Downtown stadium update...

[Kirby Jackson]

Why do they NEED to c\lose the gap? The value of the team is relative to their market size, which helps most teams to utilize the stadiums which they control for non-NFL events they can profit from. As Forbes states in its story, "The bigger your domain, the greater the opportunity to cash in on the fantasy and reality of the NFL." Also, winning seems to matter, for those that care. The Colts, are a top 10 revenue team in a small market despite not hosting many non-NFL events (like would happen with a new Bills stadium)... why? They win. Been in the playoffs 16 of 20 years. Same with Green Bay. Win, the seats and suites fill, money rolls in.

 

I guess I don't care about rankings like some do. Somehow, people equate the ranking with some personal valuation. The reality is, the Pegulas are diversifying their domain without the need to diversify revenue streams just for the Bills. That's the beauty of what they're doing. Guys like Skeletor Jones pours all their money into the team and stadium. Pegulas have taken a different and smarter approach. They own tow teams, they built a hotel/bar/rink complex on the edge of a public park at the end of a rail line. They're are into beer now. They sell OneBuffalo merch. They aren't done downtown from what recent stories said. Sure, a new stadium may help, but does incurring millions in debt in a small declining market return the same annually as not owning a stadium that the county keeps improving?

 

Everyone here speculates on what a new stadium means because they want to extrapolate the Cowboys and Patriot model out, which assumes continually regional growth in terms of per capita income, population, and corporate headquarters that will buy higher priced tickets.... none of which are happening. Take a look at regional data. Economies aren't created by building new buildings subsidized on the backs of taxpayers.

 

So someone, sometime provide a rational model of how this purported new stadium improves the profit for the owner, including the assumption about ticket, suite prices, and expected new streams of revenues?

 

I suspect from talking my friends with seasons, many of us would opt out of a new stadium downtown because a) tickets would jump substantially, b) tailgating would decrease or disappear and/or they wouldn't want to sit inside a domed stadium. So in a region with stagnating population and economic growth, they aren't going to just add to the existing season ticket and suite holder base, they will actually need to replace a good number of them before they can increase these numbers.

 

And many will say "Great, higher paying customers will get the riff-raff out." Surely, and then you'll have a Sabres game full of corporate ticket owners and wealthy fans more interested in being seen than attending a game. And that crowd the players and fans love turns into a Miami crowd. And anyone who has gone to a game there knows what I'm talking about.

 

To me, the most sense if a new stadium is built is to do it like Pittsburgh did. Keep it on the small side and do it as cheaply as possible. Make it soccer-ready too and as the MLS grows, the Pegulas have a stadium to buy themselves a soccer team (fingers crossed!).

You answered your own question in many ways. They will be bringing the people to the area that they already own. The tailgating will change and move towards bars and restaurants that they own. There will be new areas to sell from a sponsorship standpoint, bars, tailgate area, concert areas, viewing decks, and most importantly naming rights.

 

In addition, there are a lot of people that have been grandfathered in to prime locations and are paying $1000 a year to sit 20 rows up at midfield. That pricing model will shift to align with the rest of the league without question. They can't do that at RWS. They cannot just say, "the seat that your family has owned since 1960 is now $250 and not $100." There are a lot of people that would pay that for that location but don't have access to it.

 

Lastly, I would think that a great deal of the stadium cost will be traded out with Delaware North in exchange for a favorable concession deal. The contributions of Jacobs and the state will leave Pegula with maybe $200M out of pocket for his portion. He pays cash for everything so isn't incurring the debt service. The new revenue streams can offset that in minimal time. It would not be even a little surprising if the new stadium generated an additional $20M a year. They will get $8M for naming rights alone I would think.

 

This is pretty much exactly what I used to do (pricing models, create inventory, etc..). Basically my job was to maximize revenue and there are a billion little tricks to it. As an example we raised more money giving tickets away than selling them at one point. We did these things to trigger certain inducements from the state in the lease deal. We made an additional $5M by giving them away than we would have by selling them. There would be no tickets left for sale and only 10,000 people in the building. That's because we gave away 5,000 that night.

 

Long story short it isn't about having a stadium that can host a monster truck show. It's about getting a larger portion of the money pre-game and post game. It's about having assets like the "Coors light party deck" that jack up the price of their sponsorship deal. It's about normalizing the ticket pricing so that the best locations, come with the best amenities and in turn are the highest priced. You can't have the best ammenities (clubs) different from the best locations. That is just foolish.

