Thursday, July 17, 2008

Summerfest attendance falls-C.C. Sabathia meets the substitution effect

Last week the Milwaukee Journal Sentinel reported that attendance was up at Miller Park, but down at Summerfest.

MJS reporter Don Walker wrote that more than 400,000 fans, a record, visited Miller Park during the Brewers' ten-day homestand, noting the team was "well on track to hit 3 million in attendance, a franchise record."

The poor economy and high gasoline prices, he wrote, didn't seem to be hurting sales.

On the very same day, another MJS reporter, Tom Held, blamed the poor economy for much of the decline in Summerfest's attendance: "The hosts of Milwaukee’s Summerfest learned this year how tough it can be to throw an outdoor party in rainy weather and a slumping economy."

Attendance at the 11-day music festival on the lakefront slumped to 831,024, the smallest crowd since 1993. Revenue from ticket, food and beverage sales also feel by roughly 4% below the previous year.

So according to the MJS, rising gasoline and foods prices and the weak economy didn't hurt attendance and hurt attendance. Hmmmmmmmmmmm!

History tells us that rising joblessness, inflation and declining real wages reduce discretionary income and expenditures. Since entertainment is a discretionary expenditure, it is among the first causalities of a slumping economy.

But if the weak economy was causing entertainment expenditures to decline, it should have effected the consumption of similar products like Summerfest and Brewers baseball similarly.

Perhaps there is a different, more coherent explanation for this contradictory experience. Call it C.C. Sabathia meets the "substitution effect."

Most economists agree that professional sports don't increase a community's aggregate entertainment spending; it simply redistributes it from one form of entertainment to another.

Brewers' fans have relatively inflexible and limited entertainment budgets. The money they spend on a attending a game is a substitute for other entertainment such as the movies or Summerfest. So when the Brewers are hot, fielding a competitive team, and management is making aggressive moves to improve the team by trading for Cy Young winner C.C. Sabathia, consumers in the Milwaukee area will spend more on baseball and less on other forms of entertainment like Summerfest.

This analysis received an unexpected endorsement recently from none other than the Seattle, or should I say, Oklahoma City Supersonics.

That's right, the Supersonics who are leaving Seattle for the greener pastures of Oklahoma City argued in U.S. District Court that the team's departure would not hurt the city's economy because there is no net economic gain from professional sports.

"The financial issue is simple, and the city's analysts agree, there will be no net economic loss if the Sonics leave Seattle. Entertainment dollars not spent on the Sonics will be spent on Seattle's many other sports and entertainment options. Seattleites will not reduce their entertainment budget simply because the Sonics leave," the Sonics said in the court brief.

This is, of course, exactly the opposite of what the Sonics had claimed when asking for taxpayer help to build a new arena. And it conflicts with what boosters in Oklahoma City are saying in their attempt to pass a $100 million tax package to spruce up its six-year-old Ford Center and build a practice facility for the team.

But it concurs with what economists, other than those paid by major league franchises, have been arguing for years. And it certainly explains why Summerfest's attendance plummeted while the Brewer's attendance soared.

1 comment:

kevin said...

Three related issues: Summerfest has increased their prices, continues to field poor or unknown entertainment and doesn't have a covered roof.