Wall Street to the Hood

The Economics of Sports
by Dr. Lance McCarthy

People have been in awe of the proverbial athlete since the heroic tales of Hercules and the legendary Gladiators, as they showcased their skills, oftentimes to the death on the floor of the Coliseum. The saga continues thanks to the integration and rise to stardom of Blacks in sports. The plight of the Black athlete is a pivotal point in America’s modern day history. Not only did these personalities and events revolutionize the sports industry; they collectively galvanized the mind, heart and spirit of sport enthusiasts and people worldwide. In many ways, the struggle of the Black athlete helped the global community realize the truth about a nation that professed that all men are created equal. There were a number of Black athletes who by their actions and willingness accepted their unique role as trailblazers on and off the field of competitive play.

During the era of the Negro Baseball League, Black athletes, concerned supporters and baseball fans were forced to create their own sports venues. This was mainly due to the discriminatory and exclusionary practices of Major League Baseball and white society at that time. Not with-standing such economically repressive conditions, and as a credit to its business ingenuity, Negro baseball employed all available resources: players utilized barnyards, fields and vacant lots to play their games and to demonstrate high levels of sportsmanship. This was the backdrop at a time in American history when Black economics and sports ownership was most visible and prosperous by modest standards. A Negro baseball game involved the entire community; it created a circuslike atmosphere, complete with vendors and merchants selling their goods. Game tickets were sold through the church, it was a musical and family festive experience, wrapped around exciting baseball.

Ironically, the humorous antics, showmanship and athleticism of the Negro Baseball League in later years inspired the basketball sensation, the Harlem Globetrotters, who continue to entertain fans worldwide. Negro baseball teams traveled from town to town; Black-owned businesses and the Black church contributed to the success of the Negro baseball games. It was a phenomenon, which marveled the current day white economists, political think tanks and sports owners alike. Why? This was during the grand old time, when white Major League Baseball was America’s favorite pastime. However, the real accomplishment of the Negro Baseball League was not its colorful and inclusive presentation; it was the quality of play and competition witnessed at these games. The Negro Baseball League and its outreach within the Black community were just an example of the electrifying impact the African American athlete had on the Black economy.

American sports boasts countless stories of Black pioneers who paved the way for others while entertaining all sectors of society. Clearly, sports were and continue to serve as an aphrodisiac when called upon to heal the ills of society and take America’s mind off the struggles of a pressing crisis. The business of sports is just what the doctor ordered for today’s African American premier athlete and those who wish to rebuild urban America. History repeatedly proves that the saga found in sports as witnessed in “The Thrill of Victory and the Agony of Defeat” is as much a vital part of our lives as family and apple pie. Sports brings people from different backgrounds together for a common goal.

It is now time African American sports icons reposition themselves in this arena. The need for today’s athletes to diversify their portfolios and to include the business of sports and economic development is paramount. We need modern day athletes to get on the backs of their predecessors, even the ones who are relatively unknown. For example, Moses “Fleet” Walker, a catcher in Ohio Major League Baseball, actually opened the door for Jackie Robinson. Walker played for the Toledo Blue Stockings in 1883, in Toledo, Ohio. The following year, when the Blue Stockings joined the Major League, “Fleet” Walker went with them, becoming the first Black player in the Major League. Walker’s talents were recognized, but downplayed due to his race. He bounced from league to league, forming alliances with other Black players, before the leagues began issuing mandates against Black players. Walker, like Robinson who followed him, understood he needed to make a living for himself outside of baseball. I am proud to report he founded an opera theatre and a newspaper, while earning a number of patents for motion picture technology.

In 20th century America, athletes represented movements and wanted to make a statement with their widespread appeal and recognition. The Black athlete during the civil rights era is a prime example. It was more than baseball when Jackie Robinson broke the color barrier; it was more than a track meet when Jesse Owens embarrassed Hitler by beating the Nazis in the Olympics. Boxing was secondary in the lives of men such as Joe Louis and Muhammad Ali. Both were champions for the right to exist as meaningful and independent Black men in America, while being among the nation’s greatest sports figures.

Thanks to Black athletes such as former tennis luminaries, Althea Gibson and Arthur Ashe, and more recently the Williams sisters, the game of tennis has been revitalized. Tiger Woods is credited for almost single handedly elevating golf to another level. It is at this time when walls are torn down and replaced with pride and possibilities for a new generation of sports fans and business opportunists.

Just as in Moses “Fleet” Walker’s time, Black athletes must transform beyond the sports game into the economics game. But The Economics of Sports By E. Lance McCarthy, Ph.D. SPORTS & BUSINESS The business of sports is just what the doctor ordered for today’s African American premier athlete and those who wish to rebuild urban America www.intheblack.com 41 the transition is not for everyone, according to Al Williams, investment relations manager of Pro Sports & Entertainment, Inc. He says that some athletes, just like some people in general, are “not willing to take calculated risks, are not willing to form strategic alliances and are not willing to share the seat at the head table.”

