A Large Part of Sports Team Profits (And Valuations) Come From Public Subsidies

I have argued many times that publicly-funded stadiums are a huge part of sports profits and team valuations.  For example, here in Glendale AZ, the town's stadium subsidies represent over a third of the value of the Cardinals and almost 200% of the value of the Coyotes.

As some of you may know, the NBA is heading into a protracted labor negotiation, with both parties acknowledging that the economics of the game have turned against owners.  Henry Abbot at ESPN argues that a large part of that economic change has been increasing taxpayer reluctance to subsidize sweetheart stadium deals for teams

Public money for stadiums has become scarce, and I have to believe that's part of the owners' pleas for financial relief from players. Huge moneymaking buildings for free or cheap have been no small part of what makes owning a team a no-brainer. Now teams in need of stadiums -- like the Kings and whatever team may one day relocate to Seattle -- face tough economics. Getting either deal done requires some kind of miracle. And in that context, if you ever fantasized about a world where taxpayers didn't contribute so much to buildings -- even if it meant players earned a little less -- well, your time is now.

To his latter point, I hope he is right.

  • John VI

    If the value of a team is set as its asking price, how can subsidies make the value 200% or twice that? Are you refering to the ASKING price of the coyotes, which you have stated previously is more than double thier value?

    I stumbled over the math while reading that and wanted to get a clarification. :)

  • http://www.ianrandom.com Ian Random

    Rich people are bad when it is petroleum and they want permits approved to compete in the market place and provide royalties to the government. Rich people are good when they own a sports monopoly that doesn't compete freely in the market and demand constant handouts. Maybe if I didn't flunk (c- in your major) college, this would make sense to me.

  • Daublin

    John: it can happen if the subsidies are being spent very poorly. For example, the city might donate a $200 million dollar stadium to a team that will never make anywhere near that in profits. In such a case, the team would be better off selling the stadium than using it, but they wouldn't be allowed to.