By Ray Stern
By Ray Stern
By New Times
By Amy Silverman
By Stephen Lemons
By Stephen Lemons
By Monica Alonzo
By Chris Parker
Not only will the stadium be an economic loser, sports economists say there is no evidence that professional sports teams have any economic impact on communities whatsoever.
"Nobody can detect any sort of difference in growth rates of communities where you have a sports team or not -- or how many of them you do have," says Washington State University economist Rodney Fort.
Strip away the NFL's bright lights and the competitive action on the field, and what is left is a huge entertainment cartel that exerts market power by artificially reducing the supply of teams in a nation hungry for sports entertainment.
"It's an unregulated monopoly," says Lake Forest College economist Robert Baade, who has conducted groundbreaking studies on sports economics for more than two decades.
In other words, the NFL is football's version of OPEC -- but far worse. At least OPEC has competitors in the world oil markets.
The linchpin supporting the NFL cartel, sports economists say, is the league's ability to restrict the supply of teams below the demand of cities that want teams and to control the ability of existing teams to enter new markets.
"These controls essentially restrict competition," says Michigan State University economist William Kern.
Restricting competition artificially increases the revenue available to the existing franchises in the NFL, thereby generating monopoly profits.
The NFL's spoils are so deeply shared that the Cardinals, which failed to make the playoffs, will receive the same amount of postseason ticket revenue this year as the New England Patriots and St. Louis Rams, who will play in the Super Bowl.
Why should the Bidwill family give a hoot about making the playoffs when the franchise gets the same amount of postseason revenue as the teams competing in the Super Bowl?
The Cardinals declined repeated requests for an interview to discuss the team's and the league's finances, as did NFL league officials in New York.
NFL financial records reveal that while the Cardinals have been fielding mediocre teams, the Bidwills have been making money.
The team reported operating profits of $5.3 million in 1995, $2.2 million 1996, $4.4 million in 1997, $4.5 million in 1998 and $1.5 million in 1999.
Operating profits probably understate how much money the family is making from the team since Bidwill family members may be drawing a salary that shows up as an expense on the earning statements obtained by New Times.
Operating profits will zoom when the stadium begins to kick in an additional $35 million a year or so with little increase in team expenses.
Since player salaries per team are capped, most of the increase in revenue from the new stadium will flow into the Bidwills' pockets. The Cardinals can elect to bring in big-name players with large signing bonuses that are exempt from the salary cap rules, but there is no guarantee that the Cardinals management will do so.
But given the lack of attendance at Sun Devil Stadium, where the team averages less than 50,000 per game in the 75,000-seat stadium, the Cardinals maybe be forced to spend more money on players in order to field a contending team to attract fans willing to pay higher ticket prices at the new stadium.
The image of the NFL as an OPEC-like cartel is not simply the ravings of academic economists.
The NFL says as much in a 1999 lawsuit the league filed against the Oakland Raiders:
"Each NFL member club has a direct economic interest in the successful business operation of each of the other member clubs in the League. Rather than acting as horizontal competitors, the member clubs of the NFL are cooperative partners in a joint business venture.
"No NFL club has an interest in forcing another team out of business, or in seeing it seriously weakened financially. While the clubs are vigorous competitors on the playing field, they act as partners in conducting their business operations."
Simply put, the goal is for each NFL team to generate as much revenue as possible, with the bulk of that money shared among all the teams. The only money that isn't shared comes primarily from revenue related to stadium luxury suite sales, premium club seats, stadium advertising and stadium naming rights.
Hence, the concerted and successful drive by NFL teams to build new, luxurious stadiums that generate maximum revenue to teams while shifting costs -- both building and operating expenses -- to taxpayers.
The Cardinals have shifted all operating costs of the new stadium -- about $11 million a year -- to the Tourism and Sports Authority. The team will pay annual rent of $250,000, down from about $1.8 million a year at Sun Devil Stadium.
The NFL cartel creates clear financial winners and losers.
First, the players. Average salaries have jumped from $82,400 in 1981 to $1.2 million in 2000, a 1,356 percent increase. Players receive about 67 percent of total NFL revenue, which topped $3 billion in 2000. There were 545 players who earned $1 million or more in the 2000 season.
Second, the owners. In addition to ongoing operating profits, owners also receive substantial tax benefits from complex depreciation rules and have ways to move income off the team's balance sheet, particularly through joint ownership with media companies, says economist Fort, who has written extensively on the monopoly power of professional sports.