Professional Sports in a Time of Crisis

Economic Impacts and Opportunities

We started investigating the benefits to the economy of professional sports – then Covid-19 changed everything.

The score is tied at 2 – 2. With 15 seconds left in the third period, the team captain takes a breakaway pass. In control of the puck, he skates down centre ice. He shoots! He scores! The hometown crowd goes wild!

But then the ref comes out on the ice and waves his arms. No one understands his signals… there’s a hush, and a worried murmur fills the stadium… what’s happening? But no, it’s all good, he signals, and the roar goes up again as the crowd cheers and claps. Still the ref continues to signal but only a few people are looking his way now. Could it be he’s signalling that although it’s a win for the hometown team it’s not necessarily a win for the hometown? Is that what he means? Or is he signalling something more ominous, that the season is ending before the playoffs begin?

Pro sports and the economy
We began research in February, seeking to learn just how beneficial an effect professional sports have on local economies, and we found conflicting information.

In 2017, for example, rumours were brewing that Major League Baseball’s (MLB) Miami Marlins might relocate, leaving Miami with a $200 million empty ballpark, partly paid for by residents’ tax dollars, as reported by Andy Uhler in Marketplace. As it turned out, it was a false rumour, because the franchise and the city of Miami had, in 2012, entered a 35-year agreement that prevents them from relocating, despite poor attendance, low revenue, and a failure to produce the economic spinoffs Miami hoped for.

Major league teams, however, can literally hold municipal governments hostage, threatening to leave unless they get better facilities. Too often, massive sums have been spent to keep teams in place, with the rationale that a sparkling new stadium will create huge economic spin-offs. Sometimes that does happen and sometimes it doesn’t, but the crippling fear local politicians face is that they will lose the next election if a team leaves – a case of damned if they do and damned if they don’t.

Since the 1950s, close to 100 franchises in Canada and the U.S. have moved, seeking larger profits, better facilities, or a more enthusiastic fan base. Sometimes it’s within a state or province, or within the country, but other times it’s across the border. The Montreal Expos, for example, moved to Washington, DC in 2005, to become the Washington Nationals, leaving Canada’s second largest city without an MLB team. Just this past January, the NFL’s Raiders, who were established in Oakland, CA in 1960, played in Los Angeles from 1982 to 1994, then returned to Oakland for the 1995 season, relocated yet again to the new Allegiant Stadium in Paradise, Nevada.

There are short-term gains to be had by building shiny new centers to accommodate teams. It creates hundreds of jobs for the construction industry, and attracts other projects such as hotels, but it’s not guaranteed to create the hoped-for long-term economic spinoff. Fans only have so much disposable income and if they spend it on high-priced tickets, they’re not spending it on pre- or post-game dinners, so in the end there’s no noticeable difference in the local economy. It seems the most successful stadiums in terms of generating revenue are those built as multi-purpose centers to attract a variety of events, including concerts and conventions.

One of the most, if not the most, astronomical construction costs of all time was that of the site of the 1976 Montreal Olympics, which cost the Quebec government $1.5 billion – 13 times the projected cost – with the deficit taking 30 years to pay off.

Looking back on it in, The 40 Year hangover: how the 1976 Olympics nearly broke Montreal, Jack Todd writes how after the last athlete went home, “Montreal woke up to what remains the worst hangover in Olympic history: not just a bill that came in at 13 times the original estimate, a string of officials convicted of breach of trust and the greatest white elephant of a stadium ever built, but a creeping sense of economic and social decline. Forty years on, no other Olympics has so thoroughly broken a city.”

On the other side of the coin, there’s the Staples Center, widely credited with revitalizing downtown Los Angeles. The multi-purpose arena, which opened in 1999 at a cost of $375 Million, is home to not one but two NBA teams – the LA Clippers and the LA Lakers –the NHL’s LA Kings, and the annual Grammy Awards. And no one ever complained about the cost because it was financed privately and named for the office-supply company, Staples, Inc., one of the corporate sponsors that paid for naming rights. In 2028 it will be the venue for the Summer Olympics and LA won’t be waking up with a colossal hangover when the party is over.

Essentially what we can take from this ‘tale of two stadiums’ is that politicians should stop footing the bill for new stadium construction and allow corporations and team franchise owners to do it, without offering huge tax breaks. If they can’t or won’t, then perhaps it’s not a good deal for their city. Business professionals know what’s a good investment opportunity and what’s not, and it’s time city councils stepped aside and instead spent taxpayer dollars on projects that will benefit everyone. It would be a smarter investment of public funds to build more gyms, pools, fields, and rinks so athletes can train and less athletic folk have a place to keep in shape. A fit and healthy population is more productive and that may be the secret to improving local economies and attracting more business investment.

Covid-19 — the unwelcome guest at the game
But as we were considering corporate versus public ownership of sports and entertainment venues, Covid-19 arrived, case by case. At the same time came the cancellations, one by one, of not just sports events, but entire seasons. We want to commend teams and owners for doing the responsible thing and taking the initiative to attempt to avoid community spread of the virus, long before governments announced lockdowns. In the end they would have had to cancel seasons, anyway, but it’s worth noting they were among the first willing to accept economic loss.

