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If there is a sports bubble
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Post: #1
If there is a sports bubble
This may have been posted before (it's from June) but didn't find it in a search.
http://www.huffingtonpost.com/2013/06/24...92094.html

Cal's financing for their stadium renovation calls for payments to jump from $18 million to $30 million in 2032. The attempts to secure an income stream through premium seating has fallen significantly below expectations.

Not unlike the Maryland situation. The Terps have apparently avoided their potential crisis with the move to the Big 10 but nothing appears to be on the horizon that could dig Cal out other than improving the income stream where they are.

This is one of things I've thought would be a major concern if there is a sports revenue bubble or the nature of revenue streams changes.

Cal has about 2 decades to plan and prepare but if revenue doesn't continue rising they face a real issue.

I've said before I think the schools at greatest risk if there is a bubble and it bursts or revenue increases level out are the schools in the P5 who aren't at the top of their leagues in ticket sales and donations because they are likely to have long-term facility improvement financing that they will struggle to support.
11-25-2013 02:59 PM
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SuperFlyBCat Offline
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Post: #2
RE: If there is a sports bubble
A bubble for Cal, yes. They spent 474 Million for a renovation, that is a fortune. Cincinnati's renovation
is 86 Million, all suites have been sold, and most of the other premium seating. 40,000 capacity,
Houston's is building a new stadium, cost of about 120 Million, 40,000 capacity. Stanford's renovation was 90 million,
looks nice to me, capacity around 50,000.
11-25-2013 03:31 PM
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JunkYardCard Offline
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Post: #3
RE: If there is a sports bubble
In a word, it's technology. My two season tickets cost as much as a nice home entertainment system with a 60-inch LED and surround sound, and that's just for one season. I can basically put a damned jumbo-tron in my house for the cost of five years worth of season tickets.

And if I stay at home and watch, I get better replay coverage, the weather is always great because it's indoors, and it's easier to keep up with other games. And I don't have to walk a mile or get stuck in traffic.
11-25-2013 03:34 PM
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Big Frog II Offline
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RE: If there is a sports bubble
TCU raised all of the $160 million for their stadium. So there is no debt. We are fortunate that construction costs are way cheaper than in California, and the stadium is not over a fault.

As for the bubble, I do believe that sports teams, schools, etc. that have gone deep in debt to finance facilites could certainly be in trouble in the future. I think fans are beginning to reassess their sports spending habits. They are getting tired of paying big bucks to watch mediocre entertainment, too much for parking, and way too much for concessions.
(This post was last modified: 11-25-2013 03:58 PM by Big Frog II.)
11-25-2013 03:51 PM
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Love and Honor Offline
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RE: If there is a sports bubble
Miami is raising $80 million in advance for an IPF, the last thing we (or any other athletic program) need is debt. Correct me if I'm wrong, but I think Cal's renovation cost so much because they had to perform some major structural adjustments since Memorial Stadium was built on a fault line.
(This post was last modified: 11-25-2013 05:17 PM by Love and Honor.)
11-25-2013 03:57 PM
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Wedge Offline
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RE: If there is a sports bubble
(11-25-2013 03:51 PM)Big Frog II Wrote:  TCU raised all of the $160 million for their stadium. So there is no debt. We are fortunate that construction costs are way cheaper than in California, and the stadium is not over a fault.

As for the bubble, I do believe that sports teams, schools, etc. that have gone deep in debt to finance facilites could certainly be in trouble in the future. I think fans are beginning to reassess their sports spending habits. They are getting tired of paying big bucks to watch mediocre entertainment, too much for parking, and way too much for concessions.

Cal has already raised as much as TCU raised -- the difference obviously is the much larger cost. The long-term financing for the balance is ok except for the component relying on premium-seat sales, and the shortfall, as the Wilner article notes, is about $120 million. So the athletic department has until 2033 to make up that $120 million, probably 80-90 percent of that from fundraising. Given the money raised from donors fairly quickly in recent years for other athletics spending, $120 million over 20 years isn't too much to ask if the fundraising is competent.

