SBJ/20100823/SBJ In-Depth

Gridiron Gold

The understated charm of Michigan Stadium has been uniquely rooted in the cold, hard steel bleachers that run circles around the big bowl.

The renovated Michigan Stadium will generate
millions in additional revenue each year.

The seats are not particularly comfortable and they’re too close together, but in 83 years of football at the “Big House,” none of the fans who packed the place  — up to 111,000 people these days — seemed to mind.

The reason the biggest college football stadium in the country worked is because it stood for the same thing that Michigan football did: simple but successful; substance over style. The stadium was the essence of Bo Schembechler’s “three yards and a cloud of dust.”

But when the season opens in a few weeks, style will have made great strides on substance in Ann Arbor. The “Big House” will be more than just big.

The addition of 81 suites and 3,000 club seats — part of a $226 million renovation by HNTB — will have transformed one of college football’s great landmarks into a showplace for Michigan football. Rather than squeezing cheek to cheek on the old bleachers, suiteholders will now watch games from a climate-controlled environment that features granite countertops, tile backsplash, flat-panel TVs and leather chairs.

Prior to its renovation, Michigan Stadium offered
little more than a giant bowl of bleacher seating.

The substance will be found on the athletic department’s revenue line. With more than 80 percent of the club seats sold and 63 of the 81 suites spoken for, the Wolverines stand to increase their annual revenue by about $15 million, which will take total athletic revenue to more than $100 million in fiscal 2011. Suites with 16 seats sell for $55,000 to $85,000 each, while the range on club seats is $1,500 to $4,000.

Michigan Stadium stands prominently as another example of a school working feverishly to mine more revenue out of its football facility. With the expense side growing each year thanks to rising travel costs, double-digit tuition increases and skyrocketing coaching salaries, administrators are waging a race to keep pace on the revenue side.

“It’s not just about building seats. It’s about creating a long-term revenue stream,” said Dick Baddour, athletic director at North Carolina. The university has $70 million worth of improvements to Kenan Stadium in the works, including 18 new suites. “When you think about this project when it’s paid off, then you’ve got a very significant revenue stream that simply didn’t exist before and that’s meaningful dollars that will help support, in our case, 28 sports.”

Cultural differences

An athletic department’s ability to increase revenue from its cash cow — football — isn’t unlimited. Administrators can raise ticket prices only so many times before they have to look for other ways.

Club seats and suites are now part of
Michigan’s inventory.

Premium seating is the trendiest method to not only increase revenue, but also pay for other projects.

Michigan’s project did more than build new luxury seating, it helped bring the aging stadium into compliance with Americans with Disabilities Act standards and widen the aisles, which allowed for the installation of handrails for the first time. The new premium seats, which will rise high above the top of the bowl at Michigan Stadium, will contain more of the noise and create a louder environment.

The upgrades also created revenue in a venue in which the Wolverines have chosen not to sell advertising on video boards or in-stadium signage. There’s not even a corporate mark on the scoreboard.

“Each school has a different culture and it does have an impact on the revenues they drive,” said Tom Stultz, senior vice president and managing director at IMG College, the multimedia rights holder at Michigan. “Michigan has no signage and they like it that way. That’s the game-day experience they want. Maybe it helps them in other ways, like driving more contributions.”

At other schools, revenue-generating renovations to the football stadium have helped support other projects.

Many of the suite holders attracted to the
new Deacon Tower at Wake Forest had
never bought season tickets before.

Connecticut’s premium seating led to revenue that helped build a football practice facility and training center, primarily to meet recruiting needs.

At Wake Forest, premium seating in the $38 million Deacon Tower opened a whole new fan base for the athletic department. Barry Faircloth, associate AD for external operations at Wake, was astonished to find that more than 30 percent of the suite holders in the Deacon Tower had not bought season tickets before. Suites there go for $28,000 to $50,000 each.

Creating new fans is essential for Wake, which has an enrollment of just more than 4,000, the smallest in the big six college football conferences. The project also showed that premium seating doesn’t just work at schools like Alabama, Texas and Michigan; it’s a viable revenue tool at smaller schools as well.

