The question on every stadium owner’s mind is what to with the thing when no games are scheduled. Think about it. An NFL team has about 8 regular season games, and 3 pre-season games. Other than that, a few concerts? Monster trucks? There’s a lot of days on at calendar where nothing’s happening.

That’s why a mixed use stadium district that pulls people in year round is at the top of every franchise owner’s wish list. And that’s also why David Carlock’s phone is always ringing.

David is the founder and Managing Partner of Machete Group, a leader in developing sports and entertainment districts. His career began at Disney, where he saw first hand how an obsession over the customer experience helped build a lifelong connection. After applying those lessons to his work with the Houston Rockets, Carlock launched Machete Group.

In our conversation, we dive into his thoughts on the next generation of stadium and arena development, what he sees as the essential parts of these new districts, and where the biggest development missteps lie. We cover how he still applies lessons from his days at Disney, what it’s like to build arenas in China, and how Fleetwood Mac’s Stevie Nicks reacted when a pipe burst over her dressing room right before a show.

ABOUT THIS PODCAST

The Sports Business Conversations podcast is a production of ADC Partners, a sports marketing agency that specializes in creating, managing, and evaluating effective partnerships between brands and sports. All rights reserved.

YOUR HOST

Dave Almy brings over 30 years of sports marketing and sports business experience to his role as host of the "1-on-1: Sports Business Conversations" podcast. Dave is the co-Founder of ADC Partners.

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David, you had interesting stops before landing at your first sports role with the Houston Rockets. You were with Disney. You were at the Hard Rock Cafe. And I'm wondering, because those are some pretty big entertainment and lifestyle companies that you were with before you got to the Rockets. So how did they prepare you, do you think, for beginning a career in sports business?

Yeah, it's a really good question. I'm going to say something that was not self -evident to me at the time, right? I was a young Turk running around at Disney in my early to mid -20s. But in retrospect, what I realized about my experience there that was... pretty fundamental to what I've been lucky enough to do with the rest of my career is that Disney was one of the first companies, I think, that really figured out if you build or create an emotional connection with your customer, that you can make them essentially price insensitive. Disney is about showing up in Orlando or Anaheim or whatever it may be and taking your wallet out of your pocket and emptying it on the table and then going home with the memories that you'll treasure for the rest of your life. When I was there, I didn't sort of know that other companies didn't really think that way about their business. Yeah,

Yeah, you sort of started at the top in that regard.

of started

Precisely, precisely. I mean, those guys are black belts in this, and they were, I think, way out ahead of everybody else. But I will say that, at least in my view, the industries that figured that same model out, I think in many respects by looking at what Disney was doing, it's gaming, cruise lines, sports. So different kinds of emotional connections, but I think the same basic underlying paradigm. And that served me really well in the sports world because you realize this is about creating that same kind of connection and then finding efficient and creative ways to monetize that relationship.

Were you surprised when you got to the Rockets? Because you say that about Disney and their unwavering unique ability to create that emotional connection with the people who love the brand. and sports being so laden with emotional potential. Were you a little surprised when you got to the Rockets that they didn't necessarily see it the same way Disney or were behind the way Disney saw things? Or was that why it was attracted to you in the first place, the opportunity to create that sort of synergy with fans?

I mean, I think it was a little bit of both. So Leslie Alexander, who owned a team when I worked there, I learned more about... pricing from him than anybody else in my entire career and so you know he really understood the way to use pricing strategies to effectively monetize and he also had a pretty profound understanding of the kind of emotional connection that can be created between a team and its fan base and so i think to his credit he was relatively advanced at the time in terms of thinking about those kinds of things yeah and my my primary assignment at the rockets was to get a new building developed. So the team, when I arrived, was playing in the old compact center or the summit, as it's probably more fondly remembered.

So the

Well, back in the day, Tree Rollins era.

back in the day, Tree Rollins era.

era. There you go. Back in the day, bit Danny Ainge right in the finger. It is, you know, that building, in addition to it, it was a relatively old building. It was also an environment that the Rockets didn't really control. So as was often the case back then, the building was publicly owned and also managed by the city.

So as

And they, in turn, hired a third party venue operator to run the building. And as a tenant, the Rockets had, frankly, pretty limited recourse. I mean, if you went and your beer was warm or your hot dog was cold or, you know, somebody wasn't nice to you who worked at the building, the Rockets' ability to address that and correct that was pretty de minimis. Yeah, sorry. And so, yeah, exactly. And so Leslie...

Yeah,

his credit was very focused on we needed an environment we can control because we we have this opportunity to connect in a really meaningful way and to some degree we're getting that already because they're fans of the team but when you come up short in material parts of the live event experience it really erodes the value that you're trying to create in the mothership, if that makes sense.

It feels like it's such a transformative experience that you're talking about right there. And there's people who are probably listening to this going like, wait a minute, professional sports teams didn't control their arenas. They couldn't control the experience because clearly over the last 25 years, that has been, we need our own arena because we need to capture all the revenue streams and have a complete control. over the fan experience from start to finish for all the reasons that you're just talking about, right? You know, like we need to create that emotional connection with fans and owning and operating your building is kind of central to that, isn't it?

A hundred percent. And, you know, to give you one example of exactly what you're talking about that relates to a very specific part of the fan experience, when you look at food service. So for a long time, the industry standard was what is called percentage rent deals. which means you have a concessionaire, an Aramark, a Levy, Delaware North, whomever it is, you know, come in and essentially say to an owner, I'll pay you this percent of the top line. I'll give you 40 % of the revenue on general concessions. I'll give you 30 % of the revenue on sweet catering. And in exchange, you're letting me run the business the way I see fit with sort of basic service standards, right?

right? You focus on the basketball, I'll focus on the food.