At first, professional sports organizations considered continuing their seasons while closing the stands. That was when Los Angeles Lakers superstar LeBron James, according to USA Today, told reporters at the Staples Centre, “I ain’t playing if I ain’t got fans in the crowd. That’s who I play for… that’s what it’s all about.”

But overnight, whether James would play to empty stands became a moot point when the National Basketball Association (NBA) suspended its season on March 11 and other sports organizations followed suit. The National Hockey League cancelled the rest of the season along with the play-offs and the start of Major League Baseball was delayed indefinitely.

On March 22, the Canadian Olympic Committee pulled teams from the 2020 Tokyo Olympics, set to open on July 24. Two days later, the IOC and Japanese Prime Minister Shinzo Abe announced they would postpone until 2021, only the fourth time since 1896 that the games were cancelled. Said three-time Olympic medalist, cyclist Curt Harnett, “It was clear Canada led the way and helped force the IOC’s hand,” according to NewsWatch.com.

We’re in this together
Health care workers will be remembered as heroes of the pandemic as they worked – and continue to work – around the clock, struggling to save lives, even as the death toll mounts, but individual athletes and organizations also rose to the occasion.

Myron Rolle, who played college football before being drafted in 2010 by the Tennessee Titans, left the professional leagues in 2013 to attend medical school. Currently a neurosurgery resident at Harvard Medical School, he was called on to work on the front lines in the battle against Covid-19 at Massachusetts General Hospital. Obviously, all professional athletes are not going to switch to medical careers, but many got involved. Drew Brees, a player with the New Orleans Saints and his wife, for example, donated $5 million for relief work in Louisiana.

Around the world, in China, India, Brazil and Wales, stadiums were converted to emergency field hospitals. On March 31, Los Angeles Mayor Eric Garcetti announced the Los Angeles Convention Center, adjacent to the Staples Center, would be used for “non-licensed” care of Covid-19 patients who were either quarantined or recovering. On the same day, NYC Mayor Bill de Blasio announced plans to turn the US Open Tennis Courts into a hospital for Covid-19 patients. Meanwhile, in Washington State, the Seattle Seahawks stadium at Century Link Field was converted to a field hospital by the US Army.

The MLB and clothing manufacturer Fanatics in Easton, Pennsylvania, which supplies uniforms for the New York Yankees and the Philadelphia Phillies, switched production lines to produce gowns and masks for health care workers. Michael Rubin, Fanatics founder and co-owner of the Philadelphia 76ers and New Jersey Devils, told CNN the goal was to make one million masks and pay all associated costs.

As the number of cases of Covid-19 continued to rise in April, finding sufficient personal protective equipment for health care workers became critical. To meet the need, Bauer of Blainville, Quebec partnered with Cascade Maverick of Liverpool, New York to produce Mylar shields from the same components used for hockey helmet visors, to be worn over masks and eyewear.

To fill the critical need for N95 masks, Robert Kraft and New England Patriots president Jonathan Kraft partnered with the state of Massachusetts to purchase 1.4 million masks for Massachusetts and another 300,000 for New York from China and then used the team’s plane to fly to China to bring them back. Said Massachusetts Governor Charlie Baker on Twitter, who was frustrated when the federal government outbid him on supplies, “This is an example of how collaboration and partnership can lead to real solutions during these challenging times.”

When the NBA closed for what it hoped would be 30 days, there was no plan to compensate arena employees; however, following the announcement, Dallas Mavericks owner Mark Cuban made a commitment to pay all workers inside the American Airlines Center and other franchise owners followed suit.

Other owners made sizeable donations toward Covid-19 relief work. Arthur Blank, owner of the NFL’s Atlanta Falcons, donated $5.4 million through the Blank Family Foundation to organizations aiding in the fight against Covid-19 in Georgia and Montana, while Jimmy and Dee Hassan, owners of the Cleveland Browns, donated $1.5 million to relief organizations in Ohio.

In good times, professional sports organizations come in for criticism regarding the hard bargains they drive with municipalities and the signing bonuses they offer super-stars, but in this crisis, the response was heartening.

What do we do now?
In the end, the question is not only whether professional sports are beneficial to the economy, (and yes, in the midst of this crisis they were); it’s more about how we want our economy to look going forward. Do we want an economy that can withstand another pandemic? Because an economy that is based on mega sporting and entertainment events, and on the travel industry, with its luxury cruise liners, has no substance when disaster strikes.

We need a return to North America of the means of production. We need manufacturing, so we can produce the goods we need, including ventilators and masks for the next pandemic, because there will be one. We need to ensure the supply chain is not interrupted and we need to ensure medical laboratories and centres for disease control are fully funded. The work contractors would have performed building more and bigger stadiums could go into more and bigger factories, health care and education centres, and gyms and sports fields where everyone benefits.

This doesn’t mean we won’t continue to enjoy professional sports, but this pandemic is an opportunity to reset our values. We need a balance in our society where the super-stars are the health care professionals who are getting us through the pandemic, the scientists who develop the vaccines, the manufacturers who supply the medical equipment, and the businesses and governments who invest in them.

June 1, 2020, 10:17 PM EDT