A city with a sports team benefits in numerous intangible ways. These teams serve as marketing for a city, both internationally and externally. It is a marker of quality for a city, a stamp of approval. They help contribute to a public identity of a city. There is value in having a communal identity. It unites people and helps them work together on more serious problems.
People also love following the local sports team. Yes, this is entertainment similar to other forms, but it can often be free. You don't need to buy tickets to a game to enjoy it. For example, every soldout NFL game is broadcast for free over-the-air in their local market. Marvel movies don't premier for free on the TV in my home.