Clippers mulling new Inglewood arena, this likely ends with Google owning all of sports, right?

And speaking of data points for an arena arms race, now Los Angeles Clippers owner Steve Ballmer is reportedly interested in building a new arena adjacent to the Los Angeles Rams‘ new Inglewood stadium, because they want their own L.A. Live or something:

Representatives of Steve Ballmer and Stan Kroenke, two of the richest owners in professional sports, have had multiple discussions about the Clippers joining the Rams and Chargers in the sports and entertainment district Kroenke is building in Inglewood…

“It’s too soon to say it would be L.A. Live lite, but if an arena were to bring 200 nights a year, that’s a tremendous amount of foot traffic that would benefit all the ancillary properties,” said a person familiar with the discussions who asked not to be identified in order to speak frankly about the situation.

To reiterate what I just wrote about a fifth arena in the New York City metro area: Building more arenas in an already well-served arena market doesn’t really make much sense, since you’re just squabbling over how to divide up the existing pie. (An L.A. Live Lite is only likely to get customers by drawing them off from the original L.A. Live district by the Staples Center, or maybe from other entertainment options elsewhere in the L.A. area.) And Ballmer making eyes at Inglewood could still very easily be a leverage tactic toward when his Staples lease is up for renewal in 2024. But then, this is after all how capitalism is supposed to work: Investors are so desperate to grab a slice of the market that they throw around whatever money it takes to enter the game, which ends up driving down windfall profits for everyone and benefiting consumers. It seldom works that way, sure, but it still can, on occasion, when corporations are more interested in fighting over the spoils than in colluding.

If there’s one thing that watching American capitalism has taught me, it’s that the likely outcome here is for one side to buy the other — Philip Anschutz couldn’t literally buy the Clippers since he already owns the Lakers, but some kind of Anschutz-Ballmer-Kroenke sports management consortium isn’t impossible, if you could get everyone’s egos out of the way. Now there’s a thought: The only thing stopping us from entering a complete monopolistic hellscape, now that the federal government has all but declared corporate consolidation a national priority, is the inability of the super-rich to get along. Strange days, indeed.


29 comments on “Clippers mulling new Inglewood arena, this likely ends with Google owning all of sports, right?

  1. You can’t tout the substitution effect when a new arena re-opened THREE YEARS AGO in the SAME CITY, causing overall concert activity in the LA area to rise dramatically.

    • Are you talking about the Forum? It’s hardly new. And you’re going to have to show me stats that concert activity in the L.A. arena overall went up dramatically as a result.

      • The LA Times article mentioned that The Forum would be “protected” in any new arena deal. Whether that means Forum gets all concerts or MSG gets management/ownership stake in potential arena tbd…

        • I read the same article. How the Forum would be protected wasn’t specified. If I represented the Forum, you can bet I’d insist on being present at any of the dealings the city of Inglewood participates in with Ballmer. The Forum has been a good partner with Inglewood-now we’ll see if the city stabs the Forum in the back.

      • I’m not going to do your research for you, Neil. Look it up. It was Billboard or Pollstar, if I recall correctly.

        And the Forum’s renovation was essentially the same as a new building going up, from the perspective of entertainment economics.

        • Googling the two outlets you mentioned doesn’t turn up any evidence that the Forum has grown the pie, though it does produce two different articles with the same quote from a Staples exec saying they’re worried about the impact on other venues:

          http://www.latimes.com/entertainment/music/la-et-ms-forum-return-20141229-story.html
          http://www.billboard.com/articles/business/6406549/irving-azoff-la-forum-strong-start-first-year

          • Analysing Pollstar data on the world’s top 200 arena venues (by concert ticket sales) and past concert diaries suggests the pie has grown since the Forum re-opened – both in terms of numbers of events and number of tickets sold:

            Events
            2013 – 53 (Forum 0, Staples 53)
            2014 – 76 (Forum 41, Staples 35)
            2015 – 117 (Forum 63, Staples 54)
            2016 – 120 (Forum 71, Staples 49)

            Tickets sold
            2013 – 0.9M (Forum 0, Staples 0.9M)
            2014 – 0.9M (Forum 0.4M, Staples 0.5M)
            2015 – 1.2M (Forum 0.6M, Staples 0.6M)
            2016 – 1.3M (Forum 0.7M, Staples 0.6M)

          • Actual data, thanks!

