Economy

The Fix Is in: How Sports Owners Have Priced Out the Middle Class, and Rip off the Public with New Stadiums

If owners are not loyal to the fan, why are the fans so loyal to them?

 The following is an excerpt from Brian Tuohy's book, The Fix Is In: The Showbiz Manipulations of the NFL, MLB, NBA, NHL and NASCAR (Feral House, 2010).

Many team owners have stated that for a team to be "successful," it needs a new and more modernized facility in which to play. On the surface, the argument appears to have some merit. Looking at the list of 2006 National Football League (NFL) playoff teams, half of the 12 teams that made the playoffs--the Baltimore Ravens, the New England Patriots, the Philadelphia Eagles, the Chicago Bears, the New Orleans Saints, and the Seattle Seahawks--played in stadiums that were either brand new or renovated within the past seven years. But the team that won the Super Bowl in 2006, the Indianapolis Colts, played in the RCA Dome, which was built in 1983. However in baseball in 2006, the opposite seemed true as the two World Series teams, the St. Louis Cardinals and the Detroit Tigers, played their 2006 seasons in new stadiums. Yet the other teams with the newest stadiums in baseball--the Milwaukee Brewers, the Seattle Mariners, the Cincinnati Reds, the Pittsburgh Pirates, the San Francisco Giants, and the Philadelphia Phillies--posted a combined record of 461 wins against 510 losses. The fact of the matter is, as nice as it is for the players to have improved training facilities with better medical equipment on site, the basic dimensions of their respective fields/courts don't change from stadium to stadium. And though the physical playing surface may be changed and improved, what's happening on top of it isn't.

It cannot be proved that new stadiums lead to significantly better team performance. As part of the book Baseball Between the Numbers, a study was conducted to determine the effect a new stadium had on a team's winning percentage. It found that with the teams that built new stadiums since 1991, their winning percentage went from .486 in the five years prior to the new stadium up to .520 in the five years after moving into their new digs. Those .034 percentage points equate to a difference of about five-and-a-half wins a year. Those are just raw stats, of course, and they don't factor in any player or coaching changes that may have gone along with the "new look" teams. In other words, improvement by those teams was most likely a coincidence.

Owners will also argue that new stadiums don't just benefit the players, but the fans as well. In a certain sense, this cannot be denied. The architecture that goes into many new stadiums is breathtaking. From retractable roof domes to backdrops of statuesque cityscapes, these are truly modern marvels. In these new stadiums, fans are treated to larger spaces, more amenities, and many times, a built-in, falsified history to make them feel as if the stadium has been situated in the city for years. This is wonderful, but consider for a moment the price paid for the pleasure of attending these sporting events. To pick specifically on baseball owners for a moment, Baltimore Orioles owner Peter Angelos was quoted in the book The Name of the Game as saying "Baseball's not a business through which one expects to derive great profits, or maybe any profits at all." That must be why, when the Orioles needed a new stadium in the form of what's now known as The Ballpark at Camden Yards, the public--that is, the taxpayers--had to fork out $226 million of the $235 million it cost to build the stadium. Baltimore isn't the only city this has happened to. Between 1990 and 2006, 18 new baseball stadiums opened at a total combined cost of $5.6 billion. Nearly two-thirds of that money, officially $3.6 billion, was paid by the public. Amazingly during the same approximate time frame (from 1990 to 2004), Major League Baseball (MLB) owners' total revenue went from $1.35 billion to $4.27 billion.

