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Posted: July 01, 2013

Accounting for sports

Broncos are most valuable, but Rockies have had a bigger economic impact

Mike Taylor

 Illustration by Shaw Nielsen

In terms of franchise value, the Denver Broncos top the list of the city’s pro sports teams, and it’s not even close. Forbes puts the Broncos’ value at $1.13 billion, which nearly matches the combined estimated values of Denver’s three other major sports franchises: the Colorado Rockies ($537 million), the Denver Nuggets ($427 million), and the Colorado Avalanche ($210 million).

But team values are based on factors – among them the popularity and prosperity of a particular league, broadcasting rights, licensing agreements and league-wide revenue sharing – that don’t necessarily have much to do with a team’s economic impact on the city where they play. So while the Broncos are the region’s most identifiable team and biggest revenue producer – $276 million annually, according to Forbes – they aren’t the leader when it comes to economic impact. That distinction goes to the Colorado Rockies.

Much of this is owed to the vast disparity in the number of games the teams play. The Broncos play only eight regular-season home games a year, and NFL football in general is a made-for-TV sport that’s less dependent on live attendance than other sports; by contrast the Rockies play 81 regular-season home games and count heavily on drawing fans to the stadium. So whether the Rockies are going nowhere and drawing only 20,000 fans to the ballpark or showing enough promise to draw close to Coors Field’s 50,000 capacity, that’s a lot of spenders descending on Lower Downtown Denver for a lot of afternoons and evenings of entertainment that often include drinking and dining as well as baseball.

And that brings us to Coors Field and its location that makes the Rockies the most powerful economic engine of Denver’s four major sports teams. For starters, those who study the economic impacts of pro sports teams often don’t even agree on the metrics and formulas that should be applied. For example, some affix a multiple as high as five to game-related sales (meaning $1 spent at the ballpark turns over five times in the community, thus stimulating the area economy). Others put the multiple closer to zero, arguing that this is merely a “substitution effect,” and that unless attendees are visiting from outside the region, money spent on a sporting event would be spent on other entertainment if the team didn’t exist.      

In fact, these city-specific studies rarely even surface except when a team is pursuing a new stadium and seeking taxpayer support to get it built. The Broncos’ Sports Authority Field, which cost $364.2 million and opened (as Invesco Field) in 2001, and Coors Field, which opened in 1995 and cost $215 million, were both financed largely by taxpayers in the six-county area with a tax of $0.01 per $10 on retail goods. In the case of Coors Field, taxpayers footed 78 percent – or $168 million – of the construction costs. By contrast, the Pepsi Center, built for $187 million, was privately funded, which is likely why it received less scrutiny from economic forecasters before it opened in 1999.

In their book, “Public Dollars, Private Stadiums,” authors Kevin Delaney and Rick Eckstein point out that supporters of a proposed new stadium for the Broncos largely stayed away from trumpeting economic impacts and instead touted the social and image benefits, noting that it would keep Denver’s four major pro teams within the city limits and further distinguish it as a “big league city.”  The authors note that economic impact was indeed a selling point for supporters when it came to Coors Field. And even though downtown Denver figured to be the biggest beneficiary of a stadium in Lower Downtown, plenty of voter support came from outside Denver County in a close (52 percent to 48 percent) outcome in favor of a publicly financed stadium:

“There was no great difference between suburban and urban voters,” Delaney and Eckstein wrote. “Relatively rural Adams County showed the weakest support, while more suburban Arapahoe County showed the strongest. Younger voters (who were underrepresented among total voters) were more inclined to support the tax than older voters were. The best stereotype of a stadium tax supporter was a single male under age 30 living in or near the city of Denver.”

From the standpoint of economic development and revitalization of Lower Downtown and arguably all of downtown Denver, it’s paid off. Whether that attraction has taken away revenue from elsewhere in the metro area is another issue, to the extent that it’s even knowable.

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Mike Taylor is the managing editor of ColoradoBiz. He writes about small-business money issues and how startups are launched. Email him at mtaylor@cobizmag.com.

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