Smaller arenas, more tech, greener

Smaller arenas, more tech, greener

Tennessee Titans and Los Angeles Rams fans prior to an NFL football game at SoFi Stadium in Inglewood, Calif., Sunday, November 7, 2021.

Marcio Jose Sanchez | AP

The Buffalo Bills are looking for a new stadium for the National Football League worth $ 1.3 billion. The Chicago Bears are spending $ 197 million to purchase land that could eventually be their new home.

FedEx Field is falling apart and the Washington Football Team is campaigning for a new stadium in Virginia. Some major league baseball teams, including the Kansas City Royals, Oakland Athletics, and Tampa Bay Rays, want new parks.

At the National Basketball Association, the Los Angeles Clippers have already started building their $ 1.2 billion arena. Fishing the Philadelphia 76ers, the Dallas Mavericks might be lurking. And then there’s the National Hockey League with the Phoenix Coyotes.

The teams are looking for upgrades to the venues and could invest more than $ 10 billion in development by 2030. The major US sports leagues have already secured national media revenue, so the teams are now looking to increase revenue in other areas. New and redesigned arenas are one option.

Sports clubs can win lucrative naming rights and sponsorship deals with new buildings. There’s also a potential real estate game where franchisees like the Atlanta Braves and Milwaukee Bucks use their new buildings as anchors for massive real estate projects. This development helps generate even more money for teams.

Still, a debate remains about who should fund sports projects and what will be different in a post-pandemic environment.

CNBC spoke to executives about the sports stadium and arena landscape and what’s to come.

An aerial photo shows the $ 1.66 billion MSG Sphere at The Venetian, where construction halted due to the coronavirus pandemic (COVID-19) on May 21, 2020 in Las Vegas, Nevada.

Ethan Miller | Getty Images

Smaller venues, more experiences

Over the past 20 years, teams have maximized arena revenue by adding larger corporate suites, club and standing room. However, the ongoing Covid pandemic is changing this thinking.

Bill Mulvihill, the head of the US bank’s sports and entertainment group, helped fund the Los Angeles Rams SoFi stadium, which cost $ 5 billion. He echoed others who predict smaller venues for the next generation of stadiums and arenas on the horizon.

Mulvihill said more and more clubs are making plans for spectators and television viewers in the arena. “The idea is to have unique fan experiences, not just to get the total number of people in your building up,” he said.

“I think the talk and trend is overall smaller capacity when it comes to arenas,” added Rob Tillis of investment firm Inner Circle Sports. “The larger NFL stadiums will maintain large capacity.”

To improve the value proposition of participating in games, you may find that your favorite team makes use of sitting experiences like the NFL’s field-level suites. The Texas Rangers have added new seating for Globe Life Field – their $ 1.2 billion stadium. It includes suites on the field and two field level lounges along the first and third baseline.

CNBC took a tour of the Rangers’ new park last August.

The field suites were pretty comfortable and sitting in the lounges felt like watching a baseball game at a local sports bar with the actual field nearby.

“These new buildings focus more on delivering a variety of premium seating projects to meet market demands,” said Dan Barrett, president of CAA Icon, the stadium and arena design division of CAA Sports.

“We’re competing against the 80-inch television in your living room,” said Jon Ledecky, owner of the New York Islanders, who opened the $ 1 billion UBS arena in November 2021.

“All of these new arenas need to give fans a reason to stand up – go to their car and come to the event. If we don’t have a top notch experience, they’ll see the game at home. ”Ledecky added.

To paint a picture of future experiences, Mulvihill referred to Madison Square Garden and New York Knicks owner James Dolan’s project in Las Vegas. The MSG Sphere, a $ 1.8 billion entertainment venue, will feature technology that will allow viewers to hear concerts in multiple languages ​​and a haptic infrasound system – a vibrating floor.

“I think some of the ideas he’s talking about about how to watch a concert differently could be carried over to the gym,” said Mulvihill. “If this technology is slick and working, it could be transferable to other venues.”

Rendering of the Climate Pledge Arena

Source: Amazon

Sustainability, grab-and-go technology

The UBS Arena was built during the pandemic, which resulted in delays. But development company Oak View Group rose to the challenge and invested $ 2 million in germicidal air-flirting systems that more teams will install.

