barclays center. barclays (multi-national corporation) personal banking credit cards corporate &...

Barclays Center

Barclays(Multi-National Corporation)

• Personal banking• Credit cards• Corporate & investment

banking• Wealth & investment

management

• International presence in Europe, North & South America, Africa & Asia

• Located in 50 countries• 140,000 employees

2001

Bruce Ratner – NYC real estate developer• 22 acres at the corner of Atlantic & Flatbush Ave– Vacant land, tenements & warehouses

• Walking distance from 4 gentrified Brooklyn neighborhoods– Above a Atlantic Yards (railway yard)– All of Manhattan & a large part of Long Island was a

20 min ride away

Kelo vs. New LondonOld Dominion Land Co vs. United States

Rindge Co vs. County of Los Angeles

• Permissible to seize private property in the name of economic development

• Public use as defined by US Supreme Court Justice Sandra Day O’Connor includes a stadium

2003-2004

• NJ Nets sold to Bruce Ratner• Nets + Jay-Z + Kelso et al + Olympic bid for

2012 + nostalgia (pro sports in Brooklyn again) = the arena gets built

This Was a Business Decision, Not a Basketball Decision

• Ratner’s purchase of the Nets– Not a stand alone commercial enterprise • (ticket sales + revenue) > (player salaries +

administration costs)

– Eminent domain insurance

• Ratner’s sale of the Nets to Mikhail Prokhorov– Recession in 2009– General purpose real estate bailout

Ratner and the Arena

• This was the asset he wanted out of the deal• Naming rights = $400 million• Annual revenue = $120 million• Operating costs = $30 million• Mortgage = $50 million• $35 million profit on an initial investment of

$350 million (annual return of 10%)

Prokhorov Take

• This project has “explosive profit potential”• Capitalization of the team will earn $700

million more after the move to Brooklyn• Nets approximate annual earnings = $30

million• Arena is worth $1 billion (owns a 20% share)

In Sum

1. Man buys basketball team as insurance on a real estate project

2. Franchise is flipped to Russian billionaire3. Both parties count their money

Next on the Agenda• Move the New York Islanders to Brooklyn

The Art of the Sellout

Case Study: Citizens Bank Park

Philadelphia Phillies

• 3 years of consecutive sellouts– 268 games (as of July 23, 2012)

• Typically draw 44,000 to 45,000 fans per game

• Eventually attendance will decline– 38,000 to 40,000 according to John Weber,

Phillies VP

Citizens Bank Park• 43,651 seats– 43,300 to 43,400 paid fans is considered a sellout

• Standing room sales are added to the total– Brings attendance to over 100% capacity

• 2011 season– Phillies won 102 games– Averaged over 45,400 per game (104% capacity)

• 2012 season– Still over capacity– Selling 600-700 less seats per game

This is a sellout?Empty Seats

Sellout Math• Calculated by tickets sold– Not the actual number of people who come through

the turnstiles• No shows count in attendance• Complimentary tickets are not counted

– Tickets available in secondary markets (ex. StubHub)• Approx 5,000 per game (June 2012 data)• This market is softening for certain non-rivalry

games–Many tickets are sold below face value

Current Attendance

• Through 28 home games– 44,980 paying customers per game– Lead the Major Leagues in average attendance

• Only the Phillies & Red Sox average over 100% capacity

2012 Ticketing

• 28,000 season tickets sold• Began selling single game tickets in February– Unload this inventory as early as possible– “you never know how a season will go” Weber

• The walk up market– At least 500 tickets are available on game day– Can be upwards of a few thousand based on

supply and demand

Ticket Sales Challenges

• Perceived scarcity– 15 games in 18 days, 19 games in August going

to one game is not perceived as scarce good

• Weather– Early season in Philadelphia cold

• Schedule– 19 games in August family vacations

Factors the Contribute to Sellouts

• Size of the stadium– Veterans Stadium seating capacity was 62,382

• Aesthetics of Citizens Bank Park– Servicescape

• The Phillies have been winning

Plenty of Good Seats Were Always Available at the Vet

Drop Off in Ticket Demand

1. New stadium loses its novelty– Novelty of a new stadium lasts 3-7 years– Citizens bank Park was opened in 2004

2. The team begins to struggle– See 2012 & 2013 Phillies

Secondary Ticket Market

• Key indicator• Typically starts slow (April & May)• Picks up in June, July and August

StubHub• Subsidiary of ebay• Official secondary ticket market for MLB• Has access to all MLB team websites including ticketing• Estimated annual revenue of $325 million for baseball tickets

– 8 million tickets sold• Market presence has led to an increase in revenue for teams

– making it easier to sell season tickets to fans who know they can easily sell tickets they cannot use

– Teams generate revenue twice• Initial sale• Via agreement with StubHub MLB gets

– $60 million annual payment– 12.5% of total ticket price