LeBron's financial impact on Cleveland

Guest post. This post is part of series of posts written by my sport management students and is cross-posted on the UMass Center for Spectator Sport Research blog. The authors of this post are Shannon Archer, Matt Britner, Steven Le, Mike McCarthy, and Shaun McNamara.

On July 8th, LeBron James decided to leave the Cleveland Cavaliers for the Miami Heat in one of the biggest free agent moves in NBA history. The impact of this decision has had a major positive effect on Miami, as they have sold out all of their games and have attained a national spotlight. The impact on Cleveland, however, has been generally negative, especially in a financial sense.

On the surface, the team would seem to be managing the loss of LeBron well. According to ESPN.com, the Cleveland Cavaliers have sold out all of their home games so far, achieving a 100% capacity. However, this is likely due to the fact that most season ticket holders would have renewed their tickets for the upcoming season prior to LeBron’s decision to leave. The impact can be seen on the road, though, as the Cavaliers rank last place in the NBA in road attendance (at 75.4%, versus second to last Charlotte at 77.6%). Likely, in the upcoming seasons, Cleveland's overall attendance will fall unless major improvements occur.

These losses of future cash flows from attendance have already been estimated for Cleveland in terms of franchise value. According to Forbes, LeBron’s departure was estimated to cost the Cleveland Cavaliers $86M in franchise value. This estimate will be firmed up in the coming weeks when Forbes publishes its annual NBA franchise valuation. The Decision has also had an effect on the city of Cleveland itself as well as the greater Northeast Ohio region with James' departure and the current economic environment being felt with a marked decrease in business for the downtown area with total losses being estimated at potentially $200 million per season. This figure takes into account everything from the expected decreases in regular season and playoff revenue, to consumer spending, to the loss of income taxes that James paid.

Despite the bleakness of this economic situation, there have been some people who have managed to still find ways of generating revenue from the LeBron James name. The recent game between the Cavaliers and the Miami Heat played in Cleveland served to highlight a new cottage industry that has been created and caters to the widespread anti-James sentiment that is now being felt by local fans toward the once revered star. "Queen James 23" and "Quitness" apparel has begun popping up all over the city with fans uniting around their newfound feelings. Nowhere have these feelings more evident than with the well-produced Cavaliers fans' response to the most recent James commercial from Nike. In it, fans get a chance to answer the question from the original commercial of what LeBron should have done. It is both heartfelt and poignant in its impact.

LeBron James' move to Miami has had far reaching financial and psychological consequences for both the Cavaliers franchise and city with it being unknown and undeterminable as to when, or if, the each will fully recover. Unfortunately, the entire situation has only seemed to add the lore of Cleveland and its sports championship drought.