Puns are fun. You can tell puns are fun because I just made one in the title. I combined two things; Lebron James’ first name and the word “economy”. I made that happen, with my brain AND my fingers.
I’ve never really been good at leading off a story or article. I’ve been taught in my however many years of school the most important part of a great article is a concrete lead that pulls the reader in and then hooks them. So far, if those facts are any indicator of reality, most of you have already exited this page.
Those of you who have heroically stuck around are in for a real treat because today I’m going to talk about two of my favorite things; basketball and economics! For those of you not familiar with the planet earth, Lebron James returned to his old team, the Cleveland Cavaliers this summer as a free agent. After four glorious years and two NBA titles in Miami, Lebron apparently had enough of the year round temperate climate of Southern Florida, opting instead to enjoy those long, horrible eastern Ohio winters. In addition to being the best basketball player on earth, James, obviously, is a major factor fiscally. According to Forbes, James’ net worth is estimated to be around $300 million, with his average salary being $70 million annually. That’s a lot of cheese for a guy who dunks on fools for a living. Worth noting, however, is James’ NBA salary constitutes only about one-third of his annual earnings, as endorsements from Nike, McDonald’s and State Farm allow the NBA superstar to make bank year round when his game checks stop flowing.
Naturally, James also generates a fair deal of money. When James announced his return to Cleveland, season tickets to Cavaliers games sold out the same day. Quicken Loans arena holds around 21,000 wild, rambunctious basketball fans. Each of these rowdy fans, on average, will fork over about $55.56 for a ticket, according to a metric that judges ticket prices. Since the Cavs are guaranteed a minimum of 41 homes games every season, all the numbers I just mentioned turn into about $47 million. That’s from ticket sales alone. It can certainly be argued those season tickets sold out because of James, so a large portion of the $47 million I just quoted are because of him.
“Wow”, lots of people thought, “if he can generate that kind of money from ticket sales, imagine what kind of money will come elsewhere?” Some folks even speculated the return of James would be enough to jump-start a struggling Cleveland economy. In fact, one economist estimated James could generate an additional $500 million in revenue each year for the city. Since James joined an already talented team, the Cavaliers are predicted to be a favorite to win the NBA championship this season. This means in addition to ticket sales, folks will buy up more merchandise, which will inject more money into the economy. The constantly sold-out arena means surrounding business will see an increase in revenue as well, as packed bars and restaurants will inject some much needed cash flow into the city’s economy. They will be so busy in downtown Cleveland these businesses will need to hire extra help, so Lebron James has even helped create jobs in this stagnant economy! As many as 600 new jobs, according to one expert.
Keep in mind, this $500 million estimate is very generous. As anyone with a working understanding of economics knows, to pull out of a recession, which Cleveland is in, goods must be bought and money must be spent. Sure, the fans will be buying jerseys from vendors on the streets, but what happens when that guy spends $4000 on a vacation to Hawaii? The successful bar owner decides to purchase a new home in the suburbs because of his added profits instead of spending his money on tickets to the rock and roll Hall of Fame in downtown Cleveland. This $500 million number is assuming every cent is being revolved around downtown Cleveland. In fact, some economists such as Leroy Brooks, a finance professor at John Carrol University in Ohio, estimates the revenue generated by “The James Effect” likely would not eclipse $250-300 million.
But hey, a quarter billion dollars is still a ton of money! Right?
I have a pretty rabid interest in business, finance, and economics, but I’m no expert. I don’t claim to be. But in a major city such as Cleveland, does $300 million really go that far? Is it really enough to help save or jumpstart a struggling economic situation like Cleveland is facing?
I like stats and numbers, so let’s look at some more: Last year, the total economic output in terms of dollars for Cleveland was $120 billion. This means the impact of Lebron James signing with the Cavs, even at its most generous estimation would make less than a 1% of a difference. The Cleveland Clinic, a world-renowned hospital system originating in Cleveland generated almost $11 billion last year. This means the “economic impact” of Lebron James returning to Cleveland would be similar to the Cleveland Clinic planning a decent sized expansion to their system.
I don’t want to downplay the importance of Lebron James to the Cleveland Cavaliers or the city of Cleveland. James is a tremendously talented guy with global recognition who has maintained an almost flawless public image for the entirely of his career. However, James is an entertainer. He does not have the economic clout to rescue the entire infrastructure of a major city. Sure, he will probably win himself the MVP award, and he may even deliver the city its first major championship since the 1964 NFL Championship, which is pre-Super Bowl era, so it doesn’t really count, meaning their last actual championship came in the 1948 World Series. Despite the success he will bring to the franchise, and the pride he will bring to the city of Cleveland, the fact of there matter remains: one man can’t save an economy.