The Hot Seat
The football season may have ended in January, but the Denver Broncos began running a new play on March 5. That's when team lawyer David A. Bailey signed and mailed form letters threatening legal action to 100 of the football team's richest fans. The recipients had all missed the February 1 deadline to make the first payment on the second year of their multi-season contracts for seats in the exclusive Club Level at Invesco Field at Mile High.
The seats, advertised as "the ultimate in luxury seating for those who do not desire a private suite, but desire an enhanced game day experience" are a new amenity offered by the team after its move from Mile High Stadium. What sets the Club Level apart from general admission are carpeted halls, padded chairs, a separate entrance, TV lounges with full bars, and unspecified "upscale concessions to complement traditional stadium cuisine."
More than 10 percent of the seats at Invesco Field -- 8,800 out of 76,000 -- are on the two-tiered Club Level, which is located between the first and second levels of general-admission seating areas. Sold in three-, five- or seven- year contracts only, Club seats cost five to ten times what season tickets with similar sight lines did at the old Mile High.
"It's not worth the money the way it is now, not even close," says Denver real estate investor Don Olguin, who has a seven-year contract for a Club Level seat on the forty-yard line. "I had basically the same seat at Mile High for about $500 a season before. Now I'm supposed to pay $5,000, which is a ripoff. I bought into this deal sight unseen, based on their promise that I would be receiving premium service and amenities. But that's not the reality of the situation. The reality is that I'm getting no extra service, and my beer line is twice as long. They said they'd serve premium food, but they're usually down to hotdogs by halftime. And on top of all that, I have to wait in line for ten minutes to go to the bathroom. This is my 'unique and exceptional game day experience?' I don't think so."
When he received an invoice for the 2002 season in January, Olguin ignored it, as he did a "friendly reminder" that arrived in the mail three weeks later. A third notice in February prompted an angry call to the Broncos' head office. "I told them, 'The Club seats are not what you told me they were, and I'm not sending you my renewal payment until you show me a floor plan for new bathrooms that will be approved and get done over the summer. Their response was, 'We're getting a lot of complaints, and we're working on it.' Well, them working on it and me sending them $5,000 are two different stories. I said, 'You didn't honor your end of the agreement, so why should I honor mine?'"
One week later, Olguin got a form letter from lawyer Bailey, who works for Stadium Management Company, a private firm hired by the Broncos to manage and staff the stadium. The letter invited Olguin to take a close look at the provisions in Section 14 of his contract: "Default and Remedies."
"The Club Seating at the Stadium did not completely sell out during the past season," the letter reads. "Maintaining the contractual commitments of the current Club Seat account holders, while continuing to market the remaining Club Seats, is a key business objective." Then the letter gets to the point: "To avoid further action related to your account, the initial payment must be received by March 15, 2002."
"I didn't respond," Olguin scoffs, "and I won't respond unless they threaten me again, and then I'll get my attorney involved, because they breached the contract first."
Other Club-seat owners who received Bailey's letter have echoed Olguin's criticisms of the Club Level and his determination not to pay the Broncos, lawsuit be damned.
One, who asked to remain anonymous, tried to get out of his contract after being promoted to a job in St. Louis. "When I called them saying, 'Look, I got transferred, and I'm not really happy with your amenities anyway,' their response was, 'Tough luck -- give us your money or we'll send you to the lawyer.' I was like, 'Fine, bring it on,'" he says, adding that he was finally able to sell the tickets to a co-worker. "The Club seats are priced just low enough that a guy who's a big football fan could get suckered into one, thinking he's splurging to get something really special. I'm lucky, because I'm out from under this mess, but I am completely on the side of the other private individuals who bought Club seats, because the amenities pretty much suck. You have to wait in lines for the bathroom all the time, and you have to eat hotdogs because they run out of food. They half-assed it all the way, and now they're going to sue anyone who wants out? That's bullshit."
Broncos officials favor the carefully measured language of diplomacy in responding to complaints by Club Level holdouts, who number "right around 100," according to Joe Ellis, vice president of business operations for the team.
"We respect that these tickets are a high-priced item for an affluent crowd, and we agree we need to increase the perception of value in that seat-pricing category. There's no question about that; we're the first to admit it," Ellis says. "We need to make some steps along the lines of food service and overall presentation of the club lounge, and we're looking at those and other ways to enhance the experience of Club-seat holders beginning in the 2003 season."
That is, not this coming season, but the next one.
As for the complaints about the number of men's bathrooms on the Club Level, Ellis says, "that's a fair and valid concern. That particular point has been raised in focus groups and telephone surveys on a high-percentage basis, and it is something we will address before we open the building for Bronco business next August."
In the meantime, he says, the message to Club-seat holders is simple: Pay up or face legal action.
"It's critical to our business model that we uphold the letter of those contracts," Ellis says. "We have large loans out that all went toward the construction of the new stadium. We have a one-quarter share of the building, and we put about $150 million into the project, and these ironclad Club-seat contracts are part of our commitments to our lender."
A little bit of math helps to further explain the football franchise's reluctance to release unhappy Club-seat subscribers from their contracts. According to Ellis, 8,000 of the 8,800 Club Level seats in the new stadium have been sold. The remaining 800 are in the end zones -- the least desirable part of the stadium, and also the least expensive. These seats range in price from $1,750 to $2,328.50 per season, plus a one-time $1,000 security deposit.
The 8,000 seats now under contract were sold for an average of $3,250 each per season. But because there are only 2,200 account holders, that means that each one lays claim to an average of 3.6 seats, worth $11,700. Using these numbers, the 100 delinquent Club-seat accounts represent $1.17 million in revenue for the Broncos.
"We can't just give them a free ride out of their contract," Ellis says. "We understand there was a general sense of disappointment as to how the season went last year, and there's a myriad of reasons people may want to be released from their Club-seat subscriptions. It's hard to gauge the real reason -- whether it's because they're having financial difficulty, or if they're truly angry about the lines at the restroom, or the food service, or if it's simply the team on the field.
"But the truth is, whatever their reasons, we're not in a position to be reselling Club seats, which, as far as we're concerned, are already sold," he continues. "The immediate reaction of a lot of these people is, 'Well, you can just keep my security deposit and flip my seats -- just turn them around and sell them to someone else. But the fact is, until we've sold all 8,800 Clubs seats, we're not in a position, based on our loan agreements and our business plan, to go around selling their seats for them."
At its conclusion, the letter from the Broncos' lawyer offers one fleeting note of conciliation: "[The Broncos] are willing to discuss or mediate terms under which it may be possible to resolve your obligations under the License Agreement. Negotiation or mediation may not result in a mutually acceptable resolution of your obligations, which will then require this matter to be resolved in court."
According to Ellis, "Our goal here is to work out some form of settlement, and there are settlement meetings taking place with several of these individuals, who did respond to the letter from our third-party outside counsel...but if legal remedies become necessary, we are prepared to go that route." However, the majority of the letter's recipients are simply waiting for the Broncos to make their next move.
"I've already offered to let them keep my $1,000 deposit, and that wasn't good enough for them," Olguin says. "But that's as good as they're going to get from me. As far as I'm concerned, this is outrageous. I'm a Denver native and a lifelong Broncos fan. My Dad had season tickets, which means I've had season tickets since I was five years old. But after this, I'm never going to buy a ticket from these people again."
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