SBJ/January 24 - 30, 2005/This Weeks Issue

Ballparks are finding non-baseball profits

If baseball purists ran the sport, the only way Bruce Springsteen, Jimmy Buffett or anyone on a dirt bike would see the inside of places like Fenway Park or Wrigley Field is with a ticket on game day.

But purists rarely consider Major League Baseball’s modern economic principles, like the one that shows how 365 days a year minus 81 home games equals 284 golden revenue-generating opportunities.

Baker Botts LLP held a Client Appreciation event on the field at Minute Maid Park.

MLB clubs increasingly are treading on tradition, opening their ballparks to everything from concerts and motocross events to fraternity formals and business outings. Because the revenue-sharing component of MLB’s collective-bargaining agreement touches only receipts from team operations, the added events generate millions of dollars of extra revenue the clubs won’t have to share with the league’s other teams.

The newer MLB venues best equipped to entertain corporate clients are making the most money from non-baseball operations, but their success is changing the way all teams see their venues.

“We never really said this was going to be an empty baseball cathedral when we weren’t playing baseball here,” said Pat Gallagher, president of Giants Enterprises, the subsidiary launched by the San Francisco team’s owners in 1999 largely to look for other ways to utilize SBC Park.

Also out West, the Seattle Mariners started hosting non-baseball events for profit shortly after Safeco Field opened in July 1999. The team now books about 300 events a year, according to Jennifer Mojo, the team’s director of ballpark sales and marketing. In addition to private parties and corporate functions, Safeco has hosted larger, public events such as WrestleMania and the Seattle Bowl.

Mojo declined to provide revenue figures for the Mariners, but she and several other team officials said most of the clubs that use their parks aggressively for non-baseball events typically generate between $1 million and $5 million annually in revenue from the events. For context, the Mariners in 2003 generated an estimated $170 million in total revenue and paid out $31 million in revenue sharing.

Safeco Field offers fans a "Centerfield of Dreams" package.

“When you look at the dollars [compared with baseball revenues], we’re the stepchild in the grander scheme of things,” Mojo said. “It’s a nice business unit to basically augment and support the overall objectives of the club.”

The Giants have set the economic standard in the ballpark-event business, due in part to an ownership group that designed the privately financed SBC Park with such ventures in mind. Bolstered by good weather, a ballpark considered one of the league’s best and a city with a heavy corporate presence, the Giants have a steady flow of clients willing to pay SBC Park’s use rates: $7,500 to rent the clubhouse for four hours in the evening or on the weekend, $100,000 for the field for the same times, or $150,000 for the entire venue for the day, among other options.

Gallagher said SBC Park is booked on about 120 non-game days per year and that Giants Enterprises generates anywhere from $7 million to $12 million annually for the club, or as much as two-thirds of Barry Bonds’ $18 million salary in 2004.

The prospect of making money they didn’t have to share was a driving force behind the late-2003 formation of Fenway Enterprises by the lucrative but highly taxed Boston Red Sox. Boston last season generated an estimated $220 million in total revenue, second-best in the league, but it also had the league’s second-highest payroll, subjecting it to an estimated $3 million in luxury tax on top of $42 million in revenue sharing distributed through the other MLB clubs.

Fenway Enterprises, which was modeled after the Giants’ venture, now hosts about 150 events a year, most of them corporate lunches or dinners in the Fenway Park’s 406 Club.

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“We always viewed the Giants as the trailblazers,” said Red Sox COO Mike Dee.

Dee said Fenway Enterprises currently generates in the low seven figures in annual revenue for the Red Sox.

Some clubs are using non-baseball events to test their parks’ durability and versatility. Tim Schuldt, CMO and vice president of sales and marketing for the Pittsburgh Pirates, said the fact that PNC Park emerged from an August 2003 Springsteen concert relatively unscathed “emboldened” the franchise to pursue more music and entertainment events.

Springsteen’s 2003 tour also included Fenway Park, Chicago’s U.S. Cellular Field and Milwaukee’s Miller Park, which since opening in 2001 also has hosted George Strait and ’N Sync. And in what could be the biggest sign of a new baseball era, Chicago Cubs officials are working to have Jimmy Buffett perform a pair of concerts at hallowed Wrigley Field over Labor Day weekend.

But concerts, while valuable for the exposure they bring to a venue, are both costly and logistically difficult because of the extra equipment required. A performance by The Cure at SBC Park last summer was the only money-losing event in Giants Enterprises’ brief history, Gallagher said.

The largest economic opportunities are in corporate functions, which means the newer ballparks in popular convention locales — like San Diego, San Francisco, Seattle and Houston — are best equipped to boost clubs’ bottom lines. The Astros had this in mind when they included a 16-room conference center in Minute Maid Park.

The San Diego Padres, by virtue of the local weather and the proximity of their Petco Park home to the city’s convention center, are the envy of many clubs. But as part of the agreement to build Petco Park, the Padres and the city agreed to split all ballpark revenue, with the Padres keeping 70 percent from events held during the season and the city keeping 70 percent from events held during the offseason.

Padres vice president of ballpark development Erik Judson said Petco, which opened in the spring of 2004, will host about two dozen events in its first offseason. Judson said when the Padres host their target of between 75 and 100 non-baseball events per year, they expect to begin generating in the low to mid-seven figures for the club.

The Padres are unique among clubs with new ballparks in their economic obligations to the city. Clubs with older ballparks tend to have more logistical, political and philosophical obstacles to such events.

Besides lacking the facilities for corporate events, teams like the New York Yankees are tenants of the city and have limited commercial access to their ballparks, beyond tours, during the offseason. Concerts are not in Yankee Stadium’s future.

Meantime, at the newer venues, where tradition is a thing of the past, the prospects are promising.

Gallagher noted that most conventions and major corporate events are planned years in advance, and it takes several years for a venue to build enough of a reputation to attract these events. As that happens, non-baseball revenue could begin to rival baseball revenue in small markets with modern facilities.

Officials from Meeting Professionals International, a 1,900-member association for meeting planning professionals that over the weekend hosted its annual conference in San Diego, said they did not have data illustrating the growing popularity of ballparks for corporate events. But in a clear nod to the promise of MLB venues, MPI officials the last two summers have chosen two ballparks — SBC Park and Colorado’s Coors Field — to plan their annual conference.

Said Gallagher, “We can charge significantly more for these private events than it would cost to go to a hotel ballroom or convention center, because what people are paying for is the pizzazz of doing it in a ballpark.”

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