STADIUM ECONOMICS: SHOW
ME THE MONEY!!
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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
1
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
2
Public Ownership & Stadium
Size 1950 Vs. 1991
90.00
77.67
80.00
70.00
60.00
43.51
50.00
40.00
30.00
26.09
20.00
10.00
30.50
1991
1950
1991
1950
0.00
% Public Vs. Private Ownership
Median Capacity (in Thousands)
3
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
4
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
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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
9
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.
10
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.
11
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.
12
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.
13
Millions
New MLB Stadiums & Attendance
1990-2000(Depken, 2003)
3.5
3
2.5
2
1.5
1
0.5
0
2.18
3.01
2.04
Average Annual Attendance
MLB Average
New Stadiums
Old Stadiums
14
New MLB Stadiums & Win%
1990-2000 (Depken, 2003)
650
600
550
500
450
400
500
543.52
492.51
350
Team Win Percentages
MLB Average
New Stadiums
Old Stadiums
15
New MLB Stadiums & Ticket
Prices 1990-2000 (Depken, 2003)
Millions 2000 Dollars
60
50
40
30
20
41.058
53.088
38.987
10
0
Team Payrolls
MLB Average
New Stadiums
Old Stadiums
16
Millions 2000 Dollars
New MLB Stadiums & Profits
1990-2000 (Depken, 2003)
16
14
12
10
8
6
4
2
0
13.343
2.161
3.803
Team Profit
MLB Average
New Stadiums
Old Stadiums
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Why do we keep building new
stadiums with Public Funds?
18
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
20
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.
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