Since we, the fans, are paying billions of dollars to build these fantastic newstadiums, we're getting something in return, right? Perhaps lower ticket prices? Unfortunately, the reverse is true. In 1976 the average MLB ticket was $3.45. By 2005, that average was up to $19.82, which doesn't seem like much, but even when factoring in infiation, it's a 67.5 percent increase.5 What is even more shocking is what happens to ticket costs when a new stadium opens. Examine the percentage ticket prices rose in one year--just one year--upon the opening of these new baseball stadiums (and this is not including the luxury boxes):

* Detroit (2000)-increased by 103 percent
* San Francisco (2000)-increased by 75.2 percent
* Pittsburgh (2001)-increased by 65.3 percent
* Philadelphia (2004)-increased by 51.3 percent
* Houston (2000)-increased by 50.6 percent
* Milwaukee (2001)-increased by 39.2 percent

* Cleveland (1994)-increased by 38.6 percent
* Texas (1994)-increased by 35.2 percent
* Colorado (1995)-increased by 35.2 percent
* San Diego (2004)-increased by 31.9 percent
* Atlanta (1997)-increased by 31.5 percent
* Seattle (1999)-increased by 27.2 percent (then another 23.3 percent the next year)

Which fans are paying to see these ballgames? The only demographic segment to attend more games in the 1990s than the 1980s was households earning more than $50,000 a year. Economists John Siegfried and Tim Peterson determined that, excluding corporate tickets and luxury boxes, the average ticket buyers' income was nearly twice the national average. That makes sense, who else could afford, much less be willing to pay for, such incredible increases in cost?

But the fans are getting better seats and "sight lines" for those increased ticket prices, right? Not necessarily. In fact, stadium consultant John Pastier claims that new stadiums actually put most fans further from the field due to space occupied by luxury boxes. Most upper decks are actually higher off the field than they were in the old stadiums. In the new Chicago White Sox stadium, the first row of the current upper deck is further from the field than the last row of the upper deck in their previous home.

How about taxes? Surely the fans see some sort of return on their money thanks to the taxes generated by these new stadiums? Not only do federal, state, and local governments allow owners to use their teams as tax shelters, the stadiums generate very little in tax revenues. Johns Hopkins' economists Bruce Hamilton and Peter Kahn figured that the aforementioned Camden Yards in Baltimore cost taxpayers $14 million in 1998 alone while taking in only $3 million in taxes during that same time period. Rutgers stadium lease expert Judith Grant estimates that on average, a typical stadium project costs about 40 percent more than official figures due to unreported costs like free land, property tax breaks, and public operations along with maintenance costs.10 This was proven true when the city of New York agreed to build two new baseball stadiums. The city donated both the land and infrastructure for each new stadium while at the same time forfeited collecting either rent or property taxes for the teams inhabiting the new homes. Meanwhile, the Yankees and Mets reaped these benefits while being ranked first and second respectively in franchise value in 2007 by Forbes.

One cannot argue against the fact that these new stadium projects create jobs, but at what cost? If Detroit created 1,500 jobs with the building of their new stadium, the cost to taxpayers was about $100,000 per job (Detroit's taxpayers paid half the $290 million price tag--$145 million-- on Comerica Park). When Arizona built their Bank One Ballpark (now know as Chase Field), it created 340 full-time jobs at the cost of nearly $705,000 per job. One of the proposals for a new stadium in Minneapolis for the Twins would create 168 new jobs at the staggering cost of nearly $2 million per job. Meanwhile, the U.S. Department of Housing and Urban Development requires that the projects they fund create jobs that cost no more than $35,000 per job.

Once all is said and done and the st adium exists in its final form, at very least the fans should get to put a lasting and meaningful name on their stadium. Unfortunately, not even that is true. The team owner can sell the naming rights for the new stadium to the highest bidder. Stadium naming rights can and do defray the costs of the new stadium, however, this rarely has an effect on what taxpayers ultimately pay. This isn't a new tradition. Weegman Park became Wrigley Field because the Wrigley family bought the stadium along with the Chicago Cubs and decided to name it after their popular brand of chewing gum. Same goes with the Busch family and the St. Louis Cardinals' Busch Stadium. Today, franchises earn anywhere from $2 million to $40 million a year in naming rights alone.

Despite these seeming drawbacks to building a new stadium, the thought that always seems to prevail is that at least that new stadium will boost the local economy. It's the typical "win-win" argument. Yet to quote University of Chicago economist Allen Sanderson, "if you want to inject money into the local economy, it would be better to drop it from a helicopter than invest it in a new ballpark."

