AEG: The new act at Consol Energy Center

With or without a Penguins lockout, no company may be better equipped to fill an empty arena than this entertainment management conglomerate


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When the Penguins hired AEG Facilities to manage the Consol Energy Center last month, they did so with the goal of generating more entertainment on the nights when hockey wasn't being played.

As it turns out, that expertise may be needed sooner than anyone expected.

With the National Hockey League lockout entering its second week, the Penguins soon could be scrambling to fill dates that had been reserved for the Crosby and Malkin acts.

Not that anyone wants to see it come to that.

"If you ask my opinion, I'm confident that we will have a full season. You can say that because I'm an optimist," said Bob Newman, president of AEG Facilities.

Lockout or not, perhaps no company is better equipped to fill empty arenas than AEG Facilities, an arm of the Anschutz Entertainment Group, a conglomerate that may be more Hollywood than Hollywood itself.

AEG owns the Los Angeles Kings hockey team, the Los Angeles Galaxy soccer team and a piece of the Los Angeles Lakers basketball team. It's the owner of the Staples Center in Los Angeles and more than 100 other venues and stadiums worldwide, including The 02, a 28-acre entertainment complex in London.

And the company is the brains behind L.A. Live, a $2.5 billion, 4 million-square-foot sports, entertainment and residential district that features a 14-screen movie theater, as well as bars, restaurants, apartments, a hotel and condo tower, and the Nokia Theatre, which will host the Emmy Awards tonight. No wonder the private company generated an estimated $2 billion in revenues in 2010, according to Forbes Magazine.

With such a diverse portfolio, AEG is intimately familiar with the struggles of arena managers to fill seats. But, unlike others, it can tap into an entertainment division, AEG Live, that manages the likes of Justin Bieber and Taylor Swift and manufactures its own festivals, events and exhibitions.

To boot, the company produces its own sporting events as well, from mixed martial arts, boxing and rodeos to motocross and monster truck shows -- all attractions that can fill dates during long off-seasons, or perhaps even when there's no season.

In fact, one of those events -- the Tour of Gymnastics Champions show featuring members of the men's and women's Olympic teams -- will stop at Consol on Nov. 16. AEG is co-promoter of the tour.

AEG, which is owned by Denver billionaire Philip Anschutz and now up for sale, beat out Global Spectrum and SMG to win a five-year contract to manage the Consol Energy Center starting Sept. 1.

The choice marked the end of a long run for SMG, the Philadelphia company that managed the Civic Arena for two decades and opened the new arena in 2010.

"SMG has served us well for many, many years and has been a good partner for many, many years. We just thought to bring us to the next level, AEG was the best fit," said Travis Williams, the Penguins' chief operating officer.

AEG is no stranger to the Penguins or their fans.

The name first surfaced in 2007 when the Pittsburgh hockey team was trying to reach a deal with state and local political leaders to build a new arena. AEG managed the then-new $276 million Sprint Center in Kansas City, Mo., where officials were offering the Penguins free rent, no construction costs and other inducements to leave Pittsburgh. As part of the deal, AEG had agreed to split building, ticketing, advertising and parking revenues with the team.

Then, just as now, Tim Leiweke served as president and CEO of AEG, and also was affiliated with the Kings hockey team. Penguins co-owner Ron Burkle, a California billionaire, and Mr. Leiweke years ago had teamed up with others on a bid to build a football stadium in the Los Angeles area.

The Penguins said neither AEG's involvement in Kansas City nor Mr. Burkle's ties to Mr. Leiweke had anything to do with the new contract. Mr. Newman said the major attraction on AEG's end was the Penguins, the organization Mr. Burkle helped to build, not Mr. Burkle himself.

"I'm excited to say this was a business decision and this was a business decision made because it was the right fit for all the parties," Mr. Newman said.

Still, Marc Ganis -- president of Sportscorp Ltd., a Chicago-based industry consultant -- believes geography could have been a factor in the new relationship, since Mr. Burkle and AEG are both based in Los Angeles. "I would not think that it was an irrelevant factor," he said.

He said location was also a factor in the ability of SMG and concessionaire Aramark, both Philadelphia-area companies, to win business in Pittsburgh. "Just as SMG and Aramark had a foothold because of geography, I would not negate the geographic location of Burkle and his top people and AEG," Mr. Ganis said.

The Penguins decided to make the change even though the Consol Energy Center's first two years have been hugely successful, starting with the Paul McCartney concert that christened the building in 2010, marking the first time the ex-Beatle had played in Pittsburgh in two decades.