The point does remain, that it's a poor idea to project ever-increasing revenue from ticket sales. Every Cal football and men's hoops game is televised, and the same is probably true of most other P5 programs, so good luck with any "premium seat" concept that asks us to pay 3 times as much for our tickets as we are already paying. Realistically, schools will be fortunate if the ticket revenue stays flat.
11-25-2013 04:23 PM
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lumberpack4 Offline
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RE: If there is a sports bubble
IIRC, Cal's stadium straddles and earthquake fault. While Maryland seems to have solved some it's problems, it's income stream will be light years behind the B10 income stream of Michigan, OSU, Wisky, Penn State, Iowa, and Nebraska. Maryland barely generates $50 million now in athletics and their school contributes some $15 or so million a year, and that was before the ACC started holding money. Once in the B10 that 50 should grow to about $65 or so million, but the B10 big boys will be bringing in about $130 a year.

Right now in the ACC UM is only running about $15-25 behind FSU, UNC, Clemson, etc. So to say they have improved their financial situation is problematic.
11-25-2013 04:49 PM
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john01992 Offline
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Post: #8
RE: If there is a sports bubble
there is without a doubt an upcoming bubble for football. every pro sports franchise knows this as do most college football athletic directors. TV is proving to be a great alternative for the fans rather than paying the money to watch the game in purpose. the football teams at the college & pro levels are quite literally a victim of their own success.

football right now has a stranglehold on the sporting market and has never been stronger. however how much further can they outpace themselves from the other sports? as the old saying goes "the bigger they are, the harder they fall." the concussion issue could very well be footballs ultimate downfall and the stats showing the declining participation at the pee wee level are very telling of this.
11-25-2013 05:16 PM
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arkstfan Away
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Post: #9
RE: If there is a sports bubble
I'm no expert on fund-raising but a board I was on built a building. We secured some small gifts and one large gift that left us about 45% short of what we needed. The board (before I was elected on) voted to borrow the rest and keep fund-raising so we could get in the building (the building also generates some revenue). What happened was, as soon as the exterior was completed, fund-raising dried up. People figure you got it built so something else needs their money worse.

We ended up bringing in outside fund-raising help who scolded the board for having built without having met the target and said people don't donate to built buildings.

If that is accurate, then Cal may find some difficulty raising the remaining money.

The good news for Cal is they have nearly 20 years to attack the problem. It's a reasonable guess that more than once in the next two decades they will have seasons where the fan mood is good and ticket sales and donations will be up. They will just need steady leadership disciplined enough to attack the debt rather than spending the new found money on something else.
11-25-2013 05:54 PM
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SuperFlyBCat Offline
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Post: #10
RE: If there is a sports bubble
(11-25-2013 03:57 PM)Love and Honor Wrote:  Miami is raising $80 million in advance for an IPF, the last thing we (or any other athletic program) need is debt. Correct me if I'm wrong, but I think Cal's renovation cost so much because they had to perform some major structural adjustments since Memorial Stadium was built on a fault line.

That goes for just about everything over there. Isn't Palo Alto in the same spot for damage? My guess is that there are draconian laws that force state institutions to spend more than they have to.
11-25-2013 06:03 PM
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Wedge Offline
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Post: #11
RE: If there is a sports bubble
(11-25-2013 06:03 PM)SuperFlyBCat Wrote:  
(11-25-2013 03:57 PM)Love and Honor Wrote:  Miami is raising $80 million in advance for an IPF, the last thing we (or any other athletic program) need is debt. Correct me if I'm wrong, but I think Cal's renovation cost so much because they had to perform some major structural adjustments since Memorial Stadium was built on a fault line.

That goes for just about everything over there. Isn't Palo Alto in the same spot for damage? My guess is that there are draconian laws that force state institutions to spend more than they have to.

Memorial Stadium is right on top of the Hayward Fault. As renovated, it will theoretically withstand a major quake right underneath the stadium.

Stanford's stadium is not on a fault line. The San Andreas Fault is a few miles west.
11-25-2013 06:13 PM
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lumberpack4 Offline
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RE: If there is a sports bubble
(11-25-2013 06:13 PM)Wedge Wrote:  
(11-25-2013 06:03 PM)SuperFlyBCat Wrote:  
(11-25-2013 03:57 PM)Love and Honor Wrote:  Miami is raising $80 million in advance for an IPF, the last thing we (or any other athletic program) need is debt. Correct me if I'm wrong, but I think Cal's renovation cost so much because they had to perform some major structural adjustments since Memorial Stadium was built on a fault line.

That goes for just about everything over there. Isn't Palo Alto in the same spot for damage? My guess is that there are draconian laws that force state institutions to spend more than they have to.