Another Oak View project in 2021 is the Climate Pledge Arena in Seattle, where the NHL’s Kraken play. Executives praised the octopus’ new home, noting that it is climate neutral and powered by solar and electricity.

“Almost every arena will try to be carbon neutral in the future,” said Tim Leiweke, CEO of Oak View. “I think you will see more commitment to hygiene.”

The arena also uses Amazon’s grab-and-go technology, which allows customers to automatically pay for items without having to check out at a checkout counter. (Amazon pioneered this technology in some of its convenience and grocery stores.)

Barrett of CAA Icon – who oversaw the Golden State Warriors’ Climate Pledge and Chase Center in San Francisco – believes facial recognition technology, automated concessions, and robotics will expand too.

“Environmental pledge and [Chase Center] have set the bar high in terms of technology, fan engagement and fan experience, ”he said. “Until the Clippers building goes online. Given Ballmer’s background, I’m sure he’ll want it [Intuit Dome] to be the model for the future. “

In the new LA Clippers arena

Source: LA Clippers

Intuit Dome will include a double-sided Halo video board with 44,000 square feet of LED lights and use walk-out technology for concessions.

“In five to ten years, when Ballmer is finished, some of the older buildings will look very old very quickly,” said Tillis. “They’ll look like dinosaurs with no extra revenue opportunities.”

But who pays the bill?

Aside from technological improvements, there is still debate about who should fund sports facilities.

In 2016, the Brookings Institute published a paper against using public money to fund stadiums. The report estimates that from 2000 to 2014, more than $ 3 billion in tax revenue was lost to tax-exempt municipal bonds that were used to fund professional sports facilities.

Leiweke, who matched the Islanders with private money to build the UBS Arena, agrees that it is best to avoid public funding.

“Local authorities and states have to spend their money on schools, education, traffic and life security,” said Leiweke. “Now there is constant thinking about how we are [privately] fund these buildings and run these teams to help generate new revenue streams in the future, “he added.

In most cases, teams have an impact calling for public funds and sometimes threaten to move if they don’t receive the money. That can damage the local economy. But after St. Louis sued the Rams for exit in 2016 – and received a $ 790 million settlement – teams will likely think twice before moving.

Buffalo Bills owner Terry Pegula.

Brett Carlsen | Getty Images

As a result, the NFL’s Buffalo Bills owner Pegula Sports and Entertainment in west New York is expected to share the cost of a new venue with the state.

Engineering firm AECOM released a report that estimated a price of $ 1.35 billion for a new venue near the existing Highmark Stadium and forecast at least $ 300 million more for a downtown stadium. The Bills’ lease at Highmark expires in July 2023, and the team aims to be in a new field with 60,000 spaces by 2027.

When asked if inflation concerns could affect sports owner funding, Mulvihill replied, “These are long-term decisions for owners, cities and states that will take 20, 30 years to make. The 10 percent increase in construction costs does not change these decisions significantly. “.”

Barrett predicted that up to $ 15 billion would be invested in new professional sports facilities over the next 15 years. That estimate increases to $ 20 billion when calculating renovation projects. Both Barrett and Mulvihill suggest more teams remodel than start over.

The Jacksonville Jaguars and Green Bay Packers are among the NFL teams looking to remodel. In the Packers’ case, they raised money by issuing $ 90 million in public shares to fund a $ 250 million renovation project for Lambeau Field.

“You are going to see significant investment over the next 10 to 15 years,” Barrett said, adding the Major League Soccer franchises including the NYCFC champions to the teams lurking for new stadiums.

Fintech and crypto who want to spend money

Should clubs go for private funding, which they normally do, more revenue is waiting.

The Clippers have signed nearly $ 1 billion in naming and partnership agreements for Intuit Dome, which is slated to open in 2024. Paul Danforth, president of CAA Sports, said fintech and crypto companies are particularly keen to spend money on sports to keep their brand in a. to establish digital age.

Danforth warned markets like Buffalo shouldn’t expect mega deals like Los Angeles teams, “but it’s still a great opportunity for a brand in New York state and the NFL.”

Danforth said, “In the past they couldn’t afford to buy naming rights. But some of these companies are growing so fast that they can get into those conversations faster. And these opportunities are inevitable. That’s why brands want to be associated with them, “he added.