You focus on the basketball, I'll focus on the food. Exactly right. Very well said, right? And if you're the owner and you say, you know what? That's not a very good hot dog. I want to offer a better hot dog to my fans. Under that model, you really have the right to do that. And if you're able to negotiate, that's because you've been able to persuade your food service operator that there's a good reason to do that, which typically is you're going to end up paying for whatever that spread is, right? That's how that tends to work.

right to

And so when we were developing Toyota Center, that was really the norm in the industry. And again, Leslie does credit said, why don't we do this on more of a management fee basis, right? Let's pay the concessionaire a guaranteed fee. Let's give them a piece of the profit above an agreed performance threshold. Right. And some skin in the game.

And some skin in the game.

Correct. You know, so we'll have some skin in the game. They'll be motivated, but it'll be our P &L and not their P &L. And so what that allowed me to do is I don't have to argue with anybody anymore about whether that hot dog is good enough or about whether we're offering enough training to the people who are working in the concession stands or the suite attendants who are taking care of our VIP customers. And so, again, he was an early adopter, right? The industry, as you probably know, has shifted pretty significantly that direction. You see more management fee deals now, in my experience, than you do percentage rent deals. But the Rockets with Toda Center were a fairly early adopter in that regard.

So you were with the Rockets for about five years. And like we've been talking about, that included your remit was the Toyota Center. You know, getting that built, bringing that online, and then operating it for a bit. So I'm assuming, I'm underscoring assuming here, which I know is a terrible thing to do. But I'm assuming like during that time, you started to look around and go, hey, wait a minute. This is something that I can... bring to other franchises out there. So I guess I'm wondering, A, is that true? It was like, when did the seed get planted for you that became Machete Group? And had there always been that? Have you always been looking for an entrepreneurial thing? I mean, you've been working for Disney and the Rockets and Hard Rock, pretty big established companies. That's a change of pace.

Yeah, for sure. I had always wanted to do something entrepreneurial. Even in college, I had some. little businesses that I ran out of my dorm room. And so I had a little business.

a little business. I ran out of my dorm room though, but that usually gets me kicked out of housing.

Technically you were not allowed to do that when I was in college, but you know, usually, usually able to get away with it one way or the other. And I think if I had a PO box, I was okay is what I remember. So I did have a PO box.

I was in

did have a PO box. And so that's how I. got that sorted out. But I, you know, when I went to Disney, I frankly, I felt lucky to get that opportunity. Working in the strategic planning group at Disney was the chance to sort of really see how the sausage gets made with a company that was that progressive in the way that it thought about its business model and building relationships with the customer and everything else was something that I really valued. And I didn't know, maybe I would have gone to Disney and had an amazing experience and decided this is the kind of environment I want to be in for the rest of my career. I had a terrific experience there, and I also concluded this is probably not the kind of environment I want to be in for the rest of my career.

want to be in for the rest of my career. Okay, so learning a lot, but not necessarily where you saw yourself.

Okay, so learning a lot,

Correct. That's exactly right. And, you know,

That's exactly right.

know, going to the Rockets really for me was an opportunity to apply some of the things I had learned at Disney and then subsequently at Hard Rock in an environment where I had responsibility for a big project. And that was exciting, and I also felt like I could get a lot out of it. I also approach that with the sort of thought in mind that I'm going to be here until the project is finished. And then I'm going to step out and I'm going to see if I can pull together something to figure something out that would be more entrepreneurial. And, you know, the arrangement that I had with Leslie and George Postolos, who was the president of the team, is that, you know, they thought it would take about three years to get Toyota Center done. And then, you know, I could ride up into the sunset, at least with respect to the Rockets. I ended up being there actually close to six years. They kept dragging you back in.

They kept dragging you back in.

you back in. Well, you know, look, it was an amazing organization. I had a lot of fun working there. And as you mentioned, it wasn't part of the plan, but I was asked to then oversee operation of the building once it was online. And I was smart enough to know then that living with your decisions as an operator when you were also the developer is a good experience, right? There's a lot of lessons. to take away from that. And I was fortunate to be able to hire a really good team. So, you know, I had a GM named Doug Hall, who's back there now running the building again, and he and his guys just made me look good, right? So it was a good situation for me in that I got to understand the mechanics of the building and how they function in a way that's been really valuable going forward. And I had a sort of a,

There's a lot of lessons. to take away

I had a sort of a, you know, best in class management team there that was running around making sure everything got covered.

Well, I've heard that a couple of times from people who've been on the consulting side, you know, who come in, you know. airdrop some ideas into an existing business and then zip back out again, say, I want to be with a business where I can actually see the results of and have stake in the results of the advice that I'm giving. And it feels like that's something that you recognized when you started operating the Toyota Center. Like this is going to be important for your development to really get your hands dirty in what you believed were good ideas, but now let's see them into practice.

Yeah, I think that's well said. I mean, the story that I'll give you, very brief story, is that when I was at Disney, one of the VPs in the group that I was in, who was something of a mentor to me and someone I really respected, was thinking about leaving Disney and going and starting a company. And he went and had drinks with, and this is back in the day, right? Someone from Sequoia Capital, whatever it was. And the next day he came in, I said, how did it go? And what he told me is that the partner at Sequoia, and again, I... you know, fill in the blank, whoever it was on the VC side said, hey, you're obviously a really smart guy. You went to Harvard Business School. You're a rising star at Disney. You used to work at a top rate management consulting firm. But guys like you are a dime a dozen, right? You'll tell me how to run my business. The guys who are valuable are guys who will run my business, right? And, you know, for better or for worse, that really stuck with me. And so in both my time at Hard Rock and later with the Rockets,

it was on the

both my time at Hard Rock and later with the Rockets, I sort of had that seed planted, right? Which is if I can put myself in a situation. where I can actually have P &L responsibility and I can get my hands dirty and sort of be the person responsible for actually delivering, that's a significant point of difference between someone who's good at pulling together a deck and building a model and sort of giving someone some guidance.

my hands dirty and

of giving someone some guidance.

