Accounting for sports
Illustration by Shaw Nielsen
In terms of franchise value, the Denver Broncos top the list of the city’s pro sports teams, and it’s not even close. Forbes puts the Broncos’ value at $1.13 billion, which nearly matches the combined estimated values of Denver’s three other major sports franchises: the Colorado Rockies ($537 million), the Denver Nuggets ($427 million), and the Colorado Avalanche ($210 million).
But team values are based on factors – among them the popularity and prosperity of a particular league, broadcasting rights, licensing agreements and league-wide revenue sharing – that don’t necessarily have much to do with a team’s economic impact on the city where they play. So while the Broncos are the region’s most identifiable team and biggest revenue producer – $276 million annually, according to Forbes – they aren’t the leader when it comes to economic impact. That distinction goes to the Colorado Rockies.
Much of this is owed to the vast disparity in the number of games the teams play. The Broncos play only eight regular-season home games a year, and NFL football in general is a made-for-TV sport that’s less dependent on live attendance than other sports; by contrast the Rockies play 81 regular-season home games and count heavily on drawing fans to the stadium. So whether the Rockies are going nowhere and drawing only 20,000 fans to the ballpark or showing enough promise to draw close to Coors Field’s 50,000 capacity, that’s a lot of spenders descending on Lower Downtown Denver for a lot of afternoons and evenings of entertainment that often include drinking and dining as well as baseball.
And that brings us to Coors Field and its location that makes the Rockies the most powerful economic engine of Denver’s four major sports teams. For starters, those who study the economic impacts of pro sports teams often don’t even agree on the metrics and formulas that should be applied. For example, some affix a multiple as high as five to game-related sales (meaning $1 spent at the ballpark turns over five times in the community, thus stimulating the area economy). Others put the multiple closer to zero, arguing that this is merely a “substitution effect,” and that unless attendees are visiting from outside the region, money spent on a sporting event would be spent on other entertainment if the team didn’t exist.
In fact, these city-specific studies rarely even surface except when a team is pursuing a new stadium and seeking taxpayer support to get it built. The Broncos’ Sports Authority Field, which cost $364.2 million and opened (as Invesco Field) in 2001, and Coors Field, which opened in 1995 and cost $215 million, were both financed largely by taxpayers in the six-county area with a tax of $0.01 per $10 on retail goods. In the case of Coors Field, taxpayers footed 78 percent – or $168 million – of the construction costs. By contrast, the Pepsi Center, built for $187 million, was privately funded, which is likely why it received less scrutiny from economic forecasters before it opened in 1999.
In their book, “Public Dollars, Private Stadiums,” authors Kevin Delaney and Rick Eckstein point out that supporters of a proposed new stadium for the Broncos largely stayed away from trumpeting economic impacts and instead touted the social and image benefits, noting that it would keep Denver’s four major pro teams within the city limits and further distinguish it as a “big league city.” The authors note that economic impact was indeed a selling point for supporters when it came to Coors Field. And even though downtown Denver figured to be the biggest beneficiary of a stadium in Lower Downtown, plenty of voter support came from outside Denver County in a close (52 percent to 48 percent) outcome in favor of a publicly financed stadium:
“There was no great difference between suburban and urban voters,” Delaney and Eckstein wrote. “Relatively rural Adams County showed the weakest support, while more suburban Arapahoe County showed the strongest. Younger voters (who were underrepresented among total voters) were more inclined to support the tax than older voters were. The best stereotype of a stadium tax supporter was a single male under age 30 living in or near the city of Denver.”
From the standpoint of economic development and revitalization of Lower Downtown and arguably all of downtown Denver, it’s paid off. Whether that attraction has taken away revenue from elsewhere in the metro area is another issue, to the extent that it’s even knowable.
But longtime developers in Denver’s city center cite Coors Field as the chief catalyst in the area’s transformation, a chain reaction they say started with people being drawn to LoDo for baseball, leading to a surge in entertainment investment – drinking and dining establishments – followed by loft projects, and finally office development. From 2000 to 2011, the population of downtown Denver increased 61 percent, according to the Downtown Denver Partnership.
