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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

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    1. Economics of the Super Bowl Daniel Ciancioso Case written by: Victor Matheson

    2. 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

    3. 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

    4. 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

    5. How to Measure Economic Impact *Numerous difficulties with this estimation method 1)Substitution Effect 2)Crowding out 3)Leakages

    6. 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

    7. 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

    8. 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

    9. 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

    10. 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

    11. 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%

    12. 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

    13. 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!

    14. 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

    15. 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