The above comment is from a reader about an article I wrote criticizing professional sports abandoning their blue collar roots by catering to white collar audiences with outrageously expensive ticket prices. I am not really surprised by such feedback because on the surface, professional sports do appear to behave as businesses adhering to the free market. People pay money for tickets or to buy merchandise, advertisers pay money for advertisements played during sports broadcasts, and the owners of the teams and the professional athletes split the profits.

All of that looks like ordinary business transactions that happen all the time in the private sector.

However, appearances can be deceiving.
 

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Professional sports are by no means free market enterprises. They enjoy one of the most blatant forms of corporate welfare by playing in publicly financed stadiums and arenas. And worse, sports organizations routinely blackmail their host cities to construct newer and more exorbitant facilities. Even though a municipality may not have a few hundred million dollars in liquid cash sitting in their treasury, they have the next best thing which is the taxpayer.

And if the citizens don’t cough up the money, then these sports franchises may very well carry out their threat by pulling up stakes and moving to another city that is willing shell out taxpayer money. Unless the franchise is a sorry team, many cities, especially the smaller ones, do not want to lose the prestige that a professional sport’s club carries with it. As result, these franchises have enormous political leverage.

Now don’t’ get me wrong. I love sports.

During my youth, I was a huge NFL fan but I became disillusioned with how boring football had become. My Dallas Cowboys could play several games and not score a single touchdown but still win games with numerous field goals. However, during that same time, the San Antonio Spurs became a team worth watching so I attended quite a number of games especially during their first championship run.

However, the Spurs were in a quandary. Although they finally escaped their outmoded “publicly financed” Hemisphere Arena, they were unhappy playing in the “publicly financed” Alamodome football stadium that was totally unsuited for basketball. Although the franchise continuously broke NBA attendance records because seats where cheap and plentiful, ticket season holders were at an all time low and a lack of luxury boxes limited potential income.

Consequently, the Spurs wanted a brand new “publicly financed” arena built that was specifically designed for basketball instead of playing in an unused football stadium. They also wanted to cash in on premium luxury boxes and manipulate the laws of supply and demand by greatly constricting supply (number of available seats) and harness their increasing demand in which they could charge more for fewer available tickets.

At first, the city balked.

San Antonio already got burned with the Alamodome. Former mayor Henry Cisneros promised that San Antonio would get an NFL franchise and eventually an MLB franchise. However, the city got ripped off. After the Alamodome was built, the NFL flatly stated that San Antonio was too small of a media market so we would never get a football team. In addition, the city had to cut corners so the stadium was modified which meant that it could never host a baseball game.

Additionally, many San Antonio residents felt outraged that the Spurs would threaten to leave town unless a new arena was built. Even though the Alamodome was deserted for most of the year, it made economic sense to continue using it for Spurs games so that the stadium wouldn’t be completely useless. As a result, the public sentiment was like, “why don’t you win one first (an NBA championship)” and then we’ll consider it.

Needless to say, the Spurs did win one in 1999 which paved the way for the construction of the state of the art AT&T Center. Completed in 2002, it cost $193.5 million to build (which the county is still paying for with hotel and car rental venue taxes).

And now with a few more NBA championships under their belt, in 2007 the Spurs made an outlandishly audacious request for the county to spend an additional $164 million to renovate and upgrade their still very new AT&T Center. Disgruntled taxpayers wanted to know how a facility that is only five years old, which already was supposed to be a top notch “state of the art” arena, needed to be renovated especially with that kind of gargantuan price tag.

The team management arrogantly claimed that these upgrades were necessary because the Spurs need to develop new streams of revenues in order to keep paying the player’s already outrageous salaries.

So what exactly is free market about that?

The county is still paying off the $193.5 million arena and now this team demands an additional $164 million so that they can raise more money for player’s salaries?

There is absolutely nothing free market about corporate welfare especially when it is used to subsidize entertainment.

However, county commissioners are going to try to whittle this figure down a bit but eventually, the team will get its upgrades because the threat of leaving town is more than enough to persuade the local powerbrokers that soaking the taxpayer is the city’s best interest.

But the situation in my hometown is not unique. Change the names of the teams and the names of the cities and the story is pretty much the same throughout the country. In fact, just about every city with a professional sports franchise has had some kind of horror story involving corporate welfare and broken promises.

The source of the problem is that once a municipality gives away free money to a sports organization, they are always going to be asked for more and it is never going to stop. Across the country, there has been a frenzy of outrageously expensive new sports facilities built and many more are on the drawing board courtesy of the taxpayer. And as long as people are willing to subsidize entertainment, the taxpayer will continue to get hosed. Although this trend may never stop, it is time recognize it for what it is; professionals sports thrives on corporate welfare instead of adhering to the free market.

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