Skyboxes Mean Big Revenue for Owners

Redskins owner Jack Kent Cooke is not the only owner of a professional football team who dreams of a stadium-sized money machine.

The same financial motive that is leading Cooke to push for a new, 75,000-seat stadium also is causing other NFL owners to consider trading up. The Los Angeles Raiders announced this summer that they will relocate to Irwindale, Calif., and teams in at least four other cities--Chicago, Atlanta, Houston and St. Louis--are looking for new places to play.

Now that the players’ strike is over, owners of those teams will resume their search for the only real pot of gold left in professional football:

Skyboxes.

Skyboxes, the glittering private suites lining the rims of more and more stadiums and bringing in profits that, unlike ordinary ticket sales, do not have to be fully shared with visiting teams.

Often equipped with closed-circuit television and wet bars, they lease for as much as $80,000 a year, each. And corporations are lining up to pay that price to entertain their customers at stadiums around the country, even though the new tax law terminated the deduction for the cost.

With player salaries rising and television revenues leveling off--or worse--in the aftermath of the strike, skyboxes represent a sure way for the owners to keep big profits rolling in.

“They are a source of great revenue, without which a club has almost no chance whatever of breaking even, much less making a profit,” said Cooke, who has complained that he loses money on the Redskins each year.

RFK Stadium in the District of Columbia is one of the few stadiums in the country with no skyboxes, and Cooke has said the boxes would be an integral part of the 75,000-seat stadium he is seeking either in the District or a suburb.

But there also is a fear that the advent of skybox-stuffed stadiums will turn football into an elite sport. Critics say it could lead to a virtual caste system, in which ordinary ticket-holders on bleachers cheer in the rain while thousands of upper-crust attendees sip champagne (it costs $6.75 a glass in the Miami Dolphins’ new stadium) and watch instant replays in climate-controlled cubicles.

So-called “club” seats, which lease for less money but still include private bars and restrooms, add a middle tier of economic segregation at some new stadiums.

“Sports spectatoring is becoming less democratic,” said Robert Baade, an economics professor specializing in sports at Lake Forest College in Illinois. “That is one facet that needs to be considered as we build more and more luxury seats.”

Pointing out that many stadiums are financed partly with public funds or tax advantages, Baade added: “What are the issues of equity and fairness? Should an ordinary taxpayer foot the bill for elite seating?”

Skyboxes themselves are not new--they were pioneered by the Dallas Cowboys’ then-owner Clint Murchison in the late 1960s--but the intensity of the search for them is. Of the five teams now debating relocation and the one that has announced plans to do so, all say the need for more skyboxes is one motivating factor. Even in Baltimore, officials are hoping the 104 skyboxes in their planned stadium will help lure a pro team.

“They are an integral part of our design plans,” said Herbert Belgrad, head of the Maryland Stadium Authority. “We will be trying to market the sky suites early on,” although, he added, the division of skybox revenue between the authority and the team will be subject to negotiation.

The potential profit in skyboxes is enormous.

In a stadium of the size Cooke is proposing, 200 skyboxes that lease for $50,000 each would bring in $10 million annually. NFL rules require that a small fraction of that revenue be shared with the visiting team, but the gravy still is much greater than it is for ordinary tickets. Per customer, the formula in this hypothetical case would allow the owner to turn over $10 and keep about $450 per game.

Dolphins owner Joe Robbie used that anticipated cash flow to build himself a new stadium. He pledged the leases on his skyboxes, which go for between $29,000 and $65,000 a year, as collateral for the $90 million in bonds floated to build the structure opened this fall. Because holders of the leases were required to deposit the last year’s rent as security, Robbie said, the flow of revenue is assured.

Nearly 60% of the 216 boxes at Joe Robbie Stadium had been leased for 10 years even before the season was interrupted. More than 80% of the stadium’s club seats have been leased.

Robbie said Cooke called him shortly after the stadium’s dedication to discuss the economics of skyboxes and how the stadium was financed.

