Football Partnerships

By Jérôme Osselaer

Following the Hillsborough disaster, the final Taylor Report in 1990 set safety standards of all-seater stadia (denying its Greek origin from “stadion”, literally a “stand”) in England and inspired new international regulations. This article defines a “modern stadium” as completed after 1990, when facilities went from an open-space football ground dedicated to supporters to a “tradium”, a rationalized and diversified leisure space dedicated to customers. In other words, a change “in appearance and function” (J. Bale).

A global overview focusing on World Cup tournaments, organized from 1994 to present, as unique opportunities for host countries to invest in durable state-of-the-art facilities, is detailed below.

1. USA WORLD CUP ‘94
In 1994, the USA organised the World Cup in existing stadia, usually dedicated to American football or baseball. As demanded by FIFA, MLS was created in 1996, and its franchises initially rented these venues, preventing them from reaping the fruits of their own facilities. Besides, they were considered second-class citizens (i.e., Red Bull New York sharing with the New York Giants
and Jets). This situation generated problems in terms of overcapacity and equipment, with clubs playing on field turf instead of grass.

According to A. Zimbalist, “one of the most important factors that has contributed to franchise profitability is the phenomenon of publicly funded stadiums. As monopolies, the leagues can artificially reduce the number of franchises below the demand” and increase competition between cities. This statement is true for well-implemented field sports in the American culture. But “soccer” still has to conquer its own loyal fanbase through a long-term settlement in cities by building soccer-specific stadia (SSS), considered as “the most important factor contributing to business and stability” by Don Garber, the commissioner of the MLS.

Thus, “what [once] was a 10-team league with no [stadia] of its own… had become a 12-team league with four [stadia] in 2006, and [what] would be a 16-team league with 10 [stadia] by 2010” (D. Garber). As of December 2007, six stadia were completed in correlation with the demand, with an average capacity just above 21,000 seats, with four other projects in process.

The latest stadium completed was the DSG Park in April 2007, designed by HOK Sport. Located outside of Denver and benefiting from a 20-year naming rights agreement with DSG, the development is evenly financed between KSE as the operator and Commerce City as the owner. It includes an 18,000-seat stadium for the Colorado Rapids, 24 full-sized outdoor fields, the new city offices and a retail development underway.

According to Jim Walters, HOK Sport principal, “from a design and usability perspective, DSG Park sets a new standard for MLS-specific stadiums”. The amenities include 20 corporate boxes, 200 club seats, and a grass field with underground heating. Next to an airport and accessible by public transportation, the DSG Park offers a specific business model, as the largest American professional complex, including some classic revenue streams, such as ticketing, catering, merchandising, or hosting other events (concerts, international games, the MLS All-Star Game, festivals, or fireworks) : the 24 outdoor fields are used for team practice, soccer leagues, and match fields for several sports, bringing additional revenues and creating a strong link with the community.

KSE is also the owner of Colorado Rapids, as well as numerous franchises and sports venues, especially the Pepsi Center, a sister venue to the DSG Park, offering cross-marketing opportunities. Finally, the complex serves as the home of both the Colorado Rapids Soccer Academy and the Arsenal Center of Excellence, KSE being owned by Stan Kroenke, a major shareholder of Arsenal.

2. England Euro ‘96
Thirty years later, football was home again for Euro ‘96. Following the Taylor report, England used eight renovated classic venues, including Hillsborough. The creation of the Premier League (PL) in 1992 was the starting point of the huge enrichment of clubs and “PL clubs have spent over 15% of revenue generated since 1992/93 on improving their facilities” (Deloitte). The trend accelerated in recent years and nearly 50% of PL clubs should “undertake further significant investment in their stadium”. Arsenal was “responsible for over 60% of total PL clubs’ investment between 2002/03 and 2005/06”, followed by Manchester United investing nearly £180M to modernize Old Trafford. However, the £800M new Wembley is the world’s most expensive stadium.

Completed in 2006 and designed by HOK, the Emirates Stadium is a 60,000 seat SSS (previously 38,000 in Highbury), including 150 Executive Boxes (previously 48), 7,000 Club seats on a separate tier, two stores and catering. The environment-friendly venue has, for example, a ventilation system minimising the use of air conditioning. First European HD-compatible facility, it is totally focused on football, and Arsenal “has no definitive plans with regards to non-footballing events”. The club also worked closely with TfL and the Islington Council to optimise local regeneration and public transport, which concerns 70% of its supporters.

