How AEG runs the show
When AEG executives signed the final documents to take over the Millennium Dome in London, giggles could be heard in the adjacent room.
The 860,000-square-foot entertainment dome was regarded as something of a national joke that had soaked up $1 billion in British taxpayers’ money and was mothballed before the Los Angeles-based venue operator showed up with an offer.
“It was like they couldn’t believe these silly Americans were dumb enough to do this,” Anschutz Entertainment Group chief Tim Leiweke recalled.
Ten years later, it’s AEG that’s laughing.
After a half-billion-dollar makeover that included an 11-screen cinema, a museum and two concert halls, plus a new name — The O2, thanks to a sponsorship deal with the British telecommunications giant — the London venue became the world’s most popular concert stage in 2009 and 2010, by number of tickets sold.
The O2 metamorphosis, AEG boosters say, is just one example of the global firm’s aptitude for spotting, shaping and selling risky projects. The company is leaning on that record to pull off what Leiweke characterizes as AEG’s riskiest project yet: a $1.35-billion football stadium in downtown Los Angeles.
That proposal is fraught with uncertainty. Assuming early City Hall political support holds through talks on a development deal, AEG would have to win over an NFL franchise, probably by persuading an existing team to move here.
It would build “Farmers Field” on public land by moving the west wing of the Los Angeles Convention Center, using nearly $300 million borrowed by the city. Knowing the city is financially strapped, the company has promised to pay for all stadium work and any shortfall in tax revenue needed to pay for rebuilding the Convention Center.
Mayor Antonio Villaraigosa backs the idea, and city analysts have spent weeks negotiating a detailed deal framework, which is expected to be released next week. Leiweke recently warned that he might call off the stadium project if the City Council does not pass a preliminary deal before members take August vacations.
One skeptic is Greg Nelson, who was chief of staff to then-Los Angeles Councilman Joel Wachs when AEG was negotiating to build downtown’s Staples Center. He said stadium proposals often overstate their economic value to a city and understate the cost to taxpayers — yet developers are able to tap the “incredible emotional appeal” of sports.
AEG, Nelson said, is especially good at that. “They are master co-opters. They understand how to push the buttons of elected officials — and what it takes to get their support.... They hire the best political consultants and lobbyists who can tell them what it’s going to take. It doesn’t make them [different] than anyone else, except they seem to be doing it much better and much more.”
Since AEG was formed to build Staples Center in 1995, the company has undergone a world-encompassing transformation. By repeatedly finding underappreciated properties, rallying public subsidies and gaining corporate sponsorships to minimize its own exposure, it has ballooned into a $10-billion entertainment and real estate powerhouse.
Privately financed by Philip Anschutz, a reclusive Denver billionaire, the company now owns or manages 100 venues around the globe. There are arenas from Charlotte, N.C., to Sydney, Australia, to Shanghai, and theaters and clubs on the Las Vegas strip and in Times Square. Six convention centers stand in Australia, Malaysia, Oman and Qatar. And four stadiums host soccer, football and rugby in Carson; East Hartford, Conn.; Stockholm; and Brisbane, Australia.
Like an oil driller that discovers crude and then ships, refines and pumps it from affiliated stations, AEG has achieved part of its success by offering a vertically integrated menu unique to its industry. It can develop and operate an arena like Staples, then assure it has something to present by booking the acts and owning the teams that play inside. In Los Angeles alone, AEG holds all or part of the Kings, the Galaxy and the Lakers.
Its concert wing produced 4,500 performances last year, including tours by Bon Jovi, Taylor Swift and the Black Eyed Peas, making it the nation’s second-largest promoter, after Live Nation Entertainment Inc. And 49 other divisions combine to push merchandise, stream videos and stage Hollywood galas.
The company’s front man has always been Leiweke, 54, a charismatic rainmaker who doesn’t have a business degree or even a college diploma — he left school after a year in a Denver junior college. What he does have, admirers say, is a salesman’s touch with key stakeholders.
From the day it launched its $350-million Staples construction — with a $71-million boost from City Hall — the company has been skilled at figuring out what public officials care about and then tailoring projects to meet those needs.
In Portland, Ore., a city famous for its environmentalism, AEG made sure the revamped Rose Garden arena secured a coveted gold rating from the U.S. Green Building Council. In addition to providing energy-efficient heating and air conditioning, AEG encourages spectators to compost their unfinished hotdog buns and popcorn.
When the issue has been feeding the public coffers, AEG has been accommodating there, too. In return for $276 million in public financing for the Sprint Center in Kansas City, Mo., the company agreed to share arena profits above 16%, netting the city about $2 million a year. The O2 agreement in London calls for the United Kingdom to get 15% of net profits for 25 years; in 2009, the venue reported after-tax income of about $20 million.
AEG also marshals vital allies such as organized labor, a political force in L.A. known for making hefty financial contributions and launching aggressive get-out-the-vote drives. The county’s 11.9% unemployment rate has enabled the company to stress that jobs would flow from building and staffing a football stadium.
In the spring, when AEG announced its plans, construction workers were showing up to support the stadium at “every single council meeting,” City Councilman Paul Krekorian said.
AEG executives have never been shy about making political contributions to key allies, especially in Los Angeles. Leiweke said it happens here more than in other AEG cities “because this is where we live.”
Records show that since 2000, AEG and its affiliates have doled out nearly $2.7 million in contributions across California. Within L.A., AEG and its parent company, Anschutz Corp., have given at least $200,000 in recent years to campaigns that backed Villaraigosa’s slate of school board candidates.
In 2008, AEG gave $100,000 to the mayor’s campaign for a utility users’ tax and sent letters urging other corporate donors to do the same. And this spring, 13 individual AEG employees stepped up to give a combined $6,300 to help Councilman Bernard C. Parks win a tough reelection battle.
The company has relied on recruiting partners that help it share the burden and risk of its projects. With the proposed football stadium, for example, AEG sold the naming rights to Farmers Insurance Group for $700 million over a 30-year period. Plans are also underway for AEG to recruit second-tier sponsors that would bring in tens of millions of dollars each year.
The deal also hinges on AEG’s ability to recruit an existing NFL team to relocate to Los Angeles and become the stadium’s anchor tenant. Owning a piece of that team is crucial. That’s because the owner of each NFL team receives $117 million a year in national television broadcasting revenue, according to Robert Baade, an economics professor at Lake Forest College, near Chicago.
“That means the games can be played to empty stadiums, and the owners would still do well,” said Baade, who analyzes the economics of professional sports stadiums.
As with its other projects, the company sees further opportunities to extract multiple streams of revenue. A stadium, for example, could be used to attract the largest conventions, bolstering occupancy at AEG’s nearby JW Marriott Hotel — financed with as much as $270 million in city assistance.
It could also book concerts there. But “there are only a handful of concerts that can play stadiums,” said Gary Bongiovanni, publisher of Pollstar, an industry publication that tracks live events. “If you look at the stadiums across the country, they’re mostly dark.”
Making the stadium profitable would require 40 to 50 events a year, possibly including monster truck rallies, national college basketball tournaments and major religious gatherings. Only 10 or 11 of those would be NFL games, Leiweke estimated.
“For us, if the stadium was just a stand-alone decision, we would never do this,” said Leiweke, who admits there are a lot of what-ifs to his stadium dreams.
“As Phil [Anschutz] likes to remind me, there’s a lot that could go wrong with this one,” he said. “It’s just riskier than anything we’ve ever done before.”
Times staff writer David Zahniser contributed to this report.