Other big acts have included Lady Gaga, Roger Waters, Bruce Springsteen, Justin Bieber and Elton John. The arena also hosted NCAA men's basketball tournament games in March and the National Hockey League draft in June. The 2013 Frozen Four, the NCAA hockey equivalent of basketball's final four, will be at Consol in April. Officials also are bidding to host the Atlantic Coast Conference men's basketball tournament.

In June, Venues Today magazine rated the new arena as fifth in the United States and 10th in the world based on concert and event gross revenue for the period between Oct. 16, 2011, and May 15, 2012. In the last fiscal year, Consol drew 1.4 million people for hockey games and other events. That's about 200,000 more than in the last year of the Civic Arena.

Nonetheless, Mr. Williams believes there's room for improvement.

The Penguins are hoping the partnership with AEG will help to fill more nonhockey dates at the arena. In the fiscal year ended June 30, the arena played host to 167 events, including hockey games. While that may be "well above average" for single-team venues, "We think we can continue to improve and get better," Mr. Williams said. "We just generally want to increase the content and the variety of the content. I would love to have the building busy 365 days a year."

As part of its 2007 deal with state and local leaders, the team keeps all building revenues, but also is responsible for all expenses. More shows would generate more money for the team -- as well as more amusement tax revenue for the city.

Mr. Williams said the concert world is changing, with many longtime acts like the Rolling Stones nearing the end of their careers. The team believes AEG, because of its extensive arena holdings, is best equipped to handle such change.

"The day of the big band slowly is coming to an end. We wanted to make sure we had a company that understood that and could react to that eventuality," he said.

He also believes AEG's connections can help Pittsburgh secure performers who may have bypassed the city in the past. The team also is interested in doing more intimate theater-style shows using half of the Consol Energy Center, a style of performance the new building is equipped to handle, and an area where the team feels AEG can help.

AEG typically is very selective in deciding on which venues to manage, but jumped at the chance to work in Pittsburgh, Mr. Newman said.

"It's a proven and vibrant sports and entertainment market. The Consol Energy Center is second to none as far as new buildings that have opened in the last five years. It is an absolutely remarkable building," he said. "We've been fans of the marketplace for a long time. Then the opportunity arose. It was just good timing on all fronts. Our content division, AEG Live, promoted shows in the Pittsburgh market for many years. We have firsthand knowledge of and experience in the marketplace."

He believes AEG differs from SMG and Global Spectrum in that it knows what it's like to own buildings, not just manage them.

"We don't consider ourselves private managers of buildings. We're partners. We're willing to take risks, invest in content or operational services, because we have to do it ourselves," he said. "The focus on creating foot traffic in real estate is part of our DNA. It's what we wake up and do every day."

Mr. Newman said AEG is looking to increase the number of "nontraditional" events held in Pittsburgh, whether that means bidding to secure Olympic qualifying competitions, high school and collegiate championships or other performances that would help generate money for the city. He said the arena also may be a good venue for high-end film or food and wine festivals.

"We're only limited by our imagination," he said.

He also vowed that Pittsburgh would get the best performers and the best concerts AEG has to offer. "We consider Pittsburgh a must-play market," he said.

While Mr. Ganis believes AEG event and promotion arms will work to the benefit of Pittsburgh and the Consol Energy Center, he noted there could be drawbacks as well.

AEG is the second-largest concert promoter in the country behind Live Nation. Mr. Ganis said the affiliation with AEG could cost Consol some Live Nation shows because of the competition between the two promoters.

But Mr. Newman didn't think it would be an issue.

"Being in the major markets of the world enables us to have a great relationship with everybody. We have the highest respect and a fantastic working relationship with Live Nation," he said.

Mr. Williams said AEG also operates energy, environmental and diversity divisions that could be helpful to the team and the arena. He said the Penguins may consult with AEG on the types of entertainment to bring to the 28-acre former Civic Arena site, where the team has the rights to development.

But he stressed that whatever is built would be nowhere near as big as L.A. Live, given that only a small portion of the arena site is devoted to retail or entertainment-related development.

"It's not driving the overall development," he said.

At the same time, Mr. Williams doesn't expect the potential sale of AEG -- parent Anschutz Company announced last week it is seeking a buyer -- to have any impact on AEG Facilities operations in Pittsburgh. "We don't expect any change whatsoever in the operation or management of the building," he said.

In hiring AEG, Mr. Ganis said it appears that the Penguins wanted to go beyond a simple facility manager to secure a company that is more multidimensional and can help with promotion and development. He said AEG is particularly effective at selling arena-related sponsorship.

Whether the change will prove to be a good move, Mr. Ganis said, remains to be seen.

"It's too soon to tell," he said.

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Mark Belko: mbelko@post-gazette.com or 412-263-1262. First Published September 23, 2012 4:00 AM


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