Superbowl Economics

Tonight, many people across the USA will be sitting down to watch the New England Patriots take on the Atlanta Falcons in the 51st edition of the Superbowl. Last year 114 million people tuned in to watch the Denver Broncos beat the Carolina Panthers (More than 4 times the usual viewing figures for a game) and we can expect to see similar viewing figures this year.

The Numbers

Do I care for the Superbowl? No. American Football is boring and too stop start. The sixty minute match is going to take four hours from start to finish and I don’t have time for that. However, I do have time to look at some of the economics for an event which generates $620 million (£500 million) every year. The event generates the host state about $750 million (£600 million every year). $220 million (£175 million) of this is as a result of direct tourist spending.

The cost of tickets for this prestigious night vary from $2,700 (£2200) to $9,000 (£7200) (albeit in secondary markets) and a ticket in a suite would only set you back $400,000 (£320,000).

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Betting

This year there will be $132 million (£106 million) bet on the Superbowl in US betting markets. However, this only makes up 3% of all Superbowl betting in the USA as 97% of it will be done in illegal black markets. This huge $4.8 billion (£3.84 billion) that is being bet underground is as a result of the Professional and Amateur Sports Protection Act (PASPA) of 1992 which was bought in and limits gambling to only a few states and only allows gambling on one off games (So you couldn’t bet on Leicester to win the league).

The purpose of the act is to stop corruption. However it is easy to see that an underground betting ring is much tougher to regulate and would likely lead to more corruption than if widespread gambling were legal in the US.

Half Time Show

superbowlhts

For 9% of people, the half time show is the most important part of the Superbowl. Because seeing Beyonce and Bruno Mars sing together is apparently vital for a sporting event, it is probably worth discussing. Firstly, it costs $7million (£5.6 million) for Pepsi to sponsor the half time show (which is actually pretty cheap advertising as we’ll see later). This will cover most of the cost. The half time show tonight, starring Lady Gaga, will cost $10 million (£8 million) tonight.

But how much will the NFL pay to Lady Gaga? Exactly $0 (£0). The NFL don’t pay artists to perform and only cover expenses. The main reason Lady Gaga will be performing (just as Katy Perry and Coldplay did) is for the exposure. Although there is also probably tradition and pride in her decision. However, for such a big money making event, it is a big surprise that they aren’t paying her. Maybe in negotiations Lady Gaga didn’t keep a good poker face.

halftime-1

The Commercials

One of the most anticipated parts of the Superbowl in America is the commercials. 52% of people (a large majority as far as some are concerned), say they are excited about the Superbowl commercials. (This increases to 68% when removing those who don’t watch the Superbowl) In fact, more people under 30 are interested in the commercials than in the game.  Because of this, big companies are prepared to pay big money for a 30 second slot.

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Firms are so desperate to be a part of the Superbowl, that they are paying $4.8 million (£3.84 million) just for a 30 second slot. This translates to $160,000 (£130,000) per second. Overall spending has also increased on adverts. Last year, $370 million (£296 million) was spent on Superbowl commercials and the amount is continuously growing.

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But are the adverts actually effective? According to a YouGov poll (see sources), 83% of Americans feel that a Superbowl advert enhances the image of a brand.  But only 6% of people say that only a Superbowl advert has made them decide to buy something. However, out of 114 million people, that isn’t terrible.

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Overall, 80% of those who advertise see no impact on their sales though. This is generally considered to be because one 30 second exposure to a brand is not enough. So is a Superbowl advert worth that amount of money? Probably not, but it’s just nice to be involved, right?

Conclusion

This event is an embodiment of the commercial side of America. It is still fascinating whenever you consider the attitudes of big firms and consumers who watch it. Good luck to anyone who watches it and make sure to drink plenty of coffee/the alcoholic beverage of your choice (in moderation).

For the record, the team I want to win (despite not watching or caring about the game) is the Atlanta Falcons .

falcons

GO FALCONS!

-Swift Economist

Notes

All statistics are about Americans.

Sources

http://www.cnbc.com/2016/01/29/super-bowl-benefits-host-city-but-by-how-much.html

The NFL is insanely popular on TV, in 17 highly-rated facts

http://www.forbes.com/sites/darrenheitner/2017/01/31/4-5-billion-will-be-wagered-illegally-on-super-bowl-51/#19714fdf1dfa

http://www.si.com/nfl/2017/01/26/super-bowl-commercial-cost-2017

https://www.graphiq.com/vlp/itQ0bRBazPv?data-script-version=true&data-sv=1.1.1&data-index=0&utm_source=viz&utm_medium=viz.referral&utm_campaign=viz.ref.5223&utm_viz_id=itQ0bRBazPv&utm_cat=Bar%2FLine%2FArea&utm_click_loc=footer&utm_pubreferrer=www.si.com%2Fnfl%2F2017%2F01%2F26%2Fsuper-bowl-commercial-cost-2017#0-Average-Cost-of-a-30-Second-Ad-Spot-During-Super-Bowl

https://d25d2506sfb94s.cloudfront.net/cumulus_uploads/document/9mdlll9bu0/Results%20for%20YouGov%20NY%20(Super%20Bowl)%20016%2001.27.2017.pdf

http://adage.com/article/special-report-super-bowl/study-80-super-bowl-ads-sales/290907/

http://www.huffingtonpost.com/entry/yougov-super-bowl-commercials-game_us_56b105d3e4b0a1b96203f436

http://www.forbes.com/sites/kurtbadenhausen/2016/02/02/10-things-to-know-about-the-money-in-super-bowl-50/#11968b2a58a2

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