STADIUM ECONOMICS SHOW ME THE MONEY Stadium Trends

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 • In 1950, most pro-sports teams played in privately owned stadiums or arenas • Most pro-football teams were the tenants of probaseball 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

Public Ownership & Stadium Size 1950 Vs. 1991

Stadiums in the 90’s • In the 1990’s U. S. cities spent $5, 298 m on 57 new venues in the four major pro sports (NFL, NBA, NHL, MLB). - Depken (2003) • Public contribution averaged $218 m 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

New Super-Stadiums of the NFL Reliant Field (Houston) • Capacity: 69, 500 • Cost: $449 Mil • Public Money: $309 Mil 5

New Super-Stadiums of the NFL Ford Field (Detroit) • Capacity: 64, 355 • Cost: $500 Mil • Public Money: $125 Mil 6

New Super-Stadiums of the NFL Gillette Stadium (New England) • Capacity: 68, 800 • Cost: $397 Mil • Public Money: $72 Mil 7

New Super-Stadiums of the NFL Seahawk Stadium (Seattle) • Capacity: 67, 000 • Cost: $360 Mil • Public Money: $300 Mil 8

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

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.

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.

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.

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.

New MLB Stadiums & Attendance 1990 -2000(Depken, 2003)

New MLB Stadiums & Win% 1990 -2000 (Depken, 2003)

New MLB Stadiums & Ticket Prices 1990 -2000 (Depken, 2003)

New MLB Stadiums & Profits 1990 -2000 (Depken, 2003)

Why do we keep building new stadiums with Public Funds?

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

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

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.