Sports economics lecture raises questions

Supposedly, living in Kildahl Hall’s close quarters in the mid- 1990s taught Victor Matheson ’99 how to manage scarce resources effectively. Matheson, in his talk “Stadiums, Mega-Events and Public Finance Follies,” demonstrated the influence professional sports have on economies. Matheson centered his talk around two questions: Is commercial sport a wise use of taxpayer money? And why do we build “factories” for the NFL?

Many Minnesotans are familiar with the recent Vikings stadium deal. According to Matheson’s calculations, the total cost of the stadium will amount to about $975 million, with the public paying $498 million of the cost. Zygi Wilf, the owner of the Vikings, will pay a net amount of $72 million.

Soon after the ink dried on the stadium contract, the value of the Vikings jumped almost $200 million, and the team is now valued at just over $1 billion.

“Owners certainly benefit from new stadiums,” Matheson said, “but probably not the fans… [and] almost certainly not the cities.”

Matheson then went on to decry “Economic Impact Studies,” which are used by professional sports and other mega-event organizations such as the International Olympic Committee to “sell” their services to cities. To Matheson, such studies are nothing more than false research “commissioned by groups with a vested interest in the results” and ignore economic dampeners like “substitution effects,” “crowding out” and “leakages.”

In a stark contrast, Matheson estimated an 85 percent agreement among economists that “spectator sports result in little or no measured economic benefits on host cities.”

So why do teams get subsidies? Matheson pointed to special-interest groups as his prime suspect. In professional sports, “a small number of people stand to make huge profits, while a large number of people stand to lose a small amount over a long period of time,” he said.

Jerry Jones, the owner of the Dallas Cowboys, spent over $1 million lobbying the Texas populace to approve the then-new Cowboys Stadium in 2006. Essentially, Matheson saw the rising cost of stadiums as evidence of “pro leagues exerting their monopoly power to pit city against city and neighborhood against neighborhood.”

Matheson asked the audience to remember the discussion about the Vikings moving to Los Angeles. He said that he saw that threat as extortion for the near billion dollar investment in the new stadium. In reality, Matheson said, “the NFL doesn’t want a team in L.A.” The threat to move there makes far more money than actually basing a team in the second-largest city in the nation.

For Matheson, the sports leagues’ monopoly on professional sports in America lies at the heart of both the problem and the solution for mega-events’ effect on local economies. He offered three possible courses of action in his talk.

First, Matheson wanted to see reform at the federal level, namely the “repeal of the leagues’ anti-trust exemptions related to TV rights if we see any more significant requests [for capital] at the local level.”

A second solution Matheson gave was municipal ownership of teams, a notion grounded in “taxpayers deciding how much they want to spend on their team,” because then fans would own control of the front office. Matheson noted that municipal ownership of professional teams is banned in every major sports league in the United States.

Matheson based his third solution on the soccer leagues of Europe, quipping that the “capitalist United States has the most socialist sports leagues in the world.” In Europe, the two best teams in a minor league take the place of the season’s two worst teams in the major league for next season.

“Success,” Matheson said, “then depends on local support of the league and the team.” For Matheson, solutions are all about balancing the never-ending game between owners and fans.

“The new Vikings stadium really should be the people’s stadium,” said Matheson, and not merely because “the people will be paying it off for another 30 years.” Professional sports leagues have more control over local economies than most people realize.