Memorial Stadium is right on top of the Hayward Fault. As renovated, it will theoretically withstand a major quake right underneath the stadium.

Stanford's stadium is not on a fault line. The San Andreas Fault is a few miles west.

I've heard you could see the fault in and around the stadium - never been there myself.

http://farm1.static.flickr.com/66/212330...5e7a77.jpg
(This post was last modified: 11-25-2013 06:36 PM by lumberpack4.)
11-25-2013 06:34 PM
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JRsec Offline
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Post: #13
RE: If there is a sports bubble
(11-25-2013 03:34 PM)JunkYardCard Wrote:  In a word, it's technology. My two season tickets cost as much as a nice home entertainment system with a 60-inch LED and surround sound, and that's just for one season. I can basically put a damned jumbo-tron in my house for the cost of five years worth of season tickets.

And if I stay at home and watch, I get better replay coverage, the weather is always great because it's indoors, and it's easier to keep up with other games. And I don't have to walk a mile or get stuck in traffic.

I think you are correct in that technology is a major contributing factor but not the only one. The super rich may attend any of our venues and sit in the same luxury they have at home. We call those skyboxes. But everyone else will sit in various open sections of the stadiums, segregated by donation level, and brave the elements, the bad food, lines at the restrooms, difficult parking, and long waits to get in and out of the area. Those people are confronted with the comfort, luxury, and most importantly ....the cost effective measure of simply staying home. So you are right in that technology is playing a major part, but the part it is playing for many is that it makes a decision possible. Do I put my money into tickets and headaches, or into technology that gives me pleasure for the game and for the whole household's entertainment? So in reality it is a budget issue that arises. Americans in droves are cutting back. Their retirement savings has not recovered from 2008, their earning power is being eroded by inflated food costs. Gasoline, while experiencing a hiatus from its high is nevertheless still hovering at over $3 a gallon. Many wage earners have had their hours scaled back, many people have lost jobs, or had to accept lower paying ones, so it is just very hard to justify what in many P5 conferences is a $2,500 dollar layout for 2 season tickets for their college football games. In the SEC at my school it's a $1200 contribution for the right to buy two season books which cost (with shipping and insurance which is not optional) a shade under $500 a book. And in travel for 7 games with food and lodging depending on where in the state you are driving in from and the cost is easily around $3,500 a year for two people. Make that a family of 4 and you double your costs.

It's easy for my wife and I to attend. We live at home and walk to the games. But even I find myself staying at home to watch more games than I attend. I like being able to keep up with other key games, enjoy not having piped in music blaring in my ears throughout the game to the point where I can no longer talk with the people I have sat with for 40 years, put up with the drunk and disorderly (whether ours or theirs), and have to stand in a line for 20 minutes (exaggeration but not by much) to relieve my bladder at half time.

If we had to decide on budget issues like some of my friends have had to do I would definitely opt for staying at home with the entertainment center. Cable television is high. But the cost of our season books are more than twice as expensive as our top tier cable package is for the entire darned year.

So I don't really call this a bubble because the demand for the product has not been saturated. What has been saturated and is in decline is the crappy game day experience replete with all the headaches enumerated for more than double my cost for cable, and easily outpacing the cost of that home entertainment center which will hopefully last us for 7 years instead of being good for only 1 season like the tickets. Throw in the backyard grill and kegerator and I wouldn't care if I ever graced the inside of the stadium again. But, my love, appreciation for the game, and my enjoyment of college sports in general are near an all time high. And if I want to watch carnage and gamble with my money there is always MSNBC and Bloomberg which is a lot rougher than anything I watch on the field or court, and at times actually frightening.
(This post was last modified: 11-25-2013 08:33 PM by JRsec.)
11-25-2013 08:30 PM
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arkstfan Away
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Post: #14
RE: If there is a sports bubble
JRSec get your coach to bring his team over to his first FBS head coaching gig for a game. A sloppy Lewis BBQ sandwich at the game will make you rethink the bad food comment (though I don't suggest any other offerings we have).
11-26-2013 09:37 AM
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RE: If there is a sports bubble
(11-25-2013 02:59 PM)arkstfan Wrote:  This may have been posted before (it's from June) but didn't find it in a search.
http://www.huffingtonpost.com/2013/06/24...92094.html

Cal's financing for their stadium renovation calls for payments to jump from $18 million to $30 million in 2032. The attempts to secure an income stream through premium seating has fallen significantly below expectations.

