Lebron, Economic Impact and a Cleveland Casino
By Evan Weiner
July 10, 2010
(New York, NY) -- The entire Lebron James free agency tale should make society reassess the importance of sports but society won't. People who should know better including New York Mayor Michael Bloomberg and the owners of the two tabloid New York newspapers, Mort Zuckerman of the Daily News and Rupert Murdoch of the Post looked like fools throughout the entire process along with a whole host of others. Bloomberg was out in the front waving the city's pom poms begging Lebron James to sign with the New York Knicks and Zuckerman and Murdoch were not very far behind nor were some of the "beautiful people", the actors and others with money to spend on Knicks tickets. Murdoch had a minority share in Madison Square Garden between 1997 and 2005.
All of this was going on while Bloomberg was cutting municipal jobs and the New York State legislature continued being dysfunction with a lame duck governor, David Patterson, cutting state jobs.
Zuckerman and Murdoch's papers reacted like heartbroken teenagers on Friday morning. The love of their life, Lebron to the Knicks, spurned New York City and that was a public slap to the face.
After all, New York is where basketball really matters. It has the world’s most famous arena and the Knicks are the Knicks. The truth is, basketball takes a far seat behind the Yankees in New York, the Garden is an antiquated arena that was poorly designed in the mid-1960s. Basketball in New York on the college level hasn’t mattered in generations, the NCAA College tournaments play on regional stages which are much more important to kids playing basketball than the Garden and the last time the Knicks won a championship was 37 years ago. Patrick Ewing is more of a villain in New York than a basketball hero because he could not deliver a championship.
New York is not a top destination in the NBA for players.
Meanwhile the adulation behavior is obscene. Gushing over a 25-year-old basketball player who is nothing more than an entertainer who puts on a show maybe 100 times a year is ridiculous.
Lebron James’ one hour infomercial with the "family-friendly" Walt Disney Company's ESPN was a total disgrace but it was no different than other disgraceful TV offered by Disney like the bachelor or bachelorette shows on the Disney owned ABC-TV network. It was a new form of "reality" programming that was tightly controlled by Jim Gray and Lebron James' management team.
The Bloomberg’s administration claim that Lebron James’ signing with the New York Knicks would pump $58 million into the city's economy was as fraudulent as the early 1990s contention by then Major League Baseball Commissioner Fay Vincent that a new baseball stadium in Cleveland would serve as an economic engine for that city.
If the Gateway Center was built, some 28,000 jobs would be created was the mantra. Cleveland voters said yes to building the ballpark with the $84 million in public financing coming from a "sin tax" or a tax on cigarettes and alcohol in Cuyahoga County.
A good Cleveland Indians team in the mid-1990s in a new baseball park probably gave life to some small businesses around the Gateway center where a new ballpark, a new arena and a football stadium were built along with the Rock and Roll Hall of Fame, but overall Fay Vincent's plea to spend municipal dollars for the Cleveland Indians owners, the Jacobs Brothers, business and it would lead to an humming economic engine has proven very wrong. The Rock and Roll Hall of Fame gets local, state and federal subsidies to keep it going. Two Gateway Center garages have cost Cleveland millions of dollars because Cleveland officials gave away too many parking spaces to the Indians owners, the Jacobs and the then owners of the Cleveland Cavaliers, the Gund Brothers.
The two sets of owners got 250 parking spaces everyday for their private use. Jacobs also got 1,250 parking spaces for each Indians home game or 81 times a year. The Gunds got 1,450 spaces for each of 41 NBA games. The free spaces go to premium and loge ticket holders which meant that the high end ticket buyers went right into the stadium or arena and skipped businesses outside the buildings. Meanwhile Cleveland is paying off the stadium/arena garages by taking money from parking meters and parking garages to pay off the garage debt and that means less money for municipal workers.
Cleveland and Cuyahoga county taxpayers have a contract with the Indians, Cavaliers and National Football League Browns. They keep paying for the facilities whether they use the venues or not. The Cleveland Browns Stadium has cost taxpayers who smoke and drink $64,609,806.86 since August 2005. The "sin tax" also has paid about $266 million to cover some of Gateway’s costs at the baseball and basketball facilities. The "sin tax" is schedule to expire in 2015. But don't bet on that. Speaking of betting, because Cleveland's downtown was in such rotten shape economically, Cleveland politicians gave thought to opening casinos in an effort to create an economic engine. The dying rust belt city's political brain trust cannot find a formula to prime the economic engine pump.