            Staples and the Forum aren’t the entire market, though. Does Pollstar also have data on the Memorial Sports Arena, which closed during that time, as well as Hollywood Bowl and the Honda Center? (I think that’s all the 20k-ish facilities in the larger area.)

          • The Hollywood Bowl is in a whole different category — outdoor amphitheater with mostly picnic bench seating and liberal bring your own food policy. The stage has limited adaptability. Acts who are doing arena tours are typically not an option.

            Due to LA traffic, unless one lives in the southern cities of LA county, the majority of the county would not consider going to the Honda Center for a concert. (Worse than expecting someone from North Jersey to go to the Nassau Coliseum).

            The LA Sports arena was rather moribund in its final year once USC basketball moved to the Galen Center. The notable exception being Bruce Springsteen’s closing concerts.

            Regardless, competition with a similar size venue across the parking lot is very different. BTW, The Forum does excel in one area that large arenas lack, acoustics.

          • Agree that Staples and the Forum aren’t the entire market, but they are really the only ones that count.

            In quite a few cases acts will play Honda Center and one of the two main LA arenas. So not necessarily an either/or. Honda has hosted 30-35 shows in each of the last 3 years, so no real movement there, but have sold slightly fewer tickets since Forum reopened.

            2013 – no. of events not tracked; 0.3M tickets
            2014 – 30 events; 0.3M tickets
            2015 – 35 events; 0.2M tickets
            2016 – 32 events; 0.2M tickets

            Memorial Sports Arena had limited sales and appeal (Pollstar shows very few events, and not ranked in world’s top 200 arenas for ticket sales), so I don’t think it’s relevant.

            Hollywood Bowl’s not an accurate comparator either, as an amphitheatre. But for completeness, their ticket sales also appear largely unaffected (certainly not negatively) by the Forum:

            2012 – 0.32M
            2013 – 0.35M
            2014 – 0.32M
            2015 – 0.39M
            2016 – 0.44M

            All of which is to say, the data suggests the pie has been grown in LA. That’s not to say it would grow further with another new arena (Staples calendar was jam-packed with tenant sports so was a market gap for Forum) though!

          • Thank you, Tristan.

            Neil, why would I ruin my impeccable reputation by posting fake news on this message board?

      • I’d want to see the overall LA area populations trends, the concert age group trends, and the number of bands needing 18,000 seat arenas forecasts. Also, why wouldn’t Kronke create some sort of reduced capacity concert configuration for his football stadium? Even with the Chargers, you’re looking at 345 available dates. If you count playoffs you’re looking, at… yeah, still 345 dates.

    • Right, but there would be issues with the NBA if Anschutz tried to literally buy into the Clippers while owning part of the Lakers. Which is why it would have to be more of a Legends Entertainment-style management consortium.

  2. I saw this coming a mile away the minute the Rams were allowed to move to L.A. Let’s not forget, Steve Ballmer is the richest sports owner in all of sports! so financing for a new arena won’t be an issue. How long did you think he was going to be a tenant(not to mention playing second banana to the Lakers) in somebody else’s building? It was also pretty obvious he was never going to leave L.A. The reasons are obvious.

    • Carl Pohlad was one of the richest owners in MLB when he started trying to get a new Twins stadium, and it still took him more than a decade.

      It’s not about financing – even mere millionaires can usually go to a bank and get that. It’s about a deal that you’ll make more money on than playing in an existing building, even after paying the construction debt.

  3. I’m not sure that an arena glut in the wider LA basin would be as easy to create as in the congested five boroughs (or three of them, at least).

    What we euphemistically call “LA” is gigantic and diffuse urban conglomeration. It already has multiple arenas of varying ages, capacities and levels of refinement.

    The three boroughs discussed here have a population of approximately 6.7m (not counting Nassau or Suffolk county… Neil, help here please… are those counties heavily populated or more “rural” as we non NYers tend to think of them?). The Los Angeles Metro area includes very nearly twice that population (12.8m), though is of course much more spread out.. all of which helps to make LA the nirvana for pedestrians that we know.

    In short, the LA basin is likely much more capable of handling the addition of a major arena/concert venue without significantly driving down fees/prices than Manhattan, Queens and Brooklyn are. As we know, Northern NJ already has too many… hence the fate of the Brendan Byrne arena.

    Regardless whether the area is capable of “handling” the addition, though, we need to consider the ego driven decision making of the two key principles… each of whom either vastly overpaid for their franchise or their new location/stadium very recently. Even if this plan were a financial disaster in the making (which it isn’t), there’s no reason to believe Ballmer and Kroenke wouldn’t just do it anyway.

