King James: How LeBron Will Boost LA’s Economy

BusinessKing James: How LeBron Will Boost LA's Economy

King James: How LeBron Will Boost LA’s Economy

You would be forgiven for thinking that LeBron James’ move from the Cleveland Cavaliers to Los Angeles Lakers was a story about perhaps the most gifted basketball player of his generation; his creativity on the court; the cultural phenom.

But James is not just the world’s most dominant basketballer: he is an economic booster to the city that hosts him. When the three-time National Basketball Association (NBA) champion moves his career, he brings with him businesses and jobs.


Researchers at Harvard University and the American Enterprise Institute (AEI) have quantified the astounding economic impact of the “LeBron James affect”, or “LeConomics”.
Professional sports — basketball included — have long been known as commercial powerhouses that bring benefits to their home fans. Team owners are often billionaires, a la Microsoft co-founder Paul Allen, who owns the Portland Trail Blazers.

While economists have debated for years the economic effect of new sports facilities (with some suggesting a negative influence), the AEI have proven that superstar sportspeople do increase ticket sales and impact broader local amenities.

James spent the first seven years of his career playing in Cleveland, before a four-year stint at Miami and a return to Cleveland in 2014. The AEI researchers found that his mere presence increased the number of restaurants and bars within one mile of the team’s arena by 13% and the employment at those businesses by nearly one-quarter. There was also a positive impact up to seven miles from the sports arena, but none further afield.

The 14-time All Star’s exit of Cleveland has caused a storm on both occasions, leaving Cavaliers’ fans distraught. James helped the team win the 2016 NBA Championship, with four forays in the finals of the competition. A mural depicting the great basketballer in Los Angeles was defaced this week after a social media post offered $300 for anyone to do the deed after people labelled James a “traitor” and a “sell-out” (the mural was later restored).

James’ departure also seems to impact local economies as much as their passionate and charged fans. The number of establishments close to Cleveland’s Quicken Loans Arena fell by around 20 when the superstar first left in 2010 but surged to 210 upon his return.

In Miami there was an impact, too, with the number of bars and eateries around the Miami Heats’ American Airlines Arena steadily rising during James’ tenure, peaking at about 250 before declining slightly when he went back to the Cavaliers.

Correlation, of course, does not necessarily mean causation, but the researchers concluded: “We find that James has a statistically and economically significant positive effect on both the number of restaurants and other eating and drinking establishments near the stadium where he is based, and on aggregate employment at those establishments.”

Economic Impact of James ‘$500m’

The findings chime with previous research in 2010 claiming that James played a “key role” in a $200m splurge in downtown Cleveland spending. Another more outlandish estimate put the impact of James at $500m, which was contested.

The impact, local Cleveland media report, is quantifiable through sales tax receipts, increases in hotel room occupancy rates and ticket-admission tax. Anecdotally, bar owners have said revenue on game nights was up by between 30-200% year-on-year when James was with the Cavaliers, which meant staff were on the payroll for longer.

The potential impact on LA is already being mooted by pundits, economists and fans. James signed a $154m contract with the Lakers, one of the NBA’s most revered franchises — a pay cut compared with his salary of about $40m a year at the Cavaliers.

He has provided a boost to the Lakers’ fan base (though not everyone is happy with his arrival), which has endured a losing season, with the team missing the play-offs for the fifth consecutive year.

Research suggests that James could create 3,000 jobs in LA, and puts the overall economic boost at $396m. His incredible popularity and enduring fan base makes him a powerful brand that could be attractive to businesses as well as fans.

The NBA is already selling online Lakers jerseys with James’ name and legendary number 23 printed on them, for about $80 a piece.

Ticket prices have soared since news broke of the Lakers signing James, with the lowest-priced annual season ticket going from $3,499 before the announcement to $6,500 later that day.

The price of the Lakers’ preseason game against the Denver Nuggets in San Diego tripled from $61 to $188. The effect of James’ move is likely to be worse for Cleveland than it is beneficial for LA.

One ticket broker has predicted that tickets for Cavaliers’ matches next season without James will lose 60% of their value, with similar falls in ticket prices witnessed when James first left Cleveland for Miami.

James has connections to sunny Southern California, leading some to suggest that his move was always on the cards. His son, LeBron James Jr, was reported likely to enrol in an LA high school, which fuelled speculation about his father signing a deal with the Lakers.

The multi-millionaire owns two homes in the LA area, plus a film production company that is based there, and he has had stints as on on-screen actor.

‘King James’ The Brand

The sporting legend has made a name for himself outside of basketball. James made $35m from investing $1m in Blaze Pizza in 2012, which is now one of the fastest-growing food chains in the US.

He opened two of his own pizza joints under the Blaze brand in Chicago and Miami. James’ massive social media following — 42m people follow his Twitter handle @KingJames — has been thought to contribute to Blaze’s success.

“Every time LeBron tweets about Blaze, it’s like a sonic boom,” Elise Wetze, who co-founded the business, told ESPN.

“It jump-starts the conversation with tens of millions of people in the US and around the world, and leads to a genuine interaction between people who know and love the brand and people who haven’t heard of us.”

Cleveland Cavaliers forward LeBron James guards Los Angeles Lakers forward Kobe Bryant Mar 10 2016
Image: Lebron James will fill in the “star power” vacancy left by former Lakers player, Kobe Bryant. Jayne Kamin-Oncea-USA TODAY Sports / Reuters Picture Supplied by Action Images

James is the second-highest-paid athlete in the world, according to Forbes, with more than $86m in earnings between June 2016 and 2017.

His $31.2m salary at that time was dwarfed by $55m from endorsements with brands such as Nike, Intel and Verizon.

More endorsements from LA-based brands may be in the making, as several of them Tweeted their delight at James’ move to the Lakers.

Jim Cavale, CEO of Influencer, which helps athletes grow social media audiences, said in a news article: “…This move is about brand and business more than it is about basketball…He’s done such a great job at building businesses outside of sports using his brand and voice, that it has already opened up a tremendous amount of opportunities for him after sports is over.”

James will benefit professionally and commercially from his move to the Lakers, and based on past form, so will anyone and anything that comes into contact with “the King”.