NCAA March Madness is no economic slam dunk

The impact on host cities' overall GDP is usually negligible, even though local businesses do benefit.

By Jonathan Berr Mar 19, 2013 7:31AM
File photo of the Lehigh Mountain Hawks playing against the Xavier Musketeers during the 2012 NCAA Men's Basketball Championship on March 18, 2012 in Greensboro, North Carolina (Streeter Lecka/Getty Images)Cities chosen to host the NCAA men's basketball tournament celebrate the event as a slam dunk for the local economy -- but it's a layup at best. 

Philadelphia and Kansas City have hosted games 27 and 29 times, respectively, and they'll reap about $10 million each in economic benefits from hosting parts of the March Madness games this year, according to The Philadelphia Inquirer.  

Though the games do benefit local businesses, their impact on the regional economy will be minuscule. For instance, Philadelphia's regional gross domestic product is about $353 billion, and Kansas City's is about $100 billion, according to the U.S. Bureau of Economic Analysis.

The impact is probably similar in Detroit ($176 billion), Atlanta ($283 billion) and Washington, D.C. ($433 billion), which are also hosting games in the 2013 tournament. Having part of March Madness in Dayton, Ohio, could have slightly more beneficial  because its economy is smaller ($33 billion) than other cities involved in the tournament. The same holds true for Austin, Texas ($91 billion), and Louisville, Ky. ($59 billion).

Large cities tend to attract visitors even when they're not hosting a major sporting event, so measuring economic impact of such an event can be tricky. A spokesperson for the NCAA, which is based in Kansas City, referred my questions about the tournament's economic impact to officials in Atlanta, the site of this year's Final Four. A spokesman for the Atlanta Sports Council couldn't immediately be reached.
"If a business is struggling, it's not going to make too much of a difference in the long run," says Brian Goff, a distinguished professor of economics at Western Kentucky University, who specializes in sports economics, in an interview with MSN Money. "You have got to keep this in perspective."
Billions in taxpayers' money is spent on building and improving stadiums and other facilities in the hopes of attracting big events such as March Madness. The NFL's Atlanta Falcons want to build a stadium that Field of Schemes, a website that's often critical of these projects, estimates will cost taxpayers $554 million. Many Major League Baseball teams are pressuring towns in Florida to build better spring training facilities. The Chicago Cubs are seeking improvements to Wrigley Field, and basketball's Sacramento Kings have threatened to move unless they get a new arena.

Of course, the schools that qualify for the NCAA's Final Four benefit from the huge media exposure that's likely to cause a spike in applications. The real winners, of course, are CBS (CBS) and Time Warner's (TWX) Turner Sports, which paid $10 billion to broadcast the games through 2014. Last year, they made $183.8 million in ad revenue and should do well in 2013 as well.

Most of that money, however, will never come near the towns where the games are played.

Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.

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Mar 19, 2013 9:32AM

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