Seattle arena finally making money, now that NBA has left town

Ever since the Seattle Sonics abandoned KeyArena for Oklahoma City, the old venue has been … doing really, really well, actually, according to the people who run it:

The arena is now quite profitable, thank you — much more so than in the days of the Sonics, to the surprise of many who saw an uncertain future for the sports venue after the team’s departure in 2009.

The Lower Queen Anne facility has gone from losing money in the Sonics’ final years to turning more than $1.2 million in profit for Seattle last year.

The trick? Instead of having to set dates aside for the Sonics, the arena is booking more concerts, which actually pay rent. Hmm, where have we heard this before?

It certainly helps that KeyArena’s construction debt is paid off, with the help of the Sonics owners paying off a chunk of it as part of their deal to skip town. Still, this is a good reminder that sports teams aren’t quite the economic anchors they pretend to be, and maybe a good sign that KeyArena could coexist with a new building if one is ever built to bring back the NBA to—

Ironically, if the NBA ever returned to Seattle, likely in a new arena, the Sonics’ old home would suffer. Another reason KeyArena has remained sustainable is because it hasn’t had to compete with another arena.

Forget I said anything. Seattle, be very happy you only have one arena, and one pro basketball team.


28 comments on “Seattle arena finally making money, now that NBA has left town

  1. Key Arena is a money loser (and so is Panther Arena in Milwaukee, for that matter). Seattle Center operated Key Arena and spends $5 million/year or so in General Fund money on non-event maintenance, upgrades and operating costs. The article is pure B.S.

  2. Source for the $5m figure, Ben? Also, that was true in the Sonics years as well, no? So the arena would still be doing better without the NBA, even if it’s just having less red ink.

  3. Has anyone asked the business near Key arena which brought in more income – Sonics vs. others? Because after the Sonics left, a fair number of business also had to close their doors. Good places employing good people. Places open 7 days a week, not just for Sonics games. So there is more to the story still if we’re honest. Doesn’t mean it would cover the difference, I can’t speak to that, but certainly a consideration.

  4. @ Chris: The article says that local businesses did better when the Sonics were playing.

    I forget the exact details but the Storm get a subsidy to play there. Either it is a portion of the naming rights or rent free.

  5. Does anyone have figures for which businesses closed after the Sonics left? Because it does seem kind of odd, given that they only played 41 home games a year.

    Also, it occurs to me that in 2008-09, there may have been some other factors in businesses closing…

  6. Please–I’m not sure what to make of stories that claim that neighborhood businesses did better because a basketball team played 40 nights a year.

    In reality, these NBA teams want to build arenas with the kinds of restaurant options inside that will put the “neighborhood places” out of businesses. Which is one reason Key Arena was deemed to lack “amenities” for the “modern” NBA.

  7. There were a handful of bars/restaurants/gift shops that closed near the Key Arena when the Sonics left. Not being from Seattle I can’t tell you more specifically than that. The proposed new arena in Seattle would include some restaurants/bars within it, but I don’t think there are any competing interests in that area currently, so while it may draw away from other places, they’re a bit further out than might be the case in other pro-sports cities where similar style new stadiums have been built.

    The other thing I’d be curious to see is the revenue differences generated from taxes in that area. Are concerts as good for tax revenue as sports games? I’m sure someone smarter than me has measured that somewhere along the line.

  8. Neil, the article talks a bit about the local businesses affected. Seems the concert going crowds do not frequent the bars and restaurants in the area. Many did close after the Sonics left, on the West side of the Key (some probably because of the recession which was in full bloom at the time). However, Seattle Center is also home to the Opera and the ballet. So several new restaurants have opened to the North of the arena. What is most interesting in the article is that a city the size of Seattle needs open dates for concert venues with a capacity of 15k or more. When the Sonics were there, they controlled the dates. In fact, they refused to let musical events in during Seattle’s busy summer/festival season. The Key is making money now that is was prevented from making before. However, the demographic of concert goers does not spend the ancillary money that NBA fans did. Also, concerts demand less concessions, less workers, equivalent security and, oddly, less parking. Seattle has not benefited from having its NBA stolen by a league that wants cities to bend to its will, like Sacramento and Milwaukee (apparently) and owners who hoped that an NBA team in there city would bring a certain cache. Of note to me was the comment from Clay Bennet, owner of the Zombie Sonics as Bill Simmons calls the team, who said, when the team arrived, that the arena there was fine for the time being, but will need to be replaced in the near future. OKC is doing nicely, which is not true of Sacramento. I suspect a new arena will be going up there soon.

