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SBJ/July 6-12, 1998/This Weeks News
Here’s what a new ballpark is worth
Published July 6, 1998, Page 1
Documents obtained by Street &Smith’s SportsBusiness Journal show the expansion Diamondbacks expect revenue to escalate to $134 million by 2003, when profits are projected to reach $22.2 million, even after $11.2 million annual debt service is paid.
The breakdown for this year’s revenue projections: $67.3 million from event revenue, including tickets, concessions, merchandise, suites and parking; $29.9 million in advertising and sponsorship revenue, including TV and radio, naming rights and signage; $5.9 million in leaguewide TV and licensing revenue; and $5.2 million in other revenue.
By budgeting for the lowest payroll in the National League West this year ($32.5 million) and projecting only a modest rise in payroll of $2 million a year through 2003, the Diamondbacks were able to forecast knockout profits. All four other NL West clubs carry payrolls of more than $40 million this season.
The Diamondbacks say they could plow some of those gains into a higher payroll if it figures to make them a playoff contender.
“That [high net income] gives us the flexibility to do things when the timing is right,” said Diamondbacks President Richard Dozer. “Our plan is to build through the system and not have one of the higher payrolls in the game. But this gives us the opportunity to take a run at somebody when Jerry [Colangelo, the owner] sees fit.”
The Diamondbacks forecast, taken from a bond-offering memorandum being circulated to potential investors, is based only upon internal projections. It includes no outside opinions on the rosy forecast.
“What is difficult to gauge [with these numbers] is this is an expansion team; it is easier when looking at an existing franchise with a history of attendance and concessions sales behind it,” said Claudia Piper, managing director of Beacon Sports, a Boston-based sports investment banking boutique. “You are really talking about a new company. Had it been the Yankees, then you know what historically the attendance and concessions are. Once the novelty of the ballpark wears off, the question is will they be able to sustain.”
While the jingling cash registers signal prosperity for the Diamondbacks, those figures are poisonous to other clubs trying to compete in ballparks that generate significantly less cash flow.
“These new ballparks just bury us,” said Jerry Bell, president of the Minnesota Twins, who have been unable to secure public funding for a new stadium. “It proves you have to have the tools to be competitive in this industry. It’s not the number of households in your market as much as what your ballpark can do. You have to have a facility designed to maximize revenue, or you’re simply going to fall out of contention.”
The Diamondbacks point to sustenance elsewhere as a reason for their optimism.
The Colorado Rockies, in fourth place in the NL West, are leading the league in attendance. On Wednesday night against the Florida Marlins, the Baltimore Orioles, who were 10 games under .500, drew 41,997 to Camden Yards. Both teams, like the Diamondbacks, rely on state-of-the-art ballparks to fill the stands – even when mediocrity prevails on the field.
“There’s a great analogy with what Baltimore and Colorado are doing,” said Dozer. “Both are still drawing very well. Winning isn’t always the most important thing.”