Many owners as well as city officials will hotly debate this point, but most economists who study the effects of stadiums and sports teams in general state that sports teams do not financially benefit local economies. It seems hard to believe that an industry such as sports, that allegedly is ranked as the 22nd largest industry in the world, can have little effect on an average local economy, but that seems to be the case. It must be remembered that all sports leagues generate the majority of their income from television and radio broadcast rights, not through their local economies via ticket sales. Studies indicate that should a city not have or even lose a sports team, the money that an average person could or would spend on sporting events simply goes to some other form of local entertainment. Certain neighborhoods may feel the boom of having a stadium nearby, but the city as a whole won't feel that fiuctuation. Teresa Serata, the city of San Francisco's budget director, stated that when the Giants threatened to leave the city (before they were granted a new stadium), she could document that the city had a $3.1 million annual net gain thanks to the Giants, but that the city's gross economic product was $30 billion or 10,000 times as large as the Giants' contribution to the city. Or as Roger Moll, professor of economics at Stanford University, stated at the time, "Opening a branch of Macy's has a greater economic impact [than the Giants]."

Robert Baade, an economist at Lake Forest College in Illinois, has perhaps done the most study on the subject. He collected 30 years' worth of data from 48 cities to determine the economic impact of sports teams in terms of the citizens of the city's per-capita income. His results were that in the study of 30 cities with new stadiums or arenas built, 27 showed no measurable change and the other three actually appeared to drop. He concluded "Professional sports teams generally have no significant impact on a metropolitan economy [and do] not appear to create a fiow of public funds generated by new economic growth. Far from generating new revenues out of which other public projects can be funded, sports 'investments' appear to be an economically unsound use of a community's scarce financial sources." Baade's not the only one with this opinion. InSports, Jobs, and Taxes, authors Roger Noll and Andrew Zimbalist state, "In every case, the conclusions are the same. A new sports facility has an extremely small (perhaps even negative) effect on overall economic activity and employment. No recent facility appears to have earned anything approaching a reasonable return on investment. No recent facility has been self-financing in terms of its impact on net tax revenues."

So what's the owner of a franchise to do when a new stadium "needs" to be built but city officials realize that maybe shelling out hundreds of millions of dollars in taxpayer money for a stadium isn't the wisest use of public funds? Threaten to move, of course. It's an excellent, and for some reason, effective bargaining tool. The Chicago Bears did it. They threatened to move just about everywhere short of the moon when the city of Chicago balked at renovating Soldier Field for them. And the renovation was strictly for the Bears. Soldier Field is used 10 times a year for Bears games and perhaps on two or three other occasions, but otherwise it sits unused for the other 350 days of the year. Chicago city officials felt the city would suffer some sort of image issue, as if Chicago would be looked upon as a "minor league" city, if they couldn't hold on to the Bears. So some $500 million later, the Bears stayed in Chicago and the city was blessed with a semi-new stadium that looks like a UFO crash landed on top of the old one. The Bears did kick in $50 million (that's 10 percent of the total costs) for the renovation. The NFL even paid another $50 million themselves, but the bulk of the money, some $400 million, came either from taxpayers' or out of the fans' pockets in the form of "Personal Seat Licenses."

This subtle form of blackmail doesn't always work. Cleveland Browns' owner Art Modell demanded that the city of Cleveland build his team a new stadium as well. The city of Cleveland said "no." Modell threatened to take his team somewhere else. The city came back and told him they couldn't afford to build yet another new stadium since they were still paying off the Indians' Jacobs Field. Angered, Modell picked up his team and moved to Baltimore where apparently the people there didn't mind building yet another $220 million stadium so soon after building an equally expensive baseball stadium. While the city of Cleveland didn't have to pay for a new stadium, Modell devastated his once rabid Browns fans. Those fans didn't much like the fact that despite all their support and money they had freely given to the Browns' organization over the years, the team left town.

