Sports Franchises and Stadium Investments

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Is there a justifiable role for government involvement to attract sports franchises?

In sports, the government must attract sports franchises. This can be done by building well-equipped stadia in cities and funding professional sports. Governments should subsidize sports facilities as it leads to the creation of new jobs. Cities with major league teams also tend to attract more business and attain additional tax revenues and lease payments.

Are privately or publicly supported stadiums the norm?

Stadiums tend to be financially supported by the private sector. Professional teams prefer using private-owned stadiums as they are better equipped and managed compared to stadiums managed by the government.

The investment decision for a city in building a stadium

Investment in a stadium brings with it some benefits. First, there is the creation of jobs for the city’s occupants. The building of a stadium is also associated with revenue and lease payments and potential business prospects.

The general range of some of the rental payments by teams for use of their stadiums

There are several formulas used by franchisees to pay rent for use of facilities. One common way is done through the computation of an annual minimum payment. This is then divided among various categories of sports planned for than a year to work out the payment for each sport. Maintenance costs are either taken care of by the stadium management or the government through its local authority.

The direct benefits and indirect benefits/costs of a sports franchise

Benefits from the sale of tickets, concessions, and the sale of broadcasting rights to televisions, radio, and the Internet are ways in which major professional teams get their finances. These are known as endorsements. The income-generating capacity of the stadium used for the game also reflects the value of the team. High valued sports generate more revenue than low valued sports.

The possible positive and negative externalities associated with a sports team

Positive externalities include growth in employment opportunities, tourism sector, and city “status.” The presence of a major league has a positive impact on residents, especially among the youth leading to a decrease in the crime rate.

What is the multiplier effect? How is the effect overstated in economic impact studies?

Change in government spending usually causes a change in national income. The fiscal multiplier refers to the ratio between these two changes. Multiplier effect denotes the increased national spending due to increased national income. As a result, there is a measurable change in aggregate output generating an equal change in aggregate income.

The merits and costs of each method

Stadiums can be financed through government subsidies. This benefits the sports franchise, the government, and the society at large. But this also means that the people have to be taxed a little more so that the government gets funds needed to finance these stadiums and teams. The private sector also finances the stadiums and sports teams. Even though their funds are more sufficient than the government’s, they might decide to pull out of endorsing these stadiums and sports franchises when they are dissatisfied, that is when they are not making any profits.

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