On 16th March, Robert Elstone attended the Downtown in Liverpool business breakfast, “The Everton Stadium and associated regeneration”.
During the course of his comments he discussed the business case for capacity, executive/premium seating and the overall costs of the project.
His view was that the business model was “tight”. The context being how much incremental increase in income would the football club see from moving to Bramley-Moore and what was the optimal point in terms of capacity and therefore income versus the capital costs, and one assumes the interest payments required on the resulting debt.
Paraphrasing, it appears his view is that the business case is supported by a smaller increase in capacity over Goodison Park than perhaps fans might have thought and a smaller number of premium seats than perhaps might be expected.
Now obviously, the club and Robert Elstone have access to much better data than I do. I can only make assumptions based on publicly available data and case histories.
However, try as I might, I can’t make the business case stack up in the manner he describes. I’ll try and explain:
I’ll list the assumptions first and then get into the meat of it:
|Option 1||Option 2|
|Average revenue per game||£20.00||£20.00|
|Average revenue per game||£166.66||£166.66|
|Average revenue per game||£25.00||£25.00|
|General admission tickets||9,400||10,000|
|Average revenue per game||£33.33||£33.33|
|Construction cost per seat||£6,000||£6,000|
|Overall Cost of stadium||£500,000,000||£452,000,000|
|Amount of LCC borrowing||£280,000,000||£248,000,000|
|Other financing (assume equity)||£220,000,000||£204,000,000|
|Cost of borrowing %||5.50||5.50|
Option 1, 60,000 capacity
With a 60,000 seat capacity of which 5,600 is Executive/premium seating, over a 19 game Premier league season, using the above assumptions matchday ticket receipts would generate £41.07 million per season.
Option 2, 52,000 seat capacity
With a 52,000 seat capacity of which 4,000 is Executive/premium seating, over a 19 game Premier league season, using the above assumptions matchday ticket receipts would generate £33.7 million per season.
The difference in matchday ticketing income between the two options = £7.37 million per annum
Now let’s look at the cost of building and financing both options. The assumption is a borrowing cost of 5.5% with capital and interest repaid over 25 years (in reality, it does not appear we will have a fixed rate but that’s a topic for another time).
At £6,000 a seat, an 8,000 reduction in capacity reduces the overall build cost by £48 million. I’ve assumed that reduces the LCC funding by 2/3rd of that, £32 million.
Repayment costs for Option 1: £20.63 million per annum
Repayment costs for Option 2: £18.28 million per annum
Net Income from matchday ticket sales minus annual repayment costs:
Option 1 = £20.44 million
Option 2 = £15.42 million
*not taking into account F&B revenues nor retailing activities around the stadium on matchdays
Now, as I started the article, the club have real information rather than what is a pretty basic calculation with assumptions, but nevertheless, regardless of the actual numbers the principle remains the same.
From a financial perspective, what is described by the CEO as a “tight” model becomes even “tighter” when a less ambitious template is applied to the Bramley-Moore stadium. For a board renowned for their cautious approach, it seems that what may appear a more achievable option in having a sold out but smaller Bramley-Moore is actually a less beneficial option financially with only marginal gains.
Is there another reason?
Perhaps the real reason is that the board, or the CEO, does not have the confidence to sell out a 60,000 seat stadium with 5,600 Executive/premium seats?
If that is the case, they really must in my opinion, re-examine their assumptions and the methods they intend to apply to attract fans to Bramley-Moore.
I have stated on several occasions we can fill a 60,000 seat stadium by segmenting the marketing approach to different categories of supporter, Executive/premium, season ticket holders, walk up or non regular attenders.
Broken down into those categories then we can compare what’s required with what other clubs sell in order to assess how likely filling a 60,000 seat stadium is.
The results (in more detail here) are that we can fill a 60,000 seat stadium by selling 8,000 fewer season tickets than West Ham in 2017/18, sell 3,000 fewer Executive/premium seats than Spurs, and have 8,000 less “walk up” or non-regular supporters than Liverpool.
We capped season tickets at 33,000 in an antiquated, but much loved Goodison Park; there’s hard evidence from several clubs as to the impact a stadium move has on season ticket sales. We have a waiting list, can we seriously not go from 33,000 to 42,000?
Liverpool sell more than 8,000 executive/premium seats at prices considerably higher than my model suggests. Can we not sell 70% of that figure, in an iconic stadium with state of the art (not necessarily the bloated Spurs version of course), at prices below that of our neighbours?
Before the club marketed season tickets as aggressively as they do now, even at the end of the Moyes era Goodison would attract around 5,000 non-season ticket fans. Most of them had the worst views in the ground. Are we really saying in a brand new stadium with perfect sight lines, and great food & beverage facilities we couldn’t double that number?
If this seems like a rant against the club I love then I apologise, it’s really not meant to be. It’s an expression of confusion regarding either the financial modelling/strategies or the lack of ambition and willingness to have an assertive, aggressive but achievable business plan which if properly executed does two things. It de-risks the project for the financiers, and perhaps more importantly for the fans, provides additional income to as in Robert’s words “invest on the pitch, and to win trophies”.
I’m very happy to have the above challenged.