Coincidentally, the Browns left to go to a city, Baltimore, which had gone through the same insult some 15 years earlier when the Colts packed up one night in 1984 and moved to Indianapolis. The reason for the Colts' midnight move was basically the same as the Browns. Colts owner Robert Irsay didn't feel the city of Baltimore was doing enough for his team. So he went out and found someplace that would comply with his wishes. Despite the pleas of the Colts' faithful, the NFL would not step in and stop the Colts' move. Why? Because even before the Colts ditched Baltimore, Oakland Raiders owner Al Davis got fed up with the city of Oakland and moved his team to Los Angeles. When the NFL tried to stop his illegal relocation to L.A., a legal battle ensued which the NFL wound up losing in a U.S. Federal Court (of course, a few years later, the Raiders were back in Oakland with a new stadium deal).

Since the NFL failed to stop the Raiders from moving and turned a blind eye to the Colts' relocation, they decided to step up and finally do something for one of their franchise cities. They promised to award the next expansion franchise to Cleveland. The NFL even went so far as to allow Cleveland to keep the name "Browns" as well as all of the team colors, records, and history their former franchise held. There was a caveat: Cleveland had to build a new stadium for the team the NFL was "giving" them. Remarkably, the city complied, building the $290 million Cleveland Browns Stadium for the latest incarnation of the team.

This relocation business is nothing new in sports. Leagues have always been more than willing to rip popular franchises out of their hometowns despite the cries of their faithful fans. One of the most notable franchise moves in sports history was when baseball's Brooklyn Dodgers packed their bags and traveled across the country to become the Los Angeles Dodgers. The move really had nothing to do with the city of New York or the fans not supporting the team; Major League Baseball (MLB) wanted a West Coast presence. Instead of creating a new team in California, MLB simply took a well-known team and dropped it out there. In doing so, an instant fan base was also created. People in L.A. knew who the Dodgers were, so they were quick to support the team. This was the same reason baseball's New York Giants were moved to San Francisco. MLB opened up the entire country to its product with these two franchise moves. The National Hockey League (NHL) would mimic this plan of action and expansion a few decades later.

It's a constantly repeating scenario in every league. Baseball's Boston Braves move to become the Milwaukee Braves then turn into the Atlanta Braves. The NFL's Chicago Cardinals move to St. Louis, demand a stadium and then move to Arizona. MLB's Philadelphia Athletics become the Kansas City Athletics then become the Oakland Athletics. The National Basketball Association's (NBA) Charlotte Hornets decided in the immediate aftermath of Hurricane Katrina to move to New Orleans. The strange part in all of this is each of these franchises that abandoned their home cities were backfilled with new teams once they vacated. Milwaukee received the Brewers four years after the Braves left town. St. Louis picked up the Rams from L.A. eight years after the Cardinals split. The people of Kansas City wanted another baseball team, so the Royals appeared two years later. Charlotte had to suffer almost a year before NBA basketball returned. So what is the real reason these teams are moving around so frequently? Is it that business is so bad in these jerkwater towns that team owners can't turn a profit? If this is the case, then why do teams keep popping up in these same cities? Fan support is clearly present. What isn't always available to these teams and their owners are the cushy deals cities give them. The profit from the stadium deals and the associated tax breaks drive these relocations more than anything. The TV networks maintain that it really doesn't matter to the NFL anymore where teams are located because the majority of the league's revenue is generated from the broadcast rights to their games. The Green Bay Packers could become the Boise Packers and to the NFL and its main revenue stream, it wouldn't matter. Financially, nothing would be lost. In fact, there's more to be gained by these moves as it keeps interest high by energizing a new city full of fans every time a team opens up shop in a new home.

