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Skyboxes & Subsidies: The New Economics of Pro Sports
A cartoon image of a well-dressed couple avoiding a zooming baseball and football while a waiter gets hit by a basketball. long description of image

Two converging forces have led to the dramatic expansion of public funding of sports stadiums in the United States. First, the changing economics of modern professional sports requires increasing revenues to feed rapid growth in player salaries and other operating costs. Second and partly independently of the first trend, the professional sports market has shifted to wealthier fans buying more season tickets. Many of these wealthier fans also demand better accommodations – in particular private skyboxes with wait staff and other individualized attention.

This shift in the market to higher paying customers dovetails neatly with revenue sharing arrangements common to most big league sports. Most leagues require that revenues from ticket sales be shared with teams in smaller markets to promote competitiveness. But every league allows its teams to keep all the non-ticket revenue generated by the stadium. In 1998 for example, according to the Heartland Institute, "a new stadium with more skyboxes, luxury suites, on-site restaurants, and other revenue-generating features enable[d] a team owner to raise $30 million a year or more."*

Team owners seeking such revenue apply pressure on host cities and states to provide public financing for at least a major portion of the costs of new construction and supporting infrastructure. Increased competition among cities to attract one of a limited number of big league sports teams has intensified the pressure on cities as teams have become more willing to pull up stakes and resettle in greener pastures.

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Footnote: "Sports Stadium Madness". (full footnote)