Based on the Courier-Mail report of a threat from the Gold Coast Titans to abandon the Cbus Super Stadium, over allegedly high charges imposed by Stadiums Queensland, the huge investments successive state governments have made in super stadiums (e.g. Suncorp, Cbus and now Townsville) may have been unnecessary. Hundreds of millions of dollars that would have been better spent on health or education priorities have been misdirected. The clubs can actually make do with smaller venues. The Courier-Mail reports:
The Courier-Mail has learnt that in a tense round of high-level negotiations, the Titans issued the explosive threat to sell home games to other venues both within Queensland and interstate, leaving Cbus Super Stadium as a $160 million white elephant…Titans officials got a taste of life away from the yoke of Stadiums Queensland when they went on the road to Toowoomba and Gladstone recently and were thrilled with the operational ease and commercial success of hosting those matches.
So the clubs don’t need the super stadiums after all! That would save the state government over $50 million in grants each year (see my Stadiums Qld post from yesterday). However, I expect the Queensland Government will find a more footy-friendly Stadiums Queensland board and it will reach a new deal with footy clubs so the government doesn’t suffer the political embarrassment of a $160 million white elephant. That, of course, would be a demonstration of the sunk cost fallacy. The government is losing money via Stadiums Queensland every year and it would be doing taxpayers a favour if it closed down the most uneconomic of its stadiums and sold them to the private sector to redevelop.
Incidentally, I had several excellent comments on my Stadiums Queensland post yesterday. Regular reader Brad suggests the governing bodies (e.g. NRL, AFL) could make a greater contribution:
One area of concern here is that the stadiums should be charging the national leagues much more money to recover costs. Each of the different leagues typically collect approximately 80% of their revenue from TV rights but those funds are not distributed to the clubs. Therefore, the leagues are getting rich while the government pays for the stadiums as the clubs have no money. The state government funding of stadiums enables the leagues to keep their money rather than them paying full cost recovery for the use of the stadiums.
Regular reader Jim noted it was a timely post:
…given the additions to the stocks of loss-making sporting assets on the back of the Commonwealth Games.
And Lateral Economics CEO Nicholas Gruen asked:
What is it with stadiums? All down the Eastern seaboard governments of both political persuasions seem to have lost their mind.
Finally, on the poor economics of the Townsville Super Stadium, see this excellent post from my old friend and former Treasury colleague Joe Branigan:
Great article Gene and some very well made points from your readers. Stadiums are assets that are 90% are vacants and when they are used they are rarely full. Smaller more boutique venues are better (and more efficient). However, our ego gets in the way… By the way Cricket Australia, AFL and NRL pay no TAX
Thanks heaps Keiran. Great points about utilisation and the sporting bodies paying no tax.
Great post Gene. You may want to recommend all State Governments read Prof Ed Glaeser’s book Triumph of the City. He talks specifically about governments wasting money on things like light rail, events, and stadiums in the search for economic growth. He is my favourite economist and has agreed to do a video link presentation at the Australian Conference of Economists this year. https://www.goodreads.com/book/show/9897152-triumph-of-the-city
Wow, you’ve scored! Well done on getting Glaeser to speak. Thanks Brad.
I suspect the titans approach is mostly bluster and negotiating tactics. Given politics & governments propensity to pay for events I suspect it may work. I doubt the titans viability roaming qld’s small regional grounds season after season.
Based on their annual report, stadiums qld expenses also cover the old qe2, sleeman, brisbane entertainment centre & the tennis centre, as well as the 5 football stadiums. It would interesting to know which of these are the least viable. Some of these stadiums hold few if any major events annually.
As you say many of these facilities would not be rebuilt, at least at their current capacities based on their economic merits. Qe2 held over 50,000 spectators, its the definition of a white elephant. If we accept the construction costs are sunk these facilities should be at least able to cover their variable costs.
I meant to say: few if any would be rebuilt