Business

Empty stadiums and fickle fans. This is how South Florida’s sports teams make money

Sports in South Florida is on an upswing. But not for the reasons you think.

Yes, the Dolphins were sitting atop the AFC East Division in the NFL for the first time in years (well, until that awful Patriots game). Yes, the Heat has convinced Dwyane Wade to come back for a curtain-call NBA season. And yes, the city looks to be finally getting a professional soccer team.

But it’s not necessarily performance on the field that’s pushing teams forward. It’s the fields themselves.

Consider: According to the Miami Dolphins, the El Clásico soccer match between Real Madrid and Barcelona in July 2017 was the highest-grossing soccer event in North American history. The team expects Super Bowl LIV, which Hard Rock is set to host in 2020, will be its highest-grossing-ever event. And not counting sporting events, the stadium drew the largest crowds of any outdoor facility in the southeast U.S. last year, according to Pollstar, a research group that collects ticket sales data from promoters, venues and artist representatives. (Individual teams declined to provide data to the Miami Herald.)

It’s one reason why ratings agency Fitch found that 2017 total revenues for South Florida Stadium LLC, the Dolphins corporate entity registered as Hard Rock’s operator, grew 13.5 percent, “reflecting strong performance of ‘other events’.”

Or take AmericanAirlines Arena. While the Heat can still pack the stadium, the team only plays about 40 games a year on Biscayne Bay. But the arena — still only in its second decade — now ranks as the 18th-most-popular in the world by annual ticket volume, according to Pollstar data. That’s thanks the bevy of other high-profile acts — such as Elton John and Paul McCartney — it attracts year-round.

And even publicly-financed Marlins Park now regularly hosts regional and national conventions in addition to its annual slate of ball games. Thanks to last year’s All-Star Game at Marlins Park, as well as the El Clásico match, Miami-Dade County in 2017 had its strongest July ever for hotel bookings, with occupancy at 81 percent during its slowest months of the year, according to Jose Sotolongo, sports tourism director for the Greater Miami Convention and Visitors Bureau.

The BB&T Center, home of the Florida Panthers, also pads out its non-hockey season with enough events to rank it as the 100th-largest arena in the world, according to Pollstar.

Despite the expensive price of a pro-sports ticket, it’s mostly TV and revenue-sharing deals that lend South Florida’s four pro teams relative financial stability — even when the season’s in the tank. But Sotolongo, as well as sports economists, say even championship-winning seasons don’t move the needle much compared with attracting people and generating excess revenues in South Florida.

Especially in a region known for its fickle fan bases and less-than-full stadiums, South Florida sees the greatest economic impact from the irregular events like soccer matches, concerts, and conventions they host.

“The Miami Open, the Ford 400 [run at Homestead Miami Speedway], the Super Bowl, the World Cup—even stuff below, like judo tournaments, are creating a boatload of receipts,” Sotolongo said.

Or as Dolphins’ owner Stephen Ross put it in a press conference last year, “I think Miami is a great event city. That’s what it’s really known as.”

Revitalizing the Rock

Were he still alive, Miami Dolphins founder Joe Robbie could hardly have imagined that the stadium he built for his team 30 years ago would become an international sports and entertainment destination.

It’s thanks to the vision — and wallet — of Dolphins owner Ross, chairman of real estate conglomerate The Related Companies. After being turned down for public money for the renovation, Ross decided to forge ahead.

“It wasn’t about...the future of [the NFL],” Dolphins President Tom Garfinkel said, describing Ross’ mindset when he committed to the renovation plan. “It was more about saying, ‘Miami deserves a new stadium, the fans deserve a new stadium, and how do we create a world-class facility?’” The Dolphins franchise owns the stadium.

The goal was to have the stadium reflect Miami’s diversity, vibrancy and sense of self as a curator of culture for the rest of the nation, Garfinkel said.

“We want to represent that, not in a cliche way, but in an authentic way,” he said. “I think the country is changing, and South Florida is a microcosm of that.”

