The 7 Cities With the Most to Lose in the NBA Lockout
Correction: An earlier version of this story incorrectly attributed a 2004 study to the Portland Business Alliance. The study was actually commissioned by the Portland Trail Blazers.
Jobs and livelihoods are at stake in the NBA lockout, but in cities where the local NBA franchise is the only major professional sports team, the picture is potentially even more bleak. Of the 30 franchises in the NBA, seven play in NBA-only markets: Memphis, Oklahoma City, Orlando, Portland, Sacramento, San Antonio, and Utah.
Annual financial totals indicate that NBA-only markets are trumping their multi-team market counterparts. According to the most recent data compiled by Forbes, the 23 NBA franchises in markets with more than one major-league sports club lost a combined $11 million in total value between 2009 and 2010. The seven NBA-only market teams? They saw a combined $64 million spike in value during the same stretch, with six of the seven teams increasing or maintaining their 2009 values.
And the numbers from across local chambers of commerce in the NBA-only markets indicate the kind of formidable economic hit arenas and nearby businesses could take if the work stoppage cuts into most or all of the season. In San Antonio, officials estimate that Spurs games have a $95 million impact on the local economy. A 2004 study conducted in Portland found that between 1970 and 2004, the Trail Blazers made more than a $2 billion impact on the community, good for about $59 million a year during that time. The Greater Memphis Chamber of Commerce took a more comprehensive look in 2010, totaling a $223 million annual economic impact when looking at operations, Grizzlies spending, plus special events at FedEx Forum.
But the lockout’s potential effects are as much about sustaining job opportunities as they are about preventing loss of jobs, especially in markets that only sustain NBA franchises. The work stoppage comes at a time for the NBA-only markets in which four of the seven have unemployment rates either right at or well above the national average of 9.1 percent. Memphis and Orlando are holding steady at 10.3 percent, while Sacramento continues to struggle at 11.9 percent. Memphis counts roughly 1,500 jobs in or around FedEx Forum. Sacramento officials estimate that its NBA arena employs about 700 workers, including 550 part-time employees. For Sacramento, the work stoppage couldn’t have come at a worse time, with the city trying to move forward on a proposal for a new arena.
Oklahoma City officials calculate that a playoff season for the Thunder has an approximately $60 million impact on the city. But for a city that’s consistently ranked as one of the most entrepreneurial places in America, there are bigger concerns. Sustaining and continuing to attract a workforce of bright, lifestyle-driven 20-somethings is one of several indirect employment issues associated with the lockout.
“When our CEOs are offering a person a job, the person either thinks, ‘Do I want to live in Oklahoma City?’ or ‘Do I have to live in Oklahoma City?’” says Oklahoma City Mayor Mick Cornett. “The NBA is an important aspect that [the city] has to offer. Typically, your peer cities are who your sports teams play. If you’re trying to create jobs, you’ve got to understand how important that major league component is.”
The issue of NBA-related jobs and revenue has already become political. Earlier this month, a group of 14 mayors sent an open letter to the league’s owners and players pleading their case for a season to take place for the sake of the local economies in jeopardy. Salt Lake City Mayor Ralph Becker was one of the 14 mayors to co-sign the letter.
“It has created a huge strain,” Becker says. “I’m sure there are people who these part-time jobs at the arena make a difference in their ability to make end’s meet.” He adds: “There are going to be economic casualties.”
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In Orlando, restaurants and bars line West Church Street in the downtown entertainment district as fans walk from their cars to the new Amway Center, planned home of this year’s All-Star Game. But the new gem of Central Florida may leave arena employees and surrounding businesses, who were promised years of prosperity following the arena’s opening last year, scrambling to cover their costs. Currently, there are 550 hourly food and concession workers, ticket-takers, ushers, security personnel, and janitorial personnel inside the arena, not to mention the countless local businesses surrounding the area. Orlando Mayor Buddy Dyer remains uneasy about the possibility of there not being an All-Star weekend this year, thus delaying the $80 million to $100 million economic impact the league had projected for the event. All-Star Game hosts in recent years have gone on to host Super Bowls, Final Fours, MLB All-Star Games, and major conventions. For those businesses who’ve been patient as the arena’s construction coincided with the rise of the team, their long-term prospects could be radically altered. Many have already sacrificed through the construction period to get to this point.
