The Angels make $100 million a year at Angel Stadium, but Anaheim sees little of that money due to a revenue formula based on the number of tickets sold and not the total dollar amount the tickets produce, according to stadium economics experts.
Anaheim receives no money from the food or merchandise sold at Angel Stadium under the current lease and the team has only made the city $1.6 million since 2010, but the City Council said it wants the team to pay market-based rent in a new lease, meaning the team should pay whatever the city can get if it put the 155-acre stadium land up for rent.
Stadium finance author Neil deMause said one of the best things Anaheim could do is get rent from the Angels in the upcoming lease negotiations because the revenue won’t be tied to the team’s performance through ticket sales to games and other events.
“Honestly I don’t really understand what the point is taxing, charging a team based on their revenues. Just do what every other business that wants to use a property has to do — charge them rent,” said deMause, author of the stadium financing book Field of Schemes.
deMause, who runs a website named after his book, tracks stadium negotiations throughout the country.
“It should all average out in the end, and then you’re not penalizing the city if the team is terrible and you’re not disincentivizing the team to not sell tickets,” deMause said. “You want to make sure their (Angels) costs are fixed and not marginal.”
Sports economist and Chicago University professor Allen Sanderson said while he doesn’t disagree with deMause’s rent assessment, the main issue is a lack of evidence that baseball and football stadiums make cities money because — outside of hosting games — there’s very little the stadiums can do during the off season.
“The stadium is pretty much a white elephant, there’s nothing else you can do with it. So the leverage in stadium negotiations is overwhelmingly with the Major League Baseball league teams,” Sanderson said. “If you’re negotiating against a monopolist, of course you’re not going to do well.”
He said Anaheim should be aggressive in negotiations and be willing to let the team walk.
“You got to be more hard nosed, hard assed or something in terms of negotiations and got to be willing to let the team walk, or you’re going to lose money on this,” Sanderson said.
He said while shopping malls are open thousands of hours a year, baseball stadiums have a limited business window throughout the year. Sanderson said arenas are able to host both a National Hockey League team and a National Basketball Association team, on top of concerts and other events throughout the year and “you can make that pay or come close to paying.”
“With football stadiums or baseball ballparks, there’s no chance,” Sanderson said. “In terms of tails wagging dogs, the stadiums are the tails.”
The team makes $101 million in gate receipts annually, according to Forbes. It’s also ranked the 8th most valuable team in Major League Baseball at nearly $2 billion. In 2003, the team was ranked 20th and was worth $225 million, which was up from 2002 — the same year the team won the World Series — when the team was ranked 23rd and was worth $195 million.
Although Anaheim makes no money on concessions, advertising or naming rights, it does get money on tickets after the Angels sell at least 2.6 million tickets in a year. After that, Anaheim gets $2 a ticket.
While deMause said rent is the best source of revenue, he said if a city does tie some revenue to tickets it should be on a share of total money made from tickets, not the total number of tickets sold.
“That’s a terrible idea, that’s a huge incentive to raise ticket prices as high as they can,” deMause said. “I think a percentage of gate receipts would be good and you can have a threshold or not have a threshold. But it should be based on revenue, not a number of tickets sold.”
Some tickets cost as much as $151 each for seats behind home plate, near the Lexus Diamond Club, according to pricing for the Angels vs. Astros game Sep. 29.
The second-floor club area, which has different boxes, lounges and suites, is blocked off from regular ticket holders by attendants who require a person hold a club or suite ticket before letting them on the floor. There are 87 suites at Angel Stadium, according to SuiteHop, which brokers suite tickets.
According to Suitehop’s website, only two suites were left for the Sept. 29 game as of Monday evening. A private suit near first base cost $2,563 and includes 18 tickets, but food catering is sold separately. The other private suite, which sits closer to the visiting team’s dugout, is $4,419 and includes 12 tickets — food catering is also sold separately.
Sports teams keep all the merchandise and concession revenue in nearly every public stadium lease between a city and a professional sports team, said Roger Noll, a Stanford University sports economist specializing in stadium finance.
Noll said the city should look at capturing a portion of the Angels’ $101 million gate revenue, which was commonplace between cities and sports teams until the 1990s.
“Historically, before the stadium subsidy craze took hold, the standard agreement between a local government and team is they would pay rent in a fraction of gate revenue, which was usually six percent,” Noll said. “It would be huge now because they take over $100 million now.”
