They Got Game: Stadium Swindles
We've just been through yet another Super Bowl spectacular, and whether you're a diehard fan or casual observer, you can't deny the power of the event. Noise levels reaching 100 decibels, emotions riding the roller coaster of ups and downs, and the final thrill of victory or agonizing crush of defeat--these elements all contribute to a unique and over-the-top experience.
I witnessed the effect on my own household last Sunday night as my older son, a long-time Philadelphia Eagles fan, alternately shouted in triumph or disgust throughout the evening. Even the guy who is usually in control of his feelings loses it when his team suffers an unexpected (and perhaps not always fairly called) defeat.
Image Credit: CCICADA
The powerful response sporting events evoke may explain the influence that major league teams have, not only over their fans, but also over the cities that host them. It seems as if there is always a discussion around building a bigger and better stadium for the home team, or the home team a city wishes to acquire. The magnitude of handing over hundreds of millions of dollars to already obscenely wealthy owners is balanced, economically speaking, with the promise of multiple benefits for the host town. Studies commissioned by these teams proffer golden promises of new jobs, increased tourism, and related revenues.
But are these studies backed up by disinterested academic research? The overwhelming conclusion is a resounding "no." From studies done by Stanford University, UC Berkley, The Brookings Institution and other organizations, the data suggests that these stadiums do not deliver the benefits promised.
According to Michael Leeds, a sports economist at Temple University, jobs may be created, but they are no more than the number generated by a midsized department store. Whether they are construction-related and short term, or seasonally-related and low pay, these jobs do not benefit members of the community in the long run. As for tourism, it may be generated, but not enough to make a significant impact. During the 1990s for example, Baltimore's Oriole Park had the greatest influx of out-of-towners of any venue; yet the net gain for the city's economy was about 1.5% on its investment. If a sports stadium were a stock, a return like this one might very well trigger a massive sell off.
So who does benefit from the $145 million per year that the average stadium generates? As in the days of the Roman Coliseum, it is the wealthy and powerful few. There is a shared idea among team owners of "socializing the costs while privatizing the profit." With this goal in mind, owners pressure cities into land grants, tax subsidies, state funding, and tax-exempt bonds that bring hundreds of millions of dollars in public funds to the table. These funds are simultaneously diverted away from ubiquitously beneficial public projects, such as infrastructure and schools. If these funding demands are not met, then the threat of moving the team to another city is used as a final bargaining chip.
The owners, on the other hand, reap the rewards of national licensing and broadcasting, ticket and related revenues, and corporate advertising. In addition, their claims of seasonal net losses simply don't add up. According to Mark Cryan, assistant professor of sports management at Elon University, most teams are more profitable than they let on. "There are a lot of depreciations of assets, including player contracts, that allow teams to honestly say, ‘We didn’t make any money this year,’ even though the owners have millions more in their bank accounts," he said in his interview with The Atlantic.
As discussed in the book Better Capitalism, exposing and articulating these abuses has been done extensively since 1998 by Neil deMause and Joanna Cagan. Their book, Field of Schemes: How the Great Stadium Swindle Turns Public Money into Private Profit, and website detail an astonishing array of sports swindles. The fact that they have so many examples eliminates any doubt that this is a massive offense conveniently hiding behind our beloved pastimes. The fact that the swindles show no sign of slowing down despite decades of condemnatory reporting makes clear the need to increase awareness and implement meaningful action.
So how do we bring an ethic of mutuality and Partnership Economics to this modern plantation economics system (so-called because just one side benefits)? We offer three approaches here, and more are available. One way would be to have ballot initiatives on stadium proposals. Since tax payer money is being used to fund the project, taxpayers should have a voice in its approval. Another way would be to place more of the cost on attendees of the game, especially those who demand and can pay for luxury accommodations. A third approach is to rethink the special consideration sports leagues enjoy when facing antitrust challenges. Sports leagues have purposely limited the number of teams to create higher demand by host cities and therefore more bargaining power for owners. It's time to see these leagues as the monopolies they are and deal with them accordingly, such as requiring true profit/loss transparency and breaking up existing leagues into competitive business entities.
Because of sports teams' loyal and adoring fan base, any of these approaches might be a tough sell. A more comprehensive and pervasive information campaign is needed to help the public realize what the true costs and economic burdens of hosting a sports team are, so that city officials are supported in negotiating for the public's share of profits generated. There is no reason that, with the empowerment of local government and proper economic restructuring, a team could not bring both pride and profit to the city that makes their existence possible.
What about you? Share your story, question, comment, idea, disagreement -- yes, we welcome disagreement for the sake of mutual benefit! -- with us at blog@PartnershipEconomics.com. We will give a thoughtful response.
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