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Does having a NBA team improve the economic growth.docx

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Does having a NBA team improve the economic growth.docx

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Does having a NBA team improve the economic growth



Introduction The sport industry is one of the key drivers of the country’s economy. The mere presence of, or lack thereof, an NBA franchise does not mean that a city’s or a country’s financial health will be better or worse. It is an investment liken any other hence poor decision making may lead to predominant misuse of public funds.Taxpayers and tourists must have a more recognizable outlet to devote their expendable income to.


Cities often use public funding to help construct and renovate the facilities of large, private sports franchises. As the major sports leagues grow in popularity and revenue, cities have had to offer increasingly competitive incentive packages to owners in order to keep their team from relocating to more profitable markets or cities willing to issue public funding for new facilities. Much literature has been conducted on the economic impact of sports teams with a general consensus that there is usually no guarantee for positive economic effect for cities that serve as homes for these teams from the largest league.



Source of Employment Having a National Basketball Association (NBA) team creates employment to the players.Owners of NBA teams report earnings around $12-30 million per season year (Berri, 2015).After counting player salaries, arena costs and maintenance, and other required expenses, the owners take home a decent payday.


There are a number of variables and they cannot always be discerned from the Team's financials.  For example, an owner may take a large salary and out family on the payroll, making him look less profitable but reducing his personal expenses.  Or, the same owner may also own the stadium and shift revenues and expenses between the two and report them separately. It is safe to say that owners make a great deal of money.  During the pre-Chris Paul days, Donald Sterling would pay his players at the NBA minimum for a team, and bank his TV and revenue sharing money and probably made in excess of $10 million per year.  Once he invested in payroll and talent, the team sold for $2 billion.  A team like the Milwaukee Bucks, without much recent success, sold for $550 million.  That would suggest the pre-tax profits were in the millions of dollars to Herb Kohl when he owned it.  All in all, the owners, either through enormous compensation or profits, make a great deal of money.



Establishment of other businessesOwning a team could help other business’s interests which obviously is a big money maker.An example of business establishments that come with an NBA team are advertisement agencies. An NBA team is also major client for the suppliers of games kits such as Nike among others (Josza, 2011).


Owners could help advertise other companies or business’s in many ways since they are well know and successful so therefore people want to have them advertise their business. For people to have the owners advertise for them they pay them good amo.

Does having a NBA team improve the economic growth



Introduction The sport industry is one of the key drivers of the country’s economy. The mere presence of, or lack thereof, an NBA franchise does not mean that a city’s or a country’s financial health will be better or worse. It is an investment liken any other hence poor decision making may lead to predominant misuse of public funds.Taxpayers and tourists must have a more recognizable outlet to devote their expendable income to.


Cities often use public funding to help construct and renovate the facilities of large, private sports franchises. As the major sports leagues grow in popularity and revenue, cities have had to offer increasingly competitive incentive packages to owners in order to keep their team from relocating to more profitable markets or cities willing to issue public funding for new facilities. Much literature has been conducted on the economic impact of sports teams with a general consensus that there is usually no guarantee for positive economic effect for cities that serve as homes for these teams from the largest league.



Source of Employment Having a National Basketball Association (NBA) team creates employment to the players.Owners of NBA teams report earnings around $12-30 million per season year (Berri, 2015).After counting player salaries, arena costs and maintenance, and other required expenses, the owners take home a decent payday.


There are a number of variables and they cannot always be discerned from the Team's financials.  For example, an owner may take a large salary and out family on the payroll, making him look less profitable but reducing his personal expenses.  Or, the same owner may also own the stadium and shift revenues and expenses between the two and report them separately. It is safe to say that owners make a great deal of money.  During the pre-Chris Paul days, Donald Sterling would pay his players at the NBA minimum for a team, and bank his TV and revenue sharing money and probably made in excess of $10 million per year.  Once he invested in payroll and talent, the team sold for $2 billion.  A team like the Milwaukee Bucks, without much recent success, sold for $550 million.  That would suggest the pre-tax profits were in the millions of dollars to Herb Kohl when he owned it.  All in all, the owners, either through enormous compensation or profits, make a great deal of money.



Establishment of other businessesOwning a team could help other business’s interests which obviously is a big money maker.An example of business establishments that come with an NBA team are advertisement agencies. An NBA team is also major client for the suppliers of games kits such as Nike among others (Josza, 2011).


Owners could help advertise other companies or business’s in many ways since they are well know and successful so therefore people want to have them advertise their business. For people to have the owners advertise for them they pay them good amo.

