Sports marketing executive Max Muhleman created the Personal Seat License. But the concept has strayed from the original idea. How did it get to be this way?
Bob Donnan-USA TODAY Sports
Longtime sports marketing executive Max Muhleman knows people probably hate him for creating the Personal Seat License. He's seen them called rip-offs, theft, an outrage, and worse. He knows people are angry, frustrated, and upset.
But you know what, Muhleman is also upset at what PSLs have become.
For example, the Atlanta Falcons have already sold $140 million worth of PSLs for their new stadium, which is scheduled to ready prior to the 2017 season. The Atlanta Journal-Constitution has defined the PSLs used to help fund the stadium as "one-time fees for the right to buy season tickets," which characterizes them as, essentially, a surcharge. This definition upset Muhleman. "What fan wouldn't be upset about that?"
In fact, Muhleman's idea for PSLs was the complete opposite of what PSLs have become. Muhleman created the PSL as a gift—instead of a leather jacket, you were given the right to own an individual seat location. The story of how the PSL became a misunderstood marketing tactic exemplifies professional sports' lost connection with the loyal fan—the story of how sports have become a business transparently ruled by dollars and cents.
For a while, PSLs were great investments. According to a 2012 Forbes article, the average Steelers PSL became eight times more valuable in the 11 years after Heinz Field opened. Likewise, Ravens and Bears PSLs increased by 243 percent and 131 percent, respectively. An entire secondary market popped up for PSL re-sales, with independent brokers filling a new market niche. Even though the prices were perceived as exorbitant, fans held a valuable asset.
But in the last few years, the PSL market adjusted as teams began charging five and even six figures for seat licenses. Jets fans took a bath on their PSLs, re-selling them for half their original cost at best. 49ers fans looking to bail on their PSLs are also facing major losses. Agnosticism has turned to burning resentment at another instance of billionaire owners profiteering off the regular fan.
But what most people don't know is that the first PSL was free.
In 1987, millionaire businessman George Shinn hired Muhleman to run the campaign to place an NBA expansion team in Charlotte, North Carolina. This was no easy task, as Charlotte was going up against bids from larger metropolitan areas like Miami and Orlando. But, at the NBA's behest, Muhleman organized a season ticket drive, in which prospective fans put down a non-refundable deposit between $50 and $250, according to the Los Angeles Times, or about 10 percent. By the time the NBA's expansion committee issued their recommendation, Muhleman had sold about 10,000 season tickets. Charlotte got the franchise, which would become the Hornets.
"When we got the franchise, George said we oughta do something for these season ticket holders who pledged even if they had to forfeit their deposits," Muhleman told me over the phone from his home in Charlotte. As Muhleman recalls, Shinn wanted to buy all the season ticket holders leather jackets. "That'd be nice," Muhleman recalled saying, but he had another idea.
Muhleman thought fans really wanted to be a part of the team, to feel like their presence—and not just their dollars—mattered. Obviously, in this instance, they couldn't own the team itself—although that is done in other countries—but maybe they could meet somewhere in the middle. Muhleman suggested giving the fans ownership of their seats. He called them Charter Seat Rights, which allowed fans to sign the rights over to whomever they wished if they didn't want to renew the tickets themselves. Shinn loved the idea, so every fan who pledged money before the franchise was awarded received a free Charter Seat Right.
Muhleman never meant for the PSL to become an investment. It was simply about thanking the fans who pledged their own money to help support a new team or stadium. The idea of re-selling Charter Seat Rights didn't even occur to Muhleman until he saw a classified ad in the paper after the Hornets' incredibly successful inaugural season, when they sold out every game in the 23,000 seat arena. The ad read: "'Leaving town. Two charter seat rights. $5000." When Muhleman called the number, the person on the other end said they had already received about a dozen calls and they regretted not asking for $10,000.
Four years later, Charlotte was once again vying for an expansion team. This time, Jerry Richardson was working with Muhleman to try and land an NFL franchise in the league's first expansion since the 1970's. Once again, Charlotte was an underdog, going up against St. Louis, Memphis, Baltimore, and Jacksonville.
PSLs weren't part of the initial plan. But, unlike some of their rival bidders, Richardson didn't have a stadium already built or public funding committed to such a project. When the NFL announced the expansion fee would be a whopping $140 million plus half-shares of TV revenues for three years—many times more than Richardson and Muhleman's original estimates—they had to find a new source of revenue. All their designated credit lines with area banks to cover the stadium construction costs now had to go to the expansion fee, leaving a giant $160 million question mark when it came to stadium funding.