    • Nassau is dense suburbs, if that’s not an oxymoron, from end to end. Suffolk is a bit more rural, though getting less so, but it’s pretty far outside the city.

      If you think of Nassau as like northern New Jersey, but on the opposite side of the city hemmed in by two bodies of water, you’re on the right track.

  4. I’ve always been a huge proponent of the Clips playing in Anaheim. You wouldn’t be adding to the arena glut since Honda Center is already there but if this is what Ballmer wants to do then I’m all for it as long as it’s 100% privately financed.

    Keep in mind how lousy the current lease is at Staples Center. Ballmer gets ZERO from the 160 luxury suites at Staples and very little concession money. He obviously gets ZERO from naming rights as well.

    If Ballmer just wanted to own the Clips for a few years then it wouldn’t make sense to build his own arena but he appears to be in it for the long haul then will pass it on to his kids. If you’re looking at long term, it makes sense to build your own crib.

    Naming rights in the NBA are tough to gauge but Sacramento is getting $6 million per year while the big market Warriors are getting $15 million so let’s just say the Clips will get around $10 million per season there.

    You get another $10 million a year in suite sales that you don’t get at Staples. Suites and naming rights over the course of a 30 year “lifespan” of the arena gets you $600 million and that doesn’t even begin to cover the other events plus concession and whatever chunk of parking and other development he will wind up getting from Kroenke.

    Throw in the ego angle, better scheduling, basketball specific venue that will allow better sightlines and thus higher prices plus all the techie things he talks about doing that he can’t do at Staples and you can see how this pencils out and more over the long haul.

    • “Suites and naming rights over the course of a 30 year “lifespan” of the arena gets you $600 million”

      Off the top of my head, that sounds ambitious, even in the L.A. market. Though I agree, if it’s Ballmer’s money, more power to him.

      • I tried to give conservative estimates though. The Warriors are getting $15 per year for Chase Center so I lowered the Clips to $10 being that they are the lesser of the 2 NBA teams in the market. Multiplied by 30 and you get $300.

        Suites is tougher to gauge. This will be a smaller, basketball specific venue so you’ll probably have less suites but even there, if you lease them at $150,000 per suite and multiply by 67 suites, you get around $10 million per season. Again, over 30 years, you’re looking at another $300 million. For comparisons sake, the NFL stadium is said to be in position for $56 million a year. I realize that the NFL stadium will be much bigger but you also have to take into account that there are far fewer events there as opposed to an arena.

        We’ll see where this goes. I’m hedging my bets on it happening as opposed to being a leverage ploy against AEG. If he were smart, he’d hire AEG to manage his arena and pay them a yearly fee with incentives to book as many events as possible. AEG could play Staples and the new place off each other to maximize events. For example, when the Grammy’s are at Staples, they could shift a hypothetical concert to the new Inglewood arena and so on.

        • You forgot to convert from nominal dollars into present value, though. In the same way that you can’t pay off a $600,000 mortgage by paying $20,000 a year for 30 years, you can’t pay off a $600 million arena with $20 million a year in revenue over 30 years.

          You could pay off about $300 million in arena costs with your projections, leaving several hundred million more to be paid off out of Ballmer’s pocket. Suddenly that Staples lease doesn’t look so bad by comparison.

          • But with Ballmer’s wealth, wouldn’t it make sense to just pay as much up front money so that he isn’t saddled with interest payments similar to what our mortgage payments are?

            A lot of his wealth is liquid. He can literally just write a check for the whole thing and keep it in present day dollars.

          • Not if his wealth can earn more in ROI elsewhere than he’d save on mortgage interest.

            “Present value” doesn’t meant that present dollars are better, but rather the reverse — it’s better to pay a million dollars (or even a million and change) next year than a million dollars now, because in the meantime that million dollars has earned you more money.

        • If the new arena does happen, it’ll be MSG and Oak View (Leiweke’s new company) that runs it. This solves (sorta) the Forum issue. AEG has too much invested in LA Live to run another facility just miles away. Staples, conceivably, would gain extra concert days if Clippers move out.

          • That would work as well. Whether it’s AEG running 2 places to maximize events or MSG or Oak View running 2 places, it helps Ballmer’s cause as well as the other building.

            The Staples having an extra 40 concert openings is what I’ve been saying all along. People keep saying that AEG won’t want to lose 40 dates and I keep saying that they won’t be. AEG will be able to fill at least 20 of those dates if not more.

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