stadium economics: show me the money!!
DESCRIPTION
STADIUM ECONOMICS: SHOW ME THE MONEY!!. Stadium Trends Arguments for Public Funding of Stadiums Arguments against Public Funding of Stadiums The Dollar Value of Purple Pride Who should pay? Fans Vs. Non-fans. Stadium Characteristics in 1950. - PowerPoint PPT PresentationTRANSCRIPT
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STADIUM ECONOMICS: SHOW ME THE MONEY!!
• Stadium Trends
• Arguments for Public Funding of Stadiums
• Arguments against Public Funding of Stadiums
• The Dollar Value of Purple Pride– Who should pay? Fans Vs. Non-fans
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Stadium Characteristics in 1950
• In 1950, most pro-sports teams played in privately owned stadiums or arenas
• Most pro-football teams were the tenants of pro-baseball teams & played football games around the baseball schedule
• All pro-hockey teams played in private arenas• Many pro-basketball teams played in college
arenas & played their games around the collegiate schedule
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Public Ownership & Stadium Size 1950 Vs. 1991
30.5026.09
43.51
77.67
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
% Public Vs. Private Ownership Median Capacity (in Thousands)
1950
1991
19501991
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Stadiums in the 90’s• In the 1990’s U.S. cities spent $5,298m on 57 new
venues in the four major pro sports (NFL, NBA, NHL, MLB).- Depken (2003)
• Public contribution averaged $218m each (approx. 66% of
cost)- Depken (2003)– Average capacity of all new arenas: 35,727
– Average total cost per seat: $6,613
– Average public cost per seat: $4,534
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New Super-Stadiums of the NFL
Reliant Field (Houston)• Capacity: 69,500• Cost: $449 Mil• Public Money: $309
Mil
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New Super-Stadiums of the NFL
Ford Field (Detroit)• Capacity: 64,355• Cost: $500 Mil• Public Money: $125
Mil
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New Super-Stadiums of the NFL
Gillette Stadium (New England)
• Capacity: 68,800• Cost: $397 Mil• Public Money: $72
Mil
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New Super-Stadiums of the NFL
Seahawk Stadium (Seattle)• Capacity: 67,000• Cost: $360 Mil• Public Money: $300 Mil
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Arguments for Public FundingIndirect Benefits (Benefits not accruing to the team)
• The Multiplier Effect – Job creation in the stadium/downtown area due
to team & stadium related activities
• A pro-team will attract more corporations to the area because of the “Major League” image of the city
• Community service by players
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Arguments for Public Funding
Direct Benefits (Benefits to the team & the fans)• Team can afford better players & contend for a
championship• Enhances civic pride from living in a major league city• Entertainment value for the fans
– Consumer Surplus of fans that attend
– Public Good aspects of telecasts
• Team Relocation as a last resort.
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Arguments against Public FundingAcademic studies find that:• The multiplier effect is overestimated in studies
by consultants hired by teams seeking new stadiums. – These studies fail to account for the substitution effect
• Stadiums are not a significant factor in explaining Income in the SMSA
• The $ value of satisfaction that fans derive net of ticket prices is not large enough to generate public subsidies for stadiums.
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Arguments against Public Funding
• Stadium moves not only increase revenues through higher prices and attendance but lower costs through favorable rental agreements.
• Most rental agreements provide attendance based rents. This shifts the risk to the landlord.
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Baseball Stadiums
• The typical pattern in baseball stadiums is one in which the stadium gets most or all of the revenue from parking.
• Teams get most or all of the revenue from the sale of programs & novelties and food and drink revenues are split between 1/3 and ½ with the rest going to the team.– TWINS RENT $0.
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New MLB Stadiums & Attendance 1990-2000(Depken, 2003)
2.18 3.01 2.04
00.5
11.5
22.5
33.5
Average Annual Attendance
Mil
lion
s
MLB Average New Stadiums Old Stadiums
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New MLB Stadiums & Win% 1990-2000 (Depken, 2003)
500 543.52 492.51
350
400
450
500
550
600
650
Team Win PercentagesMLB Average New Stadiums Old Stadiums
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New MLB Stadiums & Ticket Prices 1990-2000 (Depken, 2003)
41.058 53.088 38.987
0
10
20
30
40
50
60
Team Payrolls
Mill
ions
200
0 D
olla
rs
MLB Average New Stadiums Old Stadiums
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New MLB Stadiums & Profits 1990-2000 (Depken, 2003)
3.803
13.343
2.16102468
10121416
Team Profit
Mill
ion
s 20
00 D
olla
rs
MLB Average New Stadiums Old Stadiums
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Why do we keep building new stadiums with Public Funds?
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What fuels the stadium debate?
• The average willingness to pay for a new stadium from a random sample of 1400 Minnesotans which includes a valuation of civic pride and indirect benefits was $22.26.
• This implies a statewide total WTP of approximately $111 million.
• The new Vikings stadium will cost about $550 million
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Why do we keep building new stadiums with Public Funds?
• Different people place different values on stadiums & sports.
• The average willingness to pay for a new stadium from a sample of Vikings fans that attend games was $312.52
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Who should pay for the new stadium?
• It is economically inefficient to tax citizens that do not use the stadium or follow the team on T.V.
• Fans can finance a large part of the cost of new stadiums through tradable seat licenses because they value the team at a much higher amount than non-fans.
• Cities should form a buyers action group that can negotiate with cartels like the NFL, NBA etc.