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Does having a NBA team improve the economic growth.docx

  1. 1. Does having a NBA team improve the economic growth Introduction The sport industry is one of the key drivers of the country’s economy. The mere presence of, or lack thereof, an NBA franchise does not mean that a city’s or a country’s financial health will be better or worse. It is an investment liken any other hence poor decision making may lead to predominant misuse of public funds.Taxpayers and tourists must have a more recognizable outlet to devote their expendable income to. Cities often use public funding to help construct and renovate the facilities of large, private sports franchises. As the major sports leagues grow in popularity and revenue, cities have had to offer increasingly competitive incentive packages to owners in order to keep their team from relocating to more profitable markets or cities willing to issue public funding for new facilities. Much literature has been conducted on the economic impact of sports teams with a general consensus that there is usually no guarantee for positive economic effect for cities that serve as homes for these teams from the largest league. Source of Employment Having a National Basketball Association (NBA) team creates employment to the players.Owners of NBA teams report earnings around $12-30
  2. 2. million per season year (Berri, 2015).After counting player salaries, arena costs and maintenance, and other required expenses, the owners take home a decent payday. There are a number of variables and they cannot always be discerned from the Team's financials. For example, an owner may take a large salary and out family on the payroll, making him look less profitable but reducing his personal expenses. Or, the same owner may also own the stadium and shift revenues and expenses between the two and report them separately. It is safe to say that owners make a great deal of money. During the pre-Chris Paul days, Donald Sterling would pay his players at the NBA minimum for a team, and bank his TV and revenue sharing money and probably made in excess of $10 million per year. Once he invested in payroll and talent, the team sold for $2 billion. A team like the Milwaukee Bucks, without much recent success, sold for $550 million. That would suggest the pre-tax profits were in the millions of dollars to Herb Kohl when he owned it. All in all, the owners, either through enormous compensation or profits, make a great deal of money. Establishment of other businessesOwning a team could help other business’s interests which obviously is a big money maker.An example of business establishments that come with an NBA team are advertisement agencies. An NBA team is also major client for the suppliers of games kits such as Nike among others (Josza, 2011). Owners could help advertise other companies or business’s in many ways since they are well know and successful so therefore people want to have them advertise their business. For people to have the owners advertise for them they pay them good amounts
  3. 3. of money so they can get their company/business heard.This is another way how owners make their money. Brand loyaltyA well-performing NBA team is recognized internationally. Any product associated with the team also gains increased attention and popularity. The owners of these products hence making striking profits out of this deal that further contribute to the national income (Kern, 2016). For one thing, Team owners have an advantage that many few other company owners can – a loyal fan base. Brand loyalty is where owners make their biggest profit. Millions of fans follow NBA teams and with that comes TV deals, ticket packs, endorsements, media attention and much more through which revenue is generated. An NBA team encourages foreign investment Sport leagues cater to ever-expanding global markets.Wealthy individuals and powerful conglomerates buy and sell teams for hundreds of millions of dollars.Sport teams play a major role in the development of complex urban economies The significant investment by local governments suggests that the economic returns of sport must be quite large. Indeed economic benefits are often proffered as the justification for sport subsidies. Teams, stadiums, and events are commonly promoted as economic catalysts. For example, in 1997 a group campaigning for a new publicly funded football stadium for the San Francisco 49ers used the slogan “Build the Stadium— Create the Jobs!” (Epstein, 1997). The Oregon Stadium
  4. 4. Campaign, a group working to bring major-league baseball to Portland, ran an ad in the local newspaper that read, “$150 million company seeks move to Oregon. Will bring jobs, development, snappy new uniforms.” Development of city economyIf a country hosts the events such as, professional basketball season sees may fans travel from different parts of the world to where the league is hosted (Lineberry, 2014). With them come immense dollars which increase the revenue base for the country.For instance, accommodation, food, travelling among other expenses increases the revenue base for the country. The professional basketball season, in its entirety, will span 82 regular season games with an additional amount reflected through a city hosting one or several rounds of the playoffs. Those additional games can range anywhere from 7 to 28; prolonging the season to an impressive 110 games. Wherever the number of games played in a season falls, it does not change the fact that the NBA is a multi-billion dollar industry that spans across the globe. With the current NBA schedule, each NBA city can host 41 regular season games and somewhere between 2 and 16 extra home playoff games. It should be noted that the focus is on the games played at home. Although the season can range between 82 and 110 games, each NBA city will only play host to between 41 to 57 games. Furthermore, the numbers found for this study will be representing a market in which there is a successful playoff-caliber team with one of the league’s most popular superstars in Kevin Durant. NBA Teams nurture talents Talents are key drivers of a
