Keith Myers / Kansas City Star file, 2007

AEG hasn't landed a team yet for Kansas City's Sprint Center, but has earned enough from events to trigger revenuesharing. Keith Myers Kansas City Star file, 2007

More Information

  • • Potential operator of Sacramento's proposed arena, acting as Kings' landlord and booking other events, in return for a multimillion-dollar investment.
    • Based in Los Angeles; owns and operates arenas such as the Staples Center there; Sprint Center in Kansas City; O2 in London.
    • Runs concert halls and convention centers. Part owner of developer ICON Venue Group.
    • Owns L.A. Kings hockey team; soccer's L.A. Galaxy; soccer and hockey teams in Europe. Part owner of NBA's Lakers.
    • Second-largest U.S. concert promoter. Produces tours for Black Eyed Peas, Justin Bieber, Paul McCartney and others. Produces Coachella Valley music festival, Amgen Tour of California and Bay to Breakers.
    • Owns AXS ticketing business.
    • CEO Tim Leiweke is former president of NBA's Denver Nuggets.
    • AEG owner Philip Anschutz made initial fortune in oil. Net worth: $7 billion. Holdings include Regal cinema chain, movie producer Walden Media ("Ray," "Chronicles of Narnia") and Weekly Standard magazine. Xanterra Parks & Resorts runs concessions at national parks.

AEG could help make Sacramento's arena dream come true

Published: Sunday, Oct. 9, 2011 - 12:00 am | Page 1A
Last Modified: Sunday, Oct. 9, 2011 - 11:12 pm

AEG started out as the owner of a troubled hockey team in search of a home. It wound up as a global conglomerate with a hand in sports teams, ticketing, rock concerts and restaurants.

If all goes according to plan, Anschutz Entertainment Group of Los Angeles will also be the operator and lead investor in the proposed sports arena in Sacramento's downtown railyard.

AEG would be one of the most powerful companies ever to descend on Sacramento – a multibillion-dollar enterprise owned by one of America's wealthiest men, Denver oil tycoon Philip Anschutz, whose privately held Anschutz Co. counts AEG as one of its subsidiaries.

The firm's core business is owning and operating a worldwide portfolio of sports and entertainment arenas. It got its start by developing the Staples Center in Los Angeles – built for Anschutz's L.A. Kings hockey team but also home to the NBA's Lakers and Clippers.

AEG's reach goes well beyond sports, however. It is the nation's second largest concert promoter and has produced tours for such big-name acts as Black Eyed Peas and Bon Jovi. It could use a Sacramento arena as another place for its rock band clients to play.

Arena goers would likely buy their tickets through something called AXS. That's the new AEG rival to Ticketmaster.

Before the show, they might eat at a restaurant developed by AEG. The company has built whole entertainment districts in Los Angeles and London.

"I don't think they're ever content to just build an arena," said David Carter, a sports business expert at the University of Southern California.

AEG hasn't signed on to the Sacramento project yet. But it's already indirectly involved, through a partly owned subsidiary called ICON Venue Group.

A partnership between ICON and Sacramento developer David Taylor has been selected by the city to negotiate an arena development deal, and AEG has shown interest in participating. AEG officials attended a meeting in Dallas last week with ICON, Taylor, the NBA and a delegation from City Hall.

"We would be willing to discuss a more formal role as the project progresses," said an AEG spokesman, who refused to be identified by name.

Negotiators are working against a March deadline to finalize a funding plan for the $387 million arena. Otherwise, the Sacramento Kings have vowed to leave town.

While the Kings' threat is motivating the push for a new arena, the team would be tenants, not owners. Under one possible scenario, the city would own the building. AEG would run it and control much of the profit – similar to its deal with the 4-year-old Sprint Center in Kansas City, Mo. In return, AEG would invest tens of millions of dollars in the building's construction, as it did in Kansas City.

John Dangberg, Sacramento assistant city manager, said the level of investment by AEG is far from settled.

"We've been talking about ranges with AEG and various ways for them to participate," he said. "It's not just as simple as a number, it's a range of numbers."

Political savvy

An arena deal has frustrated Sacramento and the Kings for years, but AEG doesn't shy from big challenges.

A decade ago, it took over London's Millennium Dome – a shuttered arena that had cost the British government $1 billion to build – and turned it into the O2, one of the world's most successful concert venues.