It is this writer’s opinion we must move from endorsements to acquisitions. Today’s star Black athletes leading the endorsements pack includes: Shaquille O’Neal, Michael Jordan, Venus Williams, Tiger Woods and LeBron James’ who recently signed with Nike for $90 million. Sounds like a lot… What do you think the greater economic impact must be for those products, goods and services promoted by the superstar athlete? Do you think these endorsements translate into real economic development for the players? No matter how you look at it, sports is a business and it has economic benefits for more than just the athlete, owner and sponsor.

For example, my research suggests that each major professional athlete creates a minimum of eight jobs? By itself, this does not guarantee it will translate into real equity development for today’s Black players. Surprisingly, Sports Illustrated in its “100 Most Influential Minorities in Sports” issue reported that the most influential minority was not Michael Jordan, but rather Bob Johnson. Some of you may be saying Bob who? Billionaire businessman Robert (Bob) Johnson is the first African American owner of a major sports franchise.

Johnson sold Black Entertainment Television (BET) to Viacom for approximately $3 billion. Bob Johnson purchased the NBA’s Charlotte expansion team. The March 2003 issue of Black Enterprise says, “Johnson closing the deal opens a new chapter in Black history as African Americans take the next evolutionary step in their role in professional sports – a step that began with struggling to participate as players, progressing to coaching through joining front office and executive ranks, and finally culminating with team ownership.”

True economics dictates, “He who owns the dirt owns the deal.” This new thrust for the 21st century Black athlete includes the stadium; the team and the entire aspect involved in sports related business. This sort of mindset and philosophical trend must inevitably become the norm for new professional athletes. This new agenda must be supported by the concept of giving back while at the same time Black athletes should be investing back in the marketplace.

Pro Sports & Entertainment, Inc. led the acquisition of the Seattle Bowl for $3.5 million and will receive revenues from broadcast rights, ticket sales, parking fees and concessions. Such acquisitions are solid investment opportunities for Black athletes, according to Al Williams, but “unfortunately, most will miss out, which will hold true to form as in the past.”

When looking at economic development from the community perspective, many think of low-income housing, small minimalls and retail outlets. However, professional football stadiums are steeped in economic development opportunities. There are some individuals who have gotten involved in stadium construction through the financing of the stadium projects but not the ownership and equity side. Vending is another area of economic opportunity. The African American purchasing power is about $600 billion. The point here is that players come and go, but the true power is found off the field, in areas such as team ownership, licensing, concessions, etc. The Black athlete must learn the entire game in order to win the super bowl of economics.

Donald V. Watkins is one of two African American billionaires. He is a financial and political heavy hitter who has built the kind of fortune that earned him the right to sit down with Major League Baseball’s top brass and say, “I want to buy a team.” More importantly, he has the business acumen and wealth to pull it off. Watkins wants to buy the Minnesota Twins, a struggling team that was targeted for elimination because of its economic troubles. Watkins will spend at least $350 million for the franchise, including the construction of a new stadium, which he plans to enhance with a Negro Baseball League Museum.

It’s time to pool our wealth. The average salary of all African American athletes combined was $2 billion in 2002, while the industry overall did $400 billion. The new athlete must leverage his economic value to have long-term economic impact in the community.

To date, there are emerging examples of progressive athletes who are seeking to participate in turnkey economic development. Harris Barton was a key part of the San Francisco 49ers, assisting in the team’s Super Bowl wins in 1989, 1990 and 1995. He became a technology investor during his football career, investing in both publicly traded companies and venture capital partnerships. Barton co-founded Champion Ventures with a mission to optimize opportunities for sports figures through investment, education and relationship building. Champion Ventures creates private equity investment vehicles in which the firm pools investment capital from sports figures and other individuals and institutions, and invests it with leading private equity fund managers. Harris knew early on where he wanted to go and prepared for it, by earning a bachelor’s degree in finance.

Los Angeles Laker Shaquille O’Neal entered into a partnership with American Housing Preservation Corp. to develop 21 housing communities throughout Colorado, thereby creating affordable homes for lower-income families, while turning a profit.

The most visible sports icon turned businessman is Earvin “Magic” Johnson. He has brought first-run movie theatres and Starbuck’s coffee to inner-cities across the nation through his Canyon-Johnson Urban Fund (CJUF), which also has strategic partnerships with 24 Hour Fitness and Fatburger. CJUF has deployed more than $400 million in 50 urban real estate investments including the development and operation of five Magic Johnson movie theaters, two T.G.I. Friday’s restaurants and 32 Starbucks Coffee houses nationwide. Johnson is also a shareholder in what is now the largest Black-owned bank in the nation, with more $260 million in assets.

The new Black athlete will take his notoriety, his value and influence and leverage it to create a more healthy economy. The more intelligent and astute the athlete becomes about the economy, the better it is for the entire country. The new athlete will not only be emphasizing his/her contract, but will also have eyes on other aspects of the sports business industry, such as team and stadium ownership, construction, vendor relations, licensing and eventually, the television networks which broadcast the games.

About Dr. McCarthy

Dr. E. Lance McCarthy is an economist, President and CEO of Development Associates, Ltd., a full service financial and economic development firm, and author of upcoming book, Wall Street to the Hood.