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Why The National Hockey League Lockout Isn’t Killing Your City’s Economy

By Travis Waldron on November 21, 2012 at 12:15 pm

"Why The National Hockey League Lockout Isn’t Killing Your City’s Economy"

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The National Hockey League’s second lockout of players since the 2004-2005 season is now 67 days old, as league owners continue their attempts to extract huge concessions from players. Now that nearly two months of games have been canceled, cities across the country are beginning to worry about lost revenue from those cancellations.

Pittsburgh says it stands to lose $2.1 million for each lost home game. Long Island, New York said in September the lockout could cost it $60 million. Detroit pegged its potential losses at $1.9 million per lost game.

But cities often inflate the impact sporting events and sports stadiums have on their economies, and recent studies show that they’re likely overstating the losses from the NHL lockout too. When economists Robert Baade, Richard Baumann, and Victor Matheson examined monthly taxable sales in three Florida metro areas that have multiple franchises in each of the Big Four sports leagues, they found that work stoppages in professional sports had “no statistically significant effect on taxable sales“:

Our detailed regression analysis of taxable sales in Florida over the period from 1980 to mid-2005 reveals that none of the labor disruptions in the big four professional leagues have been associated with any statistically significant reductions in taxable sales and none of the franchise expansions or new stadiums have been associated with any statistically significant increases in taxable sales.

If that seems counter-intuitive, it shouldn’t. Baade, Baumann, and Matheson, and a host of other economists, have done extensive research that supports the idea that professional sports franchises, and the publicly-financed stadiums in which they play, have little overall economic impact on their home cities. That’s because most of what is spent by fans in and around stadiums isn’t new money injected into the local economy; rather, it’s money diverted away from other sectors of the city’s economy. So when the NHL cancels games, most of the money doesn’t leave the local economy. It’s just spent elsewhere.

“Money not spent by local fans on the NHL is money available to be spent elsewhere in the economy. The NHL’s loss is a gain for local restaurants, theaters, and other entertainment options,” Matheson said in an email. “So, the $2.1 million figure is probably a pretty good estimate of gross losses but an extremely poor estimate of net losses.”

The loss of revenue from NHL games certainly has negative effects for businesses in the neighborhoods around the arenas where those games would be played, and for the people who work at those businesses and staff arenas. But like the effects of stadiums and teams in general, Matheson said, the effect of lost games on the entirety of metro area economies is negligible.

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