Not unlike the Maryland situation. The Terps have apparently avoided their potential crisis with the move to the Big 10 but nothing appears to be on the horizon that could dig Cal out other than improving the income stream where they are.

This is one of things I've thought would be a major concern if there is a sports revenue bubble or the nature of revenue streams changes.

Cal has about 2 decades to plan and prepare but if revenue doesn't continue rising they face a real issue.

I've said before I think the schools at greatest risk if there is a bubble and it bursts or revenue increases level out are the schools in the P5 who aren't at the top of their leagues in ticket sales and donations because they are likely to have long-term facility improvement financing that they will struggle to support.

Arguments for and against the existence of a sports bubbly:

For: TV revenues for sports are artificially inflated by the current ability of ESPN to pay above market rights fees that they can recover from cable companies. Fox and some others are also willing to pay top dollar as they try to copy ESPN's business model. However, the whole thing could come crashing down if internet video replaces cable as the primary medium for video service delivery, since non-sports fans will bypass charges from ESPN and others. This scenario is likely to occur because these new options will create real competition that will allow people sick of paying too much for cable to avoid these charges.

Against: As entertainment options become more diversified, those options that engender strong loyalty among their fans will be the most successful. Sports fans are among the most loyal entertainment fans, and college sports fans are more loyal than most other sports fans in the US. Live entertainment and other premium entertainment experiences can collect top dollar for tickets and even more for premium access (club seats, backstage passes, etc.). From a TV perspective, sports are also able to deliver the most difficult demographic to reach with advertising - males 18-49. This is particularly true of football and basketball, the two most popular college sports. If and when the cable business model evolves, college sports may see its cost recovery mechanism change (changing the mix among flat fees for all subscribers vs. premium subscriptions or Pay per view vs. advertiser support), but the value is too high for it not to thrive under whatever business model ultimately prevails.

I am in the latter camp.

As a follow on, I would offer that ESN just paid $700 million per year for an extension of its package of Major League Baseball about 80 games, including one wild card. By comparison, ESPN pays the ACC $280 million per year. My rough calculations suggest that the ACC package will provide a similar or possibly higher average rating for its highest ranked 80 football and basketball games on ESPN Networks than the MLB package does for its 80 games, which will average a 0.8 to 0.9 rating. Bottom line, college sports is not overpaid.
(This post was last modified: 11-26-2013 11:18 AM by orangefan.)
11-26-2013 11:08 AM
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RE: If there is a sports bubble
"Bubble" has become a new buzzword. Predicted way too often, and overapplied to situations that can't possibly become bubbles.

The problem with Cal is that they spent too much money on a stadium expansion that won't be paid for with ticket revenue. That's not a "bubble." That's called a poor business decision, possible based on hubris. Marketwide hubris may cause a bubble, but the "market" in this case is sports arenas in the San Francisco metro. Or, viewed another way, the "market" might be for Cal football tickets. But there is no definition of the "market" that relates this to sports rights fees. ESPN doesn't care if a sports team has 60,000 or 80,000 seats beyond the fact that there's 20,000 fewer eyes on ESPN's tv commercials.
11-26-2013 11:26 AM
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RE: If there is a sports bubble
(11-26-2013 11:26 AM)Captain Bearcat Wrote:  "Bubble" has become a new buzzword. Predicted way too often, and overapplied to situations that can't possibly become bubbles.

The problem with Cal is that they spent too much money on a stadium expansion that won't be paid for with ticket revenue. That's not a "bubble." That's called a poor business decision, possible based on hubris. Marketwide hubris may cause a bubble, but the "market" in this case is sports arenas in the San Francisco metro. Or, viewed another way, the "market" might be for Cal football tickets. But there is no definition of the "market" that relates this to sports rights fees. ESPN doesn't care if a sports team has 60,000 or 80,000 seats beyond the fact that there's 20,000 fewer eyes on ESPN's tv commercials.

Right. You can't associate a bubble in market value for college athletics with anything more than a bubble in that particular product with any effectiveness.

Cal may not have the ticket revenue but as with almost all P5 institutions the money is sitting around to make up for shortfalls if they happen.

I'm not sure a "bubble" in TV valuations will ever happen when P5 sports are price comparably per school to what the major leagues are earning on TV per franchise. There will always be a high demand for sport viewing in this country and the providers will learn how to monetize it.
11-26-2013 08:43 PM
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