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Outline the various pieces of the case study that you are focusing...

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Outline the various pieces of the case study that you are focusing...

  • Outline the various pieces of the case study that you are focusing on.
  • Evaluate these pieces by discussing what is working and what is not working.
  • State why these parts of the case study are or are not working well.

 

Louisville City FC began its inaugural season playing in Louisville Slugger Field, which is managed by the Louisville Bats and owned by the city of Louisville. The baseball team has a 20-year lease with the city. Louisville City FC in turn signed a five-year lease with the Louisville Bats and operates as a secondary tenant. Signed in September 2014, the lease states Louisville City FC will operate under this arrangement for five years until December 2019. The team, however, has the option to terminate this lease early if a soccer-specific stadium is built and Louisville City FC becomes the new primary tenant of the new stadium (CSL, 2016). The Louisville City FC lease with the Louisville Bats outlines revenue and expense allocations for each soccer game. Louisville City FC receives 100% of the revenues generated through ticket and merchandise sales, parking, unsold annual suites (occurs when Louisville Bats suite owners do not exercise their option to purchase the same suites for Louisville City FC games), sponsorships through temporary field signage, and broadcasts. The soccer team also receives 50% of the revenues from annual suite sales for Louisville Bats season ticketholders who buy season tickets for the soccer games. In return, the Louisville Bats receive 100% of the revenues from concessions and annual suite sales for these games. The baseball team receives 100% of the sponsorship revenues from naming rights, fixed signage and building sponsors, and temporary field signage during its own games. Fifty percent of the revenues from annual suite sales of Louisville City FC games also accrue to the baseball team. On the expense side, the soccer team pays $5,000 in rent for each game. Louisville City FC also incurs 100% of the game-day costs and team facilities operations. This includes utilities, maintenance, and other expenses associated with the Louisville City FC locker rooms, offices, and storage spaces at the stadium. Finally, Louisville City FC is responsible for expenses such as security and public-address announcers (CSL, 2016). The Louisville City FC leadership argued that having their own stadium would help the team better manage their expenses and attain profitability. In 2015 Louisville City FC reported $2.3 million in operating revenues and $3.0 million in operating expenses, resulting in a $0.7 million operating loss. Ticket sales represented the largest percentage of team revenues at approximately 80% of total revenues, followed by merchandise (15%), sponsorships (5%), and other revenues (1%). The team did not provide a breakdown of its 2015 expenses. The CSL pro forma income statement included line items for operating expenses such as team operations, general and administrative, and advertising expenses as well as stadium operating expenses such as event services, utilities, and ticketing (CSL, 2016). The team likely incurred the same or similar expenses in 2015. The Louisville City FC leaders believed challenges with operating as a secondary tenant at Louisville Slugger Field directly influenced the financial performance of the team. They highlighted limitations with how much revenue could be generated through game-day operations. Louisville City FC leaders also believed the team paid "higher than normal game-day costs" associated with constantly converting the facility from a baseball field to a soccer pitch (CSL, 2016). Other challenges with playing at Louisville Slugger Field persisted beyond the financial aspects. For spectators, this included less than ideal sightlines, with some seats located farther from the soccer pitch. Scheduling challenges existed, where Louisville City FC waited until the Louisville Bats scheduled its games before scheduling its own. The lease also stated that the team must play between 15 and 20 games at the stadium each season. Finally, the team had to ask in advance for permission to practice on the baseball field (CSL, 2016).  In 2016, the USL decreed that all teams must play in a soccer-specific stadium. All teams should have their stadiums available for use by the start of the 2020 season, and these stadiums must have the ability to accommodate as many as 10,000 spectators (Green, 2017, April 12). For teams such as Louisville City FC, this requirement dictated building a new stadium. Mayor Fischer approved a feasibility analysis to address this prospect. He highlighted the possibility of expanded economic development and economic impact beyond game-day operations. The mayor expressed his preliminary commitment to this venture, noting, "This new investment in soccer will contribute to our authentic and vibrant community and give citizens one central team to rally around" (Louisville commits $75K for feasibility study of soccer stadium, 2016). A feasibility study would offer more details about the USL, the current state of professional soccer, and options for team and city officials to pursue. 

 

The feasibility study created by CSL contained an analysis of several key factors: (a) estimated stadium utilization and projected seating capacity; (b) USL benchmark stadiums; (c) stadium options for Louisville City FC; and (d) five-year pro forma income statement and sensitivity analysis of projected revenues and expenses for the Louisville City FC.

 

Stadium utilization and seating capacity For the estimated stadium utilization, CSL projected that Louisville City FC would host 19 games in the stadium: 15 regular season games; two exhibition games; one US Open Cup game; and one playoff game (Table 1). CSL also forecasted other events, which would allow Louisville City FC to take greater advantage of the facility. The consulting agency projected that the stadium would host one national or international soccer game, two music concerts, and seven other local events. The average attendance at these events would equal 6,553, consisting primarily of general admission tickets (average of 6,091 tickets sold) in conjunction with club seat and luxury suite sales of 270 tickets and 192 tickets, respectively. 

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