Today, about half of Dolphins’ stadium revenues in a given fiscal year come from non-Dolphins events, Garfinkel said. Just this year, the stadium has hosted Beyonce and Jay-Z, Taylor Swift, and the Eagles and Jimmy Buffett. A Coldplay concert at the Hard Rock last summer featuring top Latin acts was the 35th-highest-grossing stadium concert in the world, according to Pollstar, with a gate of more than $6 million.

The math makes sense: Thanks to the NFL’s 17-week schedule, the Dolphins will play no more than 10 games a season at home (not counting a hypothetical 11th game playing in the Super Bowl in a year they host it). Without such events, the stadium would sit empty for much of the year. In addition to concerts and soccer, Hard Rock will now be home to the Miami Open, an event calculated at a $300 million economic impact on the city, according to the CVB, thanks to its ability to attract high-spending jet-setters.

The Hard Rock will also be the home of the Miami Hurricanes for the next 13 years. Miami Athletic Director Blake James said in an interview that the pro stadium environment is now one of its most potent tools when recruiting top football talent.

“Seeing us in a stadium that’s gonna host Super Bowls, national championships, it’s just a great environment,” he said. “[The renovation] has been a huge win for us—who wouldn’t want to play there?”

Still, as a flagship franchise in the NFL, the Dolphins have invested in ensuring its football sell-out streak, now in its fourth-consecutive year, continues at the stadium. One of the organization’s biggest investments has been in content and social media, Garfinkel said—and it’s paid off big: Its 300 million video views helped generate $3.5 million in sales leads and new new season ticket sales, he said. Their in-house digital team now comprises 25 employees.

Right now, the Dolphins are valued at $2.6 billion, about league average, according to Forbes. It’s one reason why Garfinkel says there is still room for progress.

“We’ve got a long way to go,” he said.

But looking back five years, Garfinkel points to a change in organizational mindset that allowed the team to rise up from the bottom-5 in ticket sales to its string of sellouts. (Like other teams, “sell-out” status is counted by tickets sold, not attendance.) After reducing seating from 75,000 to 65,000 as part of the renovation, the Dolphins now ranks second in attendance percentage according to ESPN, averaging an overcapacity crowd.

On The Bay

As Hard Rock Stadium becomes the premier large-capacity outdoor venue for South Florida, 20,000-seat AmericanAirlines Arena has cemented its place as the beating heart of sports and entertainment for the city of Miami—a claim its predecessor, the slightly smaller Miami Arena, could hardly ever make. Last year, Marc Anthony’s Miami concert generated one of the highest-grossing events for any indoor arena in the world, with a gate of more than $3 million, according to Pollstar. Other major acts that visited the Triple-A in the fiscal year ending June 1 included Justin Timberlake, Ed Sheeran and Kendrick Lamar.

Thanks in part to the arena’s ability to draw worldwide acts, Forbes now ranks the Heat as the 10th-most valuable franchise in the NBA, at $1.7 billion—a 26-percent increase year-over-year. For Eric Woolworth, Heat president of business operations, the key to success has been simple: Get people in the seats. The Heat has had more success than any pro team in the area at doing so, boasting a sellout for every game since 2011, according to ESPN.

The Heat declined to say what percentage of annual revenues come from non-Heat events. (The Heat owns all revenues directly generated from the arena.)

When he joined the organization in 1995, Woolworth says, the Heat had the oldest fan base in the league. Now, thanks to Miami’s changing demographics, the NBA’s successful push to make basketball a world game — and of course, the LeBron years — the Heat has one of the league’s youngest fan bases.

“We have an international brand now,” Woolworth said, recounting a recent trip to Tanzania where he saw a local wearing Heat gear. “That’s important from a sponsorship perspective.” Among the Heat’s largest sponsors: American Airlines, FedEx, Kia and Baptist Health South Florida.

At the same time, Woolworth said, the Heat has made a strong push to boost its local footprint.

“The brand proposition is a premium sports and entertainment brand,” he said. “But what we’ve mapped out for ourselves is to create a ‘big hug’ that benefits not just the Heat family, but also the entire community, so they hopefully understand we’re part of who they are.”

Public support

The majority of pro sports stadiums in the U.S. today have been subsidized at least in part by public funds, according to Timothy Kellison, director of the Center for Sport and Urban Policy at Georgia State University. That’s also the case locally. Still, South Florida taxpayers haven’t always seen the direct impact they expected from the deals government has signed over the years.

