Summary of ‘The Economic Impact of Seattle Sonics and Seattle Storm Basketball Franchises in Washington State’
A Comparative Analysis Based on the Mariner and Seahawk Economic Studies
Summary of Findings
The Sonic and Storm Basketball Franchises in Washington State have an impact on the State’s economy that is similar to the economic impacts of the Mariner and Seahawk franchises. This analysis estimates that the total economic impact of the franchises in current terms is approximately the following:
Mariners $ 270 million
Sonics & Storm $ 234 million
Seahawks $ 218 million
Significance of Findings:
In 1995 the legislature passed a measure supporting a baseball facility estimated to cost $498 million in public funds. Public funding for the facility exceeded $400 million. In 1997 the legislature passed a referendum to the people authorizing the construction of a $430 million football and soccer facility. Public funding was set at $300 million. Voters approved the proposal in June, 1997.
In each case the economic impact of the franchise and the facility was an element in the legislative decision to move forward with the support for significant public funding.
The Sonics total expenditures in 2004 were comparable to the Seattle Seahawks (1995 adjusted to 2004) and the Seattle Mariners (1993 adjusted to 2004): Mariners $ 177.4 million, Sonics and Storm $ 161.1 million, Seahawks $ 147.7 million.
The Seattle Sonics in 2004 was comparable in total economic impact with the Seattle Mariners and the Seattle Seahawks:
Total Economic impact: Sonics Mariners Seahawks
Output: $234.7 $269.6 $218.3
Conclusion
An analysis based on the expenditure levels of the principal sports franchises in Washington State yields similar economic impact results. When adjusting to 2004, the total economic impact of the three franchises is as follows:
Sonics & Storm $238 million--Mariners $270 million--Seahawks $218 million
The impact on tax revenues tracked those of total economic impact with the following results, again adjusted to 2004.
Sonics & Storm $10.8 million--Mariners $13.7 million--Seahawks $9.1 million
This analysis is directed to the impact of the franchises.
Understanding the Finances of KeyArena as relevant to the Sonics & Storm and the city
Seattle Center receives revenues for KeyArena from various sources. Each year, Seattle Center’s goal is to collect enough revenue to pay for the KeyArena’s expenses and debt service. The largest KeyArena revenue sources are explained below.
Rents: KeyArena rents are received from three sources: Sonics basketball ($800,000 per year with $533,000 in the lockout shortened 1998 season), Thunderbirds hockey ($275,000 per year), and other entertainment events (over $1 million per year).
Suites: The KeyArena has 58 luxury suites. One is provided to Full House Entertainment (the business and marketing company for the Sonics), one to Key Bank. Single event suite prices range from $250 to $6,500. Suite lease prices range from $60,000 to $150,000 per year. Gross proceeds are split on a percentage basis between Full House Entertainment and the City. In 1996, the City received 80 percent of suite revenues. The most important contribution to the KeyArena’s financial success is leasing its 56 Luxury Suites. The KeyArena faces competition from Seattle’s baseball and football teams for luxury suite leases. The biggest barriers faced by Seattle Center marketing staff in finding 48 non-sports events are: the price of using KeyArena for an event compared to the Tacoma Dome (20 percent higher), a decreasing number of arena-sized touring concerts and events, and the increase of promoter-owned facilities (The Gorge and White River).
Club Seating: The KeyArena has 1,112 Club Seats (used for sporting events): 1,055 are leased by the season and 57 are sold on a per game basis. In 1998 seat prices were $104 or $130 per game. Gross proceeds from leased and single game sales are split on a percentage basis between Full House Entertainment and the City. In 1996 the City’s share was 60 percent. The revenues are determined by ticket prices, which are set by the Sonics, and the popularity of Sonics’ games which are dependent on the Sonics’ win/loss record.
Ticketmaster Fees: The City receives royalties on tickets sold through Ticketmaster. In addition, Ticketmaster pays the City interest earned on ticket revenues before disbursements to promoters.
Advertising: Full House Sports and Entertainment (Sonics) pays an annual fee to the City for selling advertising space in the KeyArena. The fee began in 1995 at $250,000 and declines by $50,000 each year for five years 1999 is the last year the City received advertising revenue.
Admissions Tax: The City levies a five percent admissions tax on all KeyArena events. The portion of the tax revenue generated by Sonics’ events is returned to Seattle Center.
In addition, on February 24th of 2006, the Seattle Thunderbirds requested a new deal. If they don’t get one, a move might be on the horizon for them as well. Colin Campbell, Thunderbirds vice president and assistant general manager has made that very clear. "We won't go on forever dumping money into this team," Campbell said. "We need a market rate lease or a lease comparable to what other minor league hockey teams are paying in the WHL." |