Teams seeking public subsidies commonly claim that building a new stadium will improve the team's revenue flow, allowing it to acquire more talent and improve the quality of the team. No doubt building a new stadium improves team cash flow, but the important question is "what is this cash being spent on?"
If fans are spending the extra cash on amenities at new stadiums, then there is no reason for teams to invest more in team quality. In other words, players have no claims to these revenues. The critical question is whether capital augments labor: do new stadiums improve the marginal product of players and, thus, improve their contribution to team revenue? If so, then teams have an incentive to increase spending on players.
Quinn, Bursik, Borick, and Raethz (2003) find that a new stadium may be complementary to on-field production, but only for baseball. But a recent Wall Street Journal article (reproduced here) provides an example how capital augments labor in sports in general:
In a separate study published this past summer, a Ph.D. candidate in Canada took saliva samples from 14 players on a minor-league hockey team before and after games. The key finding: Levels of testosterone, which have been found to facilitate assertive and aggressive behavior, were 25% to 30% higher before home games, suggesting the home arena triggered players' elemental instinct to protect their territory. "It has the potential to go a long way in developing techniques to create the ideal physiological profile prior to playing," says Justin Carre, the doctoral candidate at Brock University in St. Catharines, Ontario, who co-authored the study.
...Mr. Poulson made his name in the 1990s, overseeing construction of the Portland Trail Blazers' arena for owner and Microsoft co-founder Paul Allen. Mr. Allen, an avid fan of both music and sports, wanted the new venue to draw top bands for concerts but not if that meant using materials that would deaden crowd noise during basketball games. Ellerbe Becket came up with a novel although expensive solution: rotating ceiling panels with a soft, absorptive side for concerts and a hard side that reflects crowd noise back to the court during games.
...At other schools, it's more than just musical chairs that's going on. When Oklahoma State University expanded its Gallagher-Iba Arena -- already one of the loudest venues around -- it went overboard to make sure that those deafening noise levels didn't drop. After taking sound readings and measuring reverberation times throughout the building, architect Gary Sparks came up with a strategy: Instead of building the extra 7,300 seats outward, he stacked them on top of the existing seats on a steep slope. He also added a flat ceiling stripped of almost all absorptive materials. The goal was to give every sound wave a direct path to a hard surface that would send it ping-ponging around for as long as four seconds.
The author of the article also notes that visiting teams and referees are adversely affected by home team crowd noise. He also notes that in the interest of fairness, some leagues are looking at ways to control noise.
The push for fan power is ratcheting up a cat-and-mouse game between teams looking for an edge and league officials charged with keeping things fair. A number of college-basketball conferences, including the ACC and the Big East, are cracking down on the practice of seating pep bands directly behind visitors' benches to make it harder for coaches to talk to their teams during timeouts. Last year, Major League Baseball instituted new rules governing stadiums with retractable roofs, which can be closed to keep out the elements -- but also to keep in the noise. Teams now have to tell the league by May their criteria for deciding when to open or close their roofs during the season, and in the postseason the final decision is up to MLB.
Seemingly this is another way that leagues standardize the effect of capital across teams. Leagues do this with standardization of playing field dimensions and equipment. While they may try to legislate against some ways to distract players, let's hope they don't go too far. We wouldn't want to be deprived of wonderful scenes like this.