Winnipeg Jets defenseman Mark Stuart checks Washington Capitals forward Nicklas Backstrom. // Photo: clyde, Flickr
The economics of missing the NHL playoffs
The following post is from Hockey Night in Headingley, a blog created and maintained by University of Manitoba economics professors and hockey parents, Ryan and Janice Compton. This article originally appeared on their blog on April 21, 2016.
What Does No Jets Playoffs Mean for Winnipeg?
Last year was an exciting one with the Jets making the playoffs for the first time since their return to Winnipeg and we wrote a fun piece back then about what making the playoffs might mean for Winnipeggers. Check it out here.
This year the Jets crashed and burned, and the only race they were in was the one for a high draft pick (and hopefully Auston Matthews). So with no playoffs for the Jets, what does this mean for Winnipeg’s economy? The answer is not much!
Now don’t get me wrong, the Jets are an important part of the fabric of Winnipeg and mean a lot to Winnipeggers. It provides a common bond for a lot of people from varied backgrounds and is a source of pride for the city. They are also one of the more popular entertainment options that certainly add a lustre to the city of Winnipeg. But we can’t forget that at the end of the day they are just that, an entertainment option. There are countless other entertainment options to spend money on in Winnipeg.
But what about the lost playoffs games? What about all the money that would be spent on tickets, and parking, and beer, and restaurants? Won’t that harm the economy? Here’s what I tell my sports economics students at the University of Manitoba.
Off to buy something else // Photo: Dave Shaver, Flickr
Professional sports don’t often have a large impact on the local economy, and to have a positive effect that team is going to have to either generate new spending by locals (that wouldn’t have otherwise spent that money locally) or bring in people from outside the region to spend money who wouldn’t have otherwise come to the city. The Winnipeg Jets have a large season ticket holder base and while I don’t know the exact breakdown, my guess is these are largely Winnipeggers. So you aren’t getting tonnes of people coming from outside the region to go these games (if anyone knows otherwise please let me know). So most of the spending is probably taking place by locals. And while it’s true that without playoff games these people won’t be spending money on Jets games as they would have, this money will likely still get spent but on something else locally instead.
So while you may hear grumbling from the bars and restaurants near the MTS Centre about how no Jets playoff games has hurt their business (and the media love to run stories like that), other restaurants, bars, movie theatres, shops, etc., throughout the city will likely see more a little money coming their way as locals continue to spend their entertainment dollars!
I have a hard time reconciling the conclusion that “professional sports don’t often have a large impact on the local economy” with the residential and commercial investment we’ve seen Downtown since the opening of MTS Centre and more recently with the return of the Jets.
Low property values and the city’s TIF scheme deserve some credit for incentivizing Downtown development over the past decade, but the MTS Centre and especially the Jets have helped rapidly transform the Downtown core’s image from a place to avoid after dark to an entertainment hub and desirable urban neighborhood.
I guess the big question is, why now are both local and out-of-province developers investing in large-scale projects in the Downtown core after neglecting it for so long? While the economic fundamentals may have been there all along, I believe the catalyst has been the cachet associated with being in the ‘big leagues’ and the massive amount of free advertising the city and Downtown receives with every Winnipeg Jets broadcast. Since the opening of MTS Centre the area has been steadily improving as a destination for dining and entertainment, but since the Jets’ return the Downtown’s image has improved with each Jets’ broadcast showcasing the city’s Downtown as an exciting hub of activity.
A deep playoff run and several nationally televised games depicting Winnipeg as a growing and vibrant place would help improve
Winnipeg’s image and in turn could be the difference between a developer choosing to build a new condo tower in Downtown Winnipeg instead of Hamilton. While it may be hard to quantify the actual impact of this phenomenon, it’s pretty clear that without the Jets, developments such as Centrepoint, Glasshouse, Skycity, True North Square, the new Artis tower, along with many smaller scale residential and commercial developments in the vicinty, would likely not exist, and many of those development dollars would likely have been spent in other provinces.
Hi Adam,
Thanks for the comments. Let me try and respond to your points. First the issue of whether pro teams have a large impact economically. If you follow economics you’ll probably know that economists are famous for disagreeing on a great many thing. On the economic impact of sports teams, stadiums, and events (Olympics, Super Bowls, etc), however economists are fairly universal in their view that these things have little effect on the overall economy. There is a large academic literature on this topic. Here are links to a few papers to look at if you are interested:
http://econjwatch.org/articles/do-economists-reach-a-conclusion-on-subsidies-for-sports-franchises-stadiums-and-mega-events
http://www.ualberta.ca/~bhumphre/papers/pfm2003.pdf
http://mercatus.org/expert_commentary/pro-sports-great-just-not-local-economy?
