Friday, July 10, 2009
Beware of Rosy Attendance Numbers
Posted by John Branston on Fri, Jul 10, 2009 at 4:08 PM
The NBA and the city of Memphis had better learn from the experiences of the car companies and the big banks: you can game the numbers for a while, but the truth will come out and get you in the end.
The Memphis Grizzlies reportedly drew 7,500 fans per game last year, not the inflated and phony "tickets sold and distributed" number that is standard practice in pro and college sports and, unfortunately, too often in the media.
When FedExForum was built, the financing projections were based on average home attendance of 14,900 per game. The "worst case" envisioned was 10,700 per game.
As my colleague Chris Herrington says on his blog Beyond the Arc, the actual attendance, as people who regularly attended games could see, was much less than that.
The revenue streams that pay the debt service on the bonds to build the arena are based on those optimistic attendance projections. The Memphis City Council and Shelby County Commission voted to build the arena based on those projections.
General Motors went bankrupt by ignoring reality and making too many cars that nobody bought and paying too many workers for too long for their health insurance and pensions. The car industry executives and overly optimistic investors pretended not to see the alarming decline in actual sales. The banks and homebuilders did the same thing, relying on junk financing and overly optimistic projections.
As they say in the investments business. past performance is no guarantee of future results.
At least FedExForum and downtown have had — so far, at least — the University of Memphis Tigers to bring in real crowds of 14,900, but the Tiger basketball revenue is distributed differently than NBA revenue.
This is a bad sign for FedExForum and the Grizzlies, but not a surprising one. Padding attendance numbers is the way it's done in sports. The University of Memphis says the football team draws over 24,000 fans a game on average, but actual attendance is about 10,000 less than that.
It's too bad the number had to come out in the national media. The Grizzlies and every other college and professional team that plays in a facility that gets public financing should regularly report actual attendance along with whatever other measurement they want to use. The media and the Public Building Authority should demand it.
What the PBA should do now is bring in the financing experts and Grizzlies owner Michael Heisley and ask what happens if attendance is 3000 less than the "worst case."
Comments (10)
Showing 1-10 of 10
The Fed Ex Forum was another government funded padding of Herenton Loyalist's pockets. There was absolutely no reason to build the place with the Pyramid right down the road. The no compete clause that was imposed on the other venues has virtually killed the once vibrant Memphis concert scene. This place is the a shining example of what happens when the citizens loose control of their government. It's only a matter of time before the grizzlies pack up and move out of "basketball city" as King Willie put it. Then once again we, the citizens that were denied a public vote on public financing, will be stuck toting the note.
like
dislike
FedEx Forum = win for memphis.
no compete clause = drunk ass, bribing, taking bribes, indicted city council. "well, we didn't uh read the contract word for word."
Not all problems can be blamed on Herenton and the City Council. Attendance at sports events is falling, for a number of reasons, at the same time sponsorships, mainly from auto and financial services firms, are being cut. Overall decline in sponsorships is about 20 percent. Public financing of facilities was one leg of the table.
JB
for the Grizzlies, specifically, you have to factor in that they have the worst combined record in the NBA over the past three seasons. There is certainly a correlation between attendance and winning.
The Fed Ex Forum was another government funded padding of Herenton Loyalists' pockets. There was absolutely no reason to build the place with the Pyramid right down the road. The no compete clause that was imposed on the other venues has virtually killed the once vibrant Memphis concert scene. This place is a shining example of what happens when the citizens loose control of their government. It's only a matter of time before the grizzlies pack up and move out of "basketball city" as King Willie put it. Then once again we, the citizens that were denied a public vote on public financing, will be stuck toting the note.
The problem with the Forum is that it was publicly financed against an overwhelming outcry against it for the sole purpose of the Grizzlies moving here. There was never any doubt in my mind that they would never generate the numbers necessary to stay here. It's simple economics; 41 home games at $25 (a very, very modest ticket price) equals $1025 just for one season ticket. This in one of the lowest earning metropolitan areas in the country. If that isn't enough, you have Memphis' less than stellar history with sports franchises and attendance. No I can't "blame" Herenton for the poor attendance, but I can sure as hell say "I told you so."
PS sorry for the double post, it wasn't showing up earlier.
All cities have good multi-use arenas -- it's a basic civic amenity these days. And FedExForum is an excellent multi-use arena, well-built, on-budget, nicely situated within the downtown landscape.
The problem is that the Pyramid was a shoddy building.
And the concert scene has improved in recent years, due largely to Minglewood Hall and the Levitt Shell and Snowden Grove and other things that have nothing to do with FedExForum. It's a myth that Memphis was getting all these major concerts that stopped when FedExForum was built.
Then I am just a devout nay-sayer. I do not doubt that Forum is a better building than the Pyramid, but you still cannot justify building a $250M arena when the one you have isn't paid off yet. And yes, the sudden and untimely death of Bob Kelly had a great deal more to do with the concerts drying up around here, but the no compete clause has forced more than one show into the DeSoto Civic Center or Snowden Grove, which are both outside Memphis and Shelby County (speaking from a monetary standpoint). Yes the Levitt Shell rebirth along with the Hi-Tone, and Minglewood Hall have been super for music lovers. And lastly, I still feel the FedEx Forum will be yet another empty arena that the tax payers of Memphis will paying the bill for.
"The University of Memphis says the football team draws over 24,000 fans a game on average, but actual attendance is about 10,000 less than that."
I'm not sure that's true. I attend most every U of M football game, and the announced number always seems pretty much a reflection of reality. Heck, they even have a guess-the-attendance multiple-choice thingee on the scoreboard during every fourth quarter, all very transparent.
Now the Grizzlies (and the Redbirds, by far the worst offenders locally)? No doubt the #s are bogus. But not those of the football Tigers.
waltzer: the source is Cindy Buchanan, head of the Park Commission, reporting to a committee of the Memphis City Council at a meeting I attended.
THIS WEEK'S ISSUE
SPECIAL ISSUES
