How Great Will LeBron James' Economic Impact Be in Cleveland?

Josh Martin@@JoshMartinNBANBA Lead WriterSeptember 17, 2014

AKRON, OH - AUGUST 08: LeBron James waves to his fans in the city of Akron after taking the stage during his Welcome Home Ceremony at Infocision Stadium at the University of Akron on August 8, 2014 in Akron, Ohio. (Photo by Ty Wright/Getty Images)
Ty Wright/Getty Images

What does LeBron James mean to Cleveland?

That depends on who you talk to.

To the Cleveland Cavaliers and their long-suffering fans, James' return to his roots in Northeast Ohio portends nothing short of a complete turnaround from the four years of misery that immediately followed the first "Decision."

The hope, of course, is that James' impact therein can and will ultimately be measured in Larry O'Brien trophies and ticker-tape parades. However, whether James brings Cleveland its first championship in over a half century probably won't stop him from affecting the city beyond his on-court exploits.

Surely, there's some karmic benefit to having one of the world's best and most successful athletes choose to live and work in a place that's struggled amid shifts in the national and global economies in recent decades.

Perhaps some Clevelanders feel better now about where they live than they did a few months ago. Perhaps there will be handfuls of out-of-towners who feel more inclined to consider Cleveland as a future home. But what will King James' retaking of his previous throne mean, in terms of actual dollars and cents, to the kingdom he's soon to oversee?

Again, depends on whom you ask.

According to Cleveland.com's Andrew J. Tobias, Cuyahoga County Executive Ed FitzGerald, who's running for governor in Ohio on the Democratic ticket, pegged James' fiscal impact to the city and surrounding region at nearly $50 million per year. FitzGerald derived that number from a pair of estimates:

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  • The anticipated savings on the county's debt payments toward Quicken Loans Arena and Progressive Field, which are offset somewhat by a tax on game tickets. Per FitzGerald, the county expects to save about $3.5 million per year on those payments now that fans will be flocking downtown to fill the 20,562-seat Q.
  • Approximately 550 jobs to be created (totaling $38 million in salary paid out) and sales tax to be spurred on by the uptick in spending by Cavs fans at and around the arena.

That number, though, wouldn't represent much of an increase over the status quo from James' first go-round in Cleveland.

In the aftermath of "The Decision," The Plain Dealer predicted that the community would bring in $48 million less per year, based on an estimate of the average Cavs fan's spending at games put out by Positively Cleveland, the city's convention and visitors bureau.

Like clockwork, attendance at the Q dipped dramatically in the years following James' departure in the summer of 2010.

Cavaliers home attendance between 2000 and 2012
Cavaliers home attendance between 2000 and 2012Aragorn.org

Compared to some, FitzGerald's prediction seems downright conservative. According to LeRoy Brooks, a professor of finance at John Carroll University's Boler School of Business, James' homecoming could contribute anywhere between $245 million and $520 million to the local economy, via The Plain Dealer's Robert L. Smith

Those estimates, first reported by TIME.com's Sean Gregory, are based on their own, separate criteria:

  • Projected increases in both attendance and ticket prices that, in tandem, could account for $129 million in additional revenue for the Cavs;
  • Appraised upticks in spending locally ($57 million) and throughout Northeast Ohio ($114 million);
  • An additional $15 million of economic activity generated by each playoff home game (which Gregory realistically projected to reach $195 million, from 13 home games if the Cavs were to reach the NBA Finals).

Several hundred million dollars is certainly something, especially since it could all be traced back to a single man, in one way or another. But, in the bigger picture, even Professor Brooks' shinier estimates would reflect little more than a drop in Lake Erie. Per Time:

Brooks is the first to admit these are educated guesses. Cut down the number of playoff games or the average ticket price, and the economic impact will be significantly lower. Plus, the Cleveland metro area has a $111 billion GDP. At around $500 million, James’ impact would be worth just 0.42% of Cleveland’s overall economic activity.

Whichever number comes into consideration—be it FitzGerald's or Brooks'—neither seems to address in any great depth one important point: where the money comes from.

"In general, when a Clevelander goes to a basketball game, they are choosing that option over another," Candi Clouse, a research associate in the Center for Economic Development at Cleveland State University, told Bleacher Report.

Victor Matheson, an economics professor at the College of the Holy Cross, elaborated on that same point to Yahoo Finance's Kevin Chupka:

They're gonna have 100,000 more fans at the games next year. But those 100,000 fans would have been going somewhere else in Cleveland. They would have been going out to dinner or they would have been going to the Indians or the Browns or they would have been going to nightclubs or the theater. So all of those gains to the Cavs are losses for other businesses in the local area.

In truth, if LeBron's going to bring the bacon back to Cleveland, he'll have to attract people from outside the city.

"When a visitor comes from another region, they bring what is called 'new money' to the region, and this is what will create economic impact from James' return," Clouse said.

At this point, the size and scope of that "basketball tourism," as Clouse put it, remains a mystery. So too, then, does James' stature as an economy unto himself.

While James may or may not bring much economic relief to Cleveland as a whole, there's at least one person who's due to reap the rewards brought by Ohio's prodigal son: Cavs owner Dan Gilbert.

Jason Miller/Associated Press

Most of the revenue generated by ticket, merchandise and concession sales at Quicken Loans Arena will filter through Gilbert's pockets before any of it trickles down to the local economy.

Gilbert should also see plenty more cash flow in when the Cavs' local TV deal expires in two years. According to Forbes' Mike Ozanian, the team could fetch upward of $40 million per year for its broadcast rights with LeBron on board—up from its current take of $25 million per year from Fox Sports Ohio.

Naturally, these LeBron-related revenue streams have sparked a spike in the value of Gilbert's most prized sports property.

"Certainly the brand itself, as well as the revenue that the team is able to generate, is much stronger with [LeBron James]—to the point of a billion-dollar franchise," Peter Schwartz, a valuation expert and managing director of venture capital at Christie & Associates LLC, told Bloomberg's Scott Soshnick.

The irony of all this? Gilbert, the biggest beneficiary of James' second stint in Cleveland, isn't from Ohio; he's a native of Detroit who currently lives in Franklin, Michigan.

This isn't to suggest that Cleveland in particular, and Northeast Ohio in general, won't gain plenty from having James back in town. The projections herein are largely speculative. The numbers could swing any and every which way once the season starts and money's flowing, from Akron to Solon and all the other points of interest surrounding Rock City.

At the very least, Clevelanders and Ohioans can look forward to watching and rooting for a loaded Cavs squad that LeBron almost single-handedly transformed into a championship contender this summer.

Even if James doesn't do quite the same off the court.

Find me where the King reigns—on Twitter, that is!

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