This summer the company and its chief executive, Tim Leiweke, obtained crucial support from the California Legislature and Los Angeles City Council to move forward on one of AEG's most ambitious projects ever, a $1.3 billion pro football stadium in downtown L.A. that AEG plans to use to lure an NFL team.

The Legislature OK'd – and Gov. Jerry Brown signed – a law that streamlines the process if someone sues to block the stadium on environmental grounds. The Los Angeles City Council, meanwhile, tentatively approved a complicated financing package and a partial tear-down of the Convention Center to make room for the stadium.

It was the latest show of AEG's political skills.

"Tim Leiweke is, if not the most important and influential person in this town, he's in the top two or three," said USC's Carter. "AEG understands public policy."

Since 2005, the company and its affiliates have spent nearly $2.4 million on political contributions and lobbyists' fees in California.

The contributions have gone to Democrats and Republicans alike, although the company's heart probably lies with the GOP. Lieweke's boss, Anschutz, is known as a staunch conservative. Among his non-AEG holdings is the Weekly Standard, an influential conservative magazine.

Mostly, Anschutz has made his reputation as an astute businessman. He's ranked 39th on Forbes' list of the wealthiest Americans, with a net worth of $7 billion.

The son of a Kansas oilman, Anschutz (pronounced "Ann-shoots") made a big score in the early 1980s by selling an oilfield on the Utah-Wyoming border for $500 million. He later acquired the Southern Pacific Railroad – which at the time owned the Sacramento railyard, site of the proposed arena.

Anschutz used Southern Pacific's rights of way to plant miles of fiber-optic cable. That became the basis of telecom giant Qwest Communications. He later sold SP to Union Pacific for a $1.5 billion profit.

In 2000, Qwest merged with U.S. West, a regional Baby Bell phone company. Anschutz remained one of the largest owners of the combined firm, which soon became embroiled in an accounting scandal. In 2004, Qwest agreed to pay $250 million to settle Securities and Exchange Commission charges that the company fraudulently booked $3.8 billion to make its performance look better to investors.

In 1995, Anschutz and a partner bought the L.A. Kings, who were struggling financially. They signaled they wanted to move the hockey team out of the aging Great Western Forum in Inglewood.

They wound up building Staples Center and persuaded the Lakers and Clippers to sign on as tenants. In order to fill the arena on nights when the teams weren't playing, they started booking concerts.

AEG was created to own and manage the vast network of sports and entertainment holdings that have grown from that single-venue foundation.

"The thing about AEG is they've really been prolific in the number of arena projects they've been involved in," said editor Gary Bongiovanni of Pollstar magazine, which follows the concert industry.

"They're not just flapping their lips – they get them built, whether it's in Kansas City or London or Berlin or Newark, N.J."

Basketball and bars

Since AEG is a private company, and Anschutz is renowned for his secrecy, it is difficult to know how deep the company's pockets are, and whether it has suffered during the recession.

But the firm does appear to have spun gold in some tough situations. Despite its failure to land a hockey or basketball team for the Kansas City arena, AEG has earned so much money there that it triggered a revenue-sharing clause that's generated $2 million a year for the city.

"We're very happy with the deal," said City Manager Troy Schulte. "AEG has done a tremendous job of getting concerts."

In Sacramento, concerts and other special events might be the key to getting the arena built. The Kings would be the main tenant, but non-sports events are usually more profitable for arenas because they tend to share more of the revenue with the building operators, Bongiovanni said.

With its stable of big-name music acts, AEG could use the railyard arena as a tour stop. "They may view Sacramento as another outlet or distribution channel for their content," Carter said.

The company also could make money by selling food and drinks, or renting hotel rooms, outside the arena itself. AEG spent billions creating the L.A. Live entertainment district adjacent to Staples and a similar development in London.

Sacramento officials say it's possible AEG could try something similar, albeit smaller, at the railyard. So far, AEG hasn't raised the subject.

"That would be an obvious discussion at some point in time," said spokesman Jared Ficker of Inland American Real Estate Trust, which owns most of the railyard.

"What they did at L.A. Live, we're keenly aware of it."

© Copyright The Sacramento Bee. All rights reserved.

Read more articles by Dale Kasler



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