In the 1990s, Heat owner Micky Arison agreed to fund construction of a new, county-owned $240 million area, built on a deteriorating, county-owned park in then-abandoned downtown. It opened in 2000. In exchange for an approximately $6.5 yearly operating subsidy from the county (financed through hotel taxes), the Heat agreed to share profits as soon as the arena netted more than $14 million a year. As county tenants, they do not have to pay property taxes.

While the arena has played a role in reinvigorating downtown, it has delivered less than expected in profit-sharing proceeds. After 14 years—and despite the success of the LeBron era—taxpayers received less than $300,000 from the franchise from profit-sharing, as the Heat continually reported that weak sales or extensive arena improvements meant there was nothing to share.

A new deal signed in 2014 and running through 2035 discards the profit-sharing agreement and increases the county operating subsidy to $8.5 million after 2030. The Heat now pays the county $1 million a year in rent as a parks subsidy, and has committed to making more improvements to the county-owned arena and to stay on Biscayne Bay through 2040.

Miami-Dade also spends about a $3 million a year to service the debt on the arena’s $37 million waterfront land. And the state of Florida pays the Heat $2 million yearly in sales-tax rebates.

Some criticized the latest arrangement as a giveaway, citing the lack of public sharing in naming-rights revenue among other issues. But others including Bruno Barreiro, a former county commissioner who was one of the deal’s biggest supporters, still believes it was good for Miami residents.

“These sports bring a level of attention and awareness to Miami around the country, around the globe that you can’t buy with advertising dollars,” he said in a recent phone interview.

The arena now ranks 7th on Trip Adviser’s list of things to do in Miami.

The 2008 Marlins Stadium deal signed by Miami-Dade County and the City of the Miami was notoriously bad for taxpayers, who picked up $370 million of the $550 million of the stadium’s cost. The city of Miami paid about $100 million, mainly for stadium parking garages. To finance the deal, the county sold $91 million in bonds that, thanks to unfavorable terms, will now cost more than $1 billion to retire.

As part of the Marlins deal, city and county officials expected to receive 5 percent of any profits then-owner Jeffrey Loria and partners might reap if they sold the team within 10 years. But after deducting debt, expenses and taxes tied to the 2017 sale to Derek Jeter and his partners, Loria claimed he did not owe either government entity anything.

The city and county are both suing.

Although both initial funding and the recent renovation to the Dolphins stadium were privately financed, the team also benefits from government subsidies. Miami-Dade has agreed to pay the Dolphins up to $5 million a year in available hotel taxes as bonuses for large events recruited to the stadium, such as the upcoming 2020 Super Bowl ($4 million) or an international soccer match ($750,000). Miami-Dade has exercised an option to delay payments on the 20-year deal and can also withhold the money if hotel revenues fall below forecasts. The stadium is also receiving $1 million a year from the county to house the Miami Open tennis tournament. And this summer, the county agreed to a subsidy worth up to $58 million to bring the Dolphins training facility to Miami-Dade.

In Broward, the county commission — which owns the the Florida Panthers’ home ice at BB&T Arena in Sunrise — voted in 2015 to give the Florida Panthers organization an $86 million subsidy. It was swayed by an analysis that a franchise bankruptcy filing could have cost the county even more. None of the money was designated for the hockey team; instead the funds were earmarked for upkeep of the BB&T Center, which opened in 1998.

Broward County now stands to receive 10 percent of gross revenues if the Panthers organization meets certain annual revenue thresholds. Stephen Farmer, a finance manager for Broward County, said the threshold has not yet been met. The county declined to release Panthers’ current financial data, citing Florida statutes.

Broward Commissioner Chip LaMarca voted against the deal at the time. But he now says the Panthers have fulfilled their commitments, and he expects the county to start seeing revenue shares in a few years. According to Pollstar data, the BB&T Center has grossed $30 million in non-hockey events since 2017, including hosting Billy Joel, Justin Timberlake and Cirque du Soleil.

“They have lived up to the bargain,” LaMarca said, noting the team had also been able to host the NHL Draft. The team is also expected to bid for an NHL All Star Game. “I’m as happy as i could be for someone who didn’t vote for it.”