The £390M venue was financed through a £100M naming rights and shirt deal with Emirates Airlines and a £260M loan. Arsenal refinanced its 14-year loan by 25-year bonds through securitisation, reducing annual debt cost from £32M to £20M. Besides, the club expects a £90M positive net cash from its Highbury residential development. The financial results of the first season are up 97% with £3.1M per game, “driven as much by a changing ‘mix’ (more premium seating places) as an increased volume of fans in a larger stadium” (Deloitte).

The new 90,000 seat Wembley was also designed by HOK and completed in 2006. The multi-purpose stadium is part of the wider regeneration of Wembley. Accessible by a refurbished subway station and a new road, it includes 17,000 corporate seats, a partly retractable roof, catering, shops, more leg room in every seat than there was in the old Royal Box and escalators for the highest tiers. Its major tenant is the national football team and it hosts concerts, shows and all the main national events in football and rugby.

Considered by some as a white elephant, the venue is owned by the FA and operated by its subsidiary, the WNSL. “Overdue and over budget”, it was mainly funded by bank borrowings. As a consequence, the FA inherited of a £40M annual debt burden and a cost reduction programme is under process, which could throw off balance the English football pyramid and “there remain concerns the grassroots will be damaged by the need to finance the stadium” (D. Bond).

3. France World Cup ‘98
14 years after the Euro ‘84, France organised the World Cup, but invested only 600M€, of which 400M€ for the Stade de France (SDF). A mere 200M€ was spent on nine other venues for minimum liftings. As French facilities belong to cities, except for Auxerre, public money rarely funded huge investments in recent years. According to Frédéric Thiriez, the LFP President, the “stadia are obsolete” and France “is 15 years late” compared to England and Germany.

The question of ownership is a stumbling block for the modernization of French stadia and for the prosperity of clubs. An alternative solution was adopted by Lille: the club will be from 2010 the priority resident of a 50,000 seat multi-purpose facility owned by the city but financed, constructed and operated by a consortium.

However, the only two French clubs with significant projects for their stadia as owners are Lyon and, to a further extent, Lens. Lens benefits from a 50-year emphyteutic lease (which stipulates that the lessee must improve the property via construction) from the city allowing the club to act as the owner. Consequently, Lens should spend 100M€ in the extension of the capacity to 56,000 seats, a retractable roof, a hotel, a casino and a commercial centre.

Lyon is even more ambitious. Thanks to its recent flotation on the stock market, a naming rights deal and its cash surplus, the club will fully finance and own its 60,000 seat facility with 6,000 club seats to be completed in 2011. The 300M€ multi-purpose stadium designed by HOK will be part of a larger project including a commercial centre, restaurants, hotels, a leisure park, a museum and a training centre.

But the SDF is still the French jewel. Located in La Plaine St Denis, in the suburbs of Paris, the 80,000 seat stadium is evenly financed between the State and a consortium. To compensate for the lack of a resident club, the State pays an annual 10M€ fee to the consortium, which built the largest French venue and operates it for 30 years. The current consortium’s role involves three main activities: rentals to sporting events organisers, the marketing of advertising areas and the rental of luxury products to companies.

The SDF includes 168 corporate boxes, 6,000 club seats, a removable 25,000-seat tier above an athletics track, restaurants and shops. Home of France’s major sporting events in football, rugby and athletics, concerts and shows, its elliptical form provides perfect visibility. Accessible by train, subway or bus, it has a small car park to avoid huge traffic jams around Paris.

4. Japan-South Korea World Cup ‘02
In 2002, South Korea and Japan co-hosted the World Cup, each country building ten stadia. In Japan, according to J. Horne, sports “have recently been assigned special importance to counterbalance the widening gap between the centre and peripheries”. That is why “local governments have assumed a driving role in paving the way for business expansion” to finance these venues. Several studies concluded on the limited economic benefits of sports facilities. However, the specific situation of Japan, mentioned as doken kokka (construction state) by McCormack, makes it worthwhile for the political bodies to invest public funds just “because of the symbolic power of the edifices themselves” (J. Horne).