“They made sure to get by the lean years to get to the good years,” Dyer says. “I don’t think many of them had built into that long-range plan a good year followed by a downward turn by not having a basketball season.
“The circumstances are not in our control. It’s always frustrating when you’re not able to control your destiny.”
Ken Young is the president and CEO of Ovations Food Services, the food vendor for the Portland Trail Blazers and the Rose Garden Arena. For any given Blazers game, Ovations can have 300 workers on concessions, including in the kitchens and those considered suite personnel. Generally, about 95 percent of the jobs on the food vendor side are considered part-time jobs, Young says, classifying the workers as “direct-event personnel,” meaning they are paid by the hour and are not on an annual salary. This also means that health insurance is not guaranteed. In the three California arenas, including Sacramento’s Power City Pavilion, for example, about 1,000 workers, most of whom are paid an average of $11 an hour, need to hit 1,300 hours to qualify for benefits. “You start missing an average month of six to eight NBA events, you’re missing significant events for these people,” he says.
Can arenas replace the revenue? The short answer is, not really. Special events like concerts are typically scheduled months in advance, especially the sort of mega-acts that can sell-out an NBA arena.
“You can’t start taking those basketball nights and schedule something else,” Young says. “Basketball has the first right on those dates. You may get some minor events, but overall, the revenue stream is not going to be replaced.”
Sports management and arena experts look at the issue of scheduling last-minute concerts in bigger markets like New York, Los Angeles or Chicago, compared to the NBA-only markets, as one of haves versus have-nots.
“If you’re Oklahoma City, Memphis, or even San Antonio, it’s not like Staples Center or Madison Square Garden where it’s like, ‘OK, the first two weeks of the season are lost, but we can still make comparable revenues,’” says Wayne McDonnell, a sports management professor at New York University. “Say at Staples Center, you lost five Lakers games. Maybe you go out and extend a band a night or two. But how many times are these bands going to these small markets?”
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Most scholarly work by sports economists indicates that a work stoppage amounts to a miniscule economic effect on an overall local economy, with some case studies even showing increases in per-capita personal income during recent MLB and NFL lockouts. In 2000, economists Brad Humphreys and David Coates concluded that the departure of a basketball franchise has never significantly lowered per capita personal income in an individual metropolitan area. The general theory is that people with disposable income will simply spend their money someplace else.
“Individuals and specific firms will be negatively impacted, but other firms and individuals will be helped when consumers redirect their entertainment budgets,” says David Berri, an economics professor at the University of Southern Utah. “It seems unlikely that consumers are just going to sit on the money they were going to spend on NBA games.”
But how and where people in NBA-only markets will redirect their spending compared to multiple-sport markets is less clear. As the 2004-2005 NHL lockout proved, attendance and spending at other sporting events tend to see a bounce when a league goes on strike. By that logic, the sports sector that could see the greatest benefit in NBA-only markets would be major college athletics, but those teams aren’t always located in city centers. In Oklahoma City, there’s a large college sports crossover among Thunder fans that would theoretically migrate even more toward Oklahoma State and Oklahoma, which are located in Stillwater and Norman, respectively. Spurs fans can take a ride up I-35N toward Austin, their disposable income going toward Mack Brown and Rick Barnes instead of Tim Duncan and Tony Parker. If Magic fans aren’t quite sold on their local college sports scene, Big East basketball is just a short drive away in the Tampa-St. Petersburg area.
The variables that affect long-term direct spending on sports and entertainment in NBA-only markets make predicting where rearranged spending will occur rather difficult.
“That gets a little complicated because you need to know how people are going to do it and where they’re going to spend it,” says David Carter, executive director of the USC Sports Business Institute. “You take Portland or Oklahoma City, you think about what are these people going to do.”
Though several mayors and chambers of commerce officials have indicated that they believe most fans in NBA-only markets would come back once a new collective bargaining agreement is reached, attendance and TV ratings will undoubtedly take a hit, complicating revenue streams even further. The average attendance for NBA games remained under 17,000 a game for the shortened 1999 season and the three seasons that followed, coinciding with a drop in TV ratings during the same time period. If the league isn’t careful this time around, says McDonnell, it could take years to dig out of the hole.
“If you get into those communities where the NBA franchise is the be-all, end-all of existence, that’s where you’re going to get the ultimate feeling of distraught and abandonment,” McDonnell says.
Image courtesy Flickr user Jeff Kern