The team doesn’t pay rent because, according to the current lease, the $87 million it paid for stadium upgrades in the late 1990s is considered prepaid rent. The city also chipped in $30 million for upgrades.
According to a 2013-2017 stadium revenue audit, 2014 produced the most ticket revenue for the city during that time frame when the Angels sold 3.23 million tickets and Anaheim made $1.26 million. The city also made $236,000 in other event revenues in 2014, which consist of shows like motocross and monster truck shows.
But Anaheim also has to put money back into the stadium for maintenance and to pay down bonds. After factoring in the expenses, the stadium cost the city a little over $181,000 in 2014.
From 2010 to 2018, the city spent $9.9 million on the stadium and made $11.5 million from tickets and other event revenues for a net revenue of $1.6 million, according to numbers provided by the city.
Mayor Harry Sidhu, along with the Council at the Aug. 27 meeting, said he and the negotiating team are looking to make the Angels pay market-rate rent. He sits on the negotiating team along with City Manager Chris Zapata and City Attorney Rob Fabela.
The team met Sept. 13 to discuss what the city would like to see in a lease from the upcoming negotiations with the Angels. The city expects to receive an offer from the team sometime in October.
Sidhu did not respond for comment.
The Angels lease, dating back to 1996 when Disney owned the team, also allows for some parking revenues and other event revenues. It also stipulates the city contribute to stadium maintenance.
Currently, the city has to pay nearly $698,000 for the maintenance fund, on top of some bond payments for an exhibition hall from the 1980s, according to a city document. The bonds are expected to be paid off in 2022.
Yet the city hasn’t made anything off parking in at least five years, according to a stadium cashflow document and the revenue audit obtained through the California Public Records Act.
City officials also point to the sales tax revenue generated by the stadium, but said it can’t release sales tax data because of state law.
“Tenant (Angels) will retain all revenues generated by the sale of merchandise … and food and beverages at the Baseball Stadium,” reads the lease. “Tenant will provide Landlord (Anaheim) with monthly statements identifying sales tax generated by Tenant from merchandising and food and beverage locations in the Baseball Stadium.”
The current rate in Anaheim is 7.75 percent, according to the state Department of Tax and Fee Administration. But only 1.25 percent of that goes to Anaheim, according to the department.
The cheapest t-shirt with the team name on it is $35 and the team jerseys can range up to $375 in the Angel Stadium shops. The high-end jerseys sell for $330 on the Major League Baseball merchandise website.
The 1996 lease, which was inherited by Arte Moreno when he bought the team in 2003 for $184 million, allows for increases in revenue thresholds on parking and other events at the stadium.
Originally, if the team sold over $4 million in parking annually, the city would get a 25 percent cut of anything over that threshold.
And the city would get 25 percent of any revenue above $2 million for other events annually, like motocross and monster truck shows.
Starting in 2013, the Angels had to produce at least $6 million in parking revenue before the city would get a 25 percent cut of anything above that number. That number climbed to $6.5 million in 2017, according to the revenue audit. It produced no revenue for the city from 2013 to 2017 and the Angels fell $1.36 million short of the $6.5 million threshold in 2017.
The other event revenue threshold climbed from $3 million in 2013 to $3.26 million in 2017. The other events did produce direct revenue for the city, according to the audit. The Angels made nearly $20 million in other event sales and the city got a little over $1 million of that revenue during the audit time frame.
The Angels originally opted out of the lease in October 2018, and Sidhu brought back the lease for reinstatement in January. But he, and some key city staff, classified it as a temporary lease extension during the January meeting.
“This seems to be even more argument for the fact that they shouldn’t have given the Angels a lease reinstatement without concessions,” deMause said.
Sanderson said cities across the country have started listening to sports economists and realizing that stadiums and ballparks are money pits.
“In a sense, I think on football stadiums or baseball ballparks, cities are still getting fleeced, but cities are getting fleeced less,” Sanderson said.
Noll said, because Anaheim has only made $1.6 million on the Angels since 2010, he doesn’t think Anaheim recovered its $30 million from the stadium upgrades.
“The best deals are the ones where they recover most or all of their operating costs, but I don’t think Anaheim does that either.”
Spencer Custodio is a Voice of OC staff reporter. You can reach him at scustodio@voiceofoc.org. Follow him on Twitter @SpencerCustodio.