Barclays Center barely breaking even despite #1 arena ranking

Hey, remember how the Brooklyn Nets’ Barclays Center was rated the top-grossing arena in the U.S. for the first half of 2013, and I concluded that it could be “an exception to the rule that arenas don’t usually make money” after paying off construction costs? Turns out I may have been slightly hasty:

In its first full year in operation, the arena brought in about $30 million in operating profit, the company reported on Monday, far less than the more than $76 million projected when the arena began construction in 2010.

That’s from the Wall Street Journal’s Eliot Brown, who took to Twitter to add:

So even the top-grossing arena in the country barely broke even in its first full year. Apparently John Christison was right when he said it’s tough to make money on these things. (Which isn’t really a surprise, him being a longtime arena manager and all.)

Norman Oder of Atlantic Yards Report takes a closer look at why the Barclays Center had that $46 million shortfall in operating profit, and finds that it’s virtually all added expenses:

Brown’s article doesn’t link to the actual SEC filing, so we’re at a dead end for the moment on how the Barclays Center managed to blow through an extra $50 million in spending in its first year. More on this later, I hope.

[UPDATE: Brown informs me that the SEC and bond filings aren't exactly comparable because they don't use the same accounting measures, so it's probably not an extra $50 million in spending. His conclusion that the Barclays Center is barely breaking even stands, though. One possible explanation: Even though the arena is doing gangbusters business, it's likely doing so by offering "generous deals to woo big names, either by offering low rent or by guaranteeing a performer a high portion of ticket sales," as Brown reported in October.]


11 comments on “Barclays Center barely breaking even despite #1 arena ranking

  1. The first table is in the Q10 that appears linked to here….
    http://atlanticyardsreport.blogspot.com/2013/12/from-forest-citys-sec-filing-missing.html
    http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000038067&owner=include&count=40

    Not sure where that second table is from. probably earlier projections ?

  2. The whole business model is bankrupt; even with significant concert and non-sport usage, most arena’s simply can’t maintain their high costs. Which then raises questions that, outside of sports teams, that even the large concert promoters are also fleecing taxpayers in order to keep up their various tours going. There’s simply no other good explanation for it.

    More and more I’m coming to the conclusion that large scale sports and entertainment cannot maintain it’s current levels of profitability without significant public assistance and that there needs to be a re-evaluation of whether that is worth propping up for a very small number of jobs. At what point do we start telling ourselves that trying to serve these industries is simply re-allocating resources from more productive areas?

  3. Yes, tables from SEC filing and bond offering. BUT: Eliot Brown tweeted to say that they can’t be directly compared, given that accounting is different for each document. Still, even if expenses are only 2X projection rather than 3X, as it seems, they’ve clearly overspent in the first year and under-estimated spending.

    They spent more on personnel than they now need, to make a good impression and, at least according to some speculation, gave artists particularly good deals in order to put the arena on the map.

  4. Eliot did confirm to me that his initial conclusion still stands, though: Barclays is still barely breaking even.

    Sean: Plenty of arenas turn an *operating* profit. They just don’t earn enough to pay back their construction costs on top of that. The obvious solution is to just stick with arenas that are already paid off, but somehow that hasn’t caught on…

  5. This is not at all unique to sports arenas… not in the least… More than likely their operating profit will go up.. Early costs are usually a burden on numbers… Again – nothing unique to sports facilities.

  6. “More and more I’m coming to the conclusion that large scale sports and entertainment cannot maintain it’s current levels of profitability without significant public assistance…”

    Well, of course those “current levels” are due in part to subsidies. But the major sports leagues have more than enough revenue to build their own facilities. Owner profits and salaries would take a hit – but 80% of a ton of money is still a ton of money.

  7. “But the major sports leagues have more than enough revenue to build their own facilities. Owner profits and salaries would take a hit – but 80% of a ton of money is still a ton of money.”

    Why would they build anything then, though? They’re demanding new buildings to boost profits, not just because they like shinier cupholders.

  8. “Why would they build anything then, though? They’re demanding new buildings to boost profits, not just because they like shinier cupholders.”

    And, if subsidies weren’t in play, why wouldn’t they build their own buildings for the same reason? The margins would just be slightly smaller because they have to finance it themselves.