[ricojes]

 

While you bring up a lot of valid points, I cannot imagine Pegula paying $1.4 billion for the franchise and not have an eye to move the Bills downtown to be the final bookend to his Harborside ambitions.

I agree, there were a lot of valid points that were spelled out very well. And I think you're correct about the "final bookends", I believe this was TP's vision before he even bought the Sabres...

[thebandit27]

You answered your own question in many ways. They will be bringing the people to the area that they already own. The tailgating will change and move towards bars and restaurants that they own. There will be new areas to sell from a sponsorship standpoint, bars, tailgate area, concert areas, viewing decks, and most importantly naming rights.

 

In addition, there are a lot of people that have been grandfathered in to prime locations and are paying $1000 a year to sit 20 rows up at midfield. That pricing model will shift to align with the rest of the league without question. They can't do that at RWS. They cannot just say, "the seat that your family has owned since 1960 is now $250 and not $100." There are a lot of people that would pay that for that location but don't have access to it.

 

Lastly, I would think that a great deal of the stadium cost will be traded out with Delaware North in exchange for a favorable concession deal. The contributions of Jacobs and the state will leave Pegula with maybe $200M out of pocket for his portion. He pays cash for everything so isn't incurring the debt service. The new revenue streams can offset that in minimal time. It would not be even a little surprising if the new stadium generated an additional $20M a year. They will get $8M for naming rights alone I would think.

 

This is pretty much exactly what I used to do (pricing models, create inventory, etc..). Basically my job was to maximize revenue and there are a billion little tricks to it. As an example we raised more money giving tickets away than selling them at one point. We did these things to trigger certain inducements from the state in the lease deal. We made an additional $5M by giving them away than we would have by selling them. There would be no tickets left for sale and only 10,000 people in the building. That's because we gave away 5,000 that night.

 

Long story short it isn't about having a stadium that can host a monster truck show. It's about getting a larger portion of the money pre-game and post game. It's about having assets like the "Coors light party deck" that jack up the price of their sponsorship deal. It's about normalizing the ticket pricing so that the best locations, come with the best amenities and in turn are the highest priced. You can't have the best ammenities (clubs) different from the best locations. That is just foolish.

 

^ Listen to this man

[JohnC]

You answered your own question in many ways. They will be bringing the people to the area that they already own. The tailgating will change and move towards bars and restaurants that they own. There will be new areas to sell from a sponsorship standpoint, bars, tailgate area, concert areas, viewing decks, and most importantly naming rights.

 

In addition, there are a lot of people that have been grandfathered in to prime locations and are paying $1000 a year to sit 20 rows up at midfield. That pricing model will shift to align with the rest of the league without question. They can't do that at RWS. They cannot just say, "the seat that your family has owned since 1960 is now $250 and not $100." There are a lot of people that would pay that for that location but don't have access to it.

 

Lastly, I would think that a great deal of the stadium cost will be traded out with Delaware North in exchange for a favorable concession deal. The contributions of Jacobs and the state will leave Pegula with maybe $200M out of pocket for his portion. He pays cash for everything so isn't incurring the debt service. The new revenue streams can offset that in minimal time. It would not be even a little surprising if the new stadium generated an additional $20M a year. They will get $8M for naming rights alone I would think.

 

This is pretty much exactly what I used to do (pricing models, create inventory, etc..). Basically my job was to maximize revenue and there are a billion little tricks to it. As an example we raised more money giving tickets away than selling them at one point. We did these things to trigger certain inducements from the state in the lease deal. We made an additional $5M by giving them away than we would have by selling them. There would be no tickets left for sale and only 10,000 people in the building. That's because we gave away 5,000 that night.

 

Long story short it isn't about having a stadium that can host a monster truck show. It's about getting a larger portion of the money pre-game and post game. It's about having assets like the "Coors light party deck" that jack up the price of their sponsorship deal. It's about normalizing the ticket pricing so that the best locations, come with the best amenities and in turn are the highest priced. You can't have the best ammenities (clubs) different from the best locations. That is just foolish.

Terrific post. I always appreciate your commentary on this subject matter.

 

Some people are wedded to the past paradigm without realizing that there is a new paradigm that applies to the current time. The fiscal realities of the present are not going to be met by the practices of the past. Business and economic models change. No matter how sentimental one gets about the Ralph Stadium and the cheap seats the current spartan antiquated facility can't be sufficiently upgraded at a cost effective price.. Nothing can be done that will increase the life span of an outdated facility that has run its course.