  9. As to the tax question, it’s clear from this article, and many others around, that the average NBA fan spends more than the average concert fan. WA does not have a state income tax, so it generates money from higher sales taxes. NBA tickets cost more than most concerts (Some bands, like, say, the Eagles, cost an equivalent number) and the fans buy more food, gear and parking. The Key has been filled with newer, younger bands and their fans don’t yet of a lot of disposable income. The NBA brings the bigger tax revenue. Neil would point out that subsidies to pro teams eat that profit up. He’s probably right.

  10. Ball Hawker, I did see the anecdotal evidence in the article that concertgoers spend less at restaurants and the like. I’m curious if anyone has tried to quantify it, though, via sales tax receipts or whatever.

    Also, even if NBA fans do spend more, there’s a downside there if they’re spending more inside the gates, since that leaves them less disposable income to spend on non-game nights at other locations. Are Seattle bowling alleys, to pick economists’ favorite example, doing better now that the Sonics are now gone? I have no idea, but it’d be interesting to see.

  11. If the Key Arena is profitable (and that’s a big if) because AEG runs it now, and AEG actually can run a venue. It has nothing to do with the Sonics.

  12. It should also be noted that when the Sonics left in 2008, it was actually one of the worse years for small business, like bars, since something like 1932. Lots of places closed all of the US that were not associated with the Sonics due to consumers cutting back and financing just drying up.

    There really isn’t any quantifiable evidence that these places closed due to the Sonics leaving, or would have still closed even if the Sonics remained due to the very crappy economy.

  13. Also, Bennett paid off the Key’s debts to break the lease in 2008. The big problem with the venue is it doesn’t make enough money to make capital improvements to the building, and therefore make it easier to book.

  14. So if improvements to the building wouldn’t bring in enough new revenue to pay off their cost … then it’s not worth making the improvements, right?

  15. This is a very interesting string. Thank you, Neil. The improvements the Sonics demanded for the Key when it was redone in the 90s really involved, as Neil states, inside the gate improvements. In this case, a restaurant, three bars, more concessions and bathrooms, a larger scoreboard, new and larger dressing rooms, a better load in area, and a ring of luxury boxes. The space for these was found by digging the bottom of the arena out and lowering the floor. It was these improvements that were paid off upon exit. I doubt that many of those improvements made a huge difference to current events at the Key. The load in space is obviously a nice addition because modern stage performances have larger sets. The Key’s profitability, and remember, we are talking about a million dollars, really doesn’t speak to any need for stadium improvements. What was needed was an arena with open dates to accommodate more tours, availability for NCAA tournaments, ice shows, etc. something the Sonics didn’t allow. The big loser in the Sonics move was probably the Tacoma Dome. Concerts, truck shows, college and high school tournaments often went there because there was no room or open dates in Seattle. Tacoma now has open dates, and is struggling with decisions about deferred maintenance and considering more investment to attract more events. The Times article said that if a new arena comes online, the Key, and the Tacoma Dome, will suffer. I doubt it. The stand-alone Key will still find a reservoir of need for stadium events. This region is growing, and fast. The Key already houses a wide range of events unsuited for any new arena.

  16. I would imagine that the Sonics official merch store certainly closed when the team left town. Did anything else? And if so, what effect did that have on the local economy?

    We tend to assume that stores closing means economic hardship. In reality, there are only so many consumer dollars to go around. If one store closes but another sees an upswing in sales and adds some (or all) of the jobs lost in the one that closes, has there been a negative economic impact? Even the landlord of the now closed store might find his next tenant pays more (or just doesn’t fall behind etc).

    The point is, judging economic impacts of anything is not easy. Any study designed to measure impacts tends to focus on a single development or project and ignore associated/knock on effects in other areas or sectors. One needs to look at net tax receipts across wide areas to see what effect, if any, one business leaving or arriving actually has.

  17. http://www.seattle.gov/financedepartment/11adoptedbudget/documents/CENfromARTSCULTUREANDRECREATION.pdf

    That’s a few years old, but it’s still probably around the same amount of tax money going to the arena.

    And yes, you’re right that the City not having to pay even more in event costs is good, but I can tell you in my one trip to that area that it was somewhat downtrodden and the Seattle area residents I was with said that the Sonics leaving killed the bar/restaurant business in the area.

  18. I would say that about 4 or 5 restaurants/bars closed on the street that borders the key to the west and at least one to the south. As one reader points out, it could have been related to the economic downturn. That said, Seattle was rather resilient compared to other cities. In 2009, the Seattle Thunderbirds also moved out of the Key arena down to Kent to play in Showare. They probably averaged around 4 thousand so not big events but I know the hockey watching crowd was more likely to hit the bars before and after.

    I know a reader pointed out that there is a shift of getting the food and amenities inside arenas which I agree with but there is still a substantial amount of people that spend time outside the arena drinking and eating. It seems to be more additive than a replacement. My only data point is the bars outside Safeco and CenturyLink are packed before games. That is consistent with my experiences at all other cities as well….with the exception of Chicago for Blackhawks & White Sox games.

