Economic Impact and the Substitution Effect
Here at the Sports Economist, one criticism of economic impact reports we commonly make is that these studies rarely account for the “substitution effect.” While people undoubtedly spend a lot of time and money watching spectator sports, in the absence of these events, people would simply spend their time and money doing other things. Today the sports and entertainment website deadspin offers up some convincing evidence of the substitution effect in action.
Web traffic data from the porn site Tube8.com (which we obviously won’t link to since it’s definitely not safe for work) shows that the traffic from NFL markets rises by an average of 9.2% when a city’s team has a bye week. Without the local team playing, people clearly find other things to do like going shopping, visiting museums, playing at the park, and yes, watching porn. All of these other activities generate economic benefits that replace the loss of economic activity from the local NFL team shutting down for the week.
Of course, depending on your view of online pornography, in this case the NFL could be seen as generating a positive externality. Regardless of that last point, however, it is quite clear that while sports are large in a gross sense, due to the substitution effect, they are much smaller in a net sense since there are lots of things to do on a Sunday afternoon besides watch football.
(Thanks go out to an anonymous colleague for pointing out the visitor traffic data which he insists he found on deadspin and not Tube8!)