Losing One Big-Budget Movie Worse than Losing Three Entire Seasons of Lakers Games for L.A. Economy

Posted on November 15, 2011 by


Local media outlets from CBS local 2 to the Los Angeles Times have been heavily reporting the impact that an NBA lockout will have on the local economy and the thousands of people who work in and around the Staples Center during a combined 82 home games for the Los Angeles Lakers and Los Angeles Clippers.  If only the media would focus such attention on runaway production (we will do so and tie in our point below).  In a recent interview on American Public Media’s Marketplace, one of the chief economists at the Los Angeles County Economic Development Corporation (LAEDC) estimated the economic impact of a single sold-out Lakers game was roughly $800,000:

John Blank is deputy chief economist with the Los Angeles County Economic Development Corporation. In adding up the economic impact of an NBA game, he counts about $200,000 in concession sales, plus meals at nearby restaurants.

John Blank: ‘If you add $10 on average to parking, is another $200,000. So what I get is $800,000 in a back-of-the-envelope type of calculation’

That’s $800,000 in direct economic impact from one single sold-out game. That’s excluding ticket revenue, which is divvied up between owners and players, so it doesn’t really trickle down.

That works out to $40 in discretionary spending for each of the 20,000 fans at a typical game.  Over the course of 41 home games, Lakers season delivers $32.8 million in direct economic impact.  Direct economic impact figures do not include indirect impacts for things like wages paid to extra wait staff at restaurants near the stadium.  Still, if the impact still sounds low, empirical research has shown that it may actually be overstated.

A recent article posted on Time Magazine’s Moneyland site suggests the economic impact of a temporary lockout is not as adverse to the local economy as one might expect, because money that fans would have spent at games is still being spent in the local economy on substitute forms of entertainment:

Without question, sporting events generate sizable, if often overstated, amounts of game-day spending in cities…

So if these games are lost in a lockout, the thinking goes, NBA cities lose out on big money. The empirical work of a few sports economists, however, has proven otherwise. For example, a 2000 study by University of Maryland-Baltimore County economists Dennis Coates and Brad Humphreys found that work stoppages in baseball and football between 1969 and 1996 – the NBA had experienced no labor disputes in that time period – had no impact on the economies of 37 metropolitan statistical areas with pro sports franchises…

Why do lockouts seem to have no adverse impact? Start with substitution: Instead of spending a fortune at the NBA arena, fans may go out to dinner, a movie, or a bowling alley, providing additional income for other local workers and business owners. Spending gets redistributed within a city during a work stoppage, but overall levels remain the same. “The idea that, somehow, the only discretionary income that people have are spent on pro sports is just wrong,” Baade says. (He does acknowledge that in today’s era of austerity, people might be more likely to save the money that they otherwise would have spent on NBA games, putting less gas in the local economic engine. But you can’t completely ignore substitution when evaluating the economic impact of the lockout)…..

Let’s be clear: The lockout will do some damage. On a more micro-level, arena support staff – the vendors, the concession-stand operators, the security guards, the ticket takers – will be out of work, at a time when low-skill workers are having trouble finding other employment. The burger joints and bars near the arenas will take a hit. These adverse effects are very real, and should not be marginalized. Select individuals will suffer and will have to scramble. But cities will survive without basketball.

So what’s this have to do with filming?  Some more back-of-the-napkin calculations are in order. With a season of Lakers games generating approximately $35 million in direct economic output, and a single motion picture project capable of bringing $100 million to the economy over a much shorter period of time, it’s reasonable to ask why there isn’t more media outcry about the loss of film production and jobs to other regions.  Let’s ignore for a moment the sizable indirect impacts that both sporting events and film projects create for the local economy.  Just one $100 million feature film generates an economic impact greater than all spending by Lakers fans attending games over three entire SEASONS.

Let’s be clear — here at Film Works we are deeply concerned about the “micro-level” damage described above.  An NBA lockout is terrible news for more than 1,000 Staples Center workers who won’t get paid unless sporting events happen as scheduled.   However, if Angelenos are concerned about the negative impacts to the local economy, the persistent loss of film projects to jurisdictions outside California is a far more worrisome problem.

After all, with lost film production spending, the local economy has no substitutes.   Sports fans can take their entertainment dollars out to dinner and a movie, but when a film project leaves, the money’s gone.