Naturally, Muhleman brought up Charter Seat Rights again, which Richardson and his son, Mark, immediately liked, particularly when Muhleman pitched it as akin to condominiums but for stadiums. Their target was to raise $100 million of the projected $160 million stadium construction cost, according to the Chicago Tribune. At the recommendation of their lawyers, they changed the name from Charter Seat Rights to Permanent Seat Licenses.
The PSLs were critical to Charlotte's bid. Franchise owners were already skeptical of Charlotte's privately-financed stadium plans, and PSLs had never been used to raise money for a construction project before. Each PSL, ranging from $600 to $5,400 per seat, came with a formal legal document outlining every clause and condition. Buyers had the option of paying in thirds over an 18-month period or taking out a loan through NationsBank, a Charlotte-area bank that provided PSL loans at slightly less than auto loan rates, with the PSL itself as the collateral.
With weeks to go before the NFL's decision, Muhleman's gamble appeared poised for failure. The St. Louis Post-Dispatch reported that Richardson's group was more than 12,000 PSLs short of their goal. As of October 1, 1993, only 49,294 PSLs had been sold, and some of those fans wanted refunds because they didn't get the location they wanted (the Dispatch reported estimates of up to 2,000 fans unhappy with their seat allocation).
Despite the shortfall, Charlotte once again won the bid, partly due to the high average PSL price of $2,200 pushing the total amount raised to more than $92 million.
The fact that Richardson and Muhleman raised $92 million at nearly no cost to themselves wasn't lost on other owners looking for new buildings. Four days after the NFL announced its decision, the St. Petersburg Times ran an article with the headline "PSL Put Owners On Hot Seat."
"Those three words could change the way NFL fans purchase season tickets in the future," Don Banks wrote. He also referred to PSLs as "one of the most attractive features" of Charlotte's bid, despite it being a perceived weakness a few weeks prior. Chicago Bears chairman of the board Ed McCaskey told Banks, "I'm sure teams that have undesirable stadiums will contemplate it."
In the time since, Muhleman has helped about a dozen teams with PSL pricing structures, using extensive surveys to gauge the market. Because many of the teams' leases with publicly-financed stadiums are for a fixed term, the lawyers advised they change the term to Personal Seat Licenses, eliminating the "permanent," since the team could move or build a new stadium (with new PSLs!) if the lease expired.
"I think PSLs were, let's just say, an innovative way to monetize something that previously teams had given away for free: a spot on the season-ticket wait list," says Neil DeMause, author of Field of Schemes (and contributor to this website). "Once you realize that you can sell this privilege rather than offer it first-come first-served to anyone who wants, it's an obvious way to raise money. It's the same principle as any other cut-in-line service, really, like memberships that allow you access to ticket presales, or what have you."
PSLs may have a nasty place in many fans' hearts, but they are a far more honest revenue-generating tool than public subsidies, which disperse the cost of a stadium to every taxpayer, whether they use the stadium or not. With PSLs, the people who use the stadium the most pay the most.
Still, owners don't have to charge such exorbitant prices for the PSLs when they are often billionaires themselves. Throughout my conversation with Muhleman, he stressed a sports business continuum of sorts, with profit on one end and fan enthusiasm on the other. Sure, owners can max out their profit by charging as much as the market will support, but over time, doing so could degrade fans' loyalty and perhaps hurts the franchise in the long run. Fans no longer feel a part of the team, but more like customers, which erodes their loyalty and, perhaps, the franchise's profitability. There's a gentle equilibrium that must be maintained, and Muhleman believes PSLs have stretched too far, to the point where fans now resent their teams. "If you can't see the value in it, then you turn from enthusiastic to offended. And that isn't what sports, or the NFL in particular, have been about."
I asked Muhleman what it has been like to see his invention, one that was supposed to be a gift to the fans, become a source of such derision and ill will. Does he take it personally?
"Yeah, I take it a little personal because I felt when we did the Charter Seat Rights or PSLs, I thought we were on to something that worked, that it made good music with the sport, the fan, the owners, we could all come together in a harmonious, mutually productive, helpful way," he said. "But these programs I see, so many of them I can only say are unilateral, and unilateral in favor of 'how much can we get out of these people?' And I do not believe the path to success in sports is maximum leverage of fans."