Quick timeout. I'm going to ask you, are you on a webcam on the camera, on a laptop? Yeah. Can you push the screen? No, keep it on because I'm going to pull some video clips, but right now I just have like the floating head kind of thing going on. Oh, sorry. Okay. Yeah, apologies. Is that better? I want to capture your masculine shoulders is what I want to do. That's right.

it on

thing going on. Oh, sorry. Okay. Yeah, apologies. Is that better?

My natural musk is coming through the camera here. I just didn't want to be like the genie in Pee Wee's, you know,

here. I just didn't want to be like the genie in Pee Wee's, you know, Big Adventure or something like that, the genie in the box kind of thing. All right, so we'll pick it back up, okay? Sure. Okay, so with the Toyota Center, you start to believe, okay, there's an opportunity for me outside of that. Did that immediately become Machete Group right away?

Yes and no. I was very fortunate that when I left the Rockets, I didn't leave with, I hadn't written a business plan, if you know what I mean. There were some other things sort of precipitated. I got to a point where I either needed to re -up for several years or I needed to step out. It just was an inflection point. Really at the tipping point right there.

you know what

I mean. There were some other

It just was an inflection point. Really at the tipping point right there.

yeah that kind of presented itself a little more a little faster than i anticipated okay and i had my head my head down and i just so all of a sudden i was like oh boy i got to make this decision and so i stepped out at the very end of 2006 and i was really fortunate that i had a i had a someone introduced me to a group right away who was looking for some help and i was to get involved then i had a couple of things come in over the transom. One was the Orlando Magic, who I got into a little bit. I toured there around Toyota Center. Charlie Freeman there, who's since become a good friend of mine, was kind enough to reach out and say, hey, could you give us some help with what ultimately became Amway Center?

got into a little

It's now Kia Center. And I called up David Stern, who I was lucky enough to have a little bit of a relationship with, and asked David if I could help the league. And he said, yeah, we're doing some things in China. And so... You know, for about four years, I spent about a week, a month in China working on projects over there for the league. So I was doing those kinds of things. At the same time, to be perfectly candid, I was trying to figure out what an entrepreneurial thing would become. And I had a good friend of mine was an entrepreneur at residence at one of the big venture firms. And so we spent some time, I probably spent half my time for four or five years working with them. Can we find something to buy that I might run? Or can we start something that I might run? We tried some things on for size. So really looking for the right fit for you.

So really looking for the right fit for you. This was this period of, I don't want to,

This was this period

don't want to, like ambivalence is the wrong word, but this period of seeking maybe was where you found yourself.

Yeah, for sure. I just wanted to get smarter about, I think you said you used the right word, right? What's the right fit and what do I want to invest in? And how can I collect some more data points along those lines?

And how

those lines? And for that time period, to some degree, a lot of the work I was doing on the sports side, was I was just lucky enough to get a lot of word of mouth. And that led to some terrific assignments and some really great opportunities. And then after I'd finished that test fitting period, it just became clear to me that this is what I enjoyed the most, that it's something that I was at least good enough to get people to recommend. you know, me to other people, right? Which is probably a pretty good place to start. And that's when I really leaned forward.

Which is probably

Well, your timing was probably fairly decent too. I mean, having done the Toyota Center and everybody started looking at the Toyota Center and going like, oh, you know, maybe that's something we should take a look at from in terms of what we want. We want the kind of resources that's generating to benefit our team too. I mean, what did they do? And I'm assuming at that point, like you said, word of mouth starts leading directly to you.

Yeah, for sure. Yeah, it was at the time. And by the way, it's still a very good building. I mean, Doug and those guys have taken terrific care of it. And at the time, it was viewed as certainly a new building, but also an example of where we had done some progressive things. I mean, Toyota Center was one of the very first buildings that had a real bunker suite or event -level suite product, right? And that was... You know, the old palace at Auburn Hills was probably the first one, but those suites were like actual bunkers. I mean, it was, you had this little window that peeked out and it wasn't sort of super high -end. It was safe though. It was safe. If there were, if there was a zombie attack or alien event. Well, the palace, you never know. Yeah, that was the place to go. So we were one of the first buildings that said, no, no, we're going to make this a real luxury product. And we're going to attach a club to it. So we got a fair amount of attention for that. Some of the things we've done on the food service side. So once we shifted to that management fee deal, all of a sudden we could be much more creative in the way that we thought about pricing food and beverage and the kinds of products we attached to tickets or different ticket types.

mean,

-end. It was safe though.

alien event. Well, the palace,

Some of the things that Leslie did in the restaurant. So all those things got us some attention. And so that was certainly helpful to your point.

So you formed the Machete Group. And I have to ask before we go through it, why Machete Group? What's the deal with big swords flying around? Where'd the name come from? I'm assuming it has to do with red tape.

assuming it has to do with red tape. Yeah, I mean, my experience on all of these projects is that there really aren't shortcuts. pull the knife out and hack your way through the jungle, right? And that's just what it takes. And, you know, over time, you can get a little better at sort of, you know, your technique in terms of how you cut your way through, but you still have to do that work. So that was the inspiration.

you cut your

Yeah, okay. But see, it does require a little bit of elbow grease to be able to get these kinds of projects done because they do require so many different, particularly as we look at what the trend is now. And I think where a big area of your focus is this idea of the, mixed use stadium development district, right? That includes retail and residential and entertainment. This has become, I think, the number one point on everybody's wishlist from an ownership standpoint, right? It's taking the arena concept and like, okay, how do we build around the arena? So it's just not the 81, 120 event days. It's a 365. And it's kind of moved everything away from the let's bring the stadium back to the urban core and the development for the redevelopment of that area. So can you talk a little bit about this trend that's seemingly not what everybody is talking about, how it came about and where you see the greatest impacts for teams?

