BusinessTN

The evolution of sports on TV has created a big-money industry whose members tantalize cities with promises of revenue streams as much as they tantalize fans with promises of winning records. Proponents argue teams deliver revenue ranging from ticket sales to taxes off stadium/arena construction, and spur development by increasing the city's profile. Detractors point to statistics that suggest such municipal investments rarely yield adequate returns.

But no matter one's leanings, there's no denying spectator sports in Tennessee are big business. Beyond the three major professional leagues – the NFL and NHL in Nashville and the NBA in Memphis – that receive the majority of attention, Tennessee also features a major venue for surging NASCAR in Bristol Motor Speedway. There's also the nationally prominent, and in some respects profitable, collegiate programs at UT-Knoxville and the University of Memphis.

Each contributes to a billion-dollar industry benefiting their respective communities. How economically vital they are to those communities is debatable, but Vanderbilt University's John Vrooman believes the answer is somewhere between the proponents' and detractors' polarized stances.

"The indirect social overhead benefits of big-league sports in attracting more economically integrated businesses that may indeed have tangible economic effects cannot be denied," says the senior economics lecturer. "There is also evidence that sports teams and their venues can have some important economic impacts if they are integrated as anchors of larger development projects like we are seeing downtown Memphis and Nashville."

King of the Mountain
The professional team with the best financial outlook is easily the Titans, Vrooman says.

"The National Football League shares a full two-thirds of revenue among clubs," he explains. "The Titans are sharing money with competition that necessarily has an economic fortune that varies inversely with their own. If the Titans falter then its business partner necessarily succeeds."

But if you open up the debate to include non-major players in the market, Fritz G. Polite, UT sports management professor and former NFL advisor, says NASCAR is soaring, and so Bristol is best.

"If you look at positive brands, business model and profitability, there's no question," he says, "the Speedway in Bristol is the hardest ticket in sports to get."

Cellar Dwellers
The team bringing up the rear is a little easier to peg. With average game attendance falling each year for the Grizzlies ('04-'05: 16,900; '05-'06: 15,800; '06-'07: 14,600), the outlook is not encouraging. Vrooman points out the Grizzlies are currently getting about 13,000, which is below the 14,000 paid-attendance threshold of the Predators that recently created a relocation stir in Nashville.

"With the Grizzlies," Polite offers, "there have been some challenges, and there will continue to be some challenges."

Vrooman says the league is partially to blame.

"The NFL is the perfectly diversified portfolio," he says. "Meanwhile the NBA Grizzlies and the NHL Predators, playing in leagues that do not share revenue, take the risk of going it alone. This is why the value of the Titans is fast approaching $1 billion (almost five times revenues) while the Grizzlies are valued at about a third of that (three times revenues or about $330 million) and the Preds are over-valued at their recent sale price $190 million (twice revenues)."

Nashville enjoys a healthier corporate community, which facilitates luxury-suite sales at Titans games, but all is not sonorous in Music City. The Titans and LP Field, according to Vrooman, probably have the highest payoff to the team and owner Bud Adams, while having the lowest payoff to metro Nashville.

"Teams and venues only pay the public if they are linked to the local economy," Vrooman says. "While the Titans are connected to our hearts, they are disconnected from the local economy."

He added that, like the FedExForum, the totally subsidized Sommet Center where the Predators play, is probably over-subsidized because of the leverage of the [league] on the metro government. A good example of a stadium benefiting a community, he says, is AutoZone Park, where the minor-league Memphis Redbirds play. He predicts a similar downtown stadium would also make "social economic sense" for the Nashville Sounds.

Ultimately, analysts agree, the success of sports teams is determined by the support of the communities.

Power Program
The only thing amateur about major collegiate athletics are the athletes. Despite the fact college competitors don't get paid, many programs are very much a part of the big-money sports industry.

"When you start looking at economic impact of sports teams, you're really looking at affinity of a brand and how attached a consumer is to that product," explains Fritz G. Polite, UT-Knoxville sports management professor and former NFL advisor. "And the Volunteer brand is much stronger and consistent than most, and I expect it will be for the near future."

Forbes magazine would agree. It ranked the Volunteers the sixth most valuable college football team in the country, earning profits in excess of $17 million and responsible for more than $16 million contributed to the school's athletic/scholarship fund in ticket reservation fees. Forbes lists its value in excess of $74 million. (The top-ranked state school, Texas—No. 2 overall, was valued at $92 million, with profits exceeding $46 million.)

But value costs more than victories on the field.

"The winning program providing a quality entertainment experience," says UT economist, Professor William Fox, "is the one that will get the most interest."

Where the University of Memphis Tigers men's basketball (the other nationally prominent collegiate team in Tennessee) play in the same venue as the NBA Grizzlies, the FedExForum, UT is left to its own. Fox contends the program has maintained its competitive edge despite a performance drop-off through renovations to Neyland Stadium—four in the past decade adding more than 10,000 regular and luxury seats and 78 luxury suites.

Forward-looking renovations like luxury seating is exactly the sort of improvements professional teams like the Titans are making, and college teams like Tennessee are following right along. Consequently, Fox believes, that is how they are and will remain competitive—not just with other schools, but with the pros, too.