In November 2009, Ohio voters said yes to building casinos in Cincinnati, Cleveland, Columbus and Toledo. Interestingly enough Cavaliers owner Dan Gilbert along with Penn National put up $35 million in campaign financing to support the initiative. There is a promise of 34,000 jobs with the creation of the casinos. Gilbert will own the casinos in Cleveland and Cincinnati.
Gilbert's tirade after Lebron James left might be more about his casino than basketball. Without Lebron James in the Cavaliers lineup, there will be thousands of people less in the arena and less people who could go to Gilbert's casino adjacent to the arena and spend money in Gilbert's casino.
Lebron James was not a linchpin of the economic pump and might have done more to harm Gilbert's business than Cleveland or James’ hometown of Akron.
The assertion that Lebron was worth $58 million to New York does need a closer inspection. Madison Square Garden, which sits on some valuable property in midtown Manhattan between 7th and 8th Avenue and 31st and 33rd Street does not pay city property taxes. It has been about 28 years since a tax bill was delivered to 4 Penn Plaza in care of Madison Square Garden. A basketball team plays just 41 regularly scheduled games during the season which runs between November and April, there may be a couple of pre-season games in October and maybe a dozen or so playoff games if a team goes far into the playoffs.
The basketball fan does not travel to games. The economic impact of a basketball game is minimal in a city's economy. Here is how this works. Sports teams need customers not fans because customers have more spending money than fans and are willing to dine in venue restaurants and other eatery which takes away from restaurants that surround arenas.
Madison Square Garden hosts about six NBA games a month between November and April. A basketball team has a coach, a number of assistant coaches, equipment and training staff along with the players and possibly a general manager. A total of perhaps 25 in a traveling party. At the upper extreme, if each member of the traveling party spent $1,000 on hotels and meals, the economic impact of a visiting team is $25,000 although some cities do tax visiting players while the perform in that city which might come out to $30,000 a day. The economic impact may be a million dollars a month which is a drop in the bucket.
Businesses are going to take clients somewhere to wine and dine them. If there was no basketball, there would be something else. Corporate ticket buyers also write 50 percent of the cost of a ticket of their taxes as a business expense.
The impact is not much. If business people in Miami are salivating over Lebron James, they are totally misguided. People will go to games because that is the "in thing" to do but what they are really doing is taking dollars that would be spent elsewhere in the area and there will be no uptick in sales at malls and supermarkets except in the immediate area of the arena.
Micky Arison, the owner of the Miami Heat and CEO of Carnival Cruises, will benefit financially. Arison knows how to work the system. The Heat’s arena was the product of the political process. In 1996, voters approved a bond for the construction of a new arena for the Heat. Arison kicked in $50 million to the costs of the building while hotel taxes were increased to pay for the other $163 million. Part of the deal was that Arison’s Carnival ships would use the nearby Miami port as a base. The Carnival Corporation has offices not far from the arena and the port.
Arison and the arena will make money. Money that had not been flowing into Heat games in the past few years will return from other parts of the region. As former New York Jets Vice President Jay Cross once pointed out when he was Jets owner Woody Johnson’s main negotiator for a Manhattan west side stadium accidentally pointed out, a new stadium (or arena) makes more for an owner, the players and maybe parking lot attendants. There is no trickle down for a municipality and in fact many municipalities are paying down large debts for venues and very few, if any, local businesses other than a bar or restaurant make measurable money off of sports teams.
Bloomberg has to know this. Sports makes people feel good or rotten. Too many people are too attached emotionally to their team. The players are not attached; it is a business no matter what they say about the home court, home ice, and home field advantage. The NFL stands for Not For Long for the players. They are feeling good in Miami, sports fans spew out venom in sports talk radio in New York. Lebron was called “The Queen” by callers, sports journalists are playing amateur shrink trying to figure out what makes Lebron James tick.
Lebron should have called his business partner Gilbert and told him that it was over. But is Lebron now a villain like sports people, media and fans, are painting him? The answer should be no. He did something stupid in the infomercial on ESPN and ESPN provided no strategic guidance but then again, ESPN is mostly geared for children anyway and this was a reality show of sorts. “The Decision”. ESPN is owned by Disney although the executives at Disney are hardly children and they too know how to work the political system.
Lebron James is a 25-year-old basketball player, an entertainer, nothing more and nothing less. Too many grownups genuflect in front of 20-something athletes. But then again fan is short for fanatic. Maybe it is time for the grownups (the politicians and the media) to grow up.
Evan Weiner is an author radio-TV commentator and speaking on “The Politics of Sports Business” and can be reached at email@example.com