Thursday , April 25, 2019

Playing to Win

     The Charlotte Chamber of Commerce touts the city as “a national sports hub.” To support its boosterism, it points to the presence of the Carolina Panthers, the Charlotte Hornets, Charlotte Sting, the Charlotte Checkers, the Coca-Cola 600 and UAW-GM Quality 500 at Lowe’s Motor Speedway and the Charlotte Knights. The city also regularly hosts such annual events as The Home Depot Invitational Senior PGA golf tournament at TPC Piper Glen, and top-flight collegiate events like the ACC basketball tournament.
     Certainly the local professional teams provide their share of exciting moments for their fans and contribute to the entertainment diversity that can be found in and around the Queen City. But how much does the city and the surrounding region benefit from having these professional sports here? At a time when city leaders are debating investing in a $224 million downtown arena for the Hornets and the Panthers’ owners are renegotiating many of their sponsorship agreements, the time is right to look at the economic impact professional sports, particularly the NFL and NBA teams, have on the greater Charlotte area.

coming to play
     John Connaughton, a professor of economics at UNC Charlotte has conducted several studies of the economic impact of professional sports on the area, and is, perhaps, the local authority on the subject. He estimates the impact of professional sports on the region approaches the billion dollar level.
     “In terms of the income created and the jobs generated, the bottom line is that sports have a tremendous impact in dollars and cents,” he says. “While calculating that impact is complicated, there is no question that professional sports, particularly NFL and NBA teams, make good economic sense for the community.”
     While NASCAR has by far the greatest economic impact on the region, it is the Panthers and the Hornets that generate the most publicity and give Charlotte its big-league status.
    Max Muhleman, a nationally known sports marketer based in Charlotte, says major league sports teams are very important to the quality of life, pride and focus of a city, particularly to medium size markets like Charlotte.
     “There is no doubt that sports teams are part of the index of liveliness and attractiveness for cities which aren’t at the very top level of markets,” says Muhleman. “The economic figures, as impressive as they may be, are only about one-third of the value these teams represent to Charlotte.”
     Connaughton and Muhleman agree that, of all the professional sports, NBA and NFL franchises are the best fit for Charlotte because they have the best chance of being successful here.
     “When you look at the economics of different sports, the NFL is the model for how you create a league with parity between small market cities and large market cities,” says Connaughton. “Because of the hard salary cap and the broad based revenue sharing policy, all teams in the league are on equal footing. It doesn’t matter whether you’re Green Bay or New York.” Or Charlotte.
     “We have the right two leagues here in the NFL and the NBA,” says Muhleman. “The NFL is the number one sport in the nation and our great college basketball teams have created an interest and market for the NBA.”
dunking for dollars

     The Hornets and the Panthers are more than sports teams of course; they are in business to make a profit. Both earn money from a variety of sources, including ticket sales, stadium rentals, permanent seat licences, broadcast rights, advertising, and corporate sponsorships.
     This is a particularly important time for the Panthers because many of their sponsorship arrangements are up for renewal this year. One major sponsor, Bank of America, has just signed a new long-term partnership agreement, estimated at $2 million annually. “Sponsoring the Panthers is great for Bank of America’s identity,” says Todd Lankford, managing director of Banc of America Securities. “The demographics of the Panther client base matches well with our target base. It’s a great association to have.”
    For its money, Bank of America receives naming rights to the club level at Ericsson Stadium, the right to place automatic teller machines at the stadium, and a backdrop for Panthers press conferences featuring the bank’s logo next to the team logo. An annual Bank of America Carolina Panthers Caravan Tour takes Panthers players to other cities in the Carolinas, extending Bank of America’s identification with the team throughout both North and South Carolina.
    Another major source of revenue is broadcast rights. The Panthers have recently restructured both its radio and TV deals, so the franchise retains more advertising inventory revenue. According to Scott Crites, who worked in Panther radio sales for Capitol Broadcasting, the Panthers generate millions of dollars in broadcasting revenues. On the radio side alone, the annual income is $5.5 to $8 million.
    Since leaving Capitol in January, Crites has started his own company, called First in Ten Marketing, which develops events for entertaining clients. He says the business grew out of the relationships he formed when doing business with the Panthers Radio network.
    “Corporations have entertainment budgets they didn’t have before professional sports came to town,” says Crites. “The entertainment side of the Panthers is a huge business. It’s also a business which generates business.”

