Scotia Place | 36.85m | 11s | CSEC | HOK

[darwink]

Then their business model is broken and it's time they fix it. Stop giving 80 million per year to players if you're not shoving a couple dozen million under the mattress each year until it's time to build a new facility to operate such business.

We don't expect Broadway Across Canada to pay for their theatre do we? Call their business model flawed?

It has always struck me as extremely bizarre that professional sports have managed to convince society that their form of entertainment requires public subsidy for their buildings. Why don't movie theatres get the same consideration? Why not just retail stores in general? I suppose this goes back ages (literally, think of the Roman Colliseum) but some cities have wised up, unfortuantely many others still take the bait, and as a result, the game continues.

It isn't about convincing. It is a literal market failure—the adverse selection market failure.

And yeah, movie theatres in very small towns are in the same boat. Plenty get public subsidies. Same with stores.

 

[DougB]

We don't expect Broadway Across Canada to pay for their theatre do we? Call their business model flawed?

It isn't about convincing. It is a literal market failure—the adverse selection market failure.

And yeah, movie theatres in very small towns are in the same boat. Plenty get public subsidies. Same with stores.

I don't buy it as a market failure beyond one team getting a subsidy so others claim to need the same to remain competitive. There is nothing whiz-bang about the business models of professional sports or other spectator events. One could claim that emotion clouds decision making on the buy side.

 

[DougB]

Edmonton does get some concerts we don’t, but it seems to vary from year to year. Some years there’s not much difference.
It’s too bad the Saddledome roof design can’t support the new types of concert stages, as the age of the building isn’t an issue concert wise.
I’d almost be as much or more worried about hockey to be honest. I know not everybody is a hockey fan, but I remember people from Winnipeg, who had moved here back in the days when Winnipeg didn’t have an NHL team and that was one of the things they complained about. Their perception was that Winnipeg was a backwater town because of that.
Because we are in Canada and the NHL is the big leagues when it comes to sports, not having an NHL team does put your city in a different light.
It wouldn’t be the end of the world for Calgary but it still would be a negative.

I’m not happy with the situation involving CSEC and the arena, but I also don’t want to see Calgary lose a big league sports team and potentially all concerts. If we get to a point where repairing the current roof is too expensive.

Disposable incomes are high in Calgary. CSEC would be able to recover facility costs through ticket prices. The Flames are in no danger of leaving as too many NHL teams are in poor financial shape.

I'm at the rational end of the spectrum as I have no emotional attachment to sports teams. I'd rather have my teeth drilled that devote any money or attention to team sports, professional sports or any form of spectator event. Building a facility is a business decision in which government should take no risk and have minimal role. That being said, I wouldn't be adverse to government contribtion in kind: ex. handing over land to CSEC as no one else has been able to jump start East Victoria Park.

 

[Surrealplaces]

Aren't we there?

I don't know where it's at exactly , but I recall somebody (Darwink possibly?) posted info about the cost to repair the roof or to re-do the roof and it wasn't worth it.

 

[darwink]

I don't buy it as a market failure beyond one team getting a subsidy so others claim to need the same to remain competitive. There is nothing whiz-bang about the business models of professional sports or other spectator events. One could claim that emotion clouds decision making on the buy side.

Even at 200 nights of use with 15,000 people average and a $20 arena profit per ticket, the numbers are still quite a stretch. I don't think it is a safe assumption that absent subsidies, we would still have arenas.

 

[Surrealplaces]

Disposable incomes are high in Calgary. CSEC would be able to recover facility costs through ticket prices. The Flames are in no danger of leaving as too many NHL teams are in poor financial shape.

I'm at the rational end of the spectrum as I have no emotional attachment to sports teams. I'd rather have my teeth drilled that devote any money or attention to team sports, professional sports or any form of spectator event. Building a facility is a business decision in which government should take no risk and have minimal role. That being said, I wouldn't be adverse to government contribtion in kind: ex. handing over land to CSEC as no one else has been able to jump start East Victoria Park.

It becomes a game of chicken, gambling they won’t leave. Chances are they won’t, but it would be out of our control and if the Flames ever did leave, Calgary would be left with an arena that will be unusable in a few years and it would cost twice as much for us to build a new one ourselves.
It’s highly unlikely we’d ever lure a another team back without having to first build the arena, or very best case scenario, pay for half. Which is where we are at now.

 

[AJX]

Then their business model is broken and it's time they fix it. Stop giving 80 million per year to players if you're not shoving a couple dozen million under the mattress each year until it's time to build a new facility to operate such business.

Not any different then other sports or the music acts putting on the concerts who make millions.
If a mid sized city like Calgary wants pro sports and concerts we have to play along.

 

[adamyyc]

It gets harder and harder to step foot in the Saddledome every time I attend a sporting event or concert at another arena (most recently the Footprint Center in Phoenix).

 

[darwink]

Las Vegas was pretty nice. And I would go to more CFL if the seats were as well laid out as Statefarm in Pheonix.

