The Sweeper: Tottenham Mortgage their Fans’ Futures
Big Story
New models in stadium ticketing don’t come along too often, and when they do, they are rarely great for fans. Many in England will remember the massively unpopular bond schemes dreamed up by clubs such as Arsenal and West Ham in the 1990s when they were scrambling around for a new way to suck cash from fans to pay for needed stadium redevelopment. These schemes saw fans asked to plonk down upwards of £1,000 for the mere right to purchase a season ticket (the actual season ticket cost extra). Not surprisingly, fan protests saw these schemes scrapped.
As Tottenham Hotspur look to fund money for the stadium they need to compete with their neighbours now at Emirates Stadium, another model is being floated: fans would be given the opportunity to purchase their own seat, in a scheme that might cost the fan anywhere from £1,000 to to £5,000 per year over forty years. As the Wall Street Journal says, “For the price of a three-bedroom home with a pool in a leafy suburb, you can now buy something really and truly invaluable. Your own stadium seat.”
The WSJ says Tottenham could be the first professional sports team to try this model, with two colleges in the US already having approved such an “equity seats right” program. The WSJ notes in passing that “though the idea may seem preposterous—and even repellent—given the state of the economy, proponents say the plan is actually a boon for serious fans because it allows them to circumvent the annual pain of rising ticket prices”.
This, of course, is the rub: with so many people right now defaulting on their actual house mortgages, some might indeed see it as rather repellent of a club owned by a tax-exiled billionaire to raise this. As for the value, some seats in MLS, at least, are also sold as long-term contracts with locked-in limits on the size of season ticket raises. Certainly, though, owning equity in the seat has a value to it and Tottenham’s idea sure beats the bond schemes of the 1990s. Would you be interested in owning a seat at your club?
Worldwide News
- The mess at Portsmouth only gets worse, a warning to all who have put their faith in sugar daddies: the players haven’t been paid this week, and now the chief executive Peter Storrie has admitted “there is no money left”.
- The Chief Operating Officer of WPS explains the ins-and-outs of the league’s waiver process. It’s too much for my head this morning, but it is good to see a league official using a blog to explain this kind of thing. MLS could learn a lesson.
- A US businessman’s attempt to buy Bari has collapsed.
- Goal.com looks at the preparations in Angola for the 2010 African Cup of Nations — all is not well, as Danny Jordaan’s comment is hardly a ringing endorsement: “As for now, no decision has been taken as to whether or not Angola is ready.” Jordaan is heading South Africa’s preparations for the World Cup, with FIFA yesterday announcing they were satisfied with that country’s readiness for the tournament.
- Remember Michael Johnson (not the runner)? The Manchester City starlet of just two years ago has gotten lost in the deluge of new, overpaid stars coming to the club. The Times looks at what went wrong.
- There’s more on the murky mess at Notts County from the Guardian, as the story gets increasingly bizarre. I give Sven til the end of October to get the hell out of there.
- It’s the second matchday in the Europa League group stage. Bill has another beautiful map of the contenders, while Jamie Jackson wonders who cares.
The Sweeper appears daily. For more rambling and links throughout the day every day, follow your editor Tom Dunmore @pitchinvasion on Twitter.
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Tom Dunmore is the founder and editor of Pitch Invasion. Follow him @pitchinvasion on Twitter.
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can I humbly suggest that large parts of Portsmouth problems pre-date the present owner and can be laid at the door of a CE who seems intent on dragging everyone down…?
I also can’t help but feel that when clubs issue long-term season tickets they’re storing up problems for the future – season ticket sales are what keeps the cash flowing over the summer months. Take away that income, and that’s a significant drop.
It’s a short-term solution for quick cash that can store up long-term problems.
Clareonenil — couldn’t agree more, the problems at Portsmouth go way way back. Storrie should have plenty of blame coming his way, and his playing of the martyr right now is hard to stomach for Pompey fans, I’m sure.
Gary — I think so too, though it’d be interesting to see some of the analysis that convinced the two US colleges to go for the scheme. Ultimately, it would be pretty curious if fans owned most of the seats in the stadium and clubs weren’t making any money from them, but that’s so far down the line that present ownership isn’t likely to be concerned about it. Any idea as obvious as this in some ways also must have an obvious downside for not having been tried before (as far as I know, anyway).
Gary – in order to get the new stadium built, funding has to be found somewhere. As I understand it, Spurs hope to fund the vast majority of the construction costs from a combined stadium naming rights and shirt sponsorship deal. If further funds are required, they will be provided, at least in part, by the sale of property with planning permission for the supermarket, hotel and 450 homes – all of which are included in Spurs’ development scheme.
This seats rights scheme is just another funding vehicle. At the very most, I would expect a maximum of 3,000 seats to be sold under this scheme. In reality, the figure will probably be far less than that. I would also expect that the vast majority of seats sold under this scheme will be expensive, middle tier seats for corporate clients and the wealthier among Spurs’ support. I can’t think of too many other fans who would be prepared to pay for ten, twenty or even forty years in advance – even taking into account the fact that subscribers to the scheme will be immune to subsequent ticket price rises.
Given that Spurs’ new stadium will have 22,000 more seats than the current White Hart Lane and, more specifically, 5,000 more corporate / club seats than the current stadium, there is not the slightest danger that selling 3,000 seats (or, more likely, 1,000) in advance will, as you say, take away ticket sales income. Spurs’ annual income from ticket sales will still be far, far higher at the new stadium than it is currently.
