Edmonton perpetual-ticket-money-generation-machine idea gets shot down

Rich Winter, who you’ll remember as the guy with the wacky idea to sell perpetual seat rights to raise money for an Edmonton Oilers arena, was in Edmonton yesterday to present said wacky idea to the city council. Which he did, projecting that it could raise $700 million by selling as many as 2,000 seats for between $278,000 and $417,000, easily paying off the building’s construction cost.

Who could be opposed to that? For one, Oilers owner Daryl Katz, the guy who suddenly wouldn’t be collecting any ticket revenue — ever — for 2,000 of his best seats. Katz Group VP Bob Black issued a statement yesterday that read, in part: “The Katz Group studied the concept of seat mortgages years ago as part of our due diligence. We determined that it would not work for the new downtown arena. … What they put forward is not achievable in our market and we consider the numbers projected to be something of a flight of fancy. Moreover, such a scheme would sacrifice the Oilers long-term financial viability in order to fund arena construction costs.”

Katz’ huffiness at the prospect of an arena-funding scheme that would actually hit his own wallet aside, the Winter plan does seem a bit dubious in other ways. First off, rights holders would get use of the seats, free of charge, for all events at the arena, hockey and otherwise; you try telling Lady Gaga that if she comes to your town, she’ll have to pay for her giant gyroscopes without the proceeds from 2,000 seats because that money has already been spent. Second, $700 million seems awfully ambitious: That’d be an average of $350,000 per seat, which is an awful lot to spend for maybe 100-150 events a year, even in perpetuity. (If I’m doing the math on mortgage rates correctly, it’s the equivalent of spending something like $200 a ticket.)

Following Winter’s presentation, city councillor Karen Leibovici (whose husband works for Katz, but who hasn’t let that stop her from being critical of the arena plans) said: “Maybe people might call me a skeptic, but I’ve always thought you don’t get something for nothing. When a deal sounds like it’s too good, there’s usually a reason for it.” Well put.

3 comments on “Edmonton perpetual-ticket-money-generation-machine idea gets shot down

  1. The idea of a sports facility mortgage funded by, you know, the people who can and will actually pay for the most expensive seats, is a good one in principle. In fact, the ever decreasing owner’s portion of the funding for these facilities is often covered (directly or indirectly) by the sale of PSLs or other advance payments for the right to buy club seats. The difference here is the seats are owned by the buyer, hence the reluctance on the part of the owners (but hey, he’d still make money selling $10 warm beers and $17 roast beef sandwiches).

    If Winter’s plan had been a little more mainstream, he might have gotten some interest (say, something like 4,500 “elite” club seat PSL’s @ $50k each, raising $225M). At least that is something that can be resold, and allows for the generation of revenue from tickets as well. “Buying” your seat is simply prepaying for every event that will ever be held in an arena – and I know of no franchise operation that offers a “bottomless” hamburger license… “Pay $17,000 now and never pay for a Whopper again”? Who’d do that?

    In any case, since Katz’ option seems to be paying essentially nothing for the arena (we still aren’t sure if his $100m is going into the arena or will be siphoned off for use elsewhere) with the Taxpayers paying the vast majority, along with home and business owners in the 30 block district surrounding the facility; with no property tax generated by the arena itself (since the city will own it); no info on who pays for upgrades or operating expenses(though the city has said it believes Katz should)…

    When your option is everything you want at next to no cost, it’s going to take some magical potion to convince Katz to take a hit on any prospective revenue from the facility. Heck, he has even demanded that Northlands close down it’s concert business and hand it over to him, all to ‘save’ the Oilers.

    If there was ever a case to call an owner’s bluff, this is it. He actually has very little leverage, since the market for NHL franchises is falling, and there are very few potential destinations available to him. Finally, anywhere he moves the club to will earn him far less money than he is making now.

    I’m not against a new arena. I’m just against people who can’t afford to buy tickets being forced to hand their tax dollars to a billionaire for no good reason.

  2. Bang on, JB.

    Not much I can add other than asking why this seat proposal wasn’t proposed with less ambitious goals. I can understand why the Oilers wouldn’t want to forfeit nearly a billion dollars in potential revenues over the next 30 years to this idea. That should make anyone somewhat leery plus the idea that there’s $700M+ in money sitting in Edmonton waiting to be tied up in concert and hockey seats is sort of naive. Maybe New York or Chicago, but even that’s a stretch.

    But why not commit 500 seats to this plan and make it all hockey games with a discount to other events? Even if all you could make out of it is $150K per seat that’s still $75M towards the arena. Which is a few dollars closer than they were yesterday and a more attainable goal. And if they one day need more revenues for something else, sell another 250 seats or whatever.

    As well, I’ve talked to friends who live in the proposed arena district tax zone and find it funny that to “save downtown” the very people who have chosen to invest their homes and businesses in downtown sans an arena are being asked to pay a premium to have the Oilers moved there. Another example of poor taxation planning by this city.

  3. It makes you wonder, doesn’t it, Andrew?

    Wild speculation… but what if Winter’s proposal wasn’t “outside”? Could a ‘ridiculous’ proposal like this actually push people toward Katz’ plan?

    I must go and find my tin foil hat… the signals, the signals…