Sure. So I think there are a few things that have driven teams in that direction. I think part of it is that the early examples of these kinds of projects and LA Live and downtown LA is a great example. The guys who worked on that project are friends of mine and they're awesome. And I think that project has been very successful. The perception of LA Live for a long time, at least from my standpoint and folks that I spent time with, was that's an exciting project. But it feels like you kind of need the extraordinary dynamics that they had there for it to be successful. And what I mean by that is Staples, then Crypto, now it had the Lakers and the Clippers and the Kings and the Sparks with the LA Convention Center right down the road. You had Nokia Theater or Microsoft Theater has been renamed since then, which was what, 7 ,000 or 8 ,000 sort of cap venue. So you could develop a project that was primarily engineered around taking care of the event guest. And that would underwrite. That would be successful. And if you look at the programming for LA Live, it's primarily large format retail. It's a lot of signage, right? I mean, Tim Lightwick and those guys are incredible at sort of monetizing on the sponsorship side. They brought the hotel online, but that was, I think, year four of the project. It's got some condos on top, but that's pretty limited residential. They had a little bit of office, right? But it was primarily oriented towards there are four or five or six million people a year who are going to come here for events, and we're going to find the smartest, most efficient way to monetize all those folks, right? That was the model. And so I think the feeling was that that's a compelling model, but how many places can that work,

had a

a compelling model, but how many places can that work, right? If I don't have four tenants, if I only have one. Is that enough foot traffic for me to be able to get my development thesis to be successful? And I think part of what's driven the shift is that there's now a realization that you can create a project that is less about or is not sort of focused exclusively or primarily on the event guest. It can be a place that has its own sense of gravity, its own sense of place. provides good reasons to be there on a Tuesday afternoon, even if nothing's necessarily happening at the ballpark or the stadium. Without the need of having four building tenants to create the traffic on its own.

Without the need of having four building tenants to create the traffic on its own. It's organic enough to create its own interest.

enough to create its own interest. That's exactly right. And if you look at the battery in Atlanta that the Braves did, and I've been lucky enough to spend a little bit of time with Mike Plant. People talk about that one,

and I've

talk about that one, yeah. Yeah,

Mike's a really smart, really sort of insightful guy. They created a place where if I have the data right here, it's like, truest attracts something like 3 million fans a year who go to Braves games. There are another 10 million people a year who are coming for other reasons, right? They're going to the battery for other reasons. And the way that we think about that is, you know, the original model was sort of arena anchored, right? That, you know, your arena is the sun. You're mixed use of the planets that revolve around the sun. Guess what? The sun's dark a lot of the time, but, you know, it's the lights are on enough so that it attracts. it tracks enough foot traffic that we can make this whole thing work what what happened at in atlanta and what we're doing in orlando and elsewhere is creating something that we would think of as arena adjacent or stadium adjacent right so that it's not anchored it's right next to it so you get the best you plan it right and you operate it right you program it properly it gets the benefits of the team partnership and being right next to the venue but it's also it's its own place and it's its own thing it's almost like the team is the icing in that regard

almost like the team is the icing in that regard

like the team is the icing in that regard It's interesting you say that. A lot of times I'll describe it as you want the building to be like Lanyap, right? That's a New Orleans expression, right? But it's like, it's that extra bit, right? That's upside as opposed to the core driver of your performance. You're flipping it how it used to be.

But it's

You're flipping it how it used to be.

Yeah. And if you can do that, now all of a sudden you have a place that even when the lights, even when your sun is dark, you still have a project that works. And that's, I think, one of the more significant shifts is the market has started to figure out that that's a formula that can work in more places than the event -driven model can work.

How do you then, with that idea, when success can rely on the development rather than the franchise? what are some of the essentials that as you've seen them, as you've seen the battery and the Orlando projects and things that you, in LA Live, we've talked about, what are the through lines for success there? Like what do organizations, where do they get tripped up in these kinds of opportunities? How to avoid them? And what are the musts? Like if you do anything, you have to do this.

Yeah, really great question. So there are a handful of things and no particular order. I mean, One is that you need scale. So if you're going to develop a place that has its own center of gravity and it's competing with, and I'm trying to use that word carefully, right? You're not really in competition with the venue. But in terms of thinking about critical mass, if you have a 800 ,000, 900 ,000 square foot multipurpose arena next to you or a ballpark, whatever it may be, if you're going to go develop a half a block or a couple of acres, that's hard. And even if there weren't intermediate there and it just was a mixed use development, it's hard to create a real sense of place if you don't have enough scale. And so probably a really critical place to start is how much land do we have and what kind of product do we think can be supported by the market, by this location?

this location?

And if you short arm it. Then the idea that like, well, we'll build sort of half of what we think the right program is. We'll see how it goes. Like I can tell you how it's probably going to go. It's probably not going to be successful. Right. Right. Because, you know, you need enough there there for this. When someone comes and visits on day one, they need to feel like this is a completed place, not half of a completed place.

There is a spectacle quality to it, too. You want people walking away going, oh, wow, kind of thing. Right. And if you like your short arm, it's like it's going to be evident. It's like, OK, this is half baked.

That's right. And you also want in really great places, give you a lot of reasons to come back. And part of that is having a mix of assets. So the second thing I would put on the list here is this shouldn't just be retail or just a hotel. You want hospitality, you want retail, you want office. And by the way, office is having a tough run, but the office that is performing well is in these kinds of highly amenitized, active, mixed -use projects. Right, because they give people a reason to go to the office.

because they give people a reason to go to the office.

