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LeBron James could bring Chicago championships — and $2 billion

Crain's Chicago Business, May 31, 2010

By Mike Colias and David Sterrett

Bob McDermott has seen the LeBron James effect firsthand: Crowds at Beer Bistro, his West Loop restaurant, more than doubled on the four occasions the NBA phenom played at the United Center last season.

"The Bulls landing LeBron would be a huge boon for business," Mr. McDermott says.

He's not the only one seeing dollar signs as the Bulls pursue Mr. James, arguably the most-coveted free agent in sports history. Broadcast execs are giddy over the prospect of ratings and ad sales leaping back to Michael Jordan-era levels. Apparel shops, ticket brokers and bar and restaurant owners say the 25-year-old megastar would spark a frenzy of spending by local high-rollers and out-of-town professionals. Tourism officials gush over the exposure Chicago would get from near-constant national telecasts.

The LeBron effect could add up to as much as $2.7 billion if he plays here for six years, estimates University of Illinois at Chicago economist John Skorburg. The catch: He'd have to take the Bulls on deep, annual playoff runs, sprinkling in at least a few NBA championships along the way.

Longtime Bulls owner Jerry Reinsdorf — mum on the chances of King James bolting Cleveland for Chicago, per league rules — would be hard-pressed not to dream of the 13-straight sellout seasons he enjoyed with MJ, when the United Center's luxury boxes bustled with corporate bigwigs.

If Mr. Reinsdorf wins this summer's sweepstakes for the Ohio-born Mr. James, it would provide an economic spark to a city that missed its shot at the global sports spotlight when last year's Olympics bid failed. The prospect of welcoming Mr. James, basketball's most popular star since Mr. Jordan, has many in the city's business community reminiscing about the collective pride and enthusiasm that permeated Chicago in the championship-rich '90s.

"The Bulls during the Jordan era changed the whole flavor, the whole attitude of the city," says Mesirow Financial Holdings Inc. CEO James Tyree, a Bulls season-ticket holder for nearly 30 years. "I used to get more business done at Bulls games than anybody could dream of. I long for those days."

Mesirow dropped its corporate suite after Mr. Jordan's retirement, but Mr. Tyree says he would consider re-upping for Mr. James. He and other Bulls fans likely will have to wait until July 1, the start of the NBA's free-agent signing period, to find out how close the Bulls might be to recapturing past glories.

Mr. James has top billing in a stable of superstar free agents, including Chicago native Dwyane Wade of the Miami Heat. The Bulls are among a handful of teams that cleared salary-cap room to offer those elite players the NBA maximum of around $16.5 million a year. Various gambling Web sites give the Bulls the best odds of landing Mr. James should he leave Cleveland, which is still considered the favorite.

Chicago offers a big-market setting for Mr. James to increase his exposure. The New York Knicks also have salary-cap room and could make a stronger fame-and-fortune pitch. But that franchise lacks the Bulls' nucleus of young talent, which NBA pundits believe offers the best chance for Mr. James to grab his elusive first NBA title — the real key to enhancing his endorsement deals and other commercial opportunities.

"Chicago has to convince LeBron that he can win championships there," says Paul Swangard, managing director of the University of Oregon's Warsaw Sports Marketing Center. "To maximize his off-court earning potential, it's all about getting rings."

To be sure, Mr. James' achievements don't yet measure up to Mr. Jordan's. He has yet to win a championship after seven seasons (Mr. Jordan won his first of six titles in his seventh year), with one NBA Finals appearance. This season he and the Cavaliers led the league in wins but put up an anemic fight in a second-round playoff loss to Boston.

Still, Mr. James might have just as much star wattage as Mr. Jordan did in his heyday, given the proliferation of digital media and the global reach of today's NBA. Even playing in Cleveland, Mr. James' $28 million in annual endorsements dwarfs that of any other current NBA player.

"LeBron has the potential to transcend international boundaries the way only a handful of athletes have, such as Jordan, (Tiger) Woods and (Muhammad) Ali," says Jim Andrews, editorial director of IEG LLC, a Chicago-based sports marketing consultancy.

Mr. Reinsdorf has misfired on past attempts to land big-name free agents after dumping salary — including infamously sending mascot Benny the Bull to greet then-superstar Tracy McGrady at the airport. (Mr. McGrady chose Orlando.)

The dearth of star power has left the Bulls relatively punchless over the past 13 seasons; the club hasn't made a playoff run since Mr. Jordan's 1998 retirement, and it was bounced by Mr. James' Cavaliers in the first round this spring.

Some economists say that while signing Mr. James would be very good for the Bulls, the estimates of his financial impact may be inflated.

Landing King James alone wouldn't produce the full economic benefit, allows Mr. Skorburg, the UIC economist. His analysis, which estimates a $450-million-a-year boost for the Chicago area over six seasons, hinges on deep playoff runs significantly extending the Bulls' season every year.

Hosting 10 playoff games a year (the Bulls have averaged 1.6 a year over the past decade) would generate nearly $5 million at the United Center on tickets, concessions, parking and other spending, Mr. Skorburg estimates. Across the metro area, he calculates another $40 million per game would be spent on TV ads, sports-bar tabs, pizza deliveries and the like.

That doesn't factor in the halo effect of national exposure. Cavs games were broadcast nationally on major networks 36 times last year — double the Bulls' national telecasts. "All of the television shots of the city during the broadcast will make people more likely to come visit us," says Marc Gordon, CEO of the Illinois Hotel and Lodging Assn.

The other pro sports teams in town would ride Mr. James' coattails, too — especially the high-flying Blackhawks, whose corporate suites often are packaged with the Bulls'. Higher ad rates, which have been known to double following a championship season, would lift Comcast SportsNet, co-owned by the Bulls, Hawks, Cubs and White Sox.

"All the teams would prosper from a LeBron effect," New York-based sports-television consultant Lee Berke says.

Returning to an NBA championship could boost the Bulls' value by 20% to 50%, history suggests, to between $613 million and $760 million, according to Forbes magazine's estimate of the franchise's worth. The value of the Miami Heat shot up more than 45% from 2004 to 2006 thanks to an NBA title. Even storied franchisees get a big lift: The Celtics' value rose 22% in two years with their 2008 championship; the 2004 league title pushed the Detroit Pistons' value up 41% in two years.