BJ Wallace
LeBron James left Cleveland just over 3 months ago and his absence doesn’t just hurt the team’s success but the city as a whole economically. If his move causes the same economic downfall as his first move in 2010, the city would lose an estimated $300 million as a whole.
Why would one player leaving an NBA team cause such a loss in a cities economy? While I know this would require a response more well-versed in macroeconomics, there are several microeconomic components through the reasoning.
First, the merchandise sold by the Cleveland Cavaliers was 25% accounted for by LeBron James jerseys and other products. Imagine you are selling any one product such as a type of crop, and there is a storm that rids of 25% of your field. This is a very significant decrease in supply. This leftward shift of the supply curve would cause the new quantity demanded to decrease.
The biggest reason for a decrease in economic value when LeBron leaves is that going to a Cleveland Cavaliers game is a complementary product to many of the local businesses such as many well known restaurants. When the demand for the cavaliers tickets go down, which will inevitably happen when the best basketball player in the world leaves, the demand for the compliments will also go down. Just being in the city and experiencing the downtown area is also a compliment and when all of these businesses are getting less customers, the economy will be in decline. Even the owner of the Cavaliers, Dan Gilbert, will experience this decline because he has invested in a well-known casino named Jack Casino. This casino has had a total revenue of of $1.26 billion in the last 6 years. Below is the number of restaurants within one mile of the stadium in the years that LeBron was in Cleveland and in Miami. As you can see, there are more restaurants when he is present. With these restaurants brings jobs which greatly benefit the economy.
Finally, a more in depth proof of the drop in price of the game tickets (the main source of profit for the team) can be shown through the marginal utility of the consumer. We know that most consumers will buy a product up until the point where marginal utility is equal to the marginal revenue or the price. Without the electrifying presence of LeBron James, the marginal utility for each game you go to will decrease. This will create one of three outcomes. Either the prices of tickets will stay the same so less people would attend the games, the prices of tickets will decrease significantly and the same number of people will attend the games, or somewhere in the middle. In each scenario, the total revenue of the organization is lower than what it was in 2017 because either the price decreases while quantity sold stays the same, price stays the same and the quantity sold decreases, or both.
It is amazing that one person can have such a large effect on the economy of a city by just being there playing a game. Not only does it affect the team’s revenue through merchandise and ticket sales, but also it affects the surrounding businesses. We will have to wait a few more months to see the final effect of his move.
Works Cited
Banks, Alec. “The LeBron James Effect: An Economy Built on One Man.” Highsnobiety, Highsnobiety, 14 July 2018, www.highsnobiety.com/p/lebron-james-effect-econony/.Rooney, Kate, and Leslie Josephs. “How LeBron's Move West Could Tip Parts of Cleveland's Economy South.” CNBC, CNBC, 10 July 2018, www.cnbc.com/2018/07/02/lebron-james-move-will-hurt-clevelands-winning-record--but-its-econ.html.
Rovell, Darren. “LeBron James Is Worth Hundreds of Millions to the Cavs and Cleveland.” ESPN, ESPN Internet Ventures, 13 June 2018, www.espn.com/nba/story/_/id/23769496/lebron-james-worth-millions-economy-cleveland.
Scott, Dylan. “LeBron James Means a Lot to Cleveland - and Its Economy.” Vox, Vox, 1 June 2017, www.vox.com/2017/6/1/15724252/lebron-james-economic-impact-cleveland-miami.
So not only does lebron leaving affect the economy, but also a huge reason people toured cleveland is also to have the off chance of meeting the worlds greatest NBA player and see all the monuments built in his name, but now since lebron left not as many people will go to cleveland to see the worlds greatest NBA player because he won’t be there.
ReplyDeleteIt is interesting how much professional sports end up changing the economy. This entire scenario can be illustrated on a graph using a Demand and Supply Curve. The Demand Curve for Cleveland tickets have shifted to the left and so the location on a graph where the demand curve and the supply curve intersect is further to the left. This means that if Cleveland keeps the price of their tickets the same, they will sell less tickets. If they decrease the price of their tickets, they might be able to sell the same amount of tickets, but they will be at a cheaper price.
ReplyDeleteIt would be interesting to research how Lebron joining the Heat impacted Miami's economy is different then Lebron joining the Lakers on the economy of LA. Also Cleveland is no where near the size of either Miami or LA so probably the impact of Lebron leaving will most likely be greater than Lebron arriving. Also LA has another basketball team in the Clippers. Maybe the quantity demanded for Lebron merchandise will be very high in Miami and LA compared to Cleveland since California and Florida are so much larger than Ohio.
