The Sports Economist

This is a common claim made by teams, but I'm skeptical.

According to economic theory, the value of any given player/coach/trainer on a profit-maximizing team is what that person contributes at the margin to the team and what fans are willing to pay for that marginal contribution. If, for example, Adrian Peterson contributes 1.5 wins to the Vikings and Viking fans are willing to pay $3,000,000 for each extra win, then AP is worth $4,500,000 to the Vikings.

In a profit-maximizing world, the only reason a team would use "money generated by the stadium" on the team is if the stadium enhanced the team's talent or if it increased fans' willingness to pay for the product on the field.

I think that it's likely that a new stadium would enhance fans' willingness to pay overall, but it's not clear that they are willing to pay more to see the action on the field per-se. They may be willing to pay more to enter a new stadium to experience the "newness" of the facility, to sample new concession items, or to experience something else that has little or nothing to do with the action on the field (like a huge scoreboard (like in Arlington, Tx), a giant pirate ship (as in Tampa), or nice views of the surrounding city/geography (as in so many facilities around the country)).

Consider a simplified numerical example. Suppose that the average fan, in an old stadium, is willing to pay $50 to watch the game and an additional $25 for stadium amenities. This fan would be willing to pay as much as $75 for a ticket to the game.

Now suppose that the same fan is willing to pay $50 to watch a game per-se in a new stadium and an additional $50 to experience the new stadium's amenities. This person would be willing to pay as much as $100 for a ticket to a game, a $25 increase. But his/her willingness to pay for the action on the field is unchanged, so the team has no incentive to spend the additional $25 it receives on "competitiveness."

The interesting question from my perspective is "are stadiums and talent complementary?" I think stadiums can be designed to impact the action on the field to improve the chance the home team will win. Here's a blog post I wrote over at The Sports Economist a year and a half ago on this subject. In that post I cite one paper in a professional economic journal that has looked at this question (this one). The paper finds little evidence that a new stadium improves the performance of the home team on average.

That's my response (edited for typos that I found later and with links embedded in the text) to a question posed to me by a reporter writing a story on the Vikings' quest for a new stadium. What I was referring to in the first sentence above was the common claim that because of the small size of the Vikes' market, money generated by a new stadium has to go towards investing in the team.

Labels: new stadium, stadiums

On Monday, about an hour before the start of the Yankees-Phillies game, about a dozen customers were eating and drinking in the Hard Rock Cafe built into the southeast corner of Yankee Stadium. Less than a block south, the steel security gates were pulled down at Stan’s Sports Bar and Stan’s Sports World, longstanding businesses that catered year-round to the crowds drawn to the old stadium.

The city’s Economic Development Corporation estimated that each home playoff game produced $15.5 million in economic activity, including $6.7 million in spending on hotel rooms and taxi rides and in restaurants, bars and stores.

But on River Avenue in the Bronx, merchants said that very little of that money was trickling their way. Mr. Alawy, who said he had pulled about $30,000 out of savings to cover his costs this year, wistfully recalled the bounty that his family reaped during the 1996 World Series, when the Yankees played the Atlanta Braves.

While working in his father’s souvenir shop up the block, he recalled, there was no time to fold the T-shirts before selling them. Customers were lined up three and four deep at the counter yelling out orders and tossing wads of bills.

Labels: economic impact, new stadium

Labels: new stadium, NFL

Labels: Major League Baseball, new stadium, stadium subsidies

The Giants and the Jets face moral and public-relations questions as they negotiate the possible sale of the naming rights to their new stadium with Allianz, a Munich-based insurer and financial services company with disturbing connections to Nazi Germany.

Allianz insured facilities and personnel at concentration camps like Auschwitz and Dachau. Kurt Schmitt, its chief executive in the 1930s, served as Hitler’s second economics minister and can be seen in a photograph from a rally wearing an SS-Oberführer’s uniform and delivering the Nazi salute with Hitler standing in front of him.

Like other insurers in Germany at the time, Allianz followed anti-Semitic policies by terminating or refusing to pay off the life insurance policies of Jews, and sent cash that was due beneficiaries and survivors to the Nazis.

It also became the insurer of Jewish valuables taken by the Nazis.

Gerald Feldman was a historian asked by Allianz in 1997 to produce an unfettered history of its role in Hitler’s Germany. He wrote in “Allianz and the German Insurance Business, 1933-1945” about when the company extended its group accident insurance for engineers working for the notorious I.G. Farben chemical company at Auschwitz.

“It was just one more piece of business in the Third Reich,” he wrote in his book, which was published in 2001, “but it demonstrated that such pieces on any large scale made contact at some point with all that is represented by the name ‘Auschwitz’ — from slave labor to extermination — virtually inescapable.”

A deal with Allianz would not be easy to sell publicly, like Citigroup’s with the Mets. The possibility of an Allianz Stadium will make some people cringe, especially in a market that is home to many Jewish people, and in which the Tisch family, which owns half of the Giants, has supported many Jewish causes.

“There must be sensitivity to the psychological impact this would have,” said Elan Steinberg, a vice president of the American Gathering of Jewish Holocaust Survivors and Their Descendants. “Survivors are still alive. It would not be appropriate to affix the Allianz name to a stadium name in an area where a lot of survivors still living.”

Labels: new stadium, NFL

Labels: mls, new stadium, stadium subsidies

The Minnesota Ballpark Authority is expected to announce today a $1 million fund to enhance the area around the Twins new ballpark.

Labels: economic impact, new stadium