The Lexington Center's board of directors heard a pitch Thursday to replace Rupp Arena's video system before the 2013-2014 basketball season.
Bill Owen, Lexington Center's president and CEO, raised concerns, saying the arena's system has gone beyond its intended life cycle and if it fails, it could disrupt a significant stream of revenue for the center. Owen said the life span for this kind of electronic equipment is typically eight to 10 years. Rupp's system is in its 12th season of use.
"We are two years, or 20 percent, past the outside of that projected life cycle," Owen said.
A major upgrade needs to be done fairly quickly because the video system has become the backbone of a pretty sizeable piece of operating revenue — about $1.8 million annually — for Lexington Center Corporation, he said.
"If we lose that backbone, the revenue goes away. Maybe not entirely, it depends on how much of the backbone fails. But that will have a direct relationship as to how much revenue we lose," he said.
Owen made the case for a new video system Thursday at the board's monthly meeting.
The current video system has technology deficiencies compared to modern systems, and malfunctions are beginning to occur, Owen said. "To stretch it another year brings risk of a breakdown, either partially or completed."
Replacing the video screens and production system could cost between $4 million and $4.5 million.
The replacement is needed because the arena's equipment is old and replacement parts are no longer manufactured and are not easily found on the secondary market, according to Learfield Sports, a sports marketing firm in the first year of a 5-year contract with Lexington Center. Learfield sells advertising on Rupp video screens, court side signs and the arena's fascia boards.
Learfield said in a memo to Owen, if any part of the system were to become inoperable, it would be "financially damaging for our partnership."
Because of the time needed to order and install the equipment, a decision on whether to buy a new video system needs to be made at the January board meeting, or at the latest by early February, to have the system ready for the 2013 basketball season, Owen said.
"If we don't move forward by that time, we will probably be using the same equipment for the next season," he said.
Board member Craig Turner called replacement costs "significant" and asked that the Lexington Center staff investigate costs and report to the capital maintenance committee more detailed figures, along with an emergency plan if Rupp's video system should fail.
Turner also wanted to know how much of the cost would be shared by Learfield and UK.
"I would assume if we're going to do this, we're going to do it the right way," Turner said. "We're looking at $4.5 million. We need to have all parties at the table before we make that decision."
Turner made these requests in the form of a motion, which the board passed unanimously.
Rupp Arena's four large video screens enhance the fan experience at University of Kentucky basketball games, showing, among other things, game action and instant replays.
Video and other electronic technology play "a critical role in the overall in-arena fan entertainment and experience," Steve Gowan and Keith Burdette, Learfield executives said in the memo to Owen.
With improved technology on large, flat-screen high definition home television sets, fans have heightened game day expectations.
"In many ways, Rupp Arena's competition is the home theater," the Learfield executives said.
Upgrading Rupp's technology is an opportunity to make the in-arena experience better than watching games at home in high definition, they stated in their memo.
The projected cost of $4.5 million to replace the system would surpass the $3.2 million paid when the system was installed 12 years ago. Funding the upgrade is among the issues the board will have to tackle.
"We don't have $4.5 million lying around," Owen told board members.
One possible way of financing a technology upgrade would be a bank-issued tax exempt loan with a favorable interest rate.
"We would repay the loan from the revenue stream we already have established" from advertising, Owen said.
If the board acknowledges the equipment is worn out, it would not be replaced with an identical system. The four 12-by-20 foot screens with 16 millimeter pixels in each corner of the arena would be replaced with 13-by-26 foot screens of 10 millimeter pixels, giving higher definition.
Courtside backlit signs would be replaced with additional light emitting diode (LED) displays. A new LED display would be added to the upper arena fascia (front edge) similar to what was done to Commonwealth Stadium a few years ago. It is the same type of LED display that is in Barclay Center and numerous other National Basketball Association and university arenas, Owen said.
If Rupp is renovated and reconfigured at some point, as proposed this year by the Rupp Arena, Arts and Entertainment Task Force, the equipment could be moved, Owen said.
Board member Julian Beard said, "It sounds like we're playing Russian roulette" with Rupp's current system.