[New York Diary] The Boston Celtics' Victory and the Economics of Sports

On the afternoon before the weekend, Boston, which I visited, was filled with a festive atmosphere throughout downtown. Countless crowds poured into the streets to watch the parade of the Boston Celtics, who clinched the NBA championship for the first time in 16 years. People of all ages wearing the Celtics' green uniforms gathered in small groups to enjoy the festive mood, and the streets, closed to traffic, were covered with green paper confetti, showing traces of the parade procession. On that day, 10,000 people gathered to watch the Celtics' parade, accounting for 1.5% of Boston's population of 650,000. Shops near downtown also experienced a rare boom from early Friday afternoon. Restaurants around Boston Common Park were packed with customers, making it difficult to dine without waiting.

As the Celtics advanced to the NBA Finals, the Boston community is estimated to have enjoyed significant economic benefits. Meet Boston, a nonprofit organization consisting of 900 companies in Boston, analyzed that a single game in the NBA Finals, played in a best-of-seven series, generates an economic impact of $6 million on Boston's economy. This is because the number of visitors to Boston hotels, restaurants, and pubs increases to watch the games, which is expected to revitalize the local economy. The Celtics played three home games at their home arena, TD Garden, during this year's NBA Finals. According to Meet Boston, the economic impact generated in Boston from the Finals games alone is estimated at $18 million.

There have been several analyses of the economics of the NBA Finals. According to investment advisory firm Silverman Associates, when the Denver Nuggets won the NBA championship last year, Denver experienced a direct economic impact of up to $25 million. This figure excludes revenue from Finals tickets and Nuggets merchandise sales and only accounts for the impact on local businesses such as hotels, restaurants, and pubs in Denver. Milwaukee also saw an economic impact of $57.6 million in 2021 due to the Milwaukee Bucks' NBA championship. Cities hosting the NBA Finals are also expected to contribute to the continuous improvement of urban competitiveness by investing in urban infrastructure such as transportation systems, facilities around the arena, and public spaces in preparation for increased visitors.

The best way to gauge the NBA's economic impact is through broadcast rights prices. The NBA is about to sign a contract to sell broadcasting rights to NBC, ESPN, Amazon, and others for $76 billion over the next 11 years. Walt Disney Company, the owner of ESPN, agreed to pay $2.6 billion annually when renewing the broadcasting rights contract, a sharp increase from the $1.5 billion contract 10 years ago. This reflects the intense interest in sports despite the declining number of TV viewers. Broadcasters can also earn enormous advertising revenue by purchasing expensive sports TV broadcasting rights. According to TV data and analytics company EDO, there were 29,000 advertisements aired during NBA game broadcasts this year. The advertising effect during NBA game times is analyzed to be four times greater than during average prime time. Viewers watched 12% more ads during NBA game times than during average prime time broadcasts, and for the Finals, they watched 39% more ads.

The finals of the three major American sports?football, basketball, and baseball?are major sporting events that stimulate American consumer spending. In particular, the Super Bowl, the football championship and the most popular sport in the U.S., held in February this year, is estimated to have generated a consumption effect of $17.3 billion. Although this is a very small portion of the U.S. economy, which exceeds $24 trillion annually, the direct and indirect contributions of sports to the two-thirds of the U.S. economy driven by consumption cannot be ignored. It remains to be seen whether the expansion of the U.S. economy, driven by consumption and fueled by Americans' unwavering interest in sports, will continue in the second half of the year.