Sports bring big money to OKC and local businesses

1 Kevin Durant crop64sc

Kevin Durant (Shannon Cornman)

Sports is big business, especially in Oklahoma City. From collegiate tournaments to marathons, the OKC Energy Football Club to the Thunder, it is hard to meet someone who doesn’t rigorously follow at least one. From courtside to Loud City at the Thunder games, you can see that the Oklahoma Supreme Court was right when it said sports act as “glue” that binds communities and people from all social spectrums.

Some argue that no matter the level of enthusiasm one has for sports, it has some effect on our quality of life because of what it brings to our local economy. However, other economists claim the economic impact of sports is negligible and overrated. Regardless, there is little argument that sporting events have a high revenue stream. The way proceeds trickle into the local economy is, however, debated extensively among economists.

Softball World Series (Mark Hancock / file)

Softball World Series (Mark Hancock / file)

 

Impact vs. development

One of the most debated aspects of the sports economy is whether the revenue that is generated by a sporting event counts as “new” money or money that would have been spent in the economy anyway. This is important because if sports act as a catalyst that separates consumers from their money in new ways, that creates higher revenue. But sports might simply serve to redistribute money that would have been spent in another way.

This debate is the key component of discussions regarding the impact of sports.

“It’s awfully difficult to disentangle the causation arrow of sports franchises, sports teams in economic development,” said Russell Evans, a local economics professor.

“It’s difficult to … see how much of the NBA being here, how much of the RedHawks and Energy, how much has economic development occurred because of those teams and how much is it that those teams are here because of the economic development.”

In other words, what came first, city development or the teams?

Evans is the executive director of the Steven C. Agee Economic Research and Policy Institute at Oklahoma City University (OCU). He is working on a study of the Thunder’s impact on OKC’s economy. However, the study is several months away from being completed.

“What we do know is that the two [city development and sports teams] tend to run hand-in-hand, and there does seem to be some evidence that given the city’s stage of development, sporting events and franchises do seem to foster some economic development,” Evans said.

OKC’s development was well underway when the NBA came calling in 2005. MAPS projects have been rolling along since 1993, and because of the development, the New Orleans Hornets settled on OKC when it needed a temporary home after Hurricane Katrina hit in 2005. To sweeten the incentive, the Oklahoma Legislature also passed a law that allows professional major and minor league sports teams in the state to sell tickets without sales tax. This law is still in effect and was one of the perks that brought the Thunder here from Seattle in 2008.

Earlier this year, Forbes estimated Thunder gate receipts at $49 million. With that estimate, the overall sales tax exemption accounts for a “loss” of more than $4 million of sales tax revenue, experts said. Based on the OKC tax rate of 3.875 percent, that means an approximately $2 million hit for OKC.

However, sales tax is included on all merchandise and concessions sold at Thunder games. Numbers were not available for those sales from Thunder officials. But the Thunder also ranks No. 4 in the NBA for merchandise sales, said Karina Henderson, corporate communications manager for Oklahoma City Thunder.

The Thunder offers multiple revenue streams for OKC. The Oklahoma City Convention and Visitors Bureau (CVB) and the city of OKC estimate that each home game brings in nearly $1.5 million in direct spending — what attendees spend per day of the event, including hotel, cabs, shuttles, food, merchandise, etc. — and roughly $78 million in direct spending for the full 2013-2014 season. Forbes calls the Thunder the No. 11 most-valuable NBA team with a revenue of $144 million and operating profit of $33 million.

Direct spending is measured with a formula derived by Destination Marketing Association International (DMAI), a clearinghouse for convention and visitor bureaus. It sets the metrics for measuring spending by people who are “in town” and live within 60 miles of the event venue or “out of town” and travel to the event from 61 miles or further, OKC Special Projects Manager Tom Anderson said.

“DMAI estimates that anyone attending an event from in town, they spend $75 per event, not counting the ticket. For out-of-town guests, they estimate that $234 [is spent] per person per day for the event,” Anderson said. “We try to be a little bit conservative with our estimations.”

