LeBron's Choice: The Economic Impact of the NBA's Hottest Free Agent
The debate over which team will acquire King James has been the NBA's hot topic since the Cavaliers were bounced from this year's playoffs on May 13. It has prompted elaborate public relations campaigns in Cleveland, New York, Chicago, Miami, New Jersey and Los Angeles. Even New York City Mayor Michael Bloomberg did his share, explaining in a video the many reasons why James should come to New York, one of which is because it's "the greatest city in the world." The mayor's 49-second effort made the front page of The New York Times.
For the most part, such active seducing has been prompted by the historically accurate idea that if James, 25, suits up for your club, it will almost instantly become a contender for the NBA title. But in addition to the sporting issues involved in the fervent courting of James lies a less emotional, more pragmatic reason for why bigwigs like Bloomberg care so much: cold cash.
Crunching the Numbers for New York
If James played for a team like the woeful New York Knicks or the disastrous New Jersey Nets, the economic impact on the area would be immense. According to the New York City Economic Development Corp. (EDC), each Knicks or Nets playoff game would deliver some $3.6 million to the region. And if you are ready to dream the impossible dream, an NBA title could inject close to $60 million into the local economy.
That's not going to get New York City out of its multibillion-dollar debt, but hey, every little bit helps.
"The way we typically do an economic impact analysis is by looking at the out-of-city dollars being spent in New York City," says EDC spokesmen David Lombino. "The difficult problem with the Knicks is that they still sell out almost every home game, even though they've sucked."
For that reason, the EDC looked at games beyond the regular season -- the Knicks last visited the playoffs in the 2003-04 season -- to determine how James would assist the economy. They see the potential for both direct and indirect impacts -- the new money spent at a midtown diner, say, would be the direct impact, the waiter that restaurant can then afford to hire is the indirect impact.
Just Ask Cleveland
A smaller, but still meaningful city revenue stream would derive from the various taxes (personal, property etc.) James would pay, so long as he lived in the city more than half the year and thus qualified as a resident. Assuming James buys a home that costs around $15 million (a safe bet considering he earns far more than that in salary and endorsement deals each season), New York City would see an additional $9 million in tax money over the next five years, according to the EDC's number-crunchers.
Lest you think that such statistics are inflated, that there is no way one player can have such an impact both on the court and off, let history be your guide. When James was a rookie with the Cavaliers for the 2003-04 season, the team doubled its number of wins over the previous year, sold out 16 home games and saw its average attendance per game soar by 7,000 fans, to 18,288 a contest. Should James opt for the orange and blue, Madison Square Garden would see an estimated $10 million to $20 million revenue surge, according to Patrick Rishe, an economics professor at Webster University. And Forbes magazine estimated that the team's valuation would climb $150 million, to over $700 million.
During the reining MVP's rookie year, twice as many Cleveland backers tuned into radio broadcasts of games, TV ratings were up 300%, and local and national sporting goods retailers sold about $72 million in James jerseys the first nine months they were on sale.
The Cost of Courting the King
While the amount is undisclosed, it's pretty clear that the city of New York has spent a considerable amount of time and also a few bucks trying to woo James to the Knicks. For the "C'mon LeBron" campaign mounted this spring, Bloomberg employed the city's high-powered advertising agency, Bartle Bogle Hegarty New York. A firm with global reach, domestically BBH has worked with an array of top-shelf brands, including Cadillac, Google, and the Westin hotel company. The firm's James-directed entreaty included a full-court social media press on Facebook, Twitter and a dedicated website where fans could create and upload videos pleading the city's case.
There were also older-school touches, such as an enormous (albeit digital) "C'mon LeBron" billboard erected in Times Square, T-shirts,and Matt Lauer, who jokingly offered James a co-hosting gig on the Today show.
According to a spokesmen with NYC & Co., the city's marketing and tourism department that worked with BBH on the campaign, the city's expenses on the effort have been minimal -- $3,500 to create T-shirts, with the videos produced in-house by staffers. But BBH is kept on retainer by NYC & Co. and that can't be cheap (NYC & Co. declined to disclose how much the retainer costs per year).
Ultimately, the many millions that tag along with LeBron James would likely register a distant second in importance to the city's deeply suffering but still loyal hoops fans. In discussing the financial ramifications of signing James with a New York-based radio station, Greg David, a professor with CUNY's Graduate School of Journalism, perhaps put it best: "You know, I don't know if the numbers are true, but it would be nice if LeBron James came and played with one of the local teams, right?"
Nice, yes, and lucrative.