  19. Does it get people to spend more money than they would otherwise on the whole, though? Or do people just empty their wallets on game nights and stay home other times as a result? Sales tax data consistently hasn’t shown any boost from the presence of teams, but it could just be too small a signal to tell from the noise.

  20. I know the lack of data and read the book so I know the “no measurable impact” statement.

    There is an impact but it is almost impossible to measure. 45% of Seahawks Season ticket holders are from outside King County and 5% are “international”. I’ve also talked to a ton of folks at a bar outside Safeco before the Toronto Blue Jays games and most of the Blue Jay fans were from BC & Alberta. They make the trip every year. (Yes, I know that is cherry picking a bit but I wasn’t really trying to do a scientific survey).

    Another, not scientific data point is the 4th table on these results. http://nhltoseattle.com/2014/06/09/nhl-to-seattle-survey-1-results/

    I certainly am not using the data to show the ROI for the city but my point is there is an impact, even if you can’t measure it.

  21. I don’t think anyone is denying that there’s *some* impact. It’s just that “one decimal place to the left” is a typical estimate by economists who’ve looked into it.

  22. Anecdotally from what I’ve seen, I’d guess that 4-5 sports bars is probably within an order of magnitude for the amount of business that results solely from the presence of a local sports team.

  23. It’s funny, but when you get right down to it, Neil, you are probably right. A few bars and restaurants whose business is solely tied to a team. Parking lots and garages. The other impacts might be employees to work the venues and private land owners who turn real estate into parking. I always think it’s a weak argument that sports venues, art venues and other performances add a lot to the economy. I was in London for the Olympics. Had a great time. We went to museums in mornings and events at night. Ate at a ton of restaurants. Two weeks. A year later, a study showed that London’s major tourist venues suffered weak attendance, well below norms, during the games. What sports teams bring in the long run, at their best, is some civic pride, some entertainment and some economic benefit. I’ll take that, I guess. But, don’t ever rent a car in any city that has built a stadium in the last 20 years. Ouch. In Pheonix, for one example, the car rental tax is absurd.

  24. Ball Hawker: I first experienced that in Seattle in 1999, actually, when we got hit first with crazy car rental taxes and then with crazy restaurant taxes (9.1%, if I remember right) after Safeco was built. It didn’t stop me from going back to Seattle — I have a bunch of good friends there — but it certainly dissuaded me from ever renting a car there again.

  25. The hotel room/car rental tax scheme has a tragic flaw: That it is sold as something that “only non-residents pay for” and is thus “free” to the host community.

    Obviously, it isn’t. Residents sometimes rent cars or book hotel rooms (if you’ve ever tried to get across a major city in order to get to a 7:30am meeting, you’ll know why). But the greater issue is that once ‘everyone’ is doing it, the travelling fan/tourist is paying for everyone else’s stadium (but their own, maybe…). In the end, fans and non-fans alike pay. Does it really matter whether you pay a small percentage on your property (or income) taxes for a stadium or whether you get dinged hard when you travel?

    We could probably spend all day arguing over whether the ‘tourist’ taxes are actually fairer or less fair than the ‘resident’ taxes. In the end, I’d argue it’s a moot point unless the fees and taxes we are talking about are paid willingly by fans alone. And if fans are willing to pay those tax increases to fund sports stadia, explain to me why the facilities can’t be built with revenue from user fees instead?

  26. From the preceding comments, it seems that pro teams should just round up some restaurants and sports bars to put up the funding for a new stadium. It would be a win-win for all the parties!

    BTW, I’d like to see an actual count of these stadium tax paying rental cars in the parking lot at a sporting event.

  27. tim clark,
    I always like the idea of the sports memorabilia tax. Then again, memorabilia isn’t something every fan spends money on and it seems to be a tax that is often proposed, and then dropped from the conversation. I think the Vikings have one and they discus one in Seattle when they need stadium money.

    I got a LOL from reading this letter to the editor about it… how times have changed for which items are selling better.

    http://community.seattletimes.nwsource.com/archive/?date=19970331&slug=2531512
    I am writing to express my strong opposition to the proposed tax on licensed sports merchandise for the Seahawks stadium plan.

    In my shop, and around the entire state I would suspect, people (especially kids) are buying much more Sonics, Mariners and other NBA and baseball merchandise than Seahawks items. Why should a fan of one particular sport have to help pay for a stadium being used by a team of an entirely different sport?

    It seems incredibly unfair to me, and I suspect I’m not alone.

  28. My last car rental in Seattle… the tax was more than the base rate. Granted my base rate was pretty cheap, but the tax was more than half the cost of the total bill.

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