SBJ/January 18 - 24, 1999/No Topic Name

NBA lockout's economic effect a big fat zero

The 191-day NBA lockout produced several estimates and a lot of consternation about the economic impact on cities and the nation from the labor-management struggle between the tall guys with tattoos and the short guys with limos. The Chicagoland Chamber of Commerce put the total per-game loss to the area's economy at upward of $10 million, 10 times what the U.S. Conference of Mayors pegged the financial hit in host cities from each game not played during the 1994-95 baseball strike, which suggests that someone has a hard time with arithmetic, let alone economics.

A much better estimate for the negative impact of the lockout and the positive impact from the return of the NBA to arenas and television is: Zero.

While some retail establishments and individuals were undoubtedly hurt financially — and substantially — by the lockout, there is no instrument sensitive enough to measure the impact on a multibillion-dollar economy such as Chicago or Seattle or Miami, let alone the $8 trillion U.S. Gross Domestic Product. Dollars and time spent watching basketball simply displace other leisure alternatives — eating at non-sports bar establishments, going to movies and renting videos, buying durable goods in stores and malls.

It is far easier to find — and to videotape for the human-interest segment of the 10 o'clock news or interview for a newspaper column — those who had their livelihoods hurt by the lockout. We focus on what is easiest to measure and ignore the rest, even though the losses and gains balance out in the aggregate.

Camera crews and reporters don't talk to individual shopkeepers in malls, movie theaters, video outlets and restaurants, each of whom gained a small fraction of their normal business during the lockout; instead, they gravitate to moonlighting vendors and parking-lot attendants, most of whom have regular day jobs, for interviews and photographs. The lockout undoubtedly had an effect on where people drank beer and ate chips; it just

didn't affect the total amount of beer they drank nor calories they consumed.

Furthermore, in terms of employment and total revenue, individual franchises are truly modest economic entities. This even holds for the league as a whole. The oft-cited $2 billion figure (that players and owners were squabbling over) in an $8 trillion economy is nothing; dividing it by 29 — the number of NBA teams — means that it's also a very small percentage of retail sales in the typical NBA metropolitan area. Put a team in, or withdraw a team from, Fargo, N.D., and it would show up on a financial radar screen, but for a Chicago or Charlotte, it's simply too small to matter. Reducing the potential impact even further are the leakages that occur — owners' profits and the fraction of players' salaries that are expended or saved well beyond the area in which the franchise is located.

Even Michael Jordan's (second) retirement from the NBA won't have a significant economic impact — in Chicago or nationally. Some people and establishments would benefit if he remained in or returned to the Bulls; others benefit from his retirement.

NBC and cable channels negotiated new long-term contracts with the league 18 months ago, knowing full well that even under the best of circumstances Jordan's tongue wouldn't be hanging out beyond June 2000. The fact that they were willing to double the amount of their previous dollar contribution suggests that they felt they could market games without him. And teens and baby-boomers will find more than enough alternative ways to spend their weekend hours and incomes with or without Jordan, and with or without the NBA.

While the economic impact on a city or the nation from the lockout or resumption of basketball is negligible, it was not unimportant for the combatants. Their closed-door sessions were simply an intrafamilial squabble about how to maintain the fleecing of fans and cities (through more subventions for arenas) and the division of those spoils between two well-heeled parties. The league's licensed slogan is: "I Love This Game." The unofficial slogan for players and owners alike is: "What the Market will Bear," though neither of them operates in anything resembling free and open competition.

It's also not that owners are greedier than players, or vice versa. In fact, fans and tavern owners are equally greedy; most of us just don't have the legal protection and leverage of a cartel or union to let us exercise our greed to the same extent.

Twenty years ago, when the Lakers defeated the 76ers for the NBA championship, there was so little interest in professional basketball that the series wasn't even carried on live television. It could happen again. Maybe fathers and mothers will shoot hoops with their sons and daughters instead of plunking themselves in front of a television set. If so, they'll buy a ball and sneakers, and end the day at McDonald's or a local movie theater. And the economy won't be able to tell the difference.

Allen R. Sanderson, an economist at the University of Chicago, writes frequently on sports business issues.

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