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LeBron James’ Big Financial Impact

{ Posted on Jul 07 2010 by Marcus Alston }

What lucky team and city will NBA Superstar and free agent LeBron James announce he is going to on ESPN on Thursday night, July 8?  I say the Cavaliers of Cleveland, Ohio, his current team and hometown.  But it could be New York, Chicago, Miami, or even Los Angeles (the Clippers, not the Lakers).  Where ever James goes, he will be paid the maximum allowed under the NBA rules (he already makes almost $16 million per year in salary and more than this in endorsements) and have a positive financial impact on the city in which he plays.  Let’s hope he spends his money wisely and not like Allen Iverson, Antoine Walker, Shaq or any of the other big time spending athletes or celebrities.  Hey LeBron, make sure you have a budget and don’t spend more than you make.  Think it’s not possible to spend all your millions– just ask Antoine Walker who made more than $100 million and is now broke. But I digress . . . .

Cleveland.  LeBron James has helped flow millions of dollars into the city of Cleveland’s economy.  Before he joined the Cleveland Cavaliers straight out of high school, the Cavs had averaged about 11,500 fans at home per game.  In LeBron’s rookie year (2003-04 season), the team’s average per game soared by almost 7,000 fans, to 18,288. The team also doubled its number of wins over the previous year and sold out 16 home games. Having the NBA’s most marketable star (based on endorsements), has meant more televised games, increased television revenue, more jersey sales, and more playoff games.  And of course more visibility for the city of Cleveland, Ohio.

During LeBron’s rookie year, radio listeners increased (twice as many), television ratings were up 300%, and local and national sporting goods retailers sold about $72 million in James jerseys during the first 9 months the jerseys were on sale.  And don’t forget more people downtown at the game, or in a bar or restaurant enjoying the game, commuting to the game, folks coming from out of town, staying in hotels, using cabs, taking the bus or train.  You get the picture.  LeBron and the team are a huge revenue generator for Cleveland, with the city getting $3.7 million for each game, according to Tamera Brown, vice president of marketing for Positively Cleveland, a convention and visitors bureau that promotes Cleveland tourism.  Over the course of the regular season (not including the playoffs), including people who head to bars and restaurants for the game, the team brings in $162.8 million for the city.  Project that over just a 6 year period, and you are talking almost $1 billion.  Factor in the playoffs, and the amount is even greater.

Sadly, if LeBron leaves Cleveland, the city will receive a very low financial blow. The Cavs would lose fans, listeners, television, ratings, attendance, and more games.  They also probably would not make the playoffs.  The city of Cleveland would lose out on a lot of revenue, conceivably in the neighborhood of $500 million over 6 years.

Chicago.  An economist with the University of Illinois at Chicago said recently that LeBron could boost the city of Chicago’s economy by roughly $3 billion if he joined the Chicago Bulls.  As in Cleveland, fans would buy more tickets, food, drink, and merchandise; spend more on hotels, and transportation.  The $3 billion estimate is based on LeBron signing a 6 year contract, sales in and near the stadium during the regular season and during 10 playoff games per year.  It also factors in at home basketball parties with food and drink.

New York.  I am no economist, but I would expect the impact of LeBron would be similar to that in Chicago, but even larger. According to the New York City Economic Development Corp. (EDC), each Knicks playoff game would deliver about $3.6 million to the area.  An NBA title could inject close to $60 million into the local New York city economy.  Additionally, James’ arrival in New York would boost the value of the franchise by “hundreds of millions of dollars,” according to Gabelli & Co. analyst Christopher Marangi.

Miami and Los Angeles.  These markets already have superstars so the economic impact might not be as great.  Miami has Dwayne Wade and now Chris Bosh, so LeBron’s impact would be hard to calculate separately.  If LeBron joins the Clippers in LA, he would compete with Kobe and the world champion (it hurts to say this) Los Angeles Lakers in the market.  LeBron’s financial impact in LA would be muted by the presence of the competing Lakers fan base.

“LeBronomics,” the “LeBron Effect, ” “Jamomics,” the “Big James Theory,” “LeFinancials,”–call it what you like, LeBron’s financial impact as an athlete is only surpassed by Tiger Woods.  While LeBron may get around $20 million per year in salary for his new contract which seems like a lot, considering his financial impact, for the team and city that gets him, he is a great investment.

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