“I give Coors Field most of the credit for that just because they were the initial catalyst that got the whole thing started,” says Randy Nichols, a real estate developer for more than 30 years, all but six of those years in Denver. His firm, The Nichols Partnership, built the 41-story Spire residential tower, among its many developments in the city’s center. “Downtown in the early ’80s was a wasteland. It was where you went to work and then as soon as work was off, you left. There was no activity, there were no restaurants, there were no bars, there was nothing to do, so why stay there? So Coors Field comes in, and there were something like 45 bars and restaurants that opened within six months before and after Coors Field’s opening. The city had terrific foresight in how it designed the field to be real neighborhood-friendly.”
But Nichols, whose firm also developed a 165,000-square-foot office building on 19th and Wynkoop streets in 1997, says there were other factors besides Coors Field that factored in the revitalization of Lower Downtown and the rest of downtown Denver.
“It isn’t the only reason why downtown is a great place to be,” he says. “There were huge investments in infrastructure and light rail and interstate highways and access from the highways into downtown. So that had a lot to do with it as well. But I think the single big event that really kicked it all off was when they built Coors Field.”
Well-known developer Mickey Zeppelin has a unique perspective when it comes to the revitalization of Lower Downtown. The Denver native has been in real estate development in Denver since 1972 and was the co-founder and first president of the Lower Downtown District Inc., when the location of a baseball stadium became an issue.
“I think at that point in time there was a group that was very excited about it, there was another group that was much more apprehensive about whether the historic character would get wiped out or what would happen to Lower Downtown,” Zeppelin says. “I think the neighborhood was particularly concerned with being overwhelmed by people who were less than sober. But from an economic standpoint and certainly from a real estate standpoint, I think it was a real sparkplug for all of downtown.
“It’s has its plusses and minuses, in terms of whether the entertainment kind of became a little overdone and overwhelmed the other things that had happened,” Zeppelin adds. “What was an extremely active art gallery scene has kind of faded away from Lower Downtown and been replaced by higher and I wouldn’t say better, but more expensive, uses.”
In assessing the development of the city’s center, both Zeppelin and Nichols cite the surge of Generation Y or millenials – the 25- to 35-age group – as a major force.
“Not only do they want to be where the action is, but they are a lot more environmentally conscious, and the thought of living in Parker and commuting for an hour and half in your car that gets six miles a gallon or something is just totally foreign to them,” Nichols says. “They’d much rather ride a bike or do something where they can walk. It’s a lot of things, but it’s clearly the Generation Y that is spurring all the growth right now.”
Zeppelin says he sometimes wonders what Lower Downtown would look like if not for the Rockies and Coors Field. “I think it probably would have taken a lot more time for it to develop,” he says. “I think it probably would be a calmer place. Probably it would be more like the Golden Triangle, basically something that happened over 30 years, just kind of gradually happening, or the Silver Triangle, which is just kind of creeping along. I think the stadium changed all of downtown.
“It’s stimulated a different kind of arts – more of the arts in terms of business; the tech businesses tended to go there, and I think that’s been a really positive thing,” he adds. “You’ve got this kind of energetic business thing. The Tech Center was really kind of the center of a lot of it (previously). Lower Downtown kind of moved the ball much more out of the suburban into the urban. People wanted to be where the restaurants, the action, the activity was.”
Nichols describes the chain of events that started with baseball fans descending on LoDo and sparking developments in entertainment, residential and, finally, office buildings.
“When the office users started coming down there as well as the residential users, it becomes a 24-hour neighborhood,” he says. “We’re seeing the culmination of that right now. LoDo is the best place to be in Denver.”
BRONCOS’ IMPACT: VAST BUT FRAGMENTED
Because the Broncos, along with the rest of the NFL, are such a television-fueled product, their economic impact on the city or region is less observable than for the Rockies, and largely anecdotal. The Nuggets and Avalanche, who play 41 home dates a year, fall somewhere in between when it comes to tangible or direct impact. Combined they play 10 times more home games per season than the Broncos, but with lower per-game numbers: 19,000 seats for basketball and 18,000 for hockey.
