Sunday, May 23, 1999

Reds drooling over new park's profit promise


Wins, attendance, (costs) likely to rise

BY JOHN J. BYCZKOWSKI
The Cincinnati Enquirer

        The Cincinnati Reds expect a lot from their ballpark.

        Three million fans? Why not?

        Annual revenues of $100 million? Anything is possible.

        The team envisions the baseball-only stadium will be fan friendly in ways they've only begun to conceive — great sight lines, five or six “neighborhoods,” from ultra-premium to bleachers.

        The point of it, however, is money. At the news conference Friday announcing the signing of a lease for a new Reds ballpark to open in 2003, Reds managing executive John Allen said, “This is about revenues and being able to generate rev enues to help the Reds put a competitive team on the field.”

        He noted the disparity between the Reds' 1998 take of $50 million and the New York Yankees' $160 million revenues.

INFOGRAPHIC
How new ballparks affected team prices and performance
        The new Cincinnati ballpark will close that gap — but not erase it — by opening up new revenue sources for the Reds and enhancing old ones. Trends elsewhere indicate new stadiums are greeted by big increases in attendance and winning ballclubs, but also higher concessions and ticket prices.

        Mr. Allen said the Reds can expect to double their current revenue level when the new stadium opens. “You're looking four seasons down the road, so you've got inflation, you've got price increases and so forth. I think you can get to the $90- to $100-million range,” he said in an interview.

        He hints at what Reds fans can expect: a ramping up of prices heading into the new stadium, and then another set of increases the first year in the new ballpark.

        Data compiled by the newsletter Team Marketing Report in Chicago indicates teams begin to increase ticket and concessions prices prior to the opening of a new stadium.

        A 16 oz. beer in Cleveland's Memorial stadium went from $2.75 in 1992 to $4 in 1993, the year before Jacobs Field opened. Average ticket prices in Atlanta went from $8.40 in 1992, while the team still played in Fulton County Stadium, to $15.54 in 1997, the first year in Turner Field.

        “It all spirals upward,” said Kevin Grace, assistant head of the University of Cincinnati's archives, who teaches courses in society and baseball. “The tradeoff for the fan is that you're usually sitting in a nicer ballpark than you used to, and the team's doing better.”

Team has more control
        Matthew Bortz, of sports and media consultants Bortz Media & Sports Group in Denver, said, “It's not very complicated. (The Reds) should see a substantial bump in attendance and revenues. How far up the ladder that pushes them regarding other franchises, it's hard to say.”

        Under the new lease, the team has a lot more control over what goes on in the ballpark, he said. For fans, “going from multi-purpose to single-purpose has a big impact. It becomes more of a pure baseball experience.” That drives attendance, which drives revenue.

        Attendance rises not just when the stadium opens, but for several years before. In Milwaukee, where the $250 milion retractable-dome Miller Park opens next year, attendance in the old County Stadium has been rising steadily since the baseball strike ended in 1995.

        The team hit 1.8 million in attendance last year, and expects 2 million this year. Next year? Laurel Prieb, vice president of corporate affairs for the Milwaukee Brewers, thinks the team will easily hit 2.5 million, and 3 million is within the realm of possibility.

        That breeds more revenue from other sources.

        “There is a mushrooming effect that springs forward from what you're able to do with attendance,” he said.

        Those sources include more lucrative broadcast rights, higher sales in concessions and souvenirs, and more revenue from in-stadium advertising.

        The Reds are looking at all that, and more. Mr. Allen is careful to point out the Reds have a core of die-hard fans the team won't alienate.

        “It's very important we have a tiered pricing structure so it's affordable for everybody that comes to the ballpark,” he said. “You'll see that tradition that we've had for years of being an affordable family entertainment facility continue. It's just that we'll have upper pricing and upper amenities available with the new stadium also.”

Luxury limited here
        First among the club's new revenue sources is luxury boxes and club seats. The new stadium will have 51 boxes with 12 seats each. The boxes will be priced from $65,000 to $150,000 per year, Mr. Allen said. It will also have 2,500 to 3,000 club seats, and those seats will have a high level of amenities, such as wait service and access to a stadium club. He didn't say how much revenue those seats might generate.

        Compared to other new ballparks, those numbers are low, “not surprising given the size of the Cincinnati market,” Mr. Bortz said.

        Given what other teams make on them, the Reds might expect $5 million to $8 million annually from luxury boxes, Mr. Bortz said. The club seats might generate $5 million and up. That doesn't include what the Reds might get from the sale of seat licenses. Mr. Allen said Friday there's been no decision on such a sale.

        The Reds may also sell the stadium's naming rights. Though there has also been no decision there, the team is thinking seriously about it.

        “That's the trend today and we have to look at that,” Mr. Allen said. “If there's revenues to be obtained that's a win-win for a major corporation, we'll evaluate that opportunity.”

        UC's Mr. Grace has been looking at naming-rights deals around the country, and said one worth $20 million over 10 years in Cincinnati “would not be an out-of-line figure.”

        For some teams, the new stadiums bring more valuable broadcast rights, but Mr. Allen doesn't expect a windfall there. The Reds' cable-TV rights are tied up by Fox Sports through 2004.

        As for radio, no change is forthcoming. The Reds' deal with WLW runs through next year, with an option for two more years. “We're not going to change,” Mr. Allen said. “We have the best radio station in baseball, because it's a clear channel. My parents pick up WLW in Kansas. We're in 38 states and two foreign countries. You're not going to walk away from that marketing vehicle.”

        Greater attendance also means in-stadium advertising becomes more lucrative. No plan is in place.

        “What you struggle with is less is more,” Mr. Allen said. “Do you have a minimum number of signs but charge more for those, or do you go for smaller signs and a lot of it? That's a matter of aesthetics.”

        He said the Reds lean toward fewer signs, “but you have to be revenue conscious.”

        The team also has plans for a year-round sports bar and a baseball museum. “Anything we can do to generate revenue year-round would be a plus,” Mr. Allen said.

Reds get concessions
        In the new stadium lease, the Reds won two key changes:

        • Concessions: At Cinergy Field, the Reds pay 10 percent of the gross to Hamilton County. The 1998 payment indicates the Reds had concession sales of about $11 million. Under the new lease, the Reds keep it all, and sales will almost definitely increase in the new stadium, with higher attendance and more offerings, particularly in catering to the fans in luxury boxes and club seats. “We'll be restructuring our entire con cessions deal, so there should be an increase,” Mr. Allen said.

        • Parking: At Cinergy, the Reds get zilch. The new lease gives the Reds the gross receipts from 3,500 parking spaces. “Do the math,” Mr. Allen said, and it works out to $2 million per year at $6 per car over 81 games.

        But while the Reds figure out how many billboards to put up and what to serve in the sports bar, Mr. Allen assured that the product on the field won't be ignored.

        “You can do all things in marketing and all the gimmicks you want, but you don't have overall attendance success until you start winning,” he said. “Long-term, you have to win. You have to have a competitive product. We understand that; that's why we've put all these resources into player development. You can't sign every six-year free agent.”

        Arguments that stadiums generate jobs and spending and economic development have long been discredited. “Hamilton County taxpayers cannot expect they'll see an even return for what they paid out for the stadium,” said UC's Mr. Grace.

        “But what they can have is a new ballpark and a successful team. It's a wonderful deal. It's too bad, if you're an owner, you can't build a new stadium every five years.”

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