This sort of behavior regarding stadium deals and relocation is but a microcosm of how owners truly feel about their fans. If the leagues really cared about the fans as much as they claim to, these relocations would never occur. The Browns would have never become the Baltimore Ravens. The Colts would be the NFL's franchise in Baltimore. Brooklyn would still have its beloved Dodgers and New York its Giants. And the list goes on. If owners respected their home towns, then they would pay their fair share of construction costs and property taxes rather than sloughing them off onto the public at large. The fact of the matter is owners care about the fans as long as their pocketbooks remain open. If that cash fiow dries up or a team's "favored nation" status ends, so too does the owner's love affair with that city. The fans, the lifeblood of professional sports, have no say in the matter.

Yet it is perhaps only in the world of sports that people bond to the product they purchase. Each fan may subconsciously think of himself as a minority owner, as if he has a direct stake in the team. Though no matter how much money that person spends on tickets, jerseys, etc. the team is independent from the fan. Sports leagues are not fan-friendly. They are massively large and impersonal businesses. Each owner's first and foremost concern is turning a profit which comes directly at the fan's expense. The sooner each fan realizes this, the more one can look at sports in an entirely different light. If owners are not loyal to the fan, why are the fans so loyal to them?

So what's the owner of a franchise to do when a new stadium "needs" to be built but city officials realize that maybe shelling out hundreds of millions of dollars in taxpayer money for a stadium isn't the wisest use of public funds? Threaten to move, of course. It's an excellent, and for some reason, effective bargaining tool. The Chicago Bears did it. They threatened to move just about everywhere short of the moon when the city of Chicago balked at renovating Soldier Field for them. And the renovation was strictly for the Bears. Soldier Field is used 10 times a year for Bears games and perhaps on two or three other occasions, but otherwise it sits unused for the other 350 days of the year. Chicago city officials felt the city would suffer some sort of image issue, as if Chicago would be looked upon as a "minor league" city, if they couldn't hold on to the Bears. So some $500 million later, the Bears stayed in Chicago and the city was blessed with a semi-new stadium that looks like a UFO crash landed on top of the old one. The Bears did kick in $50 million (that's 10 percent of the total costs) for the renovation. The NFL even paid another $50 million themselves, but the bulk of the money, some $400 million, came either from taxpayers' or out of the fans' pockets in the form of "Personal Seat Licenses."
 
This subtle form of blackmail doesn't always work. Cleveland Browns' owner Art Modell demanded that the city of Cleveland build his team a new stadium as well. The city of Cleveland said "no." Modell threatened to take his team somewhere else. The city came back and told him they couldn't afford to build yet another new stadium since they were still paying off the Indians' Jacobs Field. Angered, Modell picked up his team and moved to Baltimore where apparently the people there didn't mind building yet another $220 million stadium so soon after building an equally expensive baseball stadium. While the city of Cleveland didn't have to pay for a new stadium, Modell devastated his once rabid Browns fans. Those fans didn't much like the fact that despite all their support and money they had freely given to the Browns' organization over the years, the team left town.
 
Coincidentally, the Browns left to go to a city, Baltimore, which had gone through the same insult some 15 years earlier when the Colts packed up one night in 1984 and moved to Indianapolis. The reason for the Colts' midnight move was basically the same as the Browns. Colts owner Robert Irsay didn't feel the city of Baltimore was doing enough for his team. So he went out and found someplace that would comply with his wishes. Despite the pleas of the Colts' faithful, the NFL would not step in and stop the Colts' move. Why? Because even before the Colts ditched Baltimore, Oakland Raiders owner Al Davis got fed up with the city of Oakland and moved his team to Los Angeles. When the NFL tried to stop his illegal relocation to L.A., a legal battle ensued which the NFL wound up losing in a U.S. Federal Court (of course, a few years later, the Raiders were back in Oakland with a new stadium deal).
 
Since the NFL failed to stop the Raiders from moving and turned a blind eye to the Colts' relocation, they decided to step up and finally do something for one of their franchise cities. They promised to award the next expansion franchise to Cleveland. The NFL even went so far as to allow Cleveland to keep the name "Browns" as well as all of the team colors, records, and history their former franchise held. There was a caveat: Cleveland had to build a new stadium for the team the NFL was "giving" them. Remarkably, the city complied, building the $290 million Cleveland Browns Stadium for the latest incarnation of the team.
 
