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Wednesday, February 25, 2009

Yet another hidden surprise of the PSL license

Everyone has this wonderful image of Donald Trump, the 'successful' entrepreneur. But those who have done business with him may have other things to say about the man. In the 1980's, he built this incredible luxury coop on Manhattan's East Side, and all the social climbers had to get into the building. But once they got in they were browned.

You see, when you deal with Mr. Trump, you have to beware of the fine print. As a coop, the owners did not own the land, and once a few short-lived tax perks disappeared it meant the annual maintenance on the apartments ballooned. When that happened, the price of the apartments in the secondary market tanked. People got annihilated. They bought in for $800K and their apartments were soon worth $350K. Nightmare. Being "partners" with Trump comes with risks.

So what does this have to do with owning a personal seat license? Well, once you buy in on this PSL, it is your OBLIGATION to pay the annual ticket prices for the 10 games. IN ESSENCE, YOU ARE LOOKING AT THIS THE WRONG WAY. Right now, everyone is seeing the PSL as this coveted gold key to own, when it is actually a potential LEAD BALL AND CHAIN. Once the Giants have the PSLs all sold, then they can charge anything they want for the annual tickets and the owners of the psl are FORCED to pay whatever they want or else they lose their license. I have not read the fine print, but technically they may be on the hook, and would need to sell it out to someone else. The parallels to the Trump maintenance fees are possible.

But what is the trigger for the Giants raising ticket prices for the PSL owners? After all, ultimatenyg, why would you think that the Giants are going to RAISE ticket prices when the economy is slumping? Well, the answer is fourfold:

1) with revenue down from other sources, the Giants may not have a choice but to tap ticket revenue

2) the CBA expires after 2009, which means labor strife is possible

3) building expenses skyrocketed way over budget for the new stadium due to paying ultra high steel and construction expenses at the top of the market

4) Shout-out to Mitch, who alerts us to something which dates back to September but which is as relevant now as ever: the Lehman Brothers nightmare

If indeed the Giants are left holding the bag on $300M, then they are going to have to ratchet prices up in order to pay for it.

a) 82,000 seat licenses.
b) Revenue from the NFL and luxury boxes will pay their players and other debt service
c) 5% ticket increases per year paying for general inflation and other annual increases
d) cannot start increases until 2011 because they are stuck in the old stadium in 2009 and have announced the price for 2010 in the new stadium

Using this set of assumptions, they could recoup $300M by 2020, if they put in

9 years of 20% annual ticket increases.

How motivated are you NOW for "owning" this seat license? Of course, if anyone from the Giants administration reviewed these numbers, they would poo-poo the conclusions the same way the government handwaves all of our current issues. But we all know this $300M disaster is going to have to get paid. The only variable revenue stream they have control over is ticket prices. Substantial ticket price increases WILL COME in 2011 and beyond. Plenty of us have been chasing the Giants seat, and like the dog who finally catches the car, what are you going to do when you actually get there?! EVERYONE will be able to buy as many seats as they want in the secondary market. When the sizzle has worn off a few years after the stadium has opened, the emotional element will be removed and you will have made a much better decision than paying for the Club or endzone seats now.

Be careful what you wish for, you just might get it. The "waitlist" that everyone talks about is about to be history, so this is like all those rent-controlled and off-market apartments all of a sudden becoming available. Just a little bit of patience and some financial planning will go a long way to everyone making the best decision for themselves. Maybe before reading the blog the past few weeks or months you thought that the PSL was a one-way ticket to getting a piece of the Giants. If more seat issues have been raised successfully, then this forum has done its job.

The season's ticket holders who used to be down at the 30 yard line on the first level and who went upstairs for a more modest ticket price and sane PSL fee probably were afforded the best deal. Those 1K terrace and 5K loge seats offer a lot of value and will be firm in the secondary market. They will be in demand unless the ticket price inflation is acute. The other seats look a lot more vulnerable. If you have been sitting downstairs and now have to move upstairs, we've got news for you- you are going to be pleasantly surprised. The views from the (current Giants Stadium) third tier are better than anything except the second tier, which is now the Mezzanine Club gouge. The secondary market will flesh out all of these realities and put EVERYONE on equal footing.

Summary: The Giants' financial problems become YOUR financial problems when you buy that PSL. Be careful what you wish for, you just might get it.


Mitch said...

Andy...I know I got your dander up yesterday with that article I sent you....but as my son always likes to say "it is what it is"...

Call it the law. It’s the most basic rule when it comes to selling tickets to sports events (or any event) make sure the demand for tickets is greater than the supply of tickets.

Let’s clear up a few issues – is it ethical for sport franchises to sell PSL’s? Not really but it is supposed to be good business.

What choice do longtime Giants and Jets fans really have? Two! It is spend the money or spend your Sunday’s watching games on TV (where yours truly will be). The only really unhappy sports fans will be the team owners who can’t sell their PSL’s. (I would like to know how other franchises are doing in that regard...I believe it is not that good)

There are a finite number of tickets and more people interested in buying tickets (as the Giants would like you to believe...using their "waiting list" as a barometer) than there are available tickets. (I believe not anymore if they have come all the way down to my name on the wait list) It is the basic law of supply and demand, Big Apple style! and as the Chairman of the Board once sang:

If I can make it there
I'll make it anywhere
It's up to you, New York, New York.

So what do the Giants do to fans like us? They laugh!!! and say sorry suckers, “Show us the money!”
This is what rich kids do when they take over their family business. Rich kids don't know hardship. Look what’s happened to this country because of spoiled rich kids. The rich have never cared about anything but keeping themselves rich. So, let the Giants sell the tickets to all their rich friends because you know what?...eventually the bottom falls out.

If I can make it there
I'll make it anywhere
It's up to you, New York, New York.

flipper said...

The part you are missing about the Giants raising ticket prices is the Giants themselves. Although they have a 30+ year waiting list they have barely raised tickets over time. I got my tickets 2 years and went on the list in '78, so I knwo how long the list is.

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