Major League sports are not as big as sports fans like to think

Sports are supposed to be a great help to the economy. That’s the story we’re told when cities add taxes to build stadiums and arenas. The problem, though, is that when we look over the numbers, we don’t see many people that sports actually help.

The Ideal Scenario isn’t that Ideal

The problem with Sports as a business is that most days your stadium or arena will be empty (at least with respect to the sport that motivated the construction of the building). Let’s take a look at a city that has managed to do it right. The Staples Centers in Los Angeles is an arena that most cities should strive for. But here’s what the numbers say.

The Staples Center host three major sports teams (The Lakers and Clippers for basketball and the Kings for the NHL)
If the Kings, Clippers and Lakers all played the maximum number of playoff games there would be a major sporting event in the Staples Center 166 days out of the year.
If the Kings, Clippers and Lakers all sold out every game they would have filled approximately 3.5 million seats
The Los Angeles area has over 12 million people. That means only around 25% of the population could go to a sports game a year, and that’s only if no one attended multiple games.

In an arena with three major teams (the ideal scenario) an arena doesn’t help much. After all, even in the ideal scenario above, the building can only seat a tiny portion of the population. And this building is still not hosting a sporting event the majority of the time. Furthermore, even if somehow the Staples Center could find events for the rest of the year, it would still only increase the number of tickets sold to about 7 million annually.

Numbers for Major Sports in the NBA

Here are some rough estimates for league wide attendance during regular seasons*

If every MLB game sold out approximately 121,500,000 seats would be filled
If every NBA game sold out approximately 25,000,000 seats would be filled.
If every NHL game sold out approximately 25,000,000 seats would be filled.
If every NFL game sold out approximately 35,000,000 seats would be filled.
Total for all four leagues is about 200,000,000

Here are some rough estimates for league wide attendance in the ideal case for playoffs for each league (7 game series in NHL and NBA and 5 game and 7 game series in MLB)

If every MLB playoffs went the distance and sold out approximately 2,000,000 seats would be filled.
If every NBA playoffs went the distance and sold out approximately 2,1000,000 seats would be filled
If every NHL playoffs went the distance and sold out approximately 2,100,000 seats would be filled.
If every NFL playoffs sold out approximately 770,000 seats would be filled.
Total for all four leagues is about 7,000,000

Here are some fun comparions

Netflix has approximately 24,000,000 customers. At each being charged once a month that’s almost 300,000,000 “seats filled” a year.
Wal-mart is estimated to have served over 10,000,000 people in the first six hours of Black Friday in 2010.

So when it comes down to it every major league sport in the United States would be about two thirds as effective as Netflix if each had maximum popularity. The playoffs all put together amount to one busy day of shopping for Wal-mart in the US. It’s easy to get impressed by large numbers when speaking about the NBA but when put in context they are just not that big.

Summing Up

The numbers I showed above say that sports just can’t seat as many fans as we’d like to think. One other issue with all of the fans listed above is this: they will spend their money else where if sports go away! The research has shown that sports don’t help local economies. Part of the reason is the limited nature of this. The size of the venues are quite small relative to the local population.

Next, even if local fans can’t see NBA games it doesn’t mean they stop doing anything for entertainment. Maybe they don’t go to the Hooters next to the American Airline arena. That doesn’t mean they don’t go to a different restaurant after doing something else such as going to a movie. The end story is that the NBA doesn’t help as many local fans as we’d like to think and it turns out those local fans are perfectly capable of having fun without the NBA

-Dre
*For NBA and NHL arena capacity I estimated 20,000 per arena. For MLB stadium capacity I estimated 50,000 per stadium. For NFL stadium capacity I estimated 70,000 per stadium.

xavier.quach says:

November 24, 2011 at 11:19 am

But don’t these venues host multiple other events on days that sports don’t play? If these arenas were not built, then Barum and Bailey wouldn’t come to your area, or Cirque du Soleil, Lady Gaga, Disney on Ice, or Antiques Roadshow, as well as industry conventions. I drive by Reliant Stadium in Houston every day, and there are 3-4 events every week besides football. So the -stadium- puts tons of money into the local economy by employing a significant number of personnel, and drawing people in from all over the country and world, who spend money locally. But those stadiums don’t get built without a major sports tenant to mobilize the public to fund it.

Imagine that you’re building a mall. You’ll make lots of money with Clair’s and Chik-Fil-A filling out your empty spaces. But without your big anchor stores like Macy’s and Sears signed on, you’re not likely to even build the mall in the first place. You need those big stores to draw in customers even if they don’t take up most of your space or generate most of your revenue. They give you the facilities around them that you can fill in with smaller businesses that WILL make you money.

That’s how I see a sport’s relationship to an arena. An arena would be very hard to justify without a major sports tenant. So the question is actually, “How does an ARENA impact the local economy?” not the sports team. The sports team is the anchor store, and you wouldn’t judge the impact a mall has on the economy based on a single store.

Interesting Links for Nov 23 | nerdslikesports.com says:

November 27, 2011 at 7:10 am

[...] – I love economics stories that make sense. Here’s an insightful look at the economics of major sports teams, and How their regional nature limits them economically from Wages of Wins: Click here [...]

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Numbers for Major Sports in the NBA

Summing Up

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