Well, if you're a business and you're competing for talent and you're trying to retain talent and you want your employees to show up for work, you want to give them good reasons to do that. And I'll tell you, I mean, 10 years ago, we would talk to a prospective office tenant. The conversation usually started with how many parking spaces do I get? How fast are the elevators? And is there a little sandwich store down on the ground floor that my employees can go to to get a turkey sandwich when they're hungry, right? Now the conversation is, where's the dog park? Is there a great fitness facility nearby? Is there a micromobility? Is there a place that my employees can live that is within walking distance, right? That's a very, very different conversation than we used to have. My 20 -year -old self is raising his fist to the sky.

My 20 -year -old self is raising his fist to the sky.

There you go. And so you need to create that kind of an environment. Right. I mean, one of the things we always look at really carefully, doesn't always make sense. We always look at is doing a live music venue as part of the program here. So in Orlando, we have a partnership with Live Nation. They're going to operate a 3 ,500 cap facility there. We're fortunate enough to know the Live Nation guys well, the AG Presents guys well. And so that's the kind of thing that you want to mix in here. If you can find a way to make those economics work, because it just makes your project that much more. vibrant, right? And you're teaching people, there are all kinds of good reasons to come back here or live here or work here or whatever it may be, because there are different things happening at all times. And that's a function of the mix of assets that you have. And it's a function of the overall scale of the project that you're delivering.

I'm going to read you a quote from an article that, or from an article in Sports Business Ventures that you gave, because I found it interesting for somebody in property development. And this kind of thing. So you said, the most important skill set in my mind is how good a storyteller you are, right? Now, that's a quote that I would expect to hear from a brand marketer, somebody in sales, but not necessarily like property development expertise. So why do you feel like storytelling of all things is so important to what your work and what your advice to these clients you're working with is?

so some of that is probably my you know my disney training speaking yeah right disney is all about storytelling and i would argue that sports entertainment are also really very much all about storytelling and i think that that particular i mean frankly if we were talking about real estate development separate apart from a partnership

right disney

disney is all about storytelling and i would argue that sports entertainment are also really very much all about storytelling and i think that that particular i mean frankly if we were talking about real estate development separate apart from a partnership with a sports team, I mean, a consumer -facing real estate development, that I think I would still make the same point, right? That you need to develop a narrative about what this place is and who should spend time here, right? Hopefully everybody, right? We're all about sort of being inclusive, but we want to create a storyline around a project that is engaging and inclusive and aspirational and all the kinds of good things that any brand can offer. I think with sports, What makes it even more significant is that increasingly what people want, in this country at least, is community and connection, right? And if you look at all the data, right? Volunteerism is down. Church attendance is down. Must -see TV doesn't exist anymore. Hasn't for 20 years, right? Tentpole movies barely sort of open in a way that makes a difference culturally, right? I mean, most people are. Unless it's Tom Cruise and Mission Impossible, they're probably waiting for it to come out on the streamer, right? And so the kinds of things that used to bring us together have eroded, unfortunately, in a fairly material way. But what hasn't is sports, right? And sports comes, it's like turnkey community and connection, right? Sports teams have pageantry and ritual and history and performances and drama and all these kinds of things, right? And that is a... It's a very powerful unifier. And what's driving, in our mind, or my mind at least, a lot of the interest in these kinds of projects, to go back to the question you asked a few minutes ago, is this notion of, well, we have this halo, right? We have this halo effect, and we have these people who want to connect with this brand and connect with this community or this tribe, whatever you want to call it. And can we find ways to allow them to do that that's in... outside of just the experience they have in the event venue. And if you're thinking the right way about storytelling here, if you think about the storytelling the team is doing, you think about how that can manifest in the context of a physical place that's outside the arena or the stadium or the ballpark, that can be very powerful. And we think that's a way or a driver of success with these kinds of projects.

Do you feel like the storytelling aspect is something that has to be developed early on? in this process as people start to think about what they want these facilities, buildings, districts to be and that it's important to go back to that story constantly in the development process or is this something that happens organically during the development process? Does it guide it or does it adjust with it?

Wow, that's a good question. I think the answer is that it's some of both.

Yeah, okay.

You probably start from a place and

probably start from a place and Yeah,

you start from a place. I mean, for example, when you name a project, so our project in Orlando that we're doing with the Magic is called West Court. And the court is a little bit of a nod to the fact that they're a basketball team. The West is that we're West of I -4. We also have a central courtyard, which is from a placemaking standpoint, something we think is really important. And so all those things come together. And we did a lot of, I think, pretty good branding work. with help from our friends at Street Sense on sort of developing that name. And of course, we went through 100 options, right? And we thought very carefully about what they all meant and how they positioned the project and what sort of message they delivered to the market. But we also had to remind ourselves of the fact that whatever name we pick and whatever the logo looks and whatever kind of style guide we develop, that's maybe 5 % of the story that we're going to use this name and this brand. to tell right the other 95 to your point is what happens over the course of developing and then delivering and managing the project so you know it's who are your retail tenants going to be and how do you program your public spaces and how are you going to flag your hotel and you know are you going to figure out a way to make a live music venue work here all those things sort of imbue the brand with something much more significant than whatever is we were thinking about you know 18 months ago in a conference room scratching our heads

I'm also curious about how you... I mean, the nature of fandom is changing all the time too. The idea of somebody sitting in a seat for three hours and watching a game is sort of like this quaint idea. People want these sports experiences to be so much more, right? What happens before the game, what happens during the game, what happens after the game. How much does the idea of what fans want play into this? Because I'm also very cognizant of the fact that sometimes fans don't know what they want until they see it. Right. So there's kind of a back and forth as far as getting input and fans on what they want, how to address the changing nature of fandom in your designs and how you come up with development concepts. Do you talk to fans a lot? Are you investigating where fandom is evolving and how these places should reflect that as part of your process?

