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Raising the roof
Published June 22, 2009
It may seem like a fairy tale, but there’s a place in sports where the recession has hardly scratched, fans happily hand over large sums to guarantee seats years into the future and demand for tickets overwhelms supply.
It’s Wimbledon, or, as the host All England Lawn Tennis and Croquet Club calls the annual spectacle unfolding today on its green lawns, The Championships (stuffy British accent required).
Perhaps the club is rightly arrogant. It has raised more than $420 million for capital improvements since 1986, including the new roof over Centre Court, through debentures, a peculiar British hybrid that combines elements of the personal seat license and secondary ticketing.
Unlike the PSL, its more permanent American cousin, the debenture is renewed every five years, a characteristic that ensures a funding stream in perpetuity. The PSL, by contrast, is a one-time charge that gives the buyer the right to buy tickets over the life of the venue.
The latest Centre Court debentures, first sold by the club in 1920, were issued this spring for the 2011-15 tournaments and raised almost $100 million. Each debenture, good for one ticket for each session during those years, costs $45,362, 19 percent more than the last debenture sale. That averages out to about $700 for each of the 65 days over those five years.
Ian Ritchie, Wimbledon’s chief executive, responded quizzically when asked if there had been any backlash against debentures, similar to furies unleashed in the United States, especially in New York against the NFL Jets’ and Giants’ PSL sales.
“The funds paid for all the improvement, so all the fans, whether they have debentures or not, enjoy them,” said Ritchie, who noted that the debentures cover only about 10 percent of the hard-to-come-by tickets, with the remainder sold by public ballot and distributed through tournament sponsors and corporate hospitality. “The roof over Centre Court benefits everybody.”
And, of course, there is the British custom of not complaining even if the debentures might seem unfair. Not everyone can come up with nearly $50,000 every five years to buy tickets for future tournaments.
“Britain is not as questioning. Americans would be more demanding; they would say this is not fair,” said Jackie Elton, a debenture holder who runs WimbledonDebentureHolders.com, an online forum for debenture holders to sell their tickets.
Debentures, as opposed to the tickets a buyer receives from owning a debenture, can also be bought and sold through two brokers in London — Hawkpoint and Evolution Securities — with prices listed in the Financial Times once a month.
The main value of the debenture is that it provides the only tickets, about 2,300 on Centre Court, that the club permits to be traded. All others are not transferable.
“Ninety percent of Wimbledon tickets on the Internet are debentures tickets,” Elton said. The remainder are sold in violation of club policy.
Essentially, what the club has done is allow the debenture holders to become an official secondary ticket market. Debenture holders can charge anything they please for the ducats, or use them themselves. Most turn a profit on their investment.
A ticket to today’s session for a fan who beat the odds and won a ticket through the public ballot cost $66. About one in 10 ballot submissions scores tickets. On Elton’s site, which she says offers among the cheapest prices on the Internet, the low price for two tickets to the same session was $1,036.
In return for winning the right to charge these kinds of markups, the debenture holders pay the club the exorbitant sums every five years, and both sides seem pleased with the arrangement. Elton said her site is doing record business, fueled in part by wealthy American tennis fans.
Unlike most sporting events or teams that sell tickets online, Wimbledon does not do so on the tournament’s Web site. Instead, the club over its 132 years of running the tournament has developed this complicated system, which has enriched the debenture holders and, in turn, the tournament.
Debentures, in fact, are popular across the United Kingdom, utilized by disparate entities ranging from Wembley Stadium to England’s largest rugby venue, Twickenham Stadium.
But could they work in the United States?
The U.S. Open Tennis Championships briefly considered using them when the event in recent years discussed building a roof at the National Tennis Center, but nothing came of the discussion, said Arlen Kantarian, the former chief executive of pro tennis at the U.S. Tennis Association, the Open’s operator. The event still has not committed to a roof, and debentures are believed to be off the table.
High demand is a must for any event considering debentures. Still, both the NFL Jets and Giants have long waiting lists, and they have so far been unable to sell all their PSLs for their joint stadium opening next year.
The Jets and Giants erred in not aggressively advertising the benefits of PSLs, said Max Muhleman, who helped create the original PSL for the Carolina Panthers in the early 1990s. Muhleman said his clients have spent seven figures promoting the benefits of PSLs, like the control over the seats and the diminished need for public financing. A debenture in the United States would need to be accompanied by such a marketing blitz, he said.
No such concern grips Wimbledon, where the debenture sales are oversubscribed. In fact, one reason the debentures usually trade for as much as two to three times their value through the two London brokers is that by holding the instrument, the buyer is all but assured of getting in on the next sale.
Other areas of Wimbledon’s business remain healthy as well. The event is sold out. The first match under the roof last month — an exhibition featuring Andre Agassi, Steffi Graf, Tim Henman and Kim Clijsters — also sold out, in just five minutes. IBM just re-signed as a sponsor for five years at an increased fee. Other sponsorship and media contracts are locked in long term.
“Wimbledon is so unique, it is always going to be an incredible opportunity for companies,” said Tony Godsick, an agent at IMG, which handles much of the club’s commercial business.
The event normally earns a profit of $35 million to $40 million.
Ritchie worries that corporate hospitality overall could be down this year, but even here, he is seeing an increase from American companies. The addition of the roof makes it worthwhile for them to come over, he said, whereas in the past the threat of rain scared them off. Even if that increased business does not fill in the larger decline, he added, the main Wimbledon money drivers are TV, tickets and sponsorship, with corporate hospitality a very small slice.
“You’d be foolish to think you are recession-proof,” Ritchie said. “But what inevitably happens is if you are a premier event, people will still want to come and be involved.”