The Business Side of the Super Bowl
Image by Julie Morin February 11, 2023
Is the economic impact as big as touted?
When the Kansas City Chiefs and Philadelphia Eagles square off this Sunday, Feb. 12, in Super Bowl LVII in Glendale, Arizona, plenty of eyes will be on the action on the field. However, there are numerous economic aspects going on around the big game as well.
Benefits for the host city
The opportunity to showcase a city to a massive worldwide audience is something public officials dream of, and economic reports that are released seem to make their case.
In 2020 when the 49ers and Chiefs faced off in Miami, the Super Bowl Host Committee and Miami Beach commissions reported that the Super Bowl brought in over 4,500 new jobs to the area and had a total economic impact of $571 million.
Last year in Los Angeles, where the Rams defeated the Bengals in brand new SoFi Stadium, the local economy was expected to gain up to $477 million.
However Tim DeSchriver, associate professor of sport management in the University of Delaware’s Alfred Lerner College of Business and Economics, says those numbers can be overrated.
“The visitors’ bureaus and business people with those cities are going to promote that huge economic impact, with hundreds of millions of dollars and a bunch of new jobs. And on the other hand, the economics professors say the impact is relatively small. There’s a wide variance of opinions,” he said.
DeSchriver also noted that the impact of this year’s big game could be less than when the game is played in a northern city, since plenty of people are vacationing in the Phoenix area this time of year anyway.
“When you hear these numbers of $400 to $500 million at a Super Bowl, I think it’s grossly overrated. Especially in a year like this with people coming to the Phoenix area, staying in hotels, eating in restaurants, those types of things. Those areas would be pretty much full this time of year anyway if they weren’t hosting the Super Bowl.”
“People go to Arizona in the winter, and they stay at resorts and hotels. There’s more traffic, and the NFL puts on special events that have an economic impact. I’m not saying it’s zero, but the numbers put out by the visitors’ bureau are greatly exaggerated,” he continued.
Another factor that cuts into the economic profit is the amount of expenses the city must incur to host such a massive event.
““It also costs the city money. They need extra police force, EMTs, ambulances, street cleaning, all that kind of stuff. That costs taxpayer money. So they have to justify that with how much money the event is bringing to the community,” DeSchriver said.
The influx of new jobs created by hosting the big game is a major benefit to the region, as the Super Bowl brought in between 2,200-4,700 new jobs to the Los Angeles area a year ago. Those visitors need places to stay, restaurants to dine at and transportation throughout the city.
“You’re primarily talking about service industry jobs,” DeSchriver explained. “You need that service when you have those crowds. So restaurant workers, hotel workers, Uber and Lyft drivers. Once the crowd goes away, they don’t need those service workers, but that’s still money in people’s pockets. So even if they’re temporary jobs, that’s still important.”
Matt Robinson, professor of sport management, agreed but added, “Because the costs of those services are higher during the week, those workers might make in a week what they would normally make in six months. So there is a significant benefit.”
Additionally, hosting the Super Bowl is essentially a two-week infomercial for the city.
“It’s the idea of return visits. If I go to Phoenix for the Super Bowl and see how nice it is, I’ll return for a vacation next year,” Robinson stated.
DeSchriver agreed, and added that television and social media posts reach a huge audience who could be persuaded to visit in the future. However, he added that it is difficult to quantify. “How can you know if somebody five years from now goes on vacation to Phoenix because of this year’s Super Bowl?” he asked.
Another benefit to hosting the Super Bowl that politicians tout is the local tax revenue, an estimated gain between $12 and $22 million for Los Angeles with millions more going to the state of California in 2022.
“The idea is that this is going to be new business. So the revenue for hotels and bars and restaurants, that economic activity gets taxed. The hotel prices are higher than normal. Once you increase the prices, the tax revenue is going to increase as well. That’s how the politicians can justify bringing the event to their city, because it's going to generate all of this tax revenue,” DeSchriver explained.
Impact for participating teams' cities
Not only is the host city benefitting from the big game, the two cities of the teams participating are also reaping economic benefits.
Philadelphia hotels from Center City to South Philadelphia are filling up and are expected to be near capacity by the weekend as people figure if they can’t attend the game, watching with their fellow fans is the next best thing. Airbnb is another option, with 400 to 500 homes available as of last Sunday for an average price of $150 a night. Watch parties figure to be held throughout the Philadelphia region as fans hope to see their Birds bring home the title.
Kansas City, looking for its second Super Bowl championship in four years, is holding a massive watch party to be held in its downtown district, while bar owners are expecting tables to begin filling up as early at 9 a.m. on Sunday.