The short answer is that we, we have done things like focus groups and surveys. We're driven a little bit less by that and more about what the market data tells us. And, you know, as it relates specifically to the fan on event day, the thing that we try to bear in mind or really focus on is that when I worked on Toyota Center 20 -something years ago, at that point, if you and I were thinking about going to a Rockets game... And we were looking at sort of the pros and cons or the advantages and disadvantages of going to the game or going to a bar or sitting on our couch or something and watching. There were sort of three things that differentiated the live experience. The first one was resolution, right? Back then, people were still watching on old like CRTs. And so, you know, when you're there live, like, boy, this is a lot sharper than what I get on my television. It looks so cool.

my television. It looks so cool. Yeah.

It looks so real. Exactly. So that was one. Number two was data. Right. So this was like pre smartphone, pre, you know, Google being able to give me every statistic in the history of the NBA in less than half a second. So back then, things like stat boards in the arena, if you were paying attention and you wanted to know what's happening out there, that was like that was the only real time source of that data you had. And it was only marginally real time. And the third thing that was a differentiator was the tribal nature of the experience. Right. That you go and there's 18 ,000 other people there and somebody makes a big shot. You high five somebody next to you that you've never met before. And you sort of experience that sort of visceral emotion that comes along with being a part of those kinds of moments. Yeah, you talk about community.

Yeah, you talk about community.

Exactly. So fast forward to 2025, there's only one of those that's still standing, right? It's that visceral live experience. And so the really smart owners, in our view, are the ones who are really doubling down on that. How can I make the live experience more visceral, more emotional? more personal, right? And I think what Steve Ballmer did with Intuit is like he really thought carefully and creatively about how to do that. And I think it's a terrific example of an owner really working outside the box to redefine what the live experience can consist of. There are many other examples, right? I'm just sort of picking that one.

one.

And so when we think about what we're doing with the mixed use, we're trying to take that same idea and expand that connection. So it's not just about the experience I have in Kia Center. It's also about extending that experience before the game, after the game, right? How can we create more touch points? How can we make that experience more positive and more desirable? How can we make it more likely that that fan is going to get off of his or her couch or decide not to go to the bar and buy the ticket and have the live experience instead? And I think that owners are figuring out that... If we can do that successfully, you know, the real lifeblood of this business, as I'm sure you know, is renewal rate, right? Renewal rate in your season tickets, renewal rate in your suites, renewal rate in your sponsorships.

I want renew forever.

want renew forever. There you go. And if you're, but that, you know, it's like when I was with the Rockets and when I've worked with other teams, it's like sweating that. Is it 88 % this year or is it 90 % or is it 92 %? That's a huge swing in the business. And it's so much easier to keep those fans than go out and find new ones to sort of step in and fill that gap. And cheaper.

And it's

And cheaper.

If you can improve the quality of the experience, that game day or event experience that helps drive a higher renewal rate, that's a really fundamental benefit that getting these projects right can deliver to the mothership, right? Which of course is the team itself.

Which of course is the team itself. Now, you alluded, talked about a little bit earlier about having done a few projects in China for the NBA. And I'm wondering, I suspect that probably requires a shift in approach and priority and some of the things that you have to do. Can you speak to those experiences a little bit? How did those development priorities differ in China? And what learnings, I'm wondering, did you bring back from China that you can apply to the US and the projects you're working on now?

How much time do you have?

We got two more minutes. Yeah, a lot on China.

more minutes. Yeah, a lot on China. So first of all, I was really fortunate to have those experiences. And I worked on the Olympic basketball venue in Beijing, which is part of that deal, not with us, but with the local developer that the NBA partnered with, was they couldn't tear it down into the game. So it's still around. I think it's now called Catalatic Arena. It's one of the busier arenas the last time I looked. in all of Asia, worked on the Mercedes -Benz arena in Shanghai, and then worked on the Guangzhou International Sports Arena in Guangzhou. So I think a couple of things I'll share briefly. One is that this was an environment where previously, if you went to a sporting event in China,

the NBA

was an environment where previously, if you went to a sporting event in China, whether it was a sellout or not, was generally determined by the government. I mean, they would sort of allocate out the tickets and they would decide this is going to be a sellout or it's not. And it turned on things that... didn't necessarily have to do with the merit of who was playing.

they would decide this is going to be a sellout or it's not. And it turned

necessarily have to do with the merit of who was playing. There were other sort of factors and considerations. And this also was a place where culturally, if you went to an event, you, you know, you showed up, you watched the event, you went home. You did not, there was nothing to eat. There was nothing to drink. There was no premium product other than maybe sort of a VIP box for the appropriate, you know, sort of communist party. Yeah.

Yeah.

And so, you know, in that kind of environment, it was interesting because it forced us. to think in a much more fundamental way about how we did things in the US when you designed an arena or a stadium experience and why. Because our partners there were very smart and very inquisitive. And so when we would say, well, you got to put a concession here and a concession there, we didn't have an argument about what the point of sale ratio would be. We had an argument about why are you doing this at all? Nobody wants anything to drink or anything to eat in an arena. I mean, literally, we debated that issue for days on end in Beijing. And we finally persuaded them. People won't eat at a basketball game.

won't eat at a basketball game.