Six years later, Japan faces two major issues concerning stadia profitability: economic unipolarity, as successful teams are located in huge population areas, and post-tournament utilisation. Even if J1 games are regularly held in half of them, the new facilities have overcapacities, meaning heavy tax burdens for local residents, except for Niigata (utilisation rate of 90% in 2007) and Saitama (79%). The vast majority of J1 clubs opted for stadia with an average 20,000 seat capacity better corresponding to the 19,000 average attendance and apart from the Sapporo Dome, “sound management systems had not been established” (J. Horne) for new venues.

The futuristic Sapporo Dome is located in Japan’s fifth largest city. Completed in 2001, it is shared by a baseball team playing on artificial turf and a J2 club playing on natural grass, thanks to the world’s first air hovering soccer pitch, allowing the grass to grow outside the stadium when not in use.

Accessible by bus, railway or subway, and close to a new airport, the Sapporo Dome is an all-weather covered stadium able to host various events through the year. Beyond some classic services (cafés, restaurants, merchandising shops, guided tours), visitors can profit from the observatory built at its top.

5. Germany World Cup ‘06
Thirty-two years after 1974, 18 years after Euro ‘88, Germany spent about 1.5B€ to build four brand new stadia and to renovate eight others, mainly financed by private funds (clubs, borrowings, naming rights deals). Consequently, seven venues were temporarily renamed the “FIFA WM Stadion”, in order to respect the marketing exclusivity sold to the official FIFA sponsors.

Furthermore, according to Ineum Consulting, 50% of the clubs in the first two German divisions benefit from a new or deeply renovated stadium since 2000. This revolution completely changed the face of the facilities and their financing, especially for the two national gems: the Veltins Arena and the Allianz Arena.

Completed in 2001, the Veltins Arena is the first German facility to be entirely financed by the private sector. A naming rights agreement was signed with Veltins, a major German brewery. Designed by HOK, the 61,482 seat stadium of Schalke 04 reduces its all-seater capacity to 53,993 for international games. It forms the heart of the “Schalke Field”, where all of the Schalke teams train and play.

Accessible by a dedicated tram stop and situated next to a motorway, the complex includes hotels, offices, fitness centres, 72 corporate boxes, 1,400 business seats, restaurants, cafés, stores, a museum, a chapel, a “beer pipeline”, a retractable roof, a centre-hung videocube, removable pitch and stand based on the Sapporo Dome system.

The Veltins Arena is a multi-purpose stadium hosting concerts, American football, operas, winter sports, exhibitions or congresses. Since moving to the stadium, Schalke 04 have registered more than a million spectators to their 17 home matches six seasons in a row, with a record average attendance last season of 61,348. The location of the Arena in the largest conurbation in Europe is a KFS : 6.4M people live within 50 km, and 60M in the wider 250 km catchment area.

Contrary to the Veltins Arena, the 66,000 seat Allianz Arena is a soccer-specific stadium. Completed in 2005, it benefits from a 15-year naming rights deal with Allianz, the insurance company. Twenty-thousand seats are convertible into standing terraces. The colour of the see-through exterior can change depending on which team is playing: white for Germany, red for Bayern and blue for TSV 1860, the two ground-sharing clubs.

Accessible through a dedicated subway station and offering the largest European parking with 9,800 car parks, the facility includes catering, 3,400 business seats, 106 executive boxes, Halls of Fame, offices and conference rooms, crèche services, 4,000 sq. m. of stores, and cashless payment thanks to the ArenaCard.

CONCLUSION
Compared to old facilities, in which the major revenue stream was matchday ticketing with a single service (watching a football game) and a simple seat pricing strategy depending on the view on the pitch, the modularity of modern stadia offers a large range of additional revenue streams “in order to host diversified events”, according to L. Dreksler, former president of the ESMA.

