The Economics of the Super Bowl

Super Bowl Kick Off

There are not many sporting events that generate an audience greater than the entire population of Britain. Yet, early every year, over 100 million people across the globe tune in to the phenomenon that is the Super Bowl. For those not well versed in the sports scene across the pond, the Super Bowl is the premiere event of the American football calendar – a contact sport where two teams of eleven players compete to score the most touchdowns on the field, whilst at the same time trying to prevent their opponents doing the same. Playing in – and ideally winning – the Super Bowl is seen as the pinnacle of a football player’s career. The contest is held annually, with the winning teams of the American football leagues – the American Football Conference and the National Football Conference – competing to take home the much-coveted Lombardi Trophy. While the outcome of the game is the concern of most, the economic output generated by this event represents a huge windfall for host cities. With the Super Bowl switching location each year, the bid process to host the event begins years in advance. The National Football League (NFL), the governing body of American football and the Super Bowl, arbitrates the selection process. While the prestige of hosting this event is certainly a motivating factor for cities that want to host the Super Bowl, the economic benefits to the local area is arguably an even greater one. Yet the monetary impact is not the concern solely of the host city: local TV networks are also looking to cash in on the lucrative event. With advertising rights going for millions of dollars at a time, the returns for TV networks can be huge.

 

Benefits to the Local Community

With this year’s Super Bowl LI, (Roman numerals are used to identify each year, rather than the year in which it’s held), Houston, Texas – the host city – is set for a big pay day on Sunday 5th February. Yet, the economic inflows from hosting the Super Bowl begin at least a week in advance. Super Bowl fever really begins to ramp up after the Monday prior to the event with a week of events and experiences being laid on for fans. Visitors and game attendees flock in their thousands to the host city in order to get in on the action and, as far as the host city is concerned, to drive the economics of the area.

The economic benefits of hosting a Super Bowl, along with other major events, has long been a matter of debate, yet clearly there is some financial incentive to hosting such a huge spectacle. While the actual windfall that Houston can expect to receive remains unclear ex ante, forecasters have still attempted to estimate the potential gains. With one estimate predicting that Houston is set to gain an additional $500million in revenue from hosting this year’s Super Bowl, the decision to host was a no-brainer for City of Houston Controller, Chris Brown, who stated that “it will be a nice economic impact at a time when we really need it”.

situated in a relatively tight geographic triangle, thus concentrating the economic gains from hosting this event

The 2015 Super Bowl, hosted in Glendale, Arizona, generated revenues in excess of $700 million for the local area according to Arizona State University. However, these takings were spread across the state of Arizona, with the game being held in Glendale and most guests staying in Phoenix – a 20 minute drive away. Yet, for Houston, this is less likely to be the case. The game itself, along with the majority of the daytime and night-time activities, hotels and transportation, will all be situated in a relatively tight geographic triangle, thus concentrating the economic gains from hosting this event. While such proximity is certainly a host city benefit for Houston, surrounding Texas is unlikely to benefit from the increased wave of consumer spending.

 

Revenue from Commercials

With American Football comes frequent stoppages in play. While often frustrating to spectators, host TV companies such as NBC, Fox and CBS look to benefit. Statistics and estimates for the coming ‘Bowl’ suggest that a single, 30 second advert during the match will set companies back a cool $5million. With circa 60 advertising slots available throughout the match, the potential revenues for TV networks are substantial.

Clearly then, firms must believe that the exorbitant premiums paid for these advertising spots pay off. Advertising to such a huge audience should, in theory, generate increased customers, greater brand recognition and enhanced market strength; however, empirical evidence does not back this. One ad research firm estimates that 80% of Super Bowl commercials do not boost sales or increase purchase intent. A survey by Adlucent, a marketing analytics agency, shows that 87% of viewers who watch Super Bowl ads are doing so solely for entertainment or social purposes, and only 6% watch to discover new brands, products, or services. Less than 1% watch to influence any kind of purchasing.

Yet companies such as Wix, a web development firm, clearly disagree with these results and state that “product improvements as well as greater visibility of our brand have contributed to the strong results in the first quarter [in which the Super Bowl is played]”, there is clearly room for scepticism. Yet while companies remain committed to ‘splashing the cash’ on Super Bowl ads, the ballooning premium shows no signs of slowing even amidst contentious outcomes for firms.

 

National economic expenditures

From parties to gambling, Super Bowl spending sweeps the US. Planned individual consumer spending on this year’s Super Bowl is estimated to be $75, with food and beverages accounting for roughly 80% of this spending. However, bigger spenders (approximately 3.3% of viewers) will even invest in furniture and entertainment centres. Evidently, with over 100 million of us tuning into to witness this spectacle, the cumulative spending impact is extensive. Statista, an online statistics portal, has predicted that Super Bowl consumer spending in the U.S. will reach 14.1 billion dollars.

represent yet another substantial boost to the US economy

Turning to betting, Americans will stake an estimated $4.7 billion to the game between the New England Patriots and Atlanta Falcons, according to numbers released by the American Gaming Association. However, most of these takings will not be filtered into the economy. The AGA estimates that 97% of the money wagered on the Super Bowl in the U.S. will be done so illegally, in an underground sports betting market that has thrived since the Professional and Amateur Sports Protection Act was enacted in 1992.

Yet this aside, with bets projected to be 11% higher compared to 2016, the legal takings are clearly noteworthy and represent yet another substantial boost to the US economy.

 

padding is an essential element of the game both on and off the field

While the economic impacts are clearly vast and wide reaching, there is evidently reason for caution. Estimates often tend to be optimistic, and costs must also be considered. Local areas undoubtedly receive the greatest monetary boon, but the spill overs and increased spending extends across the nation. However, Baade and Matheson, authors of a 2003 study into the financial impacts of the Super Bowl, capture the economic essence of the spectacle: “cities would be wise to view with caution Super Bowl economic impact estimates provided by the NFL… It would appear that padding is an essential element of the game both on and off the field.”

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