Anderson also said that about 1 to 5 percent of the 18,203 ticket holders are from out of town.

The Oklahoma City Barons, an American Hockey League team, has had an average attendance of 3,685 each season during the four seasons it has been in Oklahoma. If one takes a conservative estimate of the DMAI metric — 2.5 percent of those attending being from out of town — that means an average Barons game has an economic impact of almost $300,000. With 38 home games this coming season, the potential direct spending amounts to $11 million.

The OKC Energy FC, Oklahoma’s newest professional soccer team and part of the United Soccer League, played to 100 percent of its capacity its freshman season. That is an estimated 3,741 fans, earnings of almost $900,000 per soccer game and more than $12 million in direct spending for the season, the DMAI formula shows.

The Oklahoma City RedHawks, a minor league team, recently wrapped up its 2014 season with an attendance of 430,000. Again, with conservative estimates, this amounts to almost $40 million in direct spending in the OKC metro.

However, direct spending doesn’t cover at all aspects of the economic impact of sporting events.

To get an idea of the complexity of estimating the economic importance of sports, one must look at multipliers, the velocity of money and subsidies, as well as intangible elements like imaging and branding for OKC, which brings in more money through things like tourism and even more sporting events. Though local sports arenas fly banners with a variety of colors — green, blue, red, black and orange — the economics of sports functions in more of a muted gray; it is not black-and-white.

 

Multipliers: ripples in a lake

When a family eats at a restaurant before or after the game, it pays for the meal and that payment is turned into a payment to the food distributor, which supplies the goods used to make the meal the family bought. Those dollars are then used to purchase goods to make more goods to make more meals and so on. Evans said that these variables are called multipliers and that is why it is hard to say definitively how much sporting events impact the OKC economy.

“On nights where we have a Thunder game, we will see anywhere from a 20- to 40-percent increase in sales, just because there’s a Thunder game,” explained Greg Powell, general manager of TapWerks Ale House & Cafe in Bricktown.

During the NBA playoffs, business will double, Powell said.

“Bricktown in general has been growing, the whole are around us is growing. More businesses, more hotels, more housing all in a one-mile radius of Bricktown, so overall businesses are doing more sales,” he said. “So, it’s hard to say overall what percentage of that is attributed to sports and what isn’t.”

 

Employment

Of course, another factor for economic impact is jobs. Altogether, OKC pro sports teams employ roughly 350 full-time and part-time workers, or 0.06 percent of OKC’s 576,100 employed, according to the Bureau of Labor Statistics.

 

The surprise

What might surprise some is that the largest direct-spending impact on OKC’s economy are annual sporting events — for example, youth events, adult amateur events, college events and races — that don’t always ping the radar of local sports fans, said Sue Hollenbeck, CVB sports director.

The six top-earning annual sporting events this year brought in over $41 million for OKC, CVB numbers show. These events included the National Collegiate Athletic Association (NCAA) Softball World Series, which just extended its stay in OKC for the next 20 years, along with the NCAA Division One Wrestling Championship, the Oklahoma City Memorial Marathon, the International Canoe Federation Marathon and others.

Altogether, CVB worked with 58 sporting events during the 2014 calendar, which brought a total estimated $86 million into the OKC economy.

“The NCAA and events that we bring in actually have a higher impact, and one of the reasons is that is outside money,” Hollenbeck said.

“There is no doubt that the effect of the professional teams has a huge impact on OKC and the economy, but with the recognition of that … that’s all associated back to Oklahoma City, and you can’t buy what that coverage is.”

However, intangible effects of the Thunder and all of the publicity associated with its star players, plus ESPN and other network coverage of the college events, are things that cannot be quantified and no doubt bring in more money for OKC and the state as a whole than annual CVB events, Hollenbeck admitted.

Mixing the tangible with the intangible sometimes puts experts at odds about what type of sports most benefit our local economy. The truth is, they all positively impact community growth and development, Hollenbeck said.

 

Print headline: Big ticket,
From merchandising to pregame parties and related tourism, sports also mean big money for OKC and local business.

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