show me the money
     Attending a professional sporting event isn’t cheap. Part of the Panthers’ annual revenue comes of course from ticket sales at the 73,248-seat Ericsson Stadium. A 9 percent increase in ticket prices this year will generate at least $2.9 million yearly. Sports Illustrated recently reported that a family of four spends an average of $304.31 to attend a Panthers’ game. For that price, they get four tickets, four hot dogs, two soft drinks, and two beers. The comparable cost, according to SI for a Hornets game, is $183.15. And that’s for regular seats. The real money in stadiums these days is in leasing corporate luxury boxes.
     David Goode of Southern Real Estate says his company shares a box for Panthers’ games with another company. They use it for entertaining clients.
    “Are we doing more business because we take them to games? Absolutely,” says Goode.
     Lankford agrees that taking clients to games is more than entertainment. It’s an opportunity to spend several hours with a client in a totally different atmosphere than at the office.
     “From a client entertainment perspective, it’s great,” he says. “There’s a social environment; everyone’s having fun.” 
     For William Bray, whose business, Welton Sports, designs custom golf vacations and arranges corporate entertainment, the presence of the Hornets and Panthers has tremendous value.
     “Professional sports give a company like mine more venues to entertain clients and more ways to do it,” he says. “I can sell a client in the Triangle area on taking a long weekend in Charlotte. They bring in 20-50 salespeople to play golf on Saturday and go to a Panthers game on Sunday. They stay overnight, eat dinner and spend money.”
     Fans come to Charlotte from a 150-mile radius to attend Panther games, and from a smaller geographic area for Hornets games.
     “There’s a huge increase in game day business,” says Crites. “All kinds of business around the stadium benefit, from discount shoe stores to restaurants. Eating establishments, transportation companies, parking garages — all of them benefit.”
     Goode’s business is commercial real estate. His company has been doing business in Charlotte for 100 years. He says there is no question that Ericsson Stadium has significantly increased the economic value of the properties which surround it. He believes the same thing could happen downtown with a new Hornets arena.
     Steve Luquire, a principal with Luquire George Andrews, a local advertising firm that works with the Panthers, agrees the location of Ericsson Stadium has had a very positive economic impact on the surrounding area.
     “The stadium was built in an underutilized area,” he says. “It has led to a lot of development in South End and the west side which has led to an expansion in tax revenue and helped rejuvenate the area.”
     Charlotte Hornets owner Ray Wooldridge is trying to sell a new downtown arena for the team as an economic development package for the city of Charlotte. In a recent interview he said, “The arena acts as a catalyst for the redevelopment of downtown. There is approximately $250 to $300 million of additional construction that we can identify and associate with the arena placement. And over the years, it’s going to produce a tremendous tax base and a lot of tax dollars for the city of Charlotte.”

jump shot
     One of the biggest economic payoffs of professional sports, and one of the most difficult to measure, is the visibility they give to the region.
     “National TV games reach a broad audience of people who watch professional ball,” says Connaughton. “The increased exposure for Charlotte through the Hornets and Panthers helps eliminate any confusion over who and where Charlotte is.” (Of course, sometimes that kind of exposure can backfire when players get into high profile scrapes with the law, as has occurred in Charlotte recently.)
     Bray says Hornets merchandising has given Charlotte international name recognition. “I was in Dundee, Scotland recently and was amazed at how many people knew Charlotte because of the Hornets,” he says. “That can’t help but benefit the city.”
     Adds Goode, “Everybody who buys a T-shirt or cap and wears it out-of-state is helping to market Charlotte.”
     How does name recognition pay off in financial decisions? Luquire explains, “The Panthers, Hornets and NASCAR play an important role in people’s perceptions of this as a growing region. Having pro sports here influences decisions like whether Bank of America keeps its headquarters here and whether we are a hub city for an airline.”
     National, even international, name recognition is also an important element in attracting new businesses to the Charlotte area. And, new and expanding businesses are fueling the city’s economic growth.
    “Charlotte is no longer recruiting manufacturing firms,” says Connaughton. “The economic development focus is aimed at headquarter type firms. There is a different set of amenities that you need to recruit at this level. Pro sports, while only one element, is an important one. If you don’t have all the amenities, you’re not a major player.”
    As the market becomes increasingly competitive, pro sports become an even more important element in an area’s mix of amenities. The presence of pro sports also makes it easier for companies to recruit and retain employees.
    Bray is an example of the attraction pro sports have for talented young professionals. In 1993, he had just graduated from law school and was considering where he wanted to practice.
     “One of the reasons I moved to Charlotte was the presence of the Panthers and the Hornets,” he says. “I’m a huge NFL fan. Seeing a team here made it a more attractive place to live.”
     As evidence of the importance of professional teams on the economic impact of an area, Connaughton points to the example of cities like Baltimore, Cleveland, and Houston, which lost franchises and the price they paid to get one back.
     “They spent a lot of money to get a team back because they found that without a major league team, an important part of their economic puzzle was missing,” says Connaughton.

playing together
     Sports teams provide one other important ingredient to the life and business of a city. A major league team provides an emotional release and a common interest for hundreds of thousands of people. Communities come together to root for the home team.
     “Sports teams have a unifying influence on the area,” says Luquire. “They create an allegiance, giving people the ability to connect with one another and to share a common goal.”


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