Monday, August 19, 2013

Is Newark's Prudential Center losing business? Evidence, though incomplete, suggests Barclays Center cuts into volume

Via Pollstar
Is Newark's Prudential Center losing business, notably concerts, because of the Barclays Center?

Evidence is mixed, but it's understandable that a new(er) arena, closer to public transit and accessible to large numbers of well-off customers, might gain more events.

Problems at the Pru?

In Bettman says report of imminent NHL takeover over Devils is “not accurate”, Field of Schemes's Neil deMause on 8/9/13 cited reports that the National Hockey League might have to take over the New Jersey Devils and quoted Forbes's Mike Ozanian:
Non-NHL events are down at the Prudential Center, also hurting Vanderbeek’s financial situation. One reason: arena operators prepay a portion of the money they are going to pay acts, like rock bands and the circus, and sources say the Devils do not have the cash to book events.
During the first quarter of 2013 [via Pollstar] the Prudential Center was not among the world’s top 50 busiest arenas. The prior year it was ranked 11th-busiest. In the mid-year ranking the Pru is ranked 33rd.
(Barclays was 26th worldwide in the first quarter, but third by mid-year.)

Via Pollstar
Yes, as deMause points out, "it’s also worth noting that in 2012, the Prudential Center didn’t have to compete with Brooklyn’s Barclays Center, which is now the nation’s busiest arena. Even in a metro area like New York City’s, there’s a point at which the arena business becomes a zero-sum game, and you have to wonder if Newark has now been leapfrogged by Brooklyn as concert acts’ preferred second stop in the tristate area after Madison Square Garden."

The Newark arena has certainly dropped in rank. As Meadowlands Matters' John Brennan wrote 1/8/13, Pollstar 2012 year -end rankings put the Pru at 7th in the country in terms of tickets sold for concerts and family shows. However, as the graphic below shows, the Barclays Center was 12th, despite having been open little more than three months.

Another measure more murky

According to Billboard--not Pollstar-- numbers, as Brennan wrote 7/20/13, the Prudential Center trailed only the Barclays Center and Madison Square Garden in the U.S., in Billboard magazine’s list of top-grossing venues for concerts and family shows, between 11/1/12 and 5/31/13.

So that complicates things somewhat. But it sure looks like the Barclays Center does not make Prudential Center operators happy.

It's quite possible that, in the initial year, Barclays Center bookers have offered attractive terms to touring acts, since, as I wrote, Billboard numbers show Barclays ahead of MSG in concert/family show revenue, but the Garden earns more per event..
Via Pollstar

That suggests that the Garden charges far higher prices and/or Barclays deliberately positioned itself to charge less and perhaps bring in smaller shows.

The Devils sold

As deMause wrote last week, the Devils are not being taken over by the NHL but being sold Philadelphia 76ers owner) Jeff Harris, who will reportedly pay $320 million for the privilege of owning the team and operating rights to Newark’s Prudential Center.

He suggested it might give the arena some clout:
The big question here is how lucrative the arena management rights will be once they’re owned by somebody with the cash flow to actually book concert acts. Things are very different in the NYC arena world than they were in 2007 when the Prudential Center opened: Brooklyn’s Barclays Center has opened, Madison Square Garden has just completed a $1 billion renovation, and even Nassau Coliseum is about to have a redeveloper announced later today. (The Devils’ former home, the Izod Center, is still hanging around too, though from a look at its upcoming concert calendar, it may not be for long.) The New York City metro area is huge compared to any other U.S. city, but even it can be susceptible to arena glut if you have too many venues fighting over too few acts.
Perhaps the Prudential Center will thrive if and when Izod closes. When Nassau Coliseum gets renovated, it will likely land some concerts/events that also are at Barclays. That doesn't mean the same act can't play New Jersey or even Madison Square Garden, but it has to hurt some venue.

Were subsidies justified?

Given that the Barclays Center gained triple tax-free bonds for construction, that, of course, reminds us of this question: should federal taxpayers subsidize a new arena to poach a team and business from another state? 

The answer, of course, is no. As sports economist Andrew Zimbalist wrote in his 2003 book, May the Best Team Win: Baseball Economics and Public Policy (p. 140-141):
While one may legitimately question the costs and benefits to a particular metropolitan area of attracting a professional sports team, there appears to be no rationale whatsoever for the federal government to subsidize the financial tug-of-war among the cities to host ball clubs. If there is a global welfare gain from the relocation of a team from city A to city B (because city B may be larger or wealthier or have more avid sports fans), then city B ought to able to pay for that gain without a subvention from Washington, D.C.
Of course, when Zimbalist wrote reports for Atlantic Yards developer Forest City Ratner, he called the project a great deal for the state and city. (He omitted the feds.)

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