The alternative would actually be far riskier and potentially more destabilising for Spurs. If Spurs couldn’t raise all the required money from sponsorship deals and property sales and if the seats rights deal was dismissed for the reasons that you suggest, then the club would be forced to take on debt. Personally, I’d far rather that Spurs raise £50 million from the advance sale of x number of seats than than that they raise £50 million of debt finance.
The seats rights deal would eliminate the element of risk and it would also almost certainly be financially more profitable in both the short and long terms.
It would be interesting to consider if, say, Arsenal had used this scheme in the 1990s instead of the bond idea. Even if limited at 3,000 seats, if people had locked in at those prices, the amount of lost revenue a decade later would be considerable per game, given ticket prices have risen so astronomically. It’s still hard to see it as anything but a short-term cash grab, isn’t it?
Tom – as I said, the alternative is debt finance. And that has a cost.
Let’s say Spurs didn’t go with the seats rights idea for the reasons you mention and, instead, take on £50 million of debt, repayable over ten years.
You’d currently be looking at a comprehensive repayment of about £8 million per annum over ten years – assuming the club decided on a fixed rate loan.
Now let’s imagine that Spurs prefer not to go down the debt finance route and, instead, do implement the seats rights scheme. Let’s say that, as will inevitably occur, the vast majority of seats sold under the scheme will be of the corporate variety. Let’s also say that they are sold at an average of £2500 per annum and for an average of ten years – the same time frame as the loan.
In order to raise as much capital as raised by the debt finance, therefore, Spurs would have to sell 2000 seats under the seats rights scheme (2000 seats x £2500 x 10 years = £50 million).
Because of the 2000 seats sold in advance, Spurs’ annual income from ticket revenue would therefore be reduced by £5 million. But that doesn’t take into account the ticket price rises to which those seats would otherwise have been subject. So let’s allow for a price increase by averaging out the ticket prices for such seats at £4000 (and that’s probably excessive) over the duration of the ten years.
In other words, the annual income lost to Spurs as a consequence of having sold 2000 seats in advance would be £8 million per annum – exactly the same as the cost of repaying a £50 million debt. So, in terms of the profit and loss column, Spurs would be no worse off by implementing the seats rights scheme.
In the meanwhile, the club would be debt free. Moreover, it would have the certainty of knowing that a set number of seats had already been paid for. Any company prefers the certainty and stability of having made a certain percentage of sales up front.
In conclusion, you’re right to say that this is a cash grab, as you put it. But it isn’t short term.
One other thing, because I’m not entirely clear………..You are aware that anyone who buys their seat under this scheme isn’t doing so in perpetuity and that it will only be for a fixed term?
JimB — thanks for the detailed response (the other alternative, of course, is not building an expensive new stadium in the first place, but that’s another discussion).
It does seem we’re talking about two different concepts, though. An average ten-year fixed term is nothing like the scale the WSJ article was citing as the model from college American football: these were at Cal $220,000 apiece over a 50-year term for (eventually) outright purchasing best seats (which you’re suggesting are the ones Tottenham will be selling). Of course, college football has a much shorter season than Premier League soccer, so one would imagine the cost for the best seats for Spurs would be considerably more.
Ten years or fifty years changes whether this is short-term or long-term thinking quite substantially, I think. In 2053 years, having your best seats at 2013 prices could be quite a significant loss. If Spurs’ scheme is different and has much shorter contracts (do supporters then own them when these fixed terms are up? What happens?), I would love to know all the details — the WSJ article was pretty vague, so if you have more please do pass on the links. If it’s just a fixed contract for club season tickets with a long-term contracted limit on price raises, this is nothing new at all — as I mentioned, MLS clubs do the same thing already.
Tom – good questions and you’re right…the WSJ article is a bit vague.
The company in question is Stadium Capital Financing Group. This is their website. I’ve linked you to the page that compares Stadium Capital’s Equity Seat Rights scheme with the much derided Personal Seat License (PSL) scheme that is common to many new US stadiums.
http://www.seatrights.com/comparison
As you can see, it lists as one of the benefits of ESR the fact that fans will receive “free tickets for an extended period of years”. Not an indefinite period. Extended.
So, I would say that the best analogy would be to buying a home on a leasehold. The home is your property for the duration of the lease (say, hundred years) and you can do to it what you want (including selling it for a profit) but, upon expiration of the lease, the property is returned to the freeholder.
And I don’t think it really matters whether we’re talking fifty year or ten year ESR deals. Yes, after 50 years ticket prices would have far exceeded the initial, hypothetical £2500 annual cost of these tickets (that is, after all, part of the attraction for potential buyers). But:
1. Just think of all the capital that the club could raise up front. If the same 2000 seats were sold in advance for a fifty year period, instead of ten years as in the earlier scenario, then Spurs would raise a massive £250 million up front from the seats rights deal. That would virtually cover the construction costs for the new stadium. And that would mean that the stadium naming rights and shirt sponsorship deal, instead of being paid up front to fund the stadium build, could be paid annually – contributing £20 million + extra to revenues.
2. Don’t forget that we are only talking here about a small proportion of the available tickets. If 2000 seats are sold in advance (and let’s assume that all of them will be premium seats), then there will still be a further 6,100 premium seats and 50,100 normal seats available for sale every year.
For Spurs, therefore, I think it’s a no brainer. For fans, however, it really depends how deep their pockets are.