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Economics of the Super Bowl. Daniel Ciancioso. Case written by: Victor Matheson. Introduction. Super Bowl is the most significant sport event in US Highest ticket prices Advertising Neutral site with location changes every year 2000-2009 average television viewership

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economics of the super bowl

Economics of the Super Bowl

Daniel Ciancioso

Case written by: Victor Matheson

introduction
Introduction
  • Super Bowl is the most significant sport event in US
    • Highest ticket prices
    • Advertising
  • Neutral site with location changes every year
  • 2000-2009average television viewership
    • Super Bowl: 90 million
    • World Series: 19 million
    • NBA Finals: 14.3
    • Stanley Cup: 4.1 million
economic impact of the host city
Economic Impact of the Host City
  • NFL claims Super Bowls generate large benefits
  • NFL/ W.P. Carey MBA Sports Business Program
    • $500.6 million from Super Bowl XLI in Phoenix (2008)
  • NFL SMRI study
    • $670 million in taxable sales in South Florida 1999
    • $396 million increase in economic activity
    • Average income of Super Bowl attendees vs. tourists
      • $144,500 compared to $40,000-$80,000
reasons to be skeptical
Reasons to be Skeptical
  • NFL has strong financial incentives
  • NFL uses Super Bowl to get public subsidies
    • 325 million tax increase for $1.1 billion AT&T Stadium
    • $400-$500 million boost to local economy
  • New NFL stadiums
    • $5 billion in taxpayer money since 1995
    • 11 cities hosted Super Bowl in the last 15 years
    • 6 were awarded immediately after new stadium
      • Tampa, Dallas, Indianapolis, Phoenix, Houston and Detroit
how to measure economic impact
How to Measure Economic Impact

*Numerous difficulties with this estimation method

1)Substitution Effect

2)Crowding out

3)Leakages

substitution effect
Substitution Effect
  • Consumers spend money on a sporting event that would have been spent elsewhere
    • Ex/Christmas present
  • Few local attendees/week long event
  • 75% available tickets to individual teams
    • 17.5% for participants
    • 1.2% for
    • 5% for host team
  • 25% for sponsors, networks, VIPs and host committee
crowding out
Crowding Out
  • Crowds and congestion assorted with a sporting event displace regular economic activity
  • Some people less inclined to visit host city during that time because of large crowds
  • Super Bowl in warm cities with large tourism
    • 80% Economic impact should only include extra rooms sold to sports fans over what would have been there
  • Sep. 11th Example
    • New Orleans auto dealer convention
leakages
Leakages
  • Much of the money made in the host city may immediate leak out of the city
  • The event may generate income for the city but not its local residents
    • Hotels raise rates 3-4x normal level during Super Bowl
    • Shareholders, not local hotel members see that money
  • Capacity constraints
    • Labor and capital must be imported to meet demand
    • Jacksonville Jaguars
      • 6 cruise ships holding 7,600 guests
other issues
Other Issues
  • Casual visitors
    • Tourists who attend sporting event on travel, not sport
    • Spending counted in typical economic impact study
    • Not significant issue during Super Bowl week
  • Time switching
    • Planning to visit a city anyway but rearranges to coincide with sporting event
    • Event doesn’tinfluence if but when
    • Once sports fan has seen the city, crossed off vacation destination
empirical studies of the super bowl
Empirical Studies of the Super Bowl
  • Independent scholars not connected with NFL examine ex post impact of hosting Super Bowl
    • Employment, personal income, per capita income, taxable sales, tax revenues, visitor statistics
  • Conclusion: Super Bowl generates a fraction of economic impact claimed by NFL boosters
independent scholars
Independent Scholars
  • 2000: Baade/Matheson
    • 25 Super Bowls 1973-1997
    • Average economic impact of $30 million (1/10)
  • 2002: Coates/Humphreys (per capita income)
    • All post-season play in North America
    • Hosting Super Bowl no effect on per capita income
    • Winner experiences $140 in per capita income
  • 2005: Matheson said $50-$60 increase in per capita income
    • Not statistically significantly different from zero at 5%
  • Negative effect?
    • 2009: Davis and End study of hosting and winning Super Bowl
    • Winning had positive coefficient at 5%
    • Hosting had a negative coefficient at 5%
difficulties measuring the economic impact
Difficulties measuring the economic impact
  • Hard to isolate within large, metropolitan economies
    • $500 million is less than 0.2% of Miami’s annual GDP
    • Super Bowl only lasts for a few days
  • Taxable sales
    • Available monthly
    • Cover individual cities instead of entire metro areas
    • Used to finance many publicly funded sports facilities
    • Single largest component of GDP is consumer spending
taxable sales
Taxable Sales
  • NFL claimed $670 million increase in South FL 1999 (Miami Dade, Broward, and Palm Beach)
    • NFL did not to account for factors besides Super Bowl
      • Inflation, population growth, routine economic expansion
      • Over 90% of increase because of these variables
  • Broward and Palm Beach had taxable sales lower than expected despite Super Bowl ($14 and $16 million)
    • Only Miami had increase($67 million)
  • Taxable sales were $1.26 higher the year after the Super Bowl!
non monetary benefits
Non-monetary Benefits
  • Assessing impact of Super Bowl in Glendale, Arizona
    • Powerful memories and good feelings
    • Return visits, family and business relocations
    • Word-of-mouth marketing
    • Game serves as an advertisement to the city
  • 30-second shot of downtown Miami- $3 million
    • Value of commercial
    • Diminishing marginal returns
conclusion
Conclusion
  • NFL convinces cities that a new stadium will bring a significant economic impact to host city
  • Because Super Bowl is used to extract public financing, we should be skeptical
  • NFL measures activity that does occur because of the Super Bowl but not activity that doesn’t
  • Scholars not connected with NFL found observed effects of the game on real economic variables to be generally positive, but a fraction of what is claimed by the NFL