LeBron the Financial King of New York?
Sports economists contest LeBron James’ financial impact on New York City.
by Kyle Stack / @NYsportswriter
The New York Knicks are expected to pull out all the stops in their free agent courtship of LeBron James and there apparently is a major financial incentive to do so.
New York City’s Economic Development Corporation compiled a LeBron James financial impact report whose contents were first leaked out by the New York Daily News June 1. The report states that King James would have a $57.8 million impact on New York City if he led the Knicks to a Game 7 win in the NBA Finals on the Knicks’ home floor at Madison Square Garden. (The study assumes the Knicks would have home-court advantage in the Finals.)
Not so fast, indicated Darren Rovell, a sports business reporter at CNBC.
“I doubt the Knicks would make $58 million,” Rovell said. “Normally a playoff game is worth $1 million to the team.”
Assuming that it takes at least two home wins in each of the four series in order to win a NBA championship, the benefit would be roughly at least $8 million. The maximum amount would be roughly $16 million since 16 home games are the most a team with home-court advantage through the playoffs can play.
Then there is the question of where extra customers will come from during the regular season and playoffs, according to Rovell.
“The large percentage of people [who go to games] would be living in New York,” Rovell said. “If LeBron comes here, the Knicks are going to have 14,000, 15,000 season ticket holders. Where would all these other people be coming from?”
Allen Sanderson, a University of Chicago economist, said that basketball audiences are local by nature. Whereas baseball season benefits from a slew of events unique to summer — good weather, kids out of school, people on vacation — basketball is played primarily during winter months in which people tend to travel much less.
While a team and ticket brokers might benefit from the ability to raise ticket prices, there isn’t as much money to be made by teams courting LeBron. Oddly enough, four of the teams who have been speculated as possible destinations for him ranked in the top five this past season in average home attendance. The Bulls (1st, 20,725 avg.), Cavaliers (2nd, 20,562), Mavericks (4th, 19,994) and Knicks (5th, 19,501) can’t draw many more fans if one of them signs LeBron. (The Mavericks can dangle the carrot of playing once or twice a year in 100,000-plus seat Cowboys Stadium.)
The Nets, another LeBron contender, drew an NBA-low 13,103 people to their games last season at IZOD Center in East Rutherford, which had a capacity of 18,974. The basketball capacity at the Newark-located Prudential Center, where the Nets will play for the next two seasons before moving to Brooklyn, is listed at 18,500 on the arena’s website. When reached for confirmation on whether that figure would be the Nets home game capacity next season, the team stated that no capacity has been determined.
So where is a superstar’s impact? It’s in their ability to raise their team’s popularity away from its home city.
“The primary beneficiary of Michael Jordan and the Bulls championship teams [in the '90s] was that they sold out arenas on the road,” Sanderson said. “Arenas that were selling 10,000 tickets per night were selling 20,000 when the Bulls circus came to town. If LeBron goes to the Knicks (something that the new cover of SLAM depicts), it just means the Knicks are going to sell out arenas on the road.”
The big question for the last year regarding LeBron’s pending free agency has turned from where he can best maximize his marketing ability to which team would provide him the greatest opportunity to win an NBA championship. Yet the former question — of where LeBron could maximize his marketing value and push toward his self-proclaimed wish to become a financial powerhouse among the likes of friend and Nets minority owner Jay-Z — is still relevant. And that’s where Rovell and Sanderson disagree.
When asked about what additional marketing opportunities New York provides for LeBron, Rovell stated there is “nothing more in New York City than he has in Chicago or L.A.” Rovell emphasized LeBron’s need to win a championship and that he should go to a place where he can do that.
Sanderson cited LeBron as needing New York City more than the city needing LeBron.
“If I’m a 25-year-old kid and have a ton of money, I’d rather be in New York than Cleveland,” Sanderson said. “It’s a whole lot more fun. There’s the potential of more endorsement income in a big city. He’s going to do really well wherever but I think he maxes it out in the biggest market.”
One other factor to consider about LeBron’s potential impact on New York City (or any city) is what teams and stars already exist there. In New York, sports fans would have the occasional dilemma of going to either a Knicks game or one played by the Jets, Giants, Yankees and Mets — all popular teams in the New York metropolitan area. Derek Jeter, Mark Sanchez and Eli Manning would ensure that LeBron wouldn’t have the New York athletic stage all to himself. Chicago could be a different matter. Sanderson gave an example of the pro sports scene in the Windy City.
“Most people in Chicago don’t give a rip about hockey,” Sanderson said in reference to the Chicago Blackhawks’ soaring popularity as a result of their current spot in the Stanley Cup Finals. “The city is Blackhawk-crazy at the moment. Is it because they’ve just turned into hockey fans? It’s a minor part. What’s the alternative? The Cubs and [White] Sox suck. The Bears are coming off a horrible season. If it turns out LeBron comes to Chicago, he can have a fairly big impact because of the woeful state of most professional sports teams in the city.”
In the end, both sports economists concluded that the New York City Economic Development Corp. study isn’t realistic. (The NYC EDC didn’t respond to an interview request for this story.)
“[The study] doesn’t make any sense,” Rovell said. “It’s unlike a Super Bowl, where people are coming from out of town on both sides.”
“These economic impact studies are off by 90 percent to begin with,” Sanderson said. “You have to discount them; they’re puff pieces.”
At a time when there are as many NBA free agency questions as there are people who have an opinion, this is likely the closest agreement you’ll see on a topic concerning LeBron James’ impending free agency.