LeBron James' homecoming: Good for the Cavaliers, but not Cleveland

Yahoo Finance


It's hard to ignore the impact LeBron James could have on the Cleveland Cavaliers now that he has rejoined his hometown team. Dan Gilbert, the Cavs and the whole city of Cleveland are looking for Lebron and company to make a deep playoff run and bring Cleveland its first professional sports championship since 1964.

The Cavaliers' record is not the only thing that could benefit from the return of King James. The Cavs' bottom line stands to makes big gains, too. Valuation expert Peter Schwartz told Bloomberg that James' return could double the value of the franchise, valuing it at over one billion dollars. Given the fact that he now has two NBA Championships under his belt, he will arguably bring back a lot more than he took away four years ago.

Victor Matheson, economics professor at The College of the Holy Cross, notes that when LeBron left Cleveland four years ago, the team's estimated value took a hit to the tune of $125 million. In a world with ever-increasing ticket prices, Cavaliers tickets have dipped 25% and attendance is down 15%. That will all change now that James is again holding court in Cleveland, according to Mattheson.

"That looks to be at least $20 million in the Cavs' pockets right there," Mattheson notes. "And then you can add things like TV contracts and concessions and parking and signage. Again, it's a good day to be an owner of the Cavs."

It may not, however, be a good day to own a small business in Cleveland. Accodring to Cleveland's local NBC affiliate, WKYC, James was worth somewhere between $50 and $80 million a year to the city of Cleveland the first time he played there. For Matheson, however, it may not work out that way this time around.

"That $20 million [the Cavs will make in new revenues] has to come from somewhere," Mattheson says. "They're gonna have 100,000 more fans at the games next year. But those 100,000 fans would have been going somewhere else in Cleveland. They would have been going out to dinner or they would have been going to the Indians or the Browns or they would have been going to nightclubs or the theater. So all of those gains to the Cavs are losses for other businesses in the local area."

The potentially negative impact doesn't stop in downtown Cleveland either, Mattheson says. Even businesses like restaurants in Cleveland's suburbs will feel the pinch of LeBron as locals take their disposable income and flock back to the Quicken Loans Arena downtown instead of finding entertainment options closer to their white picket fences and 2.5 kids.

At least one Cuyahoga County Executive disagrees. Ed FitzGerald, who is also running for Governor of Ohio this year, told reporters yesterday that King James' return would mean $500 million to the city and surrounding areas. County number crunchers say spending will increase at area restaurants and at games themselves. The numbers also estimate 500 new jobs propped up by renewed interest in the Cavs.

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