms are the tip of the iceberg. [11] Team owners have to sell the economic advantages to local cities because the owners (and fans) are generally not the only ones that bear the cost of financing these new venues. Oftentimes, cities and states bear a substantial portion of the cost of the stadiums. [12] While the afore mentioned reasons are the strongest points for cities bearing a portion of the cost for stadiums, oftentimes, those reasons may actually lack credence. Some experts even say that building a stadium has very little positive, and in some cases, may have a negative impact on the local economy. [13] Although it is true that stadiums can create economic growth when they are a source of a significant export industry, [14] specifically when the stadium attracts non-locals and results in broadcast or licensing rights to national media. [15] Generally, the economic impact of sports facilities is minimal. [16]

So with this minimal economic benefit of stadium building in mind, why allow teams to keep building with the benefit of taxpayer dollars?

III. Put Up Or Shut Up!

The fact is that sports leagues are a monopoly. [17] It really comes down to simple supply and demand. More cities can support sports franchises, than sports franchises exist. Thus, if a team wants to build a new facility or renovate its old one, and the city is not willing to put up a portion of the cost, the team will simply move to a new city. Sports leagues deliberately keep the number of franchises low, to maximize member teams' profits. [18] With more states and cities that want, and are able to sustain sports franchises, teams are able to essentially 'auction off' their franchises to the highest bidder. [19] In such situations, fans end up being the losers because they pay higher ticket prices at the gate, higher PSLs, and their tax dollars are used to finance the new stadiums.

With the current economy shrinking the lending ability of banks and increasing the loan costs for teams, it sadly makes sense that teams would try to squeeze every last dollar from their prospective suitor cities. For instance, because of the collapse of the short term debt market, the New York Jets, Giants, and Dallas Cowboys’ debt costs have increased substantially. [20] The problem is that a large portion of the clubs' debts are auction rate securities. [21] Auction rate securities are long term securities that banks hold weekly or monthly auctions to set their rates and give the holders, usually corporations or wealthy individuals, the option to sell the securities. [22] While these securities are usually considered extremely safe, due to the credit crunch, fewer banks are showing up for the auctions, resulting in greatly increased interest rates for the securities. [23] With investors losing confidence in the market, it is unlikely that the auction rate securities’ interest rates will be coming down. Further, with collective bargaining, teams are paying more to obtain quality professional athletes. Again, this results in the average fan paying more for tickets, concessions in the stadium, and PSLs.

For instance, the Giants will charge $85 to $700 for a single game ticket, and PSLs of $1,000 to $20,000 for the privilege of purchasing single game or season tickets. [24] The Jets on the other hand, will charge $4,000 to $25,000 for PSLs, and $95 to $700 for single game tickets. [25] The irony of this situation is that even though fans and cities often finance the construction of these stadiums, there is not much they can do about the increased prices for everything within the stadium.

IV. To Sue or To Vote

Unfortunately, it appears that there is little legal remedy for fans who feel that their team has priced them out of their sports escape. While individual cities may be able to negotiate a longer lease for stadium venues, or write provisions in leases that would deter teams from leaving their cities, there is very little that fans can do to avoid paying substantial costs to see their home teams. [26] In the past, fans have tried to use lease agreements between the city and the sports team to challenge increased prices. [27] In Heidrick v. PDB Sports, Ltd. [28], the plaintiffs claimed that the Denver Broncos ownership had violated the terms of their lease, by charging higher prices than NFL teams with comparably priced facilities. [29] The judge however ruled that the plaintiffs had misinterpreted the lease's limitation on ticket prices, essentially shutting the lawsuit down. [30] Alternatively, citizens can take to the ballot boxes. While voters have rejected public financing of stadiums in San Jose, Milwaukee, and Seattle in ballot initiatives, those teams were still able to obtain new stadiums. [31]

V. Conclusion

Sports have always been a way for people to escape from their day to day realities. Teams give their fans something to cheer for at coffee shops and around water coolers. Sadly, the cost of seeing an occasional game these days have become extremely restrictive. While the costs may be explainable in some instances, the fact remains that many fans are priced out of the market, with very little they can do about it.

In the end, it may come down to fans simply boycotting their team to protest price increases. In these economic times, it will not be very difficult for some fans to cut off this expense. However, while some are willing to give up their season tickets, or their intermittent foray to go and see their team, many others are financially able and willing to accept the burden of the costs. Until there is an organized boycott by all fans, or a plausible legal remedy, it appears that new stadiums and higher prices are here to stay.

Sources:

[1] Richard Sandomir, New Stadiums: Prices, and Outrage, Escalate, N.Y.Times, Aug. 25, 2008, at A1 available at http://www.nytimes.com/2008/08/26/sports/26tickets.html?_r=1&oref=slogin.

[2] Evan Weiner, Fans Welcome New Stadiums, Will Stadiums Welcome Fans?, N.Y. Sun, Apr. 7, 2006, http://www.nysun.com/sports/fans-welcome-new-stadiums-will-stadiums-welcome/30613/.

[3] Andrew Zimbalist & Roger G. Noll, Sports, Jobs, & Taxes: Are New Stadiums Worth The Cost?, Brookings Inst., Summer 1997, http://www.brookings.edu/articles/1997/summer_taxes_noll.aspx.

[4] Id.

[5] Don Walker, How Cowboys New Stadium Will Change the NFL, JSonline, Sept. 10, 2008,  http://www.jsonline.com/story/index.aspx?id=797212.

[6] Id.

[7] Id.

[8] Raymond D. Sauer, Public Finance and Stadium Subsidies, http://hubcap.clemson.edu/~sauerr/classes/324/public_finance_files/frame.htm (last visited Oct. 13, 2008).

[9] Id.

[10] Walker, supra note 5.

[11] Sauer, supra note 8.

[12] The Fans, Taxpayers, and Business Alliance for NFL Football in San Diego, New Stadiums in Other Cities, http://ftballiance.org/stadiums/financing.php (last visited Oct. 13, 2008).

[13] Zimbalist, supra note 3.

[14] Id.

[15] Id.

[16] Id.

[17] Id.

[18] Id.

[19] Sauer, supra note 8.

[20] Daniel Kaplan, Debt Costs for New Stadiums Soar, Sports Bus. J., Mar. 31, 2008, http://www.sportsbusinessjournal.com/article/58516.

[21] Id.

[22] Jenny Anderson & Vikas Bajaj, New Trouble In Auction-Rate Securities, N.Y. Times, Feb. 15, 2008, http://www.nytimes.com/2008/02/15/business/15place.html?ref=business.

[23] Kaplan, supra note 20.

[24] Sandomir, supra note 1.

[25] Jetsblog.com, Jets Seating Chart Prices for New Stadium, http://www.thejetsblog.com/2008/08/26/jets-seating-chart-prices-for-new-stadium/ (last visited Oct. 11, 2008).

[26] Zimbalist, supra note 3.

[27] Sports Business Daily, We're Not Gonna Take it: Broncos Fans Sue Over TIcket Prices, June 20, 2000, http://www.sportsbusinessdaily.com/article/17729 (last visited Oct. 13, 2008).

[28] Heidrick v. PDB Sports, Ltd., No. 01CA2377, 2003 WL 304283 (Colo. Ct. App. Feb. 13, 2003).

[29] Sports Business Daily, supra note 27.

[30] Amy Arnold & Marcus Leazer, The Air is Thin in Mile High Stadium, http://www.sportslawnews.com/archive/Articles%202001/MileHighrights.htm (last visited Oct. 13, 2008).

[31] Zimbalist, supra note 3.