Why hosting the Super Bowl isn't worth it
- The NFL and host committees claim that the Super Bowl brings between $300 to $500 million to host cities.
- Economist Victor Matheson estimates the big game brings in between $30 to $130 million.
- The higher estimates encourage cities to continue to provide the NFL with tax subsidies to host the event and build new stadiums.
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Following is a transcription of the video:
Narrator: The Super Bowl is America's biggest annual sporting event. Each year, over 100 million TV viewers tune in for the big game, making the Super Bowl nine of the 10 most watched American TV programs of all time. And hosting it has become as American as watching it.
Many Super Bowl host committees believe that popularity can mean just one thing: big profit for the city. Committees and the NFL claim that the game can spur 300 to 500 million dollars of spending in a host city. For example, in 2018 Minnesota's host committee reported that Super Bowl 52 brought in $450 million to its half of the Twin Cities. But sports economists, including Victor Matheson, are skeptical.Matheson: "If someone claims, 'Look, this event is three, four, five hundred million dollars,' what an economist would say is: 'Prove it.'"
Narrator: In fact, when Matheson crunched the numbers, he found that Super Bowl brings in between $30 and $130 million, a fraction of what the host committees and the NFL claim.
Here's why hosting the Super Bowl isn't as valuable as people think.
So what does it cost to host a Super Bowl? Matheson contends that for some cities the cost starts with building a new stadium. Seven NFL stadiums were constructed from 2006 to 2017. And by 2019, each will have hosted a Super Bowl. And on average, taxpayers contribute $250 million for stadium construction.
Matheson: "They say, 'Look, you build the stadium and we'll bring you a Super Bowl.' If the Super Bowl actually brings four or five hundred million dollars to the city, then, all of a sudden, handing over $500 million in taxpayer subsidy looks like a pretty good deal. Unfortunately, if the actual impact is a fraction of that, then, all of a sudden, taxpayers are on the hook for a huge stadium, and they're not getting much in the way of help, at least from the Super Bowl, to pay that stadium off."
Narrator: In addition to the stadium, which the NFL uses at no charge, there's also the cost of hosting the event, like public transportation and police overtime. For example, in 2014, New Jersey gave the NFL an $8 million tax break, and NJ Transit ended up with $5.6 million of losses transporting fans to and from the Super Bowl.But on top of that, the NFL requires additional expenses. Minneapolis's Star Tribune published the NFL's 153-page bid book that it obtained in 2014. The document lists millions of dollars worth of the NFL's specifications and requirements for host cities. The list includes: parking spaces, hotel rooms, transportation, billboards, security, food, access to golf courses and bowling alleys, along with an exemption on paying city, state, and local tax.
Matheson: "That obviously means that a lot less money is sticking in the city. That's all going back to NFL's headquarters, and, at that point, the money does get shared. But again, it doesn't get shared with local governments. It gets shared with the other 32 team owners."
Narrator: These are high demands, and committees comply under the assumption that they'll make the money back. But just how much of a profit are cities actually making? Well, it all depends on how you do the calculations.
Matheson found three differences for the disparity. The first is substitution effect, which is when consumers spend money on a sporting event, that they would have spent anyway. So it doesn't increase the amount of money being spent. It rearranges the spending pattern.
The second is crowding out effect, which is when crowds associated with a sporting event displace regular spending. So if the Super Bowl fills every hotel that would normally be 80% occupied, the NFL is only accounting for the 20% increase.
And the final reason is leakage, which accounts for where the money ultimately ends up. Hotels usually increase prices by three or four times during the Super Bowl, but corporations and shareholders reap the benefits of the price increases, not the local workers.
Matheson: "So, what you're trying to do is, you're trying to pay for tens of millions of dollars of expenditures on really not much in the way of additional economic activity, so, you can definitely not come out ahead, at least as a state or local government."
Narrator: In 2008, Glendale, Arizona hosted Super Bowl 42, and the city's mayor told ESPN that the city lost $1 million in the process. In 2016, San Francisco hosted a week of events leading up to Super Bowl 50, which was being held in Santa Clara, and San Fran ended up with a $4.8 million public services bill.Matheson: "We do have some evidence that big events, like the Super Bowl or the Olympics, at least temporarily cause a surge in happiness. But, we need to be careful about that. So, if you wanna say, hey, bring in the Super Bowl because it makes people happy, that's great. Just don't tell us it makes us rich."