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Sports costing taxpayers billions

What if there is an NFL lockout? What if there is an NBA lockout? How would that impact both the sports and non sports fans? The New York Giants and New York Jets football teams play sixteen home games during the regular season and an additional four pre-season games at the Meadowlands. That is just twenty days a year without playoffs and if the two teams play one another during the regular season, that is one less opening. Under the right circumstances there could be as many as 24 dates in a 365 day calendar. That means there are 341 other days where there is no NFL football at the East Rutherford facility.

In addition to owning about $100 million to pay off the debt on a stadium that is no longer standing, New Jersey sunk about $300 million for infrastructure for the East Rutherford stadium and the Giants/Jets venture isn't fully paying property taxes for the building. Instead they Giants/Jets real estate venture is paying a far lesser fee through a mechanism called payment in lieu of taxes (PILOT) and East Rutherford is getting a bit more than six million dollars annually through rent and the PILOT scheme. East Rutherford probably should get closer to $15 million annually.

It is hard to image that businesses near the stadium would lose significant money if there is an NFL lockout. The NFL is about tailgating not people wandering through an area to spend money before and after a game. In fact, unless NFL owners own a nearby retail facility (such as New England Patriots owner Robert Kraft's Patriot Place, which according to the Patriot Place website, "features more than 1.3 million square feet of shopping, dining, and entertainment. You will find major fashion retailers, live and interactive entertainment, eateries, a four-star hotel, state of the art theatre and much, much more."), the owners don't want fans to spend their money anywhere except at team-licensed or owned facilities.

One of the reasons Sacramento could not build a new basketball facility for the Maloof brothers Kings franchise was that the 2006 arena proposal took away parking lots and replaced them with businesses around the facility. The Maloofs refused to give up 8,000 parking spaces and the $3 million or so in revenue that was generated from the lots. The arena proposal was voted down by Sacramento residents in overwhelming numbers. The Maloofs never campaigned for the building as it was not in their best financial interest.

In Philadelphia, there is not much around the South Philadelphia sports complex which houses the Phillies, Eagles, 76ers and Flyers except for roads and parks. Eventually Comcast hopes to replace the old Spectrum arena with a retail, restaurant and entertainment district called Philly Live! which means that all business will be conducted inside the sports complex with monies going to Comcast and their partner the Cordish Company? (Cordish was the partner for the stalled St. Louis Cardinals stadium village concept). Comcast is hoping the center will be open by the start of the 2012 Philadelphia Phillies season.

Madison Square Garden is undergoing an $800 million renovation, all designed to extract more money from patrons. Sports does practice class segregation even though sports operators and some sports fans would beg to differ. Sports owners want customers not fans. Customers can spend money for very expensive personnel seat licenses, club seats, luxury boxes and dine in expensive stadium or arena eateries. Customers can also take off the cost of sports tickets as a business expense.

If the National Basketball Association players are locked out, just how much of a real economic impact will the lockout have on cities? Probably very little. There are 41 regular season games, a few pre-season games and some playoff games. Not many fans travel for an NBA game so most of the people in the stands are local and if there are no games they would spend their money elsewhere. Teams have traveling parties of member 30 people and there are just six games a month between November and April, so that isn’t much of an economic generator. Cities like New York and Philadelphia will lose one day of player salary taxes or six in a month or maximum 50 times over a year if the team advances to the playoffs. Cities should be able to get rent money from teams. In 1999, Golden State Warriors owner Chris Cohan tried to skip out on rent payments at the Oakland Coliseum Arena for missed games. An arbitrator ruled against Cohan and made him pay rent. It was an owners’ lockout after all, not a players strike in the 1998-99 NBA labor dispute.

The middle class has been priced out of attending a cluster of games. But there is always cable TV. Cable TV prices for ESPN and other sports channels are pretty reasonable on a monthly basis thanks to socialism. In 1984, Congress and President Ronald Reagan came up with the Cable TV Act which allowed multiple systems operators (MSO) to create a basic expanded tier and group together channels and sell it as one to a consumer. If you wanted ESPN back in 1984, you had to also take CNN and the Weather Channel if the MSO decided that is what was best for their customers. (Remember the "I want my MTV campaign?") Sports channels ended up on those tiers nationally which enabled sports to migrate from over-the-air TV to cable. Cable channels made more off of consumers whether they watched sports or not and some advertising.

Sports has made billions off of people who never watch a sports event on cable TV which is a significant majority of cable TV subscribers.

The segregation of fans started in 1965 with the opening of the Houston Astrodome when Astros owner Roy Hofheinz included "sky boxes" in the stadium.

Hofheinz was charging about $20,000 annually for the boxes, and that did not go unnoticed by his fellow owners. NFL Commissioner Pete Rozelle said in the 1980s that the sky box was a "bane to the business," and because of them, NFL owners needed stadium renovations or new stadiums with built-in luxury boxes. Rozelle was correct, and the 1980s and 1990s were a time of franchise shifts in the NFL because owners were looking for stadiums with luxury boxes. Hofheinz also influenced entertainment by using a scoreboard to entertain people during games. Hofheinz went after the non-sports fan who he felt would show up at an event and not be concerned with the action on the field. Hofheinz even put in a Dow Jones ticker in the original boxes.

McMullen once commented that sports is all about emotion and rational thinking goes out the door in sports. In Washington, DC Goodell and Smith are trying to slice up billions that flow into the industry. They are doing that obvious to what has made football — the 1961 Sports Broadcast Act which was signed into law by President John F. Kennedy after sailing through the House and Senate which enriched the football industry, the shifting of stadium costs from private ownership to municipalities (a trend that started in Milwaukee in 1950), the 1984 Cable TV Act and the real dagger in the back of the average fan, the 1986 tax code revision. By accident Congress and Ronald Reagan approved a bill that put a ceiling of eight cents on a dollar generated in a stadium that would go off to pay the municipal debt of taxpayers funded facilities. New arena and stadium building and renovations sprung up everywhere as owners wanted the latest shiny gadgets compete with luxury boxes, club seats and eateries along with other revenue generating sports in a building. Ticket prices exploded even on the minor league level.



 

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