Why Stadiums Are Priceless To Some And Worthless To Others

The growing demand to watch live football has soared throughout recent years forcing clubs to make huge long-term decisions on their stadium and if the idea is to upgrade they have to finance project worth hundreds of millions or even up to a billion. So how is a club’s stadium worth billions to some and nothing to others? Well, here we go.

The Prized Possession

To football clubs and many other sporting organisations that have a stadium, it is the most prized possession that the club has, no matter what, it will be there for decades. So, for football clubs, it’s a huge investment which happens possibly once maybe twice within a single fans’ lifetime.

worldsport1201a.jpg
Chelsea’s planned new ground (Evening Standard)

So, the investment in a stadium is huge and to put it simply according to Soccernomics the average price per seat within a new stadium is between£1,000-£2,000 and with the average stadium life of 40 years. However, the Emirates is a more luxury ground and cost £6,500 per seat while Chelsea’s new ground is expected to cost more than £15,000 per seat (based off the Times report claiming it will cost £1bn). So, for a football club it’s a huge investment and especially for clubs with smaller revenues to so-called “bigger clubs”, the wrong decision could lead to administration and possibly insolvency. 

Despite the huge outlay in finances, the stadium is at the heart of the club’s business plan. Many will think that the players are the main part of a football club when in reality they aren’t, although investment into players will lead to the club becoming more successful the bigger clubs are under no pressure to buy as they will sell their ground out every other week without significant investment into playing staff. So, a stadium is the club’s most prized asset and the most reliable form of income (ticket sales/naming rights) as well as a sustainable asset that will be used for decades.

So, in short clubs invest millions or billions into their stadium, therefore, they will want a return on investment in order to make it a good investment. Therefore, stadiums are priceless to football clubs.

A Worthless Structure

Despite a stadium costing millions, they aren’t worth so much to others, let’s start with the banks who loan to clubs in order to fund new stadium projects. Football clubs often pay their debts back over years however if a club can’t pay their debt what would happen? Well, in the case of most businesses the bank will take away assets of the business, however, this often cannot be done to football clubs. Usually, they (the bank) will take the asset they funded but there’s only one use to stadiums and little interest to be able to auction them off to make money back as for buyers the land would be worth a lot, but they would have a costly demolition job first. Basically, the stadium is worthless to the bank once the debt is being repaid however if the bank wishes they can often push the club to administration, therefore, finding a new owner who can pay off the debts.

But if a club can’t pay off their debts it will impact the politicians as if in the unlikely event that the stadium was auctioned off and the buyer wanted to make the land something else such as a supermarket they would need planning permission, from the local politicians and with the majority of voters’ football fans a stadium can change elections. So mostly football stadiums are worthless to politicians however it can ultimately be at the heart of their local manifestos.

Ultimately stadiums are priceless to clubs and fans and most likely worthless (in terms of money) to banks and politicians however they can have long-term implications for all that are involved.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.