“I feel, and I am sure that Jack Kent Cooke shares this feeling, that Washington is an ideal market to sell skyboxes and other special seating,” Robbie said in a telephone interview. “With the government, and Congress and all the people who like to wine and dine their clients, Washington would be ideal.”

Luxury seating also seems to be an attractive lure for team owners in other cities, according to spokespersons for teams that are looking for new stadiums. In Chicago, for instance, Bears owner Michael McCaskey would like to keep the same number of open seats now available in Soldier Field and add 10,000 club seats and perhaps 240 skyboxes in a new stadium.

“Football is a hot commodity,” said Tim LeFevour, director of stadium operations and skybox manager in Chicago. “I don’t feel there is a better place where you can spend your dollar and take your key clients.”

A company owned by the Mara family, which owns the New York Giants, recently sold 66 of Giants Stadium’s 72 skyboxes to a limited partnership for $17 million. The boxes, which last year leased for $40,000, are going for $50,000 this season, and leaseholders are required to purchase tickets for all 19 Giants and New York Jets home games as part of the bargain.

Next year, the price will rise to $72,000. The boxes’ owners don’t expect many defections.

“The people we have here we have had for 12 years,” said Ned O’Connell, director of marketing and sales for Skybox Inc., which manages those New Jersey Meadowlands boxes. “Fewer than five have not renewed their leases. But we also recognize the fact that if they don’t renew them, there are other people who will.”

The 60 skyboxes at Denver’s Mile High Stadium were sold this year to an affiliated limited partnership, also for $17 million. With lease prices ranging from $50,000 to $80,000, the boxes can earn nearly one-quarter of their purchase price each year.

As team owners go after skybox dollars, some experts say they threaten to undermine the all-for-one philosophy that has made the NFL the wealthy and powerful institution it is today. The league that shares almost everything, from television revenue to gate receipts, could become divided against itself as some teams enrich themselves from skyboxes while others do not.

Some owners, such as Robbie, already are resisting pressure from the league to share the wealth from club seating. The revenue from skyboxes is considered untouchable.

“Skyboxes create an independent economic base for each team. They are the wild card in the deck right now,” said David Harris, author of “The League: The Rise and Decline of the NFL.”

“They threaten to disrupt to an extreme degree the economic sharing principle on which the league has been built.”

Some pro football teams have itchy feet. They include:

--Washington Redskins: Owner Jack Kent Cooke wants a stadium in the area that can seat 70,000 to 75,000 people, to replace RFK Stadium, capacity 55,750. RFK has no skyboxes; the new stadium would have as many as 200. RFK lease expires in 1990.

--Los Angeles Raiders: Owner Al Davis said last month he will move the team to Irwindale, a town of about 1,000 that agreed to lend the team $115 million to build a 65,000-seat stadium with 80 “luxury boxes.” The Los Angeles Coliseum had blocked Davis’ request to add skyboxes. Coliseum lease expires in 1991; Raiders are said to want out sooner.

--Chicago Bears: Owner Michael McCaskey wants to leave Soldier Field, capacity 65,000 plus 60 skyboxes, for a new stadium with the same number of general seats as well as 10,000 club seats and 240 skyboxes. No site selected.

--Atlanta Falcons: Owner Rankin Smith wants a domed stadium that could hold 70,000 seats, plus skyboxes. Now playing in Atlanta Fulton County Stadium, capacity 60,748, with 36 luxury suites added by Smith. Stadium lease expires in 1990.

--Houston Oilers: Owner Bud Adams is unhappy with the Astrodome, maximum capacity 50,594 plus 55 skyboxes, and is weighing an offer from Jacksonville to refurbish the 82,000-seat Gator Bowl, increasing its 28 skyboxes by a substantial amount and guaranteeing revenue of $115.2 million over 10 years. Astrodome lease expires in 1988.

--St. Louis Cardinals: Owner Bill Bidwill wants to stop sharing Busch Stadium with the baseball Cardinals. At 54,200, stadium capacity is second smallest in the NFL. It has 53 skyboxes, but Bidwell wants 70,000 seats plus 180 skyboxes. Stadium lease expires in 1996 but could be ended by mutual agreement.