 

I understand why so many people are so enthused about tailgaiting. But the current scale of tailgating is not going to happen in a downtown/waterfront site where space is at a premium. The reality is that the tailgaters are going to be directed toward establishments that will increase the cash flow not only within the stadium but also to the surrounding establishments.

 

What is very encouraging about this stadium issue is that this new owner and his group know how to wisely plan a project and execute it. As you have indicated in many of your posts related to financing a new stadium project it is a complicated endeavor with many moving pieces. Terry and Kim Pegula bring a level of creativity and sophistication that will get the stadium project not only done, but done well.

[Kirby Jackson]

 

^ Listen to this man

Terrific post. I always appreciate your commentary on this subject matter.

 

Some people are wedded to the past paradigm without realizing that there is a new paradigm that applies to the current time. The fiscal realities of the present are not going to be met by the practices of the past. Business and economic models change. No matter how sentimental one gets about the Ralph Stadium and the cheap seats the current spartan antiquated facility can't be sufficiently upgraded at a cost effective price.. Nothing can be done that will increase the life span of an outdated facility that has run its course.

 

I understand why so many people are so enthused about tailgaiting. But the current scale of tailgating is not going to happen in a downtown/waterfront site where space is at a premium. The reality is that the tailgaters are going to be directed toward establishments that will increase the cash flow not only within the stadium but also to the surrounding establishments.

 

What is very encouraging about this stadium issue is that this new owner and his group know how to wisely plan a project and execute it. As you have indicated in many of your posts related to financing a new stadium project it is a complicated endeavor with many moving pieces. Terry and Kim Pegula bring a level of creativity and sophistication that will get the stadium project not only done, but done well.

Thanks guys!! The point was just that there are lots of things that can be done that people wouldn't even realize that can make a big difference.

 

One more example that I forgot (that may actually be my favorite) is something that my mentor did. He took the entire cost of a suite and reallocated the money between what was a license fee and what was a ticket cost. It added like $3M a year to the owner's bottom line because he took it out of the revenue sharing pot. He basically said that you own the license to the suite through the arena and that is the big number and then you pay $50 a game per ticket in there or something. So, while people paid $125,000 a year for their suite only $25,000 of that went into the revenue pool. I am sure that I don't have it all right here but it was something like that. If you figure 77 suites at $100,000 each is no longer shared you get that $3M number. It took the NBA like 3 years to catch up on this and change the wording in the bylaws. We weren't doing anything against the rules we just found some loopholes. Those are the kind of things that we had to do with a cash strapped owner

Edited September 24, 2015 by Kirby Jackson

[Keukasmallies]

Not really though, the Bills were recently valued as the least valuable franchise in the NFL. A new stadium presents a clean slate with numerous new revenue streams (not just talking about increased ticket prices) to close the gap between the Bills and the rest of the league.

 

For a period of time, the new revenue streams will be diverted to fund the cost of the new stadium (and the costs of managing the continued existence of the old stadium) resulting in a zero-sum experience. Unless the new stadium is funded with public $'s and sold to the community as an investment in the region's future - a scenario which may, or may not, come to pass in actuality. Even in the public money scenario, it's a long time before any positive cash flow is delivered to anyone.

[Kirby Jackson]

 

For a period of time, the new revenue streams will be diverted to fund the cost of the new stadium (and the costs of managing the continued existence of the old stadium) resulting in a zero-sum experience. Unless the new stadium is funded with public $'s and sold to the community as an investment in the region's future - a scenario which may, or may not, come to pass in actuality. Even in the public money scenario, it's a long time before any positive cash flow is delivered to anyone.

I believe that it will be about an $800M stadium funded 1/2 by the state, 1/4 by Pegula and a 1/4 by Jacobs in exchange for the concession rights.

[Captain_Quint]

Terrific post. I always appreciate your commentary on this subject matter.

 

Some people are wedded to the past paradigm without realizing that there is a new paradigm that applies to the current time. The fiscal realities of the present are not going to be met by the practices of the past. Business and economic models change. No matter how sentimental one gets about the Ralph Stadium and the cheap seats the current spartan antiquated facility can't be sufficiently upgraded at a cost effective price.. Nothing can be done that will increase the life span of an outdated facility that has run its course.