The ‘new’ Marlins

The Marlins just notched the lowest attendance for any MLB team since the 2004 Expos. But as they embark on what team officials are calling a “building”—as opposed to re-building—project, the Marlins are repositioning themselves as a Miami-focused team that embraces the community’s international flavor. Under the previous ownership, the team relied largely on a Broward-based fan base, Marlins President of Business Operations Chip Bowers said.

People are very protective of their own cultures here—you don’t see a lot of assimilation,” Bowers said. “They’re very proud of their cultures, and that’s something we want to embrace.”

The team now hopes to make Marlins Park a “365-day-a-year” facility that could host events like monster truck rallies (57,914 tickets were sold at the park’s two-day Monster Jam fest in February). Later this month, the Miami Archdiocese will host its 60th anniversary gala at the park, with disco queen Gloria Gaynor slated as headliner.

Thanks to TV revenues, the Marlins are able to stay afloat despite its disappointing record. The baseball club hopes to renegotiate with Fox Sports Florida for an even more lucrative regional sports network contract with Fox. How can a deal get bigger with a team that struggled to win and draw fans this year?

“There’s only so much good content,” said Austin Karp, a writer for Sports Business Daily. “Major league lacrosse is not exactly going to drive the needle, and MLB is still MLB.”

Soccer team, and the Miami ‘recipe’

And then there’s Club Internacional De Fútbol Miami — Miami Inter, for short — the city’s nacent MLS team. Here too, soccer is just one part of the busines plan for owners David Beckham, Marcelo Claure and brothers Jorge and Jose Mas. Team officials have projected that gate receipts, retail and office leases at the proposed Miami Freedom Park will generate up to $385 million annually. In addition to the soccer stadium, the park would include 600,000 square feet of entertainment, restaurant and retail space on the site of the current International Links Miami - Melreese Country Club golf course near MIA Airport. According to ownership projections, just $0.11 out of every dollar spent at the completed complex would be spent watching games at the stadium itself.

The lofty projected revenue figure has raised questions about whether the city would be getting a fair price at the proposed $3.5 million in minimum annual rent the team would pay to use the land. The team has countered that its revenue figures would translate to $44 million in new tax revenue for the city, county and state. A vote on whether to sell the golf club land to team owners is on the November ballot for City of Miami residents.

For more than a decade, team co-owner Marcelo Claure has believed that Miami was ready for another MLS franchise, even after the first one folded in 2002. And while the vision of the multi-use stadium will reduce the financial impact of a bad season, Claure said in a recent interview that he knows he will have to make the on-field product appealing. Unlike other sports, MLS teams still do not enjoy eight-figure TV deals.

“There’s only one recipe for sports to happen in Miami, and that’s to have a winning team,” he said. “There’s no other way—we’ve seen it.”

SPORTS BY THE NUMBERS

Below is a breakdown of South Florida team revenue sources. Attendance estimates provided by ESPN. Revenue estimates provided by Forbes.

MIAMI DOLPHINS

Owner: Stephen Ross

President: Tom Garfinkel

Stadium: Hard Rock (sole owner)

Attendance (2017 average tickets sold per game): 67,627

Starting ticket price: $65

Estimated revenue sources: Broadcasting: 74% Gate: 15% Premium seating: 11%

Forbes valuation: $2.575 billion

MIAMI HEAT

Principal Owner: Micky Arison

CEO: Nick Arison

President: Pat Riley

Stadium: AmericanAirlines Arena (county owned; no money sharing)

Attendance (2017 average tickets sold per game): 19,643

Starting ticket price: $15

Estimated Revenue Sources: Broadcasting: 59% Gate: 25% Premium seating: 17%

Forbes estimated valuation: $1.7 billion

MIAMI MARLINS

Principal Owner and Chairman: Bruce Sherman

CEO: Derek Jeter

Stadium: Marlins Park (government owned; no money sharing)

Attendance (2017 average tickets sold per game): 10,014

Starting ticket price:

Estimated revenue sources: TV: 48% Revenue sharing: 37% Gate: 14% Premium seating: 5%

Forbes estimated valuation: $1 billion



FLORIDA PANTHERS

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