Economics

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Super Bowl: Trophy or Trial?

2 Feb, 2015

By: Tracey Schelmetic
A Deeper Look at the Cost-Benefit Ratios of Hosting the Big Game

Here’s a great example of inflation at work: what cost $5 million in 1996, $18 million in 2008, and $70 million in 2014? The answer is the Super Bowl. While much of the cost depends on location – the $70 million figure was shelled out by New York and New Jersey for last year’s Super Bowl in East Rutherford, New Jersey, whereas this year’s Super Bowl XLIX in Glendale, Arizona will be had for the relative bargain rate of $30 million – it’s apparent that costs are rising alarmingly. While hosting a Super Bowl certainly bring economic benefits to a region, if costs keep rising, certain cities will find that hosting a Super Bowl is beyond their means.

"The cost to cities for all of these major events has skyrocketed in the past 15 years,'' Doug Thornton, regional vice president for the company that manages the New Orleans Superdome, told USA Today. "Soon certain cities may be priced out.''

Much of the cost comes from complying with the NFL’s “Super Bowl Host City Bid Specifications & Requirements,” a tome handed to any city that makes a serious effort to bid for a Super Bowl. The requirements have been compared to those necessary to host a national political convention….also a pricey venture, though without as much perceived benefit to ordinary citizens.

Many studies have been commissioned to determine the cost-benefit ratio of hosting a Super Bowl. Some studies commissioned by various host committees have found that hosting a Super Bowl can have a positive impact on the local economy of between $200 million to $500 million. Analyst group PricewaterhouseCooper US has estimated that Super Bowl XLIX will generate approximately $206 million in direct spending for the Phoenix area by the National Football League (NFL), businesses, visitors and the media.  Not included is indirect spending, such as business-to-business revenue local businesses will make supplying food concessions or other direct suppliers.

Attracted by cost-benefit ratios such as these, many localities have become more aggressive about bidding in the last decade or so – building new stadiums for the bids and temporarily waiving state taxes on sports tickets -- and their tactics have emboldened the NFL to become more aggressive in its demands.

Critics say the rewards are reaped by a small few and can have powerfully negative consequences for many cities. According to the group ThinkProgress, Glendale, Arizona has been left deeply in debt by its efforts to attract mega sporting events, and Glendale’s Mayor Jerry Weiers has reportedly butted heads with the NFL over the costs of the Super Bowl requirements.

“Multiple layers of complex financing arrangements around three separate sports spaces in town have starved the suburb of resources it needs to provide services to its people, and this week’s festivities will worsen Glendale’s problems,” wrote ThinkProgress’ Alan Pyke.

Other economists have cast doubts on the rosy economic pictures painted by host committees.

“With these mega-events, yeah, you’ll have people coming, staying at hotels, going to bars and restaurants,” Minnesota State University-Mankato economics professor Phil Miller told ThinkProgress’ Travis Waldron. “But then they go, and, OK, show’s over. It doesn’t leave behind much of a lasting impact. And it’s a very narrow impact.”

These economists say the reason the rewards are smaller than anticipated is that fans spend most of their money at NFL-sponsored or corporate events rather than at local businesses.

"Move the decimal point one place to the left," Robert Baade, a professor at Lake Forest College in Illinois, who has studied the Super Bowl's impact on local economies, told Fox News Latino. "The NFL says $500 or $600 million? I think $50 to $60 million would be a generous appraisal of what the Super Bowl generates."

Ironically, the various studies that have demonstrated the economic benefits of hosting a Super Bowl in very rosy numbers may have seriously contributed to driving up the costs.

“That's because the NFL saw the studies, too,” wrote USA Today Sports.

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