This relocation business is nothing new in sports. Leagues have always been more than willing to rip popular franchises out of their hometowns despite the cries of their faithful fans. One of the most notable franchise moves in sports history was when baseball's Brooklyn Dodgers packed their bags and traveled across the country to become the Los Angeles Dodgers. The move really had nothing to do with the city of New York or the fans not supporting the team; Major League Baseball (MLB) wanted a West Coast presence. Instead of creating a new team in California, MLB simply took a well-known team and dropped it out there. In doing so, an instant fan base was also created. People in L.A. knew who the Dodgers were, so they were quick to support the team. This was the same reason baseball's New York Giants were moved to San Francisco. MLB opened up the entire country to its product with these two franchise moves. The National Hockey League (NHL) would mimic this plan of action and expansion a few decades later.
 
It's a constantly repeating scenario in every league. Baseball's Boston Braves move to become the Milwaukee Braves then turn into the Atlanta Braves. The NFL's Chicago Cardinals move to St. Louis, demand a stadium and then move to Arizona. MLB's Philadelphia Athletics become the Kansas City Athletics then become the Oakland Athletics. The National Basketball Association's (NBA) Charlotte Hornets decided in the immediate aftermath of Hurricane Katrina to move to New Orleans. The strange part in all of this is each of these franchises that abandoned their home cities were backfilled with new teams once they vacated. Milwaukee received the Brewers four years after the Braves left town. St. Louis picked up the Rams from L.A. eight years after the Cardinals split. The people of Kansas City wanted another baseball team, so the Royals appeared two years later. Charlotte had to suffer almost a year before NBA basketball returned. So what is the real reason these teams are moving around so frequently? Is it that business is so bad in these jerkwater towns that team owners can't turn a profit? If this is the case, then why do teams keep popping up in these same cities? Fan support is clearly present. What isn't always available to these teams and their owners are the cushy deals cities give them. The profit from the stadium deals and the associated tax breaks drive these relocations more than anything. The TV networks maintain that it really doesn't matter to the NFL anymore where teams are located because the majority of the league's revenue is generated from the broadcast rights to their games. The Green Bay Packers could become the Boise Packers and to the NFL and its main revenue stream, it wouldn't matter. Financially, nothing would be lost. In fact, there's more to be gained by these moves as it keeps interest high by energizing a new city full of fans every time a team opens up shop in a new home.
 
This sort of behavior regarding stadium deals and relocation is but a microcosm of how owners truly feel about their fans. If the leagues really cared about the fans as much as they claim to, these relocations would never occur. The Browns would have never become the Baltimore Ravens. The Colts would be the NFL's franchise in Baltimore. Brooklyn would still have its beloved Dodgers and New York its Giants. And the list goes on. If owners respected their home towns, then they would pay their fair share of construction costs and property taxes rather than sloughing them off onto the public at large. The fact of the matter is owners care about the fans as long as their pocketbooks remain open. If that cash fiow dries up or a team's "favored nation" status ends, so too does the owner's love affair with that city. The fans, the lifeblood of professional sports, have no say in the matter.
 
Yet it is perhaps only in the world of sports that people bond to the product they purchase. Each fan may subconsciously think of himself as a minority owner, as if he has a direct stake in the team. Though no matter how much money that person spends on tickets, jerseys, etc. the team is independent from the fan. Sports leagues are not fan-friendly. They are massively large and impersonal businesses. Each owner's first and foremost concern is turning a profit which comes directly at the fan's expense. The sooner each fan realizes this, the more one can look at sports in an entirely different light. If owners are not loyal to the fan, why are the fans so loyal to them?

 

Brian Tuohy is the author of The Fix Is In: The Showbiz Manipulations of the NFL, MLB, NBA, NHL and NASCAR (Feral House, 2010).
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