  5. 5. country’s economy. Prominent basketball players are recognized worldwide. This increases the country’s visibility to investors (Schiavone, 2016). Other entities may purchase players or hire them on contractual basis. Huge amounts of revenue are deposited with the mother country. One of the biggest benefits in owning a team is selling the team for a much higher price. Especially since there is high inflation, millions of money will be made. For example, Bill Davidson bought Detroit Pistons for eight million in 1974 and possibly sell the team for over 37 million in today’s money. Another example is that the Philadelphia Sixers were bought for 125 million in 1996 and now 180 million after inflation and soon could be sold for roughly 300 million. Obviously by doing this, you make millions of money and a good profit. Tax revenue benefitsFans’ spending before, during, and after games is likely to be subject to local and state sales taxes.The income accruing to any net increase in jobs is often subject to local and state income taxes. Such spending “imports” tax revenue that would otherwise not be possible if the league was not held in the country. The main way in which increased sales tax revenue benefits a host metro area is if it is paid by nonlocal residents. Nonlocal sports fans visiting to attend games pay sales taxes on all local purchases before, during, and after games. Such spending “imports” tax revenue, which in the absence of a professional sports team would have accrued to governments outside the host metro area. Imported sales tax revenue benefits the host metro area by reducing the amount of taxes that need to be raised from local residents
  6. 6. Quality of life benefitsThe presence of a major league sports franchise can help make a metro area an attractive place to live.Nearly all analyses of the benefits from hosting professional sports teams recognize this contribution to a metro area’s quality of life.Quality of life captures the satisfaction, or happiness, residents derive from shared metro area attributes such as recreation facilities which are major drivers of the country’s economy. Professional sports teams contribute to a metro area’s quality of life primarily by increasing the happiness of sports fans. The most visible source of fan happiness comes from attending home games. However, only part of this happiness actually counts as a quality-of-life benefit attributable to hosting a team. This is because fans must pay to attend games. In the absence of a professional sports team, fans could instead use what they paid for game admissions on other sources of happiness, such as watching a movie or traveling to a different metro area to attend a game. Formally, the quality-of-life benefit to a particular fan who attends a sports game is the amount above the admission price they would have been willing to spend to attend the game. For instance, if someone is willing to spend $30 to attend a game that only costs $20, they receive a $10 quality-of-life benefit. Adding up the individual quality-of-life benefits of all residents who attend games yields the total metro area’s quality- of-life benefit from game attendance. Cont…It is important to understand that have an NBA does not guarantee economic benefits. The real public cost of sports facilities is tremendous. Policymakers should be extremely
  7. 7. wary of devoting a significant portions of their capital budgets to sports facilities. Unless there are mechanisms to guarantee team’s revenues within the city and the entire country (Kern, 2016). The real public cost of sports facilities should be a key consideration in determining the economic significance of an NBA team. She claims that the publicly reported costs associated with a new stadium is often grossly underreported because they only account for the amount of direct support in the form of issued bonds and do not incorporate other financial support such as the cost of foregone property taxes, the cost of municipal services to the facility, and even the ongoing cost of operations in some cases Cont…The economic benefits of an NBA team will largely depend on the management of the team and how active it is. No investor would be associated with a non-performing team. Fans want assurance that they will be given the value of their money. Well performing teams will attract people from all parts of the world whereas underperforming teams will discourage investors (Kern, 2016). The public benefits from professional sports teams will always leave open the possibility of public funding, even if there were many more franchises and less owner leverage. It is is not necessarily a bad decision for smaller cities to offer subsidies as a way to entice owners to remain within the municipality because there is intangible public benefit present. Policymakers just have to decide whether the public funding they are offering to a profitable, private venture for the economic benefits of having a professional sports team in the community
  8. 8. ConclusionA sports team would also employ either directly or indirectly, lead to establishment of businesses and contribute significantly to the host city’s economy. However, the ec0nomic benefits of an NBA team are not guaranteed. Before the team is established, the costs should be examined in relation to the prospected benefits. It should hence be considered if the expected benefits surpass the public and private costs of establishing it. References Berri, D. J. (2015). The wages of wins: taking measure of the many myths in modern sport. Stanford, CA: Stanford University Press.Jozsa, F. P. (2011). The National Basketball Association: business, organization and strategy. Singapore: World Scientific.Kern, W. S. (2016). The economics of sports. Kalamazoo, MI.: W.E. Upjohn Institute for Employment Research.Lineberry, W. P. (2014). The business of sports. New York: H. W. Wilson Co.Schiavone, M. (2016). Sports and labor in the United States. Place of publication not identified: State Univ Of New York Pr.

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