 

I understand why so many people are so enthused about tailgaiting. But the current scale of tailgating is not going to happen in a downtown/waterfront site where space is at a premium. The reality is that the tailgaters are going to be directed toward establishments that will increase the cash flow not only within the stadium but also to the surrounding establishments.

 

What is very encouraging about this stadium issue is that this new owner and his group know how to wisely plan a project and execute it. As you have indicated in many of your posts related to financing a new stadium project it is a complicated endeavor with many moving pieces. Terry and Kim Pegula bring a level of creativity and sophistication that will get the stadium project not only done, but done well.

But can I still piss in the sinks?

[BillnutinHouston]

Some people are wedded to the past paradigm without realizing that there is a new paradigm that applies to the current time.

Correct. Likely the folks who don't know what a paradigm is, and are too lazy to look it up or Google it.

Thanks guys!! The point was just that there are lots of things that can be done that people wouldn't even realize that can make a big difference.

 

One more example that I forgot (that may actually be my favorite) is something that my mentor did. He took the entire cost of a suite and reallocated the money between what was a license fee and what was a ticket cost. It added like $3M a year to the owner's bottom line because he took it out of the revenue sharing pot. He basically said that you own the license to the suite through the arena and that is the big number and then you pay $50 a game per ticket in there or something. So, while people paid $125,000 a year for their suite only $25,000 of that went into the revenue pool. I am sure that I don't have it all right here but it was something like that. If you figure 77 suites at $100,000 each is no longer shared you get that $3M number. It took the NBA like 3 years to catch up on this and change the wording in the bylaws. We weren't doing anything against the rules we just found some loopholes. Those are the kind of things that we had to do with a cash strapped owner

I forget the exact split between the RWS club seat license fee and the actual game ticket cost, but as I recall it's around 50/50.

[jimmy10]

Correct. Likely the folks who don't know what a paradigm is, and are too lazy to look it up or Google it.

Exactly. People have no idea that when it comes to the value of the NFL experience, the paradigm is shifting more toward a paraquarters or even a paradollars.

 

/I'll show myself out.

[QCity]

Correct. Likely the folks who don't know what a paradigm is, and are too lazy to look it up or Google it.

 

 

par·a·digm

/perəˌdīm/

noun

1. Business parlance that rose to prominence in the 1990's; terminology often used to distract in lieu of providing actual substance.

"Jack's business model was a complete nonstarter, so he called it a paradigm instead in an attempt to garner support."

[MarkyMannn]

and then you'll have a Sabres game full of corporate ticket owners and wealthy fans more interested in being seen than attending a game.

 

 

You answered your own question in many ways. They will be bringing the people to the area that they already own. The tailgating will change and move towards bars and restaurants that they own. There will be new areas to sell from a sponsorship standpoint, bars, tailgate area, concert areas, viewing decks, and most importantly naming rights.

 

In addition, there are a lot of people that have been grandfathered in to prime locations and are paying $1000 a year to sit 20 rows up at midfield. That pricing model will shift to align with the rest of the league without question. They can't do that at RWS. They cannot just say, "the seat that your family has owned since 1960 is now $250 and not $100." There are a lot of people that would pay that for that location but don't have access to it.

 

Lastly, I would think that a great deal of the stadium cost will be traded out with Delaware North in exchange for a favorable concession deal. The contributions of Jacobs and the state will leave Pegula with maybe $200M out of pocket for his portion. He pays cash for everything so isn't incurring the debt service. The new revenue streams can offset that in minimal time. It would not be even a little surprising if the new stadium generated an additional $20M a year. They will get $8M for naming rights alone I would think.

 

This is pretty much exactly what I used to do (pricing models, create inventory, etc..). Basically my job was to maximize revenue and there are a billion little tricks to it. As an example we raised more money giving tickets away than selling them at one point. We did these things to trigger certain inducements from the state in the lease deal. We made an additional $5M by giving them away than we would have by selling them. There would be no tickets left for sale and only 10,000 people in the building. That's because we gave away 5,000 that night.

 

Long story short it isn't about having a stadium that can host a monster truck show. It's about getting a larger portion of the money pre-game and post game. It's about having assets like the "Coors light party deck" that jack up the price of their sponsorship deal. It's about normalizing the ticket pricing so that the best locations, come with the best amenities and in turn are the highest priced. You can't have the best ammenities (clubs) different from the best locations. That is just foolish.

