Monday, February 23, 2015

The Economic Benefits of Sports Teams Are Difficult to Define

Sports teams are popular for improving brand image of a city and encouraging greater investment in downtown districts. People become attached to the image of a sports team as a representation of their city. The economic advantage of sports teams can be difficult to define as traditional economic measurements look for close relationships.  Putting the advantages of sports teams in perspective may help encourage focus on other economic fundamentals. 


Arenas are expensive and methods of financing them come from multiple sources. According to one study of American and U.S. facilities 70% of the money is from public coffers even though the teams are private (Siegfried & Zimbalist, 2006). The large cost of construction and the land and zoning requires require public involvement.


There should be a difference between a sports team and an arena. The arena is the physical facility that sports teams play in and are often financed through public monies. The team is licensed by a league and works independently from individual cities. The two are seen as the same thing in people’s minds even though teams can pack their bags and leave when contracts end.


The economic benefits of sports teams can be difficult to define from a pure numbers point of view. A review of sports teams over a decade found that sports teams don’t always result in distinct advantages for urban economies (Coates & Humphreys, 2003). The benefits of new jobs and new business can be somewhat limiting when compared to the costs of building large facilities. 


These studies are dated but do bring forward the idea that sports teams may not be what makes or breaks an area economically. It is much better to view sports teams as an enhancement to an area that provide local branding advantages and secondary support to local businesses.  Long-term sustainability of a city may rely on other factors beyond the public image a team offers. 


Calculating the full economic impact of a sports team requires the understanding the nature of branding and business, costs of construction, associated vendors, and the secondary impact of mass amounts of visitors on local businesses such as hotels and restaurants. The level of benefits can be difficult to define and calculate appropriately leaving decision-makers in the lurch.


Losing a professional sports team may impact the perception of an area and hurt egos but may not make or break a local economy. A thorough investigation of its total impact, directly and indirectly, would be needed to ensure that the loss has a significant influence on the area and what type of replacements might help alleviate the problem. Perhaps focusing on more fundamental aspects of the economy and business can create higher levels of long-term economic benefit.


Coates, D. & Humphreys, B. (2003). Professional sports facilities, franchises and urban economic development. Public Finance and Management, 3 (3). 


Siegried, J. & Zimbalist, A. (2006). The economic impact of sports facilities, teams and mega-events. Australian Economic Review, 39 (4).  

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