Indeed, the ideal environment-friendly modern venue includes a retractable roof, a removable pitch, state-of-the-art technology (TV replay screens, smart cards instead of tickets, HD-compatibility, LCD boards), high comfort standards (a seating bowl with an unobstructed view from each of the three tiers instead of four separate stands, lifts, numerous and clean sanitary facilities), world-class match-related infrastructure (players’ facilities, grass, media facilities, hospitality and catering facilities) and ancillary services (guided tours, museums, merchandising shops, conferencing, exhibitions, hotels, night clubs, swimming pools, casinos, theme-park like attractions, fitness centres, office accommodation) in and around the stadium relocated in a larger leisure complex or as part of a revitalised area.

A modern facility also provides its owner with regular land usage through non-footballing activities, indirect economic benefits (better advertising space management, feel-good factor), and maximization of revenue per seat with a refined pricing strategy (premium seats, corporate boxes, seat licences) and more customers spending more time in an easily accessible venue. For example, 43% of Manchester United ticketing turnover comes from 9% of the seats and “new stadiums are driving an average 66% increase in football clubs’ turnover in the first season” in England (Deloitte).

But even before the first brick of any “new cathedral”, apart from “sourcing a suitable site” and “obtaining planning permission” (Deloitte), two major issues must be addressed: financing and utilisation. Concerning financing, the best practice is to minimize the debt burden while maximizing future profitability by elaborating schemes mixing various solutions (naming, PPP, securitisation, stock market, loan, equity, ground-sharing), with “naming rights in the ascendancy” in Europe, according to A. Ullmann, Head of Market Intelligence Sport+Markt. In Germany, the Allianz Arena is shared by two clubs, but a strong “topophilia” (Yi-Fu Tuan) makes ground-sharing unlikely to happen in England. In France, the key stumbling block is the ownership of the grounds by cities.

Regarding utilisation, the potential demand has to be estimated and segmented as precisely as possible through a market-sizing study focusing on its structure (population density, purchasing power, or propensity to consume), in order to optimise “the size, volume and mix of the facilities” (Deloitte). This issue is especially key in countries where football is not the most popular sport and was apparently neglected in Japan, where stadia were completed “without the evidence to substantiate the proposed development[s]”. In the USA, clubs are more pragmatic and have started to build facilities sized to the regional demand for soccer.

However, the major challenge for clubs is to perpetuate profitability through effective management, even if “the ‘new stadium effect’ can quickly erode after one season, particularly if the club’s performance on the pitch” is poor (Deloitte). Besides, “the ‘prawn sandwich’ debate” (W. Grant) recently revived in England after Alex Ferguson compared “the atmosphere inside Old Trafford with a ‘funeral’” (C. Whyatt). “A lot of clubs now go for the corporate image and the boxes are more important to them than the bread and butter fans”, says Navid Nazir, founder member of Villa Fans Combined. Indeed, the typology of fans radically changed in the last decade, with working-class supporters progressively priced out and replaced by middle- or upper-class customers.

Consequently, one of the key drivers to the financial success of new facilities will be the clubs’ ability to deal with “the paradox of modern stadium landscapes” (J. Bale). Mainly because of safety issues demanding more control and surveillance of crowds, recent “sanitized”, homogenised and consumer-orientated venues have never been closer to “the carceral model” of Foucault, described as an “enclosed segmented space…in which the individuals are inserted in a fixed place”, including panopticism (CCTV).

In Germany, terraces are still allowed during national games and two recent surveys conducted by Sportbild and Sport+Markt showed that the vast majority of visitors were delighted with the “event character” (atmosphere and matchday entertainment) of facilities. In England, some clubs work closely with their fanbase to address the issue. According to Paul Matz, chairman of the AISA, occupying a dedicated section of the Emirates, “the solutions are to have ticket prices of all ranges. Then the supporters’ groups must work to ensure atmosphere is improved. The club, in turn, needs to ensure not everything in football is money-driven.”

Jérôme Osselaer is a football consultant based in Paris. His column appears in Offsides on Fridays. Email him at josselaer@gmail.com.

By Merryn Sherwood

Its slogan is ”football with style”, but don’t expect the W-League to simply be a pretty addition to the Australian soccer program when it kicks off today.

Since the WNSL folded in 2004 there has been a gaping hole in women’s soccer in Australia. But when the whistle blows this afternoon a new era of women’s soccer will kick-off. Comprising seven teams affiliated with A-League clubs and Canberra United, the W-League will put women’s soccer back on the map.

And the players are keen to make an impact

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