Monday, August 15, 2016

Revising official figures, new report reveals Nets averaged just 11,622 home fans last season, Islanders drew 11,200 (and have option to leave in 2018)

The Brooklyn Nets drew an average of only 11,622 fans per home game in their most recent (and lousy) season, more than 23% below the announced official attendance figure, and little more than 65% of the Barclays Center's capacity.

The New York Islanders also drew some 19.4% below announced attendance, or 11,200 fans per home game.

The surprising numbers were disclosed in a consultant's report attached to the Preliminary Official Statement for the refinancing of some $462 million in tax-exempt bonds for the Barclays Center (plus another $20 million in taxable bonds). The refinancing should lower costs to Mikhail Prokhorov, owner of the arena operating company, by and average of $3.4 million a year through 2044 in paying off arena construction.

Official attendance for basketball
According to official figures, the Brooklyn Nets attendance averaged 17,187 in the debut season, 2012-13, 17,251 in 2013-14, 17,037 in 2014-15, and 15,125 in the most recent season, 2015-16. For hoops, the arena holds 17,732.

But official attendance refers to tickets distributed, not gate count.

As I reported 4/24/14, a report  on traffic by Empire State Development, the New York state agency that oversees the arena and larger project, stated, "Actual attendance during the 2012-2013 season (including Playoffs) averaged approximately 14,974." Previously, a memo from transportation consultant Sam Schwartz suggested that gate count in that season was closer to 15,500.

Real gate count

According to the report from consultant Convention Sport & Leisure (CSL; excerpt below), the Nets averaged approximately 14,900 fans per game over the first three years, which I calculate as about 13.2% less than announced attendance.

More dramatically, in the most recent season, "average attendance fell by 22% over the previous three-year average." That's a drop of 3,278, which works out to 11,622 fans. That 11,622 figure suggests 3,503 no-shows, or 23.2%, from the announced 15,125 figure.

(It's unclear whether CSL figures include playoff and pre-season games, but I believe they do, since such games were included for the Islanders.)

Reassuring potential bond buyers, the document does suggest the Barclays Center will meet revenue projections for the Nets, but "it will be important for the Arena that the Nets field a competitive team on the court into the future."

Indeed, though also bringing in unusual players like Jeremy Lin might expand the casual fan base, even if the team doesn't improve tremendously.

Attendance policies

I wrote in 2008 about the curious dichotomy between announced attendance and gate count for the then-New Jersey Nets. Tickets distributed sometimes vastly exceed actual attendance. Freebies do count as attendance if the people show up, because, after all, those fans typically spend money on concessions, another profit center for the arena.

It's not uncommon for professional sports to count tickets distributed as attendance. In a definitive 5/18/06 article headlined Mythinformation, the San Diego Union-Tribune's Mark Zeigler explained how attendance figures were skewed, and suggested that the National Basketball Association's policy is among the least transparent:
NBA: A strict leaguewide policy of announcing tickets distributed, including comps. It refuses to release turnstile counts.
NHL: Announces tickets distributed, but the difference between that and turnstile counts appears to be growing.

Islanders attendance

The New York Islanders, which played their first season at the Barclays Center, experienced a similar divergence between official attendance and actual gate count.

The Islanders averaged 13,626 fans for regular season home games, according to league figures, or 13,900 announced attendance overall, including three pre-season games and six playoff games, according to the CSL report.

(The Islanders had three low-attendance preseason games, one of which had an announced attendance of 7,046, with the other two lacking announced attendance. But all six playoff games sold out, at 15,795.)

But the report reveals that the team actually averaged 11,200 fans per game, which is 2,700 fewer people than announced, or 19.4%. Overall, 11,200 fans is 70.9% of arena capacity.

Prospects for the Islanders

As noted in the excerpt above, as previously reported in the New York Post and other outlets, the unusual financial arrangement is that the arena pays the Islanders an annual guarantee of $53.5 million (and climbing 1.5% a year) in exchange for ticket, advertising, sponsorship, and concession revenues--though the team keeps certain playoff revenue.

It is reasonable to expect attendance growth, the CSL report says, as the Islanders continue to field a competitive team and develop new fans. Indeed, per-game attendance grew over the past season.

However, a decline in attendance as a result of poor on-ice performance or other factors--the report doesn't mention how fans find the arena awkward for hockey, with bad sightlines--could impact revenue.

CSL notes reports that the Islanders are exploring moving to a new arena--which I think is a stretch, given the cost of construction. Note that the Barclays Center is still making money from the Islanders, despite the relatively low attendance:

And if the Islanders leave?

If the Islanders were to leave after the 2018 or 2019 seasons, the Barclays Center could leverage existing relationships to fill "a portion" of the lost 44 dates with concerts and other events. Of course they could; the question is what portion. 

The Preliminary Official Statement explains that, as described (in less precise detail) elsewhere, how, after the next season, AreanCo--the arena operating company--and the Islanders could renegotiate the 25-year license agreement:
If the parties are unable to reach an agreement on a modification to the NYI License Agreement, either party, through delivery of a notice no later than January 30, 2018 (an “Opt-Out Notice”), may elect to terminate the NYI License Agreement effective as of the conclusion of the fourth (4th) NHL season of the NYI License Agreement term (i.e., conclusion of the 2018-2019 NHL season); provided, however, that, in the event that an Opt-Out Notice is delivered, the Islanders shall also have the right to terminate the NYI License Agreement effective as of the conclusion of the third (3rd) NHL season of the NYI License Agreement term (i.e., conclusion of the 2017-2018 NHL season). 
In other words, the Islanders could be gone after three years. That seems unlikely. But the threat, as many agree, could be leverage for improvements, some of which Barclays Center has begun to make.

How many arena events per year?

In another section of the Preliminary Official Statement, it's revealed that the Barclays Center "averaged approximately 180 to 200 events each year since its opening in September 2012, which has increased to over 240 events with the addition of Islanders Home Games in 2015."

That's a significant different, and it suggests that the originally projected 225 events a year was a stretch.

The arena also might lose--or have to renegotiate--sponsorships that were predicated on a two-team venue.

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