There was a very strong and sincere belief that this was just like a Western thing that would not translate to China. We ended up persuading them to do, what ended up being a relatively limited food and beverage program. The very first test event they did, there was a line that went all the way down the concourse and around the bend of people who were waiting to buy a soda. And I forget, we had a hot dog or something.

would not

Maybe it wasn't even a hot dog. Maybe it was Chinese food. I don't remember. But it really forced us to make the arguments and to think really carefully about them in a way that I think was helpful. It challenged a lot of our assumptions. But it speaks a lot.

it speaks a lot. I've had a couple other conversations with people who have led EPL teams. They've brought American -style sports business practices to European football and had some successes. And then other cultural moments where we're like, yeah, we're not doing that. We're not coming to the game early to get a beer. We're going to the pub early to get the beer because that's culturally what we're doing. And it sounds like that was sort of a similar process, like from an eye -opening perspective, kind of have to try it a little bit in order to see what's going to work or what's not going to work. God help you start bringing mascots to game in EPL soccer, probably, you know, hang them up from something. That I don't think would go well.

don't think would go well. But what I will tell you is, you know, we've spent a fair amount of time in Europe and I spent a lot of time over there in the late aughts, early.

don't think would go well. But what I will tell

teens -ish, right? 2009, 10, 11, not too long after I'd left the Rockets, there were some opportunities over there that we looked at. And there's sort of a much longer backstory here that relates to what was happening in that market. But part of what had occurred is that for a long time, the European clubs, as I understand it, looked at American stadiums and were like, oh my God, this is not true. That's not what a true fan wants. To your point, a true fan goes to the pub, knocks back a few, goes to the game. you know, yells his or her head off and then, you know, you're gone as soon as it's over, right? You're not going to a VIP club. You're not waiting in line to buy anything. You're watching the action. You're, you know, you're sitting in your seat during halftime. It's a very defined linear experience. And then what happened is that Arsenal opened up Emirates Stadium. And that was the first, at least in the UK, that was the first stadium that was really... had more of an American approach, right? They had premium products, they had VIP clubs, had a fairly robust food beverage program. And there's a report that Deloitte puts out every year in Europe. It's called the State of Football or something like that. Don't hold me down exactly. And that lists like every club in Europe, every first year club, what's their match day revenue. And I just remember that back in like 2000. or something that, you know, that, that Arsenal was like 150 million euros and Old Trafford, Man U, of course the Glaziers owned it, right? So they were already thinking like Americans about what they should do. They had renovated it. They were like 110 million. And then there was like a third place tie, you know, of like 20 teams that were doing like 30, you know?

that were

Yeah. This is an environment where there's no salary cap. yeah right so all this extra revenue that you're generating because you have a building yeah yeah exactly and so then there was like this gold rush of like how do we that's probably why we were over there like all of a sudden we're getting a lot of inquiries about yeah what how do we do that here how do we take advantage of these incremental revenue streams with everything that we've talked about to this point i'm wondering if you have any thoughts on future proofing stadium developments right because

right so

you have a building yeah

what how do we do that here how do we take advantage of these incremental revenue streams with

everything that we've talked about to this point i'm wondering if you have any thoughts on future proofing stadium developments right because We're talking about buildings that are going to be ideally have utility for 30, 40 years and the surrounding districts for them. So these are not quick projects to complete. Like you said, Machete Group, you got to cut through there, make the shortcuts wherever you can and things like that. But in that time, like new tech comes online, consumer preferences change. How do you help clients prepare? for that, like the inevitable pivots that are going to have to be made.

Yeah, it's probably the most important question on these kinds of projects. And to add on to what you said, all of which I agree with, they're also really significant investments. And so I think that there are a couple of things. One is that what's driven a lot of the new stadium development over the past 25 -ish years or so, has been that the prior generation of arenas and stadiums, one way to think about these buildings is that they're like a cake, right? And the two key questions are, what's the footprint of your cake? Like, what's the diameter of the cake? And then how many layers does it have? And so those are like the bones of the building. And the older generation of buildings, Compact Center or the Summit being a good example, you know, much smaller footprint, only a couple layers of the cake. One or two layers of cake.

the cake. One or two layers of cake.

Yeah. And so when you say, hey, for us to be competitive, we need to add a variety of premium product. We need to, you know, incorporate various kinds of amenities, whether those are GA amenities or VIP amenities, wherever they are. You just, there isn't enough, there's enough room in the cake, right, to do that when it's a small footprint, only a couple of levels. And so, you know, we did some analyses for the NBA League office back 15 years ago. We looked at Arco Arena in Sacramento. And the question was, could we renovate this? Yeah, exactly. The answer is you could, but you had to take the roof off.

we renovate

And you need to take the wall off to make a bigger cake and a taller cake. And by the time you finish doing that, you might as well build yourself a new cake.

You might as well open up a new bakery with the Arco Center.

Exactly. A large bakery and an even larger cake. So the good news in a lot of respects is buildings that have been developed since then, the cake is sort of right -sized. So if you look at Toyota Center,

Exactly.

if you

you know, do the Rockets want to sort of, you know, renovate that building and continue? Sure, absolutely, right? I think Tillman and Gretchen Scheer, who's the president there, I'm sure are thinking about this right now. But do they necessarily have to take the roof off the cake, take the top off the cake and take the, no, I don't think so. I think the building is sized the right way. I think it has enough levels. So that's the first way I would answer your question, right? Is that you want to build something that gives you adequate flexibility. And if anything, what I would say is, You know, the interest in capacity, maximizing capacity, that's actually coming down a little bit, right? You're seeing owners start to figure out. And to go back to the theme of what we've been covering on the podcast today, which is what's the quality of the live experience? Like, I would much rather have a 17 ,000 -seat arena that's packed.

You're seeing owners

17 ,000 -seat arena that's packed.

Jammed to the gills.

Than a 20 ,000 that's got 19 ,000 people in it, but 1 ,000 seats are empty.

Yep. Better for the optics, too.

