I initially posted this article "Who really profits?" on the Stadium Facts website back in July, and I think it worth re-publishing here while the City is considering the feasibility of contributing $222,000,000 and 15 acres of land to build a professional footbal stadium for the San Francisco 49ers.
The 49ers have been more than willing to talk about the potential economic benefits a stadium might have for Santa Clara and the surrounding region.
They haven't been quite so open about how they will benefit economically from that same new stadium.
Well, it's probably because the value of their team will increase substantially if they get a new stadium — an immediate increase in value of somewhere between $250,000,000 and $700,000,000.
That's a much bigger increase than your average bathroom remodel.
How does the team's value increase?
Each year, Forbes magazine assesses the value of all 32 NFL teams. In their most recent list, the San Francisco 49ers are valued at $734 million — near the bottom of the pack (29th place.)
As Forbes states, this valuation is a reflection of the fact that "the 49ers have some of the lowest revenues in the league thanks to an antiquated stadium that features no club seating, and an onerous lease that forces the team to share concession, luxury-suite, naming-rights and signage revenue with the city."
A new stadium with a better revenue stream would increase the team's value. Could the new value go as high as $1.423 BILLION — Forbes' valuation of the Washington Redskins (and the team currently at the top of the list)? Maybe not. But it is certain that a new stadium with more favorable revenue stream would markedly increase the team's value.
Mike Swift at the San Jose Mercury News analyzed this very issue back in November 2006, shortly after the Santa Clara proposal was announced.
As he wrote in his article "Deluxe Stadium May Enrich 49ers"
. . . in many markets, a new stadium has produced a windfall for owners.
Patriots owner Robert Kraft paid $172 million for the team in 1994. Today, with the Patriots playing in a new suburban Boston stadium partly financed by the NFL, in a market with wealthy demographics like the Bay Area's, the franchise is valued by Forbes magazine at $1.2 billion. That is the second-highest among the four major sports (football, basketball, baseball and hockey), more valuable than even the storied New York Yankees.
By the way, it's worth noting that the new Patriots stadium (in Foxboro, MA, a town of about 16,000) was paid for ENTIRELY by the team's owner, Robert Kraft. [State taxpayers did finance about $75 million in infrastructure improvements, but the team is responsible for paying back that debt.]
As reporter David Copeland noted in his article "Patriots teach lesson about stadium financing",
By conventional "wisdom" for financing sports stadiums, Kraft should be crying poor. That conventional wisdom says that teams -- no matter what the sport -- can't possibly pay for a new stadium on their own and remain competitive.
The Patriots finished the regular season with an NFL-best 14-2 record. On top of that, Forbes magazine valued the team at $756 million [in 2003] -- in large part because of the new stadium -- up considerably from the $158 million Kraft paid for the Patriots in 1994.
We need to remember that professional sports are a big business, just like any other business, and the example of the New England Patriots is clear evidence that teams don't need public money to succeed.