So Long to the Suite Life – WSJ.com

So Long to the Suite Life – WSJ.com:

It was like watching an era of sports history being erased. In early December, construction workers sawed through the multiple layers of drywall and metal studs separating a row of skyboxes at the Seattle Mariners’ Safeco Field. They tore up the suites’ beech-hardwood floors and carted away their oriental rugs and leather furniture. By the end of the week, the eight skyboxes were gone.

In a reversal that strikes at a cornerstone of pro-sports finances — and of the way corporate America entertains — teams around the country are ripping out luxury suites. These perches have been used to justify billions of dollars in stadium construction over the past two decades. But in many cities, they are losing luster with surprising speed, partly the result of factors that couldn’t have predicted five or 10 years ago, from changes in tax laws to scandal-driven reforms on corporate entertaining.

About the only words I disagree with here are “couldn’t have been predicted” — anything that depends on business T&E or marketing budgets, especially where the benefits are, well, at best indirect — you have to assume that when it gets big enough and it involves a tax subsidy of some sort, it’ll eventually get notice from the IRS and the government and the regulations tightened up.

I’m not surprised that the market for suites has saturated and demand is weakening; we’re seeing a similar weakening of demand for sports advertising — not from lack of interest, but because available inventory of both have grown to the point of saturation. When you stop to think about how many “corporate” ticket owners are really either small businesses shifting the owner’s cost to the company (and taking a deduction), or a part of a larger company where the marketing budget is controlled by someone doing the same thing, it’s not surprising that after a while, the IRS and companies are going to start looking at the value of these deals…

I think this is actually part of a larger issue in pro sports: there’s been a massive growth in salaries and expenses, and along with that, ticket prices and prices of other aspects of being involved with a sport (sponsorships, suites, advertising, etc, etc, etc); many fans have been priced out of seeing their teams, or complain that they are (but find a way to go anyway). We’re now starting to see the TV networks (ABC giving up monday night, for instance) and companies (weak demand for suites as one example) also starting to say enough.

that indicates that revenue growths are probably peaking, or has peaked. How will leagues handle this when revenues flatten or drop?

Honestly, given hockey’s been the league that’s stayed closest to gate receipts, it may be the one best poised to handle whatever happens if this peak doesn’t lead to a plateau, but instead to the other side of the curve….

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