“We use the term ‘psychic income,’ which is not quantifiable, but just the good feeling you have right now associated with the city. People in Philadelphia are so excited about the Super Bowl that they’re hosting bigger parties and all that kind of stuff, some things that are hard to quantify. But it’s just the general goodwill that is being felt throughout the city right now,” Robinson said.
For either Chiefs or Eagles fans, that feeling will continue into next week and result in a downtown parade.
In between the action as the Eagles clash with the Chiefs, viewers will be watching an impressive pile of money changing hands.
The commercials have become spectacle, drama, mini-sitcom and a giant cash pit for companies vying to catch the attention of all those Super Bowl partygoers. For many viewers, it’s not so much an ad break as a football game sandwiched between ads.
The network airing the game (this year it’s Fox) takes full advantage. Per AdAge, the average cost for 30 seconds of ad time during the 2023 Super Bowl is $7 million. We’ve seen high inflation, but not enough to make that anything other than an enormous sum. It works out to more than $233,000 per second – significantly more than most Americans earn for a year’s labor.
Is that kind of massive payout worth it for companies?
Bob Kent, associate professor of marketing at the Lerner College, has long studied television advertising. He says the allure of the Super Bowl is about reaching a massive audience that’s increasingly hard to corner.
“You might have 90 million people, 100 million people watch one thing. That (kind of size) doesn’t exist anymore,” he said.
The huge television audiences of yesteryear have fractured, he said, amid the switch from networks to cable, and again with the advent of streaming services. Online advertising is even more segmented, with messages targeting specific interest groups.
Also, unlike the rest of the year, the audience is not trying to skip ads using DVR. Kent has analyzed stats on DVR usage and says the Super Bowl attracts a large share of live audience.
That’s the biggest advantage to Super Bowl advertising, according to Matthew McGranaghan, an assistant professor of marketing in Lerner College.
“During a typical TV program, ads are a nuisance that people tend to avoid by changing the channel, leaving the room or shifting their attention to something or someone else,” he said via email. “During the Super Bowl, ads can be the main reason why the viewer is watching.”
So does the huge audience justify the expense? Kent isn’t so sure.
“Just spending money doesn’t mean you get results,” he said.
It could be worth the investment if a company manages to convey a very effective and creative message. Super Bowl ads can take on a life of their own online, leading to even more views. The problem, he said, is that companies are competing for attention, often with other similar products – like cellphones and soda.
It’s very risky, he said. “How are you going to have a standout ad?”
It likely varies by advertiser, McGranaghan said. “An advertiser with an underwhelming ad that doesn’t attract new customers or strengthen relationships with existing customers will likely lose money,” he said. He recommends being clearheaded about it – having a way to rigorously measure the effectiveness.
One situation when it could make sense to spend that kind of money, Kent conceded, might be to advertise an upcoming movie premiere. If a studio can get more people to go to the opening weekend of a new film, it might actually pay off in revenue. Or it could be worth the investment if a company has a specific objective, like a brand seizing the opportunity to share the name of its new product.
The unicorn of Super Bowl ads is when one becomes a classic, famous for years afterward and renowned for its brand impact. Kent pointed to Apple’s famous 1984 ad for its new Macintosh computer, an epic minidrama directed by Ridley Scott that referenced George Orwell’s 1984. (At a minute long, that ad would have cost Apple something like $700,000 or so just for the airtime, but on the other hand, we’re still talking about it in 2023.)
Those ads are the exception though.
“How are you really going to have a breakthrough ad for Doritos?” Kent asked. “And even if you do, the sales are probably not going to jump.”
The classic strategy is to use talking animals, humor or other gimmicks to get attention. But that has to be done right.
“I’m a little bit concerned that people can watch an ad and remember the ad, and then the connection to the product might not be that clear,” Kent said.
For example, he gets a kick out of the “Don’t turn into your parents” ads for Progressive Insurance. But it took him a while to actually connect them to Progressive. Viewers might also have trouble sorting out their humorous insurance providers – was that Geico? Progressive? State Farm?
That’s not to say humor can’t work. Kent pointed to the old Energizer Bunny ads, which were funny but directly connected viewers to the point: That Energizer batteries last a long time.
“You want to try to link it as much as possible with the advertised branding,” he said.
McGranaghan admired cryptocurrency platform Coinbase’s ad last year using an innovative QR code that bounced around the screen like a screensaver. It was a huge success in promoting their app, and he said he wouldn’t be surprised to see more QR codes this year. (Get your phones ready.)
But in the ultra-competitive world of Super Bowl ads, where everyone is trying to be the catchiest and funniest, companies should tread carefully.
“There are always ads that leave me wondering, ‘Who approved $7 million for that?’” McGranaghan said.
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