The lockout has officially arrived when newspapers start reporting half-baked economic impact projections that are so far removed from reality as to be laughable. You know the sort. "Team X brings in so much money, without them the city would go broke and revert to feudalism OMG." These studies are usually trotted out to justify building billion-dollar taxpayer funded stadiums, so using one to sound the alarm on a labor stoppage is somewhat less odious, if no less full of shit.
If the lockout cancels the entire 2012-13 NHL season, what would it mean for hockey-mad Detroit? MLive spoke to economist David Littman, who I'm sure is a smart guy, but where in the hell he's getting his numbers from I have no idea. Littman lays out the apocalyptic scenario:
Littman's conclusion: If the Detroit Red Wings do not play a single home game this season, Detroit will be out $84.4 million.
Littman reached this number by estimating that the Red Wings would play about 45 home games at the Joe Louis Arena, with that number including a handful of playoff games.
He considered the average ticket price for a game as $53.26, based on a compilation of average rates at statista.com, and estimated the average attendance per game at about 20,000.
Littman then estimated about $20 per person would be spent on souvenirs and food. He added transportation and parking revenues, totaling an estimated $900,000. He tacked on magazine, radio, television and other expense outlays at $200,000.
Added to those elements was a "multiplier," which he said adds the "second and third effect" of game attendees' dollars spent in the immediate area.
Can you spot the flaw? Maybe you said "That multiplier is bullshit. If someone tips their bartender $10, then that bartender buys a hat for $10, that's not $20 added to the economy. That's not how money works." And you'd be right. But there's an even bigger flaw: the fact that Detroit gets almost none of this money.
Attendance? Merchandise? Concessions? That goes straight into the Red Wings' pockets, not the city of Detroit's. (This should probably have been pointed out to Littman.) While Detroit owns Joe Louis arena, it's operated by Olympia Entertainment, Red Wings owner Mike Ilitch's company. The city only receives a tax on cash spent at Red Wings games, a cut of concessions, and whatever Ilitch is paying in rent.
Want a more accurate number? A 2011 Crain's Detroit Business breakdown found that Detroit turns an annual profit of $2.7 million on Joe Louis Arena.
But what about the secondary spending, you ask? Don't people have to pay to park? Yes, but the two biggest parking lots on site are also owned by Olympia Entertainment.
These stadium economic impact projections always contain the same fallacy. They assume that if people aren't spending their money on sporting events, they're not going to spend it at all. That's not true. People tend to spend whatever disposable income they have, and if they're not going to hockey games, they're going to do something else with it. More trips to bars, restaurants, concerts, etc. So a lockout could actually funnel more money back to the city—if Ilitch didn't also own concert venues, movie theaters, food distribution companies, restaurants, the Tigers, and a casino.
A lockout hurts the players, the fans, and the owners who aren't losing money on their teams. The Red Wings are one of those few teams in a good hockey market, turning a big profit—Ilitch doesn't want a lockout. (As we explained, this is about big market owners vs. small market owners, rather than owners vs. players.) Nobody wants there to be hockey more than Mike Ilitch. Hell, he's publicly spoken out against the salary cap. Because he's the one who stands to lose tens of millions, not the city of Detroit. Detroit would take a very minor hit, nothing it can't handle. To imply otherwise is baseless scaremongering.