 

You know KJ, and my own view, I can agree and understand where you are coming from. In my mind, where I would agree with Zonabb, is the price of going to a Bills game will be more priced as a big event now and simply price out a lot of people. And I think that is a shame. Wouldn't be surprised without tailgating and moving to restaurants and bars and stadium venues, higher ticket prices, that the cost of going to a game could easily double. Maybe approach concert prices. Seriously, I could see a couple going to a game and be out $500 when including all the other activities. Things you do on the cheap at RWS.

[Kirby Jackson]

 

 

 

You know KJ, and my own view, I can agree and understand where you are coming from. In my mind, where I would agree with Zonabb, is the price of going to a Bills game will be more priced as a big event now and simply price out a lot of people. And I think that is a shame. Wouldn't be surprised without tailgating and moving to restaurants and bars and stadium venues, higher ticket prices, that the cost of going to a game could easily double. Maybe approach concert prices. Seriously, I could see a couple going to a game and be out $500 when including all the other activities. Things you do on the cheap at RWS.

I don't disagree. The cost of ownership will go up. What now costs you $300 (tickets, parking, tailgating and a few beers) may move to $500 and only a part of that will be the increased ticket price. You may have an additional beer at the "Rolling Rock, Rock and Roll pre-game concert" and another at the Coors light party deck. All of a sudden you have spent another $50 without been noticing. The Bills are getting part of that as well as the money for Rolling Rock and Coors.

 

My brother and I pay $2K for our seats and about another $100 a week (between us) for parking tailgate and beers. The cost of ownership (including preseason) is roughly $3k. At the new stadium this may move closer to $5k I would anticipate.

[JohnC]

But can I still piss in the sinks?

Be creative. Discreetly pee in your empty beer cups. There is a risk though that the people sitting next to you might accidently bump you and cause some spillage.

[PromoTheRobot]

 

 

 

You know KJ, and my own view, I can agree and understand where you are coming from. In my mind, where I would agree with Zonabb, is the price of going to a Bills game will be more priced as a big event now and simply price out a lot of people. And I think that is a shame. Wouldn't be surprised without tailgating and moving to restaurants and bars and stadium venues, higher ticket prices, that the cost of going to a game could easily double. Maybe approach concert prices. Seriously, I could see a couple going to a game and be out $500 when including all the other activities. Things you do on the cheap at RWS.

I don't think prices will go up that much. I think the Pegulas know their market. But also don't think that Buffalo isn't changing. It's not stagnant, as someone described it earlier. There is growth and it's reflected in the prices people are willing to pay on the secondary market. If the Bills and Sabres charge X for a ticket, and the same ticket goes for double on StubHub, then the team knows they are under pricing their seats. That's where Buffalo is today.

[jimmy10]

Long ago I got comfortable with the idea of a new stadium and prices going up. So my lower level corner endzone seats translate to upper level or some such. The Bills are here long term. Ownership is genuinely invested not just in the team, but in the city and region as well.

 

It's all good.

[JohnC]

I believe that it will be about an $800M stadium funded 1/2 by the state, 1/4 by Pegula and a 1/4 by Jacobs in exchange for the concession rights.

I understand the reasoning why Terry Pegula bid so high for the team. He wanted to quickly win the bid and move on. But in hindsight instead of buying at $1.4B there is a good probability that he could have won the contest with a bid between $1B and $1.25. That approximately extra $250 M would have been useful for his contribution to the building of a new facility.

 

Terry P was asked why he bid so high when there was a chance that he could have gotten the team for a lesser price. He responded by saying something to the effect hat he got what he wanted. End of the story. In other words when you got the resources why mess around!

[May Day 10]

I just hope they can take the experience/enthusiasm from RWS and make sure its transplanted and maybe enhanced at the new stadium. Not even necessarily tailgating. I think by then Ill be ready to take it back a few notches and try different, more tame experiences pre game. Ill be maybe on the North side of 45.

[Fadingpain]

Is it a foregone conclusion that the new stadium will be an opening dome?

[GG]

Maybe this thread will move to PPP where it will get the proper economics treatment. But another way of looking at it is that Bills fans have been getting the NFL product at a discount relative to the rest of the league. The owner just plopped down $1.4 billion for the franchise and intends to keep it here. It's not out of the realm of possibility that he would be looking to earn more on that investment and maximize the value of his other holdings.

 

Can't have your cake and eat it too. Bills are staying in Buffalo for a long time. But that means the fans will have to pony up more money for that privilege.