I’ll admit right out of the box that I was excited, as only a sports economist can be, when I read the headline to this post which is the headline to this St. Louis Post-Dispatch article written by Matthew Hathaway (link via Chad Venable). Matthew gets right to the chase: spending on Cardinal games is not necessarily an inflow of money into an economy. At least a portion of it would have been spent elsewhere in the city.
A long Cardinals run of postseason baseball is good for business, right? The local chamber of commerce predicts it will pump millions of dollars into the economy.
This year, the playoffs certainly seem good for anyone peddling a shirt, hat, costume or whatever else with a squirrel on it.
For some other businesses, though, watching the Cardinals get bounced from the playoffs wouldn’t be a tragedy.
Take the STL Cinemas chain. Harman Moseley, the owner, says attendance at his four theaters drops by about half on postseason game nights. He gets it — he, too, plans to spend the next three nights at home to watch the games on TV. That trend, though, isn’t hot for movie ticket sales.
“It’s killing us,” Moseley said. “As a St. Louisan and a Cardinals fan, I’m excited and I want them to win. But as a businessman, the sooner they lose the better.”
That’s not to say all the spending is essentially “rearranged”.
Patrick Rishe, a sports economist at Webster University, said St. Louis probably will get a bigger economic boost than other cities with playoff teams.
“The Cardinals are unique in that they attract more of their fans from outside the region,” Rishe said, noting the team’s strong following throughout much of the Midwest and South.
Rishe expects about 5 percent of Cardinals fans attending this week’s games to come from outside the region. He expects a similar percentage of fans at the stadium to be out-of-towners cheering on the Brewers.
But there will be leakages too. In Major League Baseball, a portion of ticket revenues from the playoffs go into a pool from which playoff participants are paid. Focusing only on the NLCS, 60% of the revenues from the first 4 games are put into the players’ pool with 40% going to the team hosting each game. Should the series go past 4 games, 100% of the ticket revenues goes to the host team (the details are here in Article X of the current MLB CBA)*. Since most of the Cardinal and Brewer players do not make St. Louis their permanent home, some portion of their paycheck is essentially going to leave St. Louis, and a portion of the owners’ keep will leak out as well in a similar manner. Also, a share of the hosting team’s receipts will get dispersed to other teams in the MLB revenue sharing system. We can make similar claims to at least some extent about visitor spending at hotels, bars, restaurants, etc. So some money flows into the economy and flows right back out. The question is “what’s the net inflow?”
Allen Sanderson gets the parting shot.
Still, even with many businesses finding creative ways to make money, Allen Sanderson, a sports economist at the University of Chicago, is among those who argue that economic impact studies tend to dramatically overstate the importance of big sports events.
He won’t argue, however, about how fun playoff baseball can be.
“To the extent that you’re primarily recycling money from the locals, there’s really no economic impact,” Sanderson said. “But that’s OK … It’s a party, not an investment.”
Agreed. The end result is not that jobs and spending are somehow created and the economy is somehow more vibrant. The end result is that the games are fun to watch and to play in. That’s the important economic impact.
*Players do not get a share of the gate after game 4 so as not to provide a perverse incentive to extend a series for the extra pay day.