ReplyDeleteThis is a really well crafted piece and I couldn't agree more. Your microeconomics points are all accurate. It is very interesting how one man leaving a sports team can directly impact a decrease in demand for Cavaliers tickets due to a change in expectations. They don't expect the Cavs to do as good and also don't expect the fun from watching Lebron play the game. This would shift demand to the left.
ReplyDeleteIt's crazy how just one person can make such a big difference from the amount of people attending the game to the business going on a downfall all cause of one player leaving a basketball team.
ReplyDeleteI remember when LeBron James left Cleveland the first time, then everyone knew that their team would suck. However, they probably didn’t realize the actual economic effects that come with this. It doesn’t help that the Cleveland Browns also are a bad team so the city of Cleveland doesn’t have a team that can bring them a ton of money, as compared to a team that is highly successful and gets their fans to games more often. Right now the demand curve is shifting to the left due to less people wanting to go to games.
ReplyDeleteThis is absolutely insane how just 1 NBA player leaving a team, could effect the way the whole city endures their money. I also on an Instagram post yesterday, that I believe they were selling Cleveland basketball game tickets for lower than $10! that's how you can tell most of the fans were there, just to watch LeBron, and not just the Cavaliers as well. This had a very steep turn towards the left ion the demand section.
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ReplyDeleteLuke Lochner
Lebron James leaving would also cause a decrease in tourism in the city of Cleveland. The city already did not have much tourism but because he was there, basketball fans would come to watch Lebron play on his own court. The tourism would also help increase the revenue of the said restaurants in the surrounding area. Also the tourists would pay for some apparel that they want originally from Cleveland. Regular attenders of the game would already have a lot of the apparel from the sports shops and fan shops in the area and within the stadium. The tourists really want the full experience when attending a game that they had to travel to which would cause them to spend more money.
I never really looked at how much a player could actually effect the economy as I have always just looked at it from a sports angle. But I can really see how much different effects a player leaving a team could have on the economy and the city. I also realized this when Aaron Rodgers of the packer got hurt in the middle of the season last year as a lot of the fans got frustrated and stopped going to games. I also realized how real the saying is the quarterback or the star player is the franchise
ReplyDeleteThe subtlety of how important one player can be in an economy really goes unnoticed. And when Lebron moved to the Lakers, if was probably very easy to see the spike change in the economy in LA from his signing. Not only does his arrival grow the economy but most likely also creates new business there, which stimulates growth even more. So Cleveland took a huge hit while LA is being pampered with good fortune. All because of the success of one player. Really shows you have much effect any one person can have on a society.
ReplyDeleteLebron James being one of the best players now, would give fans a lot of hope. However, when leaving fan in Cleveland lose more hope because they have lost one of their stars. Without the player that helped the Cavaliers to many championships, the fans also lose hope in the team. They won't even bother paying a lot of money for tickets to the game. From less ticket sales to no more Lebron merchandise, the team as a business is making less money than they did before.
ReplyDelete-Colin Pham
I never realized that Lebron James had a substantial impact on the economy.I simply thought he was just another basketball player that is very popular and has succeeded in the NBA. After reading this article I see that he not only is a world famous and very talented basketball player, he also brings in a lot of money wherever he plays. He sells merch, sells tickets and brings many customers to restaurants which benefits the economy.
ReplyDeleteLebrons departure this summer will cause economic struggles for years to come for Cleveland. James is more than just a basketball player, where ever he goes he is able to stimulate the economy of the city he is in. Lebrons ability to lead basketball teams deep in to the playoffs generates more revenue for the league the team and the cities he is playing in.
ReplyDeleteI was intrigued from the start because my original thought was that there was no way one basketball player could affect an economy that much or cause it to lose about $300 million. Your explanation helped me realize that this is indeed possible as LeBron’s absence in Cleveland not only affects the game itself (tickets and merchandise), but surrounding businesses as well. If LeBron James were to be considered a good, he would be more elastic in the sense that when he moves out of a city, the demand is greatly affected in a negative way.
ReplyDeleteIt crazy to think that only 1 player for an NBA team could impact the economy so greatly. The statistic that about 25% of the whole sales for the Cavaliers was solely for Lebron James really made me realize that the only reason there were so many fans of that team last year was all because of one person. Cleveland is also notorious for not having decent sports teams so when one of the major teams gets a ring, it's huge for the economy. Lastly, I thought it was quite interesting that the whole restaurant economy increased the number of buildings just when Lebron was there and when he wasn't, the amount decreased.
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