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How does an NHL lockout affect the local economy?

Greg Fiume - Getty Images

Several stories have been written recently about how a lockout would affect a hockey town's economy, expressing concern that lost games will mean lost sales for the city's businesses.

The Boston Business Journal recently wrote this:

"Roughly each [Bruins] home game is worth anywhere between $850,000 to $1 million," said Pat Moscaritolo, CEO of the Greater Boston Convention & Visitors Bureau – "money that is generated outside the four walls of TD Garden. That means spending in the North End, North Station area, spending at restaurants and sports bars, sports paraphernalia, etc."

The Philadelphia Inquirer followed up locally:

Phil Hopkins, vice president and director of research for Select Greater Philadelphia, said he didn't have enough information to estimate the revenue-loss figure for businesses around the Wells Fargo Center. But he said the Boston figure "doesn't seem unreasonable. You would think it would be comparable" in Philadelphia.

The Star Tribune previously did something similar:

According to the city, revenue from a half-cent citywide sales tax was down in the lost season. The following year, sales-tax revenue went up by $300,000, to $8.7 million. City leaders estimated the economic hit to St. Paul that season at $60 million.

As have others -- KGO-TV in San Jose, KDKA in Pittsburgh, Long Island Newsday, and many others. It's a copycat league, you might say.

So what's the problem? The articles don't appear to be particularly accurate.

Minnesota Public Radio showed that St. Paul's numbers were based on the feeble assumption that all of the growth in sales taxes from '04-05 to '05-06 was due to the return of hockey, and ignored the fact that sales tax also grew from '03-04 to '04-05.

A writer at noted that Boston's figures suggest a belief that the average fan will spend $50 per game outside the arena, and also built into the calculation is the assumption that none of that money would be spent on any other local entertainment activity in the absence of hockey.

This seems hard to believe, and it is not surprising that it does not stand up to rigorous scrutiny. Several studies have shown that "no statistically significant effect on taxable sales is found from the sudden absence of professional sports due to strikes and lockouts," and that "prior work stoppages in professional football and baseball had no impact on the economies of cities with franchises."

Yes, there will be establishments which built their business model on game-day walk-in sales, and which will struggle if those games are not played. But as Tyler Dellow noted in two tweets (in the way that only he can), the evidence tells us that the same money will be spent elsewhere and other local businesses will grow. The connection between the lockout and the losses of arena-area businesses are more direct and visible than the connection to gains of other local ventures, which may make them more sympathetic to some. However, the overall net result is not a loss to the city.

So why do we have such a spreading tide of articles about damage to local economies, when those articles are overly simplistic to the point of inaccuracy?

Perhaps it is a simple matter of copying what looks like an easy story, and missing the subtle economic reality. But these stories have become so prevalent -- almost every NHL city had one in the last week -- that I can't help but wonder whether there is something else at work. Perhaps there might be an incentive for the NHLPA to plant stories like this across the country.

The players have spent the last few months convincing the public that the lockout is the owners' fault, that the players are being reasonable and trying to get a deal done and the owners are just being greedy. After months of saying that I don't see why the battle for public relations matters to anyone other than the fans, I finally see a possible connection.

Teams get heavy subsidies from local governments in the form of publicly financed arena deals. If politicians believe that the lockout has generally been the fault of the owners and now are led to believe that the lockout is sharply damaging the local economy, one imagines that they would exert whatever pressure they can on the owners to end the lockout -- or perhaps they might be less supportive of the next round of arena subsidies.

The lockout does not have any impact on the local economy overall; it merely redistributes revenue from one business to another. The rash of articles suggesting otherwise will likely mislead many of the readers, and if those readers include local politicians, the misleading articles could even impact the lockout itself. Whether or not the NHLPA has suggested this line of investigation to local reporters, there is a reasonable chance that the articles are helping the players' cause.

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