News of the Arroyo
Title: | Put value of NFL franchise into perspective |
Subtitle: | |
Date: | 2003-08-07 |
Summary: | August 7, 2003 - Sports marketting consultant David M. Carter offers some works of caution about courting the NFL. |
Author: | David M. Carter |
Publication: | Pasadena Star News |
Content: | REMEMBER when Irwindale attempted to lure the Raiders? Or how about Inglewood\'s interest in building a stadium at Hollywood Park? What about Los Angeles\' seemingly endless pursuit of an NFL franchise? Recently entering the fray have been Pasadena and Carson, with the possibility of Anaheim joining the race at some point. Why all this posturing, politicking, and hand-wringing - does it really matter if the NFL returns to Southern California? Should these municipalities allocate precious time and scarce resources to what many view as a fruitless mating dance? The NFL wants to supply Southern California a team, but how aggressively should our public sector be in demanding one? Municipalities undertake the financing, construction and maintenance of sports venues because they believe doing so delivers both tangible and intangible benefits, some of which accrue to residents and taxpayers, while others measurably benefit the owner of the team playing in the stadium. But if investing in stadiums made prudent financial sense, wouldn\'t private financing be flocking to such opportunities since they would offer the requisite return on investment? By extension, if municipal stadiums are not designed to be money makers, why should anyone expect them to deliver revenue to a city\'s coffers? When considering how these dynamics pertain to Southern California as it seeks an NFL franchise, it is important to understand the critical distinctions in this market by taking into account the impact such nuances have on the rationale for financing stadium renovation or construction. Tangible benefits typically cited include economic impact, particularly that impact associated with the hosting of major events such as the Super Bowl. The direct spending (revenue generated directly at/through the venue) associated with these major events is complemented by the indirect spending that occurs in conjunction with the event, such as the renting of automobiles and hotel nights. While no doubt the single most important benefit, the revenue generated from such events in Southern California, while welcomed, is less significant as our region\'s economy remains one of the largest in the world. Further, for smaller cities like Pasadena, it is difficult to fully accommodate such large events as evidenced by tourists staying in Newport Beach and Century City when in town to enjoy the Rose Bowl game. In a strict sense, then, the financial benefits leak from Pasadena and are enjoyed throughout Southern California. The other major benefit often referenced is that the building of venues assists - if not drives - redevelopment in and around the immediate area where the venue is to be located. In this instance, the venue is seen as an ‘‘anchor\'\' tenant of sorts, providing a compelling reason for other businesses to relocate to what they believe will be a revitalized area. Throughout Southern California it is believed that much of any ‘‘new\'\' spending taking place in and around a football stadium would constitute a transfer in existing spending in the area rather than ‘‘new\'\' spending. Intangible benefits enjoyed by municipalities include the fact that hosting major sporting events routinely garners that city ‘‘Big League Status.\'\' That is, having a sports team or event in your city elevates the municipality\'s status nationally/internationally. The fact that Southern California boasts one of the most dynamic sports and entertainment markets in the world suggests that our status as a big league city is understood. Further intangibles extend to sports fans, who generally welcome new/upgraded facilities as they believe that their viewing experience will improve. However, given the cost of attending an NFL game -- Team Marketing Report estimates that the average cost for a family of four to attend an NFL game is $290; an amount likely to be much higher in Southern California -- it is hard to imagine a stadium filled with rabid, face-painting fans. This issue is compounded by the fact that many NFL fans in Los Angeles follow teams from other markets and may not immediately be inclined to spend their disposable income on a team they do not call their own. Finally, sports and sports venues deliver a classic externality, a benefit provided to people that are neither buyers nor sellers of the production of an event, to the community. If the region believed an NFL franchise would provide it with important benefits, one would expect a groundswell of support for such a pursuit. Upon consideration, it should become clear that not only shouldn\'t municipalities be investing in stadium projects in Southern California, but those that have already been constructed, particularly the Rose Bowl and Coliseum, should not and cannot be expected to generate meaningful revenues for the cities of Pasadena and Los Angeles, respectively. After all, if venues such as these were indeed profitable enterprises, they would attract private financing for their (re)development as was recently the case in Carson, where the new Home Depot Center is squarely positioned to be a profitable business investment. Our region would do well to remember this as we pursue an important, albeit modestly impactful, amenity known as the NFL. David M. Carter is a principal in the Redondo Beach-based Sports Business Group, which specializes in strategic marketing for the sports industry. He has consulted for both the Community Redevelopment Agency of Los Angeles and the Rose Bowl Operating Company. |
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