On the lighter side of economics, the Boston Globe—via Marginal Revolution—highlights a new study arguing that winning sports teams actually increase the incomes of local residents and workers.
It’s been long established that the fans’ investment in sports teams—emotions rising and falling on every goal, streak, or fleeting playoff run—pays dividends in positive psychological effects. Adopting a team’s on-field success as their own, fans gain “a sharp rise in confidence in their abilities,” their intelligence, and even their attractiveness after a win. Now, the authors of the new study, economist Michael Davis and psychologist Christian End of Xavier University, argue that by putting fans in a collective good mood, winning franchises stimulate the fans to “work longer hours, take bigger risks, and shop more avidly, all of which helps the local economy.” The end result is a $120 increase in per capita income. In other words, the study concludes that “all the psychic benefits of winning translate into a very modest, but measurable economic boost.”
There’s always the possibility that the study has got its causality reversed, and that richer teams in higher income areas can afford better talent. On the other hand, most big-time leagues operate under salary cap systems so that teams cannot simply buy championships for higher-earning ticket-holders. And, by being limited to examining the NFL—where there are a lot fewer games—the study might overexaggerate football’s impact on the local economy and be less applicable to sports like hockey. Nevertheless, the question begs asking: If winning brings positive psychological effects to the local economy, what sort of boost does the Maple Leafs’ forty years of futility have on Toronto?
If you own the team, a huge boost. Last season, the Leafs once again ranked number one on Forbes’ annual list of NHL team values and revenue with a total value of $413 million and revenues of $138 million. In addition, the team is the most expensive ticket in the league according to Team Marketing’s Fan Cost Index [PDF], which measures the cost of taking a family to a game. According to figures in The Star, the franchise saw a profit margin of 21 per cent in fiscal 2007. Over the same period, Canada’s highest earning bank saw only a 13 per cent return on investment.
Given how much Toronto fans—even fair-weather fans—invest in the Leafs emotionally and financially irrespective of on-ice success, mediocrity has been a good way to maximize profits for the club. While expanding the economic study’s arguments to apply to hockey (or critically dissecting its findings) must be left to the experts, just what does the team return for the fans’ investment? The entertainment of a season-long emotional roller coaster ride, sure. But it also delivers frustration, anger, and the despairing knowledge that even lowered expectations are often too high.
Photo by bigdaddyhame from the Torontoist Flickr Pool.