“We didn’t realize how many fans were looking for a good entertainment option and we didn’t have a product for them before we built the tower,” Faircloth said. “If you build something of a certain quality, people will pay for it. There’s a certain element there, whether it’s corporate entertainment dollars or just people who like to do things in a certain style.”

That Wake Forest was able to not only build, but sell out 26 suites and 1,200 premium seats is an upset in itself, given the school’s small alumni base and woeful football past. Current coach Jim Grobe is the first coach to have a winning overall record at Wake since Peahead Walker in the 1930s and ’40s, and Grobe’s 2006 team won the ACC championship just as the Deacon Tower was taking shape.

“Our timing couldn’t have been better,” Faircloth said.

What about funding?

Building the premium seats and reaping the revenue is sometimes the easy part, compared with how administrators are going to pay for the renovations.

The University of Washington, about to start on a $250 million plan to practically rebuild Husky Stadium, went to the state legislature three times to ask for money and was denied each time. Washington finally settled on a preliminary plan that calls for building 25 suites, 25 loge boxes and 2,500 club seats.

Football’s financial powerhouses
Top athletic department revenue for football and overall*
School Football Total
Texas $87,583,986 $138,459,149
Ohio State $68,196,195 $119,859,607
Florida $66,150,063 $108,309,060
Georgia $65,218,406 $81,496,357
Alabama $64,606,392 $103,934,873
LSU $61,868,953 $100,077,884
Penn State $61,767,717 $95,978,243
Auburn $58,618,819 $87,001,416
South Carolina $57,118,519 $76,254,236
Notre Dame $56,929,397 $81,088,368
Nebraska $55,226,605 $74,881,383
Michigan $52,246,025 $95,193,030
Michigan State $43,506,725 $75,624,811
Tennessee $42,805,360 $92,524,125
Oklahoma $42,638,431 $81,487,835
Wisconsin $40,005,517 $89,842,749
Iowa $38,896,234 $79,521,143
Arkansas $38,630,265 $63,978,641
Texas A&M $38,358,422 $72,886,100
Clemson $35,205,168 $60,167,535
* 2008-09 academic year
Source: SportsBusiness Journal analysis of U.S. Department of Education reports

Most of the recent projects have been financed by a combination of borrowed money and fundraising. Michigan has generated about $30 million in gifts for the stadium renovation. UNC has a 50-50 model, with half of the money coming from gifts and half being borrowed.

When Illinois spent $120 million to build 47 suites and 1,600 club seats in 2008, it achieved its goal of raising at least 15 percent from private sources to start the work. Those new premium seats at Illinois, which have sold out each of the last two seasons despite middling success on the field, have represented $5 million in new annual revenue, according to Ron Guenther, Illinois’ AD.

Schools typically set up reserves to pay for the bonds in case there’s a revenue shortfall or perhaps a bad season leads to poor suite and ticket sales.

“The advice I give everybody is to be conservative,” Guenther said. “The easy trap is to get overly aggressive. You’ve got a responsibility to the university’s administration to make sure you keep your debt under control. Your gate receipts are very tough to forecast, so you have to be prepared to pay the debt no matter what kind of season you have.”

Wake Forest and North Carolina hired PriceWaterhouse Coopers to survey fans and determine the value and interest in premium seating. The firm is doing a similar study for Duke as it formulates a plan to build premium seating at Wallace Wade Stadium.

“There’s a lot of work done behind the scenes before anyone comes out with what they’re going to do,” said Boo Corrigan, associate AD at Duke. “You don’t come out and say, ‘Hey, we’re going to do this, everybody jump on board.’ You have to build the excitement so that by the time a plan comes out, everyone’s already on board.”

E.J. Narcise, principal at Team Services, works with schools to acquire naming rights and identify new revenue opportunities, through either sponsorship or premium seating. He advises administrators to have a plan for debt payments, beer and alcohol sales, displacing longtime fans, possibly relocating the band and students, and a pricing threshold that makes sense for that fan base.

“Some stadiums get smaller in the process of adding premium seats,” Narcise said. “If you’re moving fans who never thought they couldn’t afford to see their alma mater play, that can be very contentious.”

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