STADIUM ECONOMICS: SHOW ME THE MONEY!!

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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
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Stadiums in the 90s

• In the 1990s 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 Funding

• Indirect 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 Funding

• Academic 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)
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New MLB Stadiums Win 1990-2000 (Depken, 2003)
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New MLB Stadiums Ticket Prices 1990-2000
(Depken, 2003)
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New MLB Stadiums Profits 1990-2000 (Depken,
2003)
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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.