A good quote from the paper from the Coates and Humphreys Econ Journal Watch paper I linked to above summarizes this well:
“The large and growing peer-reviewed economics literature on the economic impacts of stadiums, arenas, sports franchises, and sport megaevents has consistently found no substantial evidence of increased jobs, incomes, or tax revenues for a community associated with any of these things.”
Now let me move on to some of the other points you raised more specifically about the Jets as a catalyst for downtown. You raise a good point when you ask:
“I guess the big question is, why now are both local and out-of-province developers investing in large-scale projects in the Downtown core after neglecting it for so long?”
I would argue this is not a result of the Jets. The Jets obviously don’t hurt, but I think you could argue one reason you are seeing more development downtown is likely due to the same reasons the Jets returned to Winnipeg in the first place. The city and economy have grown and improved to the point that they would now support the Jets, and IKEA, and new mall developments, and US retailers, and everything else we are seeing. It’s not that the Jets arrived in 2011 and all this stuff happened, but rather they arrived for the same reason all this stuff was happening and continues to happen. I’d also add the development you are seeing in the downtown core, especially condos is something going on across Canada and so happens to coincide somewhat with the Jets returning. You see this sort of thing discussed in the news http://www.metronews.ca/views/toronto/condo-trends/2015/12/03/cities-on-the-rise-tall-condos-transforming-skylines-across-cana.html
You also raise the point
“While the economic fundamentals may have been there all along, I believe the catalyst has been the cachet associated with being in the ‘big leagues’ and the massive amount of free advertising the city and Downtown receives with every Winnipeg Jets broadcast.”
Again there is a literature that shows this idea of being “big league” doesn’t really measure up in terms of really raising a city’s profile. Also by your argument Winnipeg was big league in the early to mid 1990s (while not located downtown the Jets would still by your logic make us big league) so we should have seen development downtown but pretty much nothing was built downtown during the 1990s. I’d also argue Canada is small enough that it’s not as though developers are unaware of Winnipeg, NHL team or not.
So all to say I think the Jets are definitely a positive addition to Winnipeg and certainly do make downtown Winnipeg a bit more attractive. However we need to be careful attaching too much to their role in transforming downtown. As a former resident of St. Louis, a city which until recently had 3 professional teams (NFL, NHL, MLB) all located downtown, and much like Winnipeg has a downtown few visit and even fewer live, I can tell you that downtown stadiums don’t generally magically transform their downtown neighbourhoods.
Thanks again for your comments and if you haven’t seen it, this video by John Oliver on stadiums will give you a good laugh. https://www.youtube.com/watch?v=xcwJt4bcnXs
Ryan
It’s an interesting debate and many of your points are valid. I do however need to clarify my central point.
I do not believe that building a stadium magically transforms a neighborhood for the better — like you I’ve witnessed several examples to the contrary. In the case of Winnipeg’s MTS Centre, the arena did lead to incremental improvements in dining and entertainment options in the vicinity, but not much else. However, what’s different in Winnipeg’s case is that the return of professional sports was accompanied by a comprehensive development plan for the ‘SHED’ that was spearheaded by True North and anchored by the pivotal Centrepoint development across the street.
What has followed are several major projects planned or underway, including Sky City, True North Square, the new Artis tower, among many other smaller scale residential projects. In total they will probably add 4-5,000 residents to the area.
If we were to replace MTS Centre with the mixed use community housing project envisioned by its opponents, the Thrashers were still in Atlanta, and we remove Centrepoint and True North Square from the equation, would flashy residential projects like Sky City and the new Artis tower be going forward, a result of the Canada-wide wave of condo construction? Perhaps the only way to know for sure is to feed truth serum to the developers, but the marketing materials for Sky City touting its central location in the SHED as its main selling point suggest the answer is probably no. Fifteen years ago most Winnipeggers would have described the area with another four-letter word, and it’s amazing to see how far things have come since then.
I would argue that it’s not simply the return of the Jets that has helped revitalize the Downtown, but the return of the Jets led by a wealthy owner with a vision for transforming the area into an entertainment and residential district that has accelerated the conditions for further residential and commercial expansion in the area. It’s not the whole story, but I think it’s an important part of it.