Better for the optics, too. Exactly right. Better for the optics. I mean, you know, if you're paying real money for a ticket and, you know, you look up at the upper deck and there's a bunch of empty seats there, or even you look in the corners, like at some point you're going to say, like, am I an asshole? Like, why am I buying this ticket? Like other people, you know, social proof is a really important, you know,

why am I buying this ticket?

know,

know, sort of psychological construct, right? And so you want that building to be active and intimate and noisy and vibrant and energetic. And so the point there is, you know, this sort of trend of like, well, I want to be bigger and bigger and bigger. You know, that's sort of reversing itself a little bit, which means it's less likely that a team is going to conclude we need to go spend a billion five on an arena that already has the right sort of cake structure. We just need to figure out how to renovate it.

means it's

Right. Which I think is a good way to future proof. I mean, the other thing I'll point to that's really important is what's happened with technology. Yeah. So there's a really interesting chart. No such thing is enough bandwidth kind of thing.

No such thing is enough bandwidth kind of thing.

This thing is exactly right. I mean, Mortensen has this, the contractor who we work with a fair amount, has a chart that looks back. So something like 20 years ago, the average multipurpose arena was spending, don't know how many of this exactly, but I think it's like, you know, the technology spend was somewhere in the range of like two to 3 % of the overall budget. And the average arena cost, and we did Toyota Center for $220 million, right? So let's just say it's.

Not anymore. $300 million,

$300 million, exactly, right? So now it's like 6 % to 7 % on a billion five, right? Wow. So if you think about how much larger that technology spend has gotten, right? It's increasing two ways as a percentage of the overall spend and the overall spend is quintupled,

exactly, right?

So if

is quintupled,

right? And so that is, to your point, the approach that we try to bring these projects is to say, don't get distracted by the peripherals. Because the one thing you can be sure of is that the peripherals, devices, software, that's going to evolve very quickly. No one can predict what that's going to look like in three years, let alone five years or seven years or 10 years. But what we can do is we can make real investments in the infrastructure piece. which is just bandwidth and connectivity. And that doesn't mean you want to build day one for where you think you might be in 10 years, but you want to future -proof your systems so that you can expand to accommodate that. I mean, the one thing I can tell you about every slide I've ever seen on bandwidth consumption for sports events that looks out a couple of years, they're always off by like a factor of two or three. Whatever you think it's going to be,

Whatever you think it's going to be, it's going to be more than that.

Yeah. And so if you can get the infrastructure right. a scalable infrastructure, then that gives you the sort of runway you need to do, you know, sort of enable whatever sort of peripherals come along. And I think splitting that exercise and that respect is a way of sort of framing the effort strategically that can be successful.

I'm with David Karlock. He is the founder and managing partner of Machete Group. David, thanks for the time. This evening, you're in New York. I'm in, it's only still just afternoon here in California. Before I let you go, though, I'm going to put you in the lightning round. This is a series of questions. You don't really know what's about to happen. That is a rueful chuckle right there, knowing that you just walked into the veritable minefield that is the lightning round. I'm ready. Okay, Mr. Confident. Here it comes. All right. You grew up in the Boston area, as we've been discussing. How close do you need to be to the city for the accent to reappear?

Oh, man. It rears its ugly head now and again, no matter what I try to do. Yeah, but it kind of just felt it right there,

Yeah, but it kind of just felt it right there, just a little whatever. Yeah. Yeah, yeah. Usually it's two beers for me. That's exactly right. Look,

Yeah. Yeah, yeah. Usually it's two beers for me. That's exactly right. Look, I mean, you're talking about a state where, what is it? The license plate says the Bay State. I mean, what it should say is, do you think you're better than me? Right? That's what they should. That's what they should be on the last year's license plate. So, yes.

All right. All right. I don't need to be that close.

I don't need to be that close. Not even that close.

Not even that close. Okay. Your first job, like we talked about at a college, is with Disney. What's your favorite ride at the theme park?

My favorite ride is at Animal Kingdom. There's something called Everest. Oh, it's a great ride. Which is a roller coaster ride. I took my daughter there when she was about six. You go backwards.

ride. Which is a roller coaster ride. I took my daughter there when she was about six. You go backwards.

Yeah, you go backwards. Exactly. And she loved that. And I must have done it 50 times. So I have really fond memories of doing that with her. That will explain the neck trouble.

will explain the neck trouble. You helped develop new restaurant concepts for the Hard Rock Cafe. What was one concept that you pitched that you were pretty sure was going to get shot down right out of the gate?

Oh, man.

Probably, we had some discussions with Harley Davidson about doing something with them that would be some kind of a restaurant, cafe, brand extension. And the reason that I was confident it was going to get shot down, which it was, is that the leadership... felt like the Harley brand and the Hard Rock brand were sort of too close to one another, if that makes sense. It was just too much energy. Yeah. Yeah. They would be viewed sort of competitive in a way that other brands might not. All right.

just too much energy. Yeah. Yeah. They would be viewed

right. No, synergy was going to be just too much. All right. Last one. And this is a two -parter. This is going to be a little bit of a test part of the lightning round. All right. Like we talked about, you opened the Toyota Center in Houston. What was the first event at the Toyota Center when after it opened? Fleetwood Mac. Very good. You got part one. What did they open with? Oh, boy.

What I can tell you is that we had a pipe burst right over Stevie Nicks' dressing room, and she was very, very, very gracious about it. Okay. Oh, man. What was the... I'm not sure.

not sure. I don't know. They opened with the chain.

don't know. They

The chain. All right. Which is a pretty strong open for a band.

All right. Which is a pretty strong open for a band. That's going right. I mean... Not that Fleetwood Mac's catalog is thin or anything like that, but man, that's getting right into the deep parts of the hits.

They were awesome. The only half -assed excuse I'll make for myself on that one is that I'm pretty sure I was down dealing with the pipe and not out listening to the concert. It's a fair argument to make for a guy who at that point in time was operating the building.

David Carlock of the Machete Group, thanks for the time.

Thank you. I enjoyed it.