Sports Economics: Current Research

By John Fizel; Elizabeth Gustafson et al. | Go to book overview
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also know, from our equation, that teams draw better in large metropolitan areas with new stadiums. Part of the reason for the poor performance of the relocation equation may be the number of expansion franchises in recent years. This suggests a different model for future research that will predict where a league will expand its membership.

Finally, we want to exercise a word of caution to city officials who see economic development and political gains from attracting new franchises. As others have noted, sports is just one of many entertainment outlets. Consultants' estimates of the multiplier effect of sports expenditures are frequently exaggerated. While making investments in new facilities may influence some team location decisions on the margin, we suspect these effects are small and the benefits are fleeting.

The moving franchises (and their destination city) are the Cleveland Browns ( NFL, Baltimore), the Los Angeles Raiders ( NFL, Oakland), Los Angeles Rams ( NFL, St. Louis), the Winnipeg Jets ( NHL, Phoenix), the Quebec Nordiques ( NHL, Colorado), the Minnesota North Stars ( NHL, Dallas), and the Hartford Whalers ( NHL, Greesboro-Charlotte). In addition, the Houston Oilers ( NFL) are scheduled to move to Memphis and later to Nashville.
Estimates of franchise values are reported in Quirk and Fort ( 1992). The highest values for each of the major leagues are for basketball, the Boston Celtics, $120 million ( 1986); for baseball, the New York Mets, $100 million ( 1986); and for football, the New York Giants, $150 million. As for hockey, the NHL recently announced four new expansion teams, with the entry price set at $80 million. By comparison, seven new sports stadiums and arenas have been built in Baltimore, Cincinnati, Cleveland, Nashville, San Francisco, St. Louis, and Seattle for between $250 million and $525 million ( Malkin, 1997).
The reason for the difference in time periods is that professional basketball was an unstable business enterprise until the early 1960s. The NBA merged with other leagues in the late 1940s and early 1950s and clearly had a less prominent place in the public eye than college basketball. In addition, data for the NBA prior to 1960, particularly on attendance, are very difficult. Thus, while the baseball data are comprehensive, there are twelve missing team-year observations for basketball, largely due to missing data on team attendance. Finally, pro basketball in the 1950s was frequently played in neutral cities or in doubleheaders where attendance and stadium data become less meaningful. The missing observations are the St. Louis Hawks, 1960-1967; the Syracuse Nationals, 1960-1961, and the Chicago Packers/Zephyrs, 1961-1962. The year refers to the beginning year of the season.


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Sports Economics: Current Research
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