Rich Grant, communications director for Visit Denver, the city’s travel and tourism bureau, points out that tourism is a $3 billion industry in Denver alone and a $12 billion industry statewide. Professional sports is a part of that, though it is difficult to estimate how much sports spending comes from outside the area and trickles throughout the local economy. Equally difficult is estimating what Denver’s pro sports teams contribute to tourism promotion through their visibility in the media.
“The Women’s Final Four (hosted by Denver last year) has had studies done on it, and the impact of that one event was $20 million,” Grant says of the women’s NCAA basketball championship that drew thousands from outside the region. The economic impact of a team or event that draws primarily from the area is difficult to quantify, he says.
The most visible economic impact locally when it comes to the Broncos, and to some extent the Nuggets and Avalanche, is in the form of spending at sports bars, which is why the exercise is mostly anecdotal.
“We’re affected by the Nuggets, the Avalanche, the Broncos, and to a lesser extent the Rockies,” says Kyle Gutherz, general manager of Brooklyn’s at the Pepsi Center and Tailgate Roadhouse, which is also near the arena. “I guess there’d even be a fifth team, the Mammoth (of the National Lacrosse League). What we really see here is that there are four different demographics. And we also survive off concerts, so that’s even another demographic. And then that can even be broken down into subgroups.”
Gutherz says a team’s success or lack thereof can impact Brooklyn’s business, but only to a point. “You’ve got to remember, how many people can you fit in the Pepsi Center? Considerably more than you can fit into Brooklyn’s. I can fit right around 1,000 people in here, especially when you talk about in-and-out, turning tables, what not. That’s considerably less than what the Pepsi Center’s going to hold.”
Even amidst the Avalanche’s dismal and abbreviated season when attendance dropped, Gutherz says fans didn’t exactly disappear. “I mean, they didn’t have any games where people just didn’t show up,” he says. “The (game attendance) volume can be down, but we still had people
Less than four months after the Rockies began playing at Coors Field in 1995, Jackson’s sports bar and restaurant opened across the street and has been practically an extension of Coors Field since.
“I don’t think Jackson’s or the majority of the bars downtown would exist without Coors Field,” says Scot Minshall, general manager at Jackson’s. As for business at the bar and restaurant, he says, “I can’t give you exact numbers, but it’s significantly different when they’re in town and they’re winning than when they’re out of town or when they’re losing.”
Although Minshall describes Jackson’s niche is Rockies “pregame” – people grabbing a bite to eat and a beer before heading to the stadium – and Friday nights, the establishment is consistently packed for Broncos games, too.
“We fill up all the way for them,” Minshall says. “Our business is Coors Field, but we do a good job income-wise with the Broncos, and obviously the better they play the better the turnout we get from that. Them losing in the first round of the playoffs last year really, really hurt business.”
A better memory was the Rockies’ magical run to the World Series in 2007 and the predicable spike in business. “Like night and day,” Minshall says of the business volume. “Every day, even the road games were just absolutely gigantic.”
He describes the same surge in business the years the Broncos won their Super Bowls. “Good teams certainly help business,” he says. “The further they go, the better the crowds become. People sort of jump on the bandwagon. For a long time the Avalanche in 2001 when they won the Stanley Cup, that was our biggest day on record. ’Til that World Series, actually.”
2012 TEAM VALUES
MLB Rank: 25
Current Value: $537 million
Annual revenue: $199 million
Operating income: $18.7 million
NFL Rank: 13
Current Value: $1.132 billion
Annual revenue: $276 million
Operating income: $49.3
NBA Rank: 19
Current Value: $427 million
Annual Revenue: $110 million
Operating income: $12 million
NHL Rank: 18
Current Value: $210 million
Annual Revenue: $91 million
Operating income: $4.5 million