Indianapolis, Kansas City, and the changing arena economy
What do you look at to tell if a team is doing well? Attendance, right? After all, the way to tell how good a team is if they have fans coming to games. Low attendance means you’re not making money. Sure, the Clippers are the exception, but it’s L.A. Everything’s overpriced. But attendance is still the real determining factor in success.
In the words of Dwight Schrute, “False.”
The real key to a franchise’s success is a more complicated algorithm that factors in sponsorships, partnerships, and attendance. But the attendance piece isn’t built on sheer numbers, but in quality.
The Dallas Morning News’ Mark Francescutti has an excellent article today outlining the success teams are having by doing something counter-intuitive. Slashing prices. The Mavs are obviously the centerpiece, with this money quote from Mark Cuban:
“Bottom line is that the upper bowl is becoming a smaller and smaller part of our total revenue,” owner Mark Cubanwrote in an e-mail to The Associated Press. “So we would rather have a full house than make a couple dollars more. More fans means a better home-court advantage, it means a better fan experience, which in turn means more sales.”
The reason that the Mavs can make those kind of cuts is because the modern arena economy is now dependent on corporate suites and club seating. By focusing on those tickets, it allows the teams to fill out the big house.
This is why so many owners are requesting new arenas (outside of sheer greed). The modern economy has shifted to a sleeker, more efficient model and many older arenas are simply not fitted to that model.
Which brings us to the case of Indianapolis versus Kansas City. We told you yesterday about the Pacers potentially being sold for dirt cheap (that’s right, $230 million is cheap in what we’re talking about). One of the reasons a potential owner may want to relocate the team is because of the way the arena is configured.
Conseco Fieldhouse has 69 luxury suites. To put that in perspective, American Airlines Center in Dallas has 144 suites. Geez. Even smaller markets like the Rose Garden in Portland has 70 suites. Arco Arenas is severely behind with only 30 suites, one of the reason a new arena is a major issue in Sacramento. The Toyota Center in Houston has 80 suites.
Now, market size is going to be a huge factor, but so is how new the arena is, as well as what kind of club level seats are available. Kansas City has been a place discussed as a potential arena location for years, because they have a brand new arena, the Sprint Center, with no tenant. Huge building, no tenant. The arena also features 72 suites and a higher capacity for club seats than Conseco. So you’d have a similar overhead structure in a cheap city, with a building that maximizes profit, if you can fill it.
The arena itself is beautiful. When I spoke with Hornets’ guard Chris Paul at a preseason game in KC, he remarked that he “couldn’t believe how nice the arena was.” Everyone that attends an event there is stunned it’s so nice and even more amazed it has not regular tenant, outside of whatever Miley Cyrus/Jonas Brothers/Nickelback merchandise-fest is in town.
The public funding issue is going to be a problem anywhere in this country during the recession, but somewhere like Indiana with traditional Midwestern values is going to be even less likely to pony up for some new owner to build an arena he can charge more for to see a team that won’t be good for some time.
The Pacers are an institution. But this situation become representative of the changes going on in modern arena structuring.
UPDATE: Some interesting numbers on a few other arenas. The new Amway Center for the Magic will only feature 56 suites with 10 specialty suites. Similarly Charlotte features 67 suites, but does feature another 60 “lodge boxes.”
Additionally, a commenter points out that Conseco features two hosptiality suites, making for a total of 71 suites in Conseco to 72 at Sprint Center. It’s easy to argue that moving from Indiana to KC would be a lateral move, and a costly one at that.