The entire city of Cleveland should be parading in the streets for the blessings that have been bestowed upon them.
Over the past few months, news has arrived that the city is gaining two of the most media-glorified athletes in sports history: Lebron James to the Cavs and Johnny Manziel to the Browns.
To say that the arrival of these two powerhouses is going to have a profound effect on Cleveland's economy is an understatement. Experts estimate that the arrival of James alone will pump $500 million into the city, thus creating the Lebron Effect.
The most obvious explanation for this estimation is the rise in ticket prices charged by Quicken Loans Arena. In Lebron's final season with the Cavs, the price for a seat averaged a whopping $195—an absolutely insane figure compared to last year's measly average of $68.17. That's a 186% change in pricing that we'll likely see in the coming years for a ticket to a Cavs game.
However, economists say that increased ticket costs will only cover ~$129 million of the potential $500 million produced by the Lebron Effect. The real advantage comes with the city once again earning hotspot status after losing much of its luster over the past few years.
Cleveland will see a huge increase in traffic not only to stadiums, but to local bars, hotels, shops, etc. This surge will force employers to create more jobs and cause the media to deliver much more coverage of the area.
To top it all off, this is going to be an extremely important year for both of these athlete's careers. Vegas has already declared Cleveland as the favorite to take next year's NBA title (1 playoff game = $15 million in economic activity. ~13 home playoff games = $195 million total) and all eyes are on Manziel's rookie season. For the record, I give Brian Hoyer 3 games MAX before Johnny's declared as the official starter.
It's safe to say that Cleveland officials are grinning from ear to ear right now. You lucky bastards.
Good write up. Interesting topic for sure
good write up, but I wonder what would happen if Charlie Sheen, Wesley Snipes and the boys came back for baseball, I'd guess another $500mm in economic impact for sure.
Loving the Major League reference; SB'ed
The GDP of Cleveland has double to 1BB.
Great post. It's the people who don't understand economics who bitch about top athletes making millions of dollars.
Given how rough Cleveland has had it, I really want them to win a major pro sports championship. They deserve it.
@"mbavsmfin" - Exactly! People like to complain about the elite athletes making tons, but it's simple economics. They drive high amounts of revenue for the organizations they support, and due to the demand for specific sports in the US, the fact that they are such elite athletes for their sport, their pay has to somehow come into equilibrium with the quantity demanded by the masses. Econ 101. I'm sick of hearing the "they get paid millions to play a game". You don't like it? Don't support it.
Don't forget Love
I'm not so sure that Love is going to add a lot of value to the Cavs. He has great stats, but the Timberwolves sucked the whole time he was there.
Bill Simmons did a nice write-up on Kevin Love here. I agree with his assertion that he's actually underrated. The guy had the 3rd best PER in the league last year behind only LeBron and KD.
LeBron alone did that.
Love is a good player but nowhere near responsible for impacting a city's economy like that.
Kind of shocked that Vegas has the Cavs winning. I think a healthy Derrick Rose gives the Bulls some shot in the East, and even then, I assumed the West would have the upper hand until the ol' team chemistry kicks in.
I am thrilled for Cleveland, and would love for them to win a title. This offseason made me realize that Wade and Birdman are the real reasons I hate the Heat, I actually like LeBron.
I'm not sure that this is true, are you considering the impact of publicly funded stadiums? How the capital would have been deployed otherwise if not paying for their stadiums? I suggest reading this http://reason.com/archives/2012/09/24/is-the-age-of-the-publicly-funded…
The article argues that the (public) costs outweigh the benefits. There are no new stadiums being built because LeBron came home, so your article isn't all that relevant, though it is interesting. The only real cost in this case in Dan Gilbert's.
I'm not a fan of public financing for stadiums, I think it's just a subsidy for billionaire team owners who should have to build their own stadiums as a cost of doing business. People may hate Kraft and the Patriots but he at least built his own stadium.
"In May, The Cato Institute’s Ilya Shapiro wrote on The Huffington Post about a study of 46 cities. It found that “cities with major league teams grew more slowly” than those without." I think this is misleading. Cities with major league sports are already large and established cities and are simply not going to grow as smaller growth cities in general. It's a case of "lies, damned lies, and statistics." If a city with major league sports has a few million people and adds 10k people it's a rounding error. If a small city of 200k people with no sports adds 10k, it's a 5% add, but outside of Green Bay, a city of 200k could never support a major sports franchise.
Good stuff
Minima consequatur exercitationem quis exercitationem. Id temporibus ipsum maxime sit vero voluptas. Est corrupti et neque labore eum iusto sunt non.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...