Also, will never get the something like Statefarm, but likely will have one as good as Las Vegas. You don't realize how much better the layout and seat position can be until you're in them, I agree.

 

[DougB]

Even at 200 nights of use with 15,000 people average and a $20 arena profit per ticket, the numbers are still quite a stretch. I don't think it is a safe assumption that absent subsidies, we would still have arenas.

View attachment 453896

$20 margin per ticket seems low. Also, parking and concession revenue is very high margin (ex. one beer and nachos likely generates $15+ profit). Never understimate the ability of private business to figure out ways to generate more revenue. Assuming 150 nights per year@$60 per attendee profit, plus $30M in annual opex would yield an NPV of ~$320M.Breakeven wouild require about $43 per attendee. Market failure my ass

 

[ByeByeBaby]

Even at 200 nights of use with 15,000 people average and a $20 arena profit per ticket, the numbers are still quite a stretch. I don't think it is a safe assumption that absent subsidies, we would still have arenas.

Only $20 per person arena profit; have you forgotten about the people who buy a second beer?

In seriousness, Forbes has the Flames at $178 million for revenue, with $41 million in operating income. There's two other hockey teams, plus concerts. And that's today in the busted-down ol' poor-me Saddledome. The Oilers have revenues of $230 million, profit of $87 million.

And the arena doesn't actually need to break even -- the Flames value has gone up $435 million in the past decade, per Forbes. If you owned an empty lot in the inner city, spent $5K a year maintaining it and then sold it a decade later for double the price, it would have been a very sound investment, even if you lost money every single year.

 

[Habanero]

I don’t think people realize how low the margins sometimes are on some of these events. Even on a high margin item such as beer, it’s not as much as people think, by the time you pay for the actual beer pay for the delivery system, call mom and pay for the employees who serve it, you might make three or four dollars a beer. You have also have to average in the people who go to an event and don’t have any food or drink at all. There is not a lot of margin on food at the concessions. The only real margin makers are popcorn, and soft drinks.
The utilities, and most of the staffing costs are the same whether it’s 5000 or 15,000.

I don’t think Darwink’s numbers are out of line. Also remember that Darwink is presenting best case scenarios. To have the building averaging 15,000 people per event 200 days of the year is not likely.

 

[Surrealplaces]

Looking at Edmonton gives a decent comparison, though Calgary would probably have more events due to the Wranglers and Roughnecks.

This year Rogers' Place should host approximately 110 events.

-approximately 42 Oilers Home games (split from this hockey season and next)
-approximately 34 Oil Kings home games (split from this hockey season and next)
-average of 3 non hockey events per month

Right now Rogers' Place is averaging around 2 non-hockey events, but it could pick up in the summer. Playoff games aren't included as there are no guarantees of that, but highest possible number is 28 playoff games in total for both teams.

Average attendance for the The Oil kings is around 5K per game.

 

[lemongrab]

A complete guess on per ticket margins isn't a very useful metric to consider...especially when you have to way it against operating expenses that can only be easily summed on an annual basis.

I don’t think people realize how low the margins sometimes are on some of these events. Even on a high margin item such as beer, it’s not as much as people think, by the time you pay for the actual beer pay for the delivery system, call mom and pay for the employees who serve it, you might make three or four dollars a beer. You have also have to average in the people who go to an event and don’t have any food or drink at all. There is not a lot of margin on food at the concessions. The only real margin makers are popcorn, and soft drinks.
The utilities, and most of the staffing costs are the same whether it’s 5000 or 15,000.

I don’t think Darwink’s numbers are out of line. Also remember that Darwink is presenting best case scenarios. To have the building averaging 15,000 people per event 200 days of the year is not likely.

They have to pay staff for ~5 hours, even though 95% of the revenue is generated in the half hour before puck drop and two 15 min intermissions. The margins are plenty healthy, but even things like inventory management can be tougher with such sporadic events; there is plenty of waste in the process of trying to serve 19000 within 15 mins.

 

[darwink]

People are realizing the market failures. Sure maybe you make the $20 margin for flames games (that the flames agreed for a higher facility fee for flames games is evidence of this), but on other events a fee high enough make the arena pencil means the event doesn’t go ahead. So now the second least popular event has a higher fee, which destroys its margin and it cancels. This continues until you only have the Flames, but they can’t cover the arena cost with just flames games, so the facility never gets built.

It is an adverse selection problem, where the revenue maximum and utility maximization is still at a loss. It sucks. It is not unique to sports arenas.

The point of my example is that there are very few venues that have utilization and market power high enough to make money. The O2, Madison Square Garden, the Staples Centre, and the Air Canada Centre are the ones that come to mind. And the Air Canada Centre still had subsidies (cheap loans, a cheap as free land swap) and building at a generational low for construction costs (they got really lucky).

The venues that make money are in metros much larger than Calgary. Most have sports anchors which sell out for half their events or more.

Like I get we all want to not have to subsidize arenas right? But besides Toronto the private funded arenas of the 90s financially damaged their owners so much that they had to sell. The numbers today aren’t any better.