Thursday, September 29, 2005

Game over: Chelsea and Ambramovich's money 

Thanks to Russian Oil and Roman Abramovich, Chelsea can outspend any club in the world, and have been. They've also become very tough to beat, even if they have been quite fortunate on several recent occasions. There is such an air of inevitability about them that one bookmaker has thrown in the towel on the season, paying off bets on Chelsea to win the EPL with 31 games left to play!

Ain't it swell to be swimming in oil money, Chelsea fans? And for good measure, Abramovich has just reportedly sold his interest in Sebneft to Russia's state oil company for a reported $12.7 billion. At FT.com, the paper is asking readers to make suggestions on how Abramovich should spend it. Pablo Halkyard at the World Bank's Private Sector Development blog would like to see the oligarch take a crack at poverty. A noble cause for a nobleman. But as for myself, I think he should purchase Clemson's state assets from the government of South Carolina, and turn them over to..... me.

Steriods and Interests Groups 

Sometimes, the simplest of economic ideas have a great deal of power. The MLB Players Association and their counsel, Donald Fehr, have been dragging their feet on an MLB steroid policy for some time now. In the Senate hearings yesterday, Arizona's John McCain called Fehr out as quoted in a Yahoo! article,
"Don't you get it that this is an issue that's greater than the issue of collective bargaining? Don't you understand that this is an issue of such transcendent importance that you should have acted months ago?''
(Note: John McCain, America's self-appointed ethics czar, can be a grandstanding jerk. Still, a skewering of Fehr does have some entertainment value.)

Self-interest explains Fehr's hesitance. He represents current players. Among these current players are many who have put of enormous, even Hall of Fame, numbers based better hitting (and pitching) through chemistry, and these players seem to have a great deal of influence on the Player's Association stance.

In contrast, several former players (Hank Aaron, Lou Brock, Phil Niekro, Robin Roberts, Ryne Sandberg) came out strongly backing more stringent penalties proposed by Bud Selig. These players represent themselves and former players whose records are threatened by steroid use. Hank Aaron said
"I want to applaud the commissioner, and I also just want to make sure that whatever we do, we make sure that we clean up baseball,"
On the other side, Barry Bond's manager, Felipe Alou, a contemporary of Aaron was quoted saying
"What is their proof?" Alou asked. "Are they testing players, too? How do you explain that? Or have they stopped testing now? We just saw him hit five in 30 at-bats. So what's going on now? I hope that he's judged by the real baseball people when he's finished."
I would call Aaron and Brock "real baseball people." It's not too hard to imagine how different Alou's comments would be if he were not a manager, and specifically, the manager of one of the prime suspects.

Have the A's been unlucky? 

Their manager thinks so. From Carl Bialik (aka the WSJ's "Numbers Guy"):
The Oakland A's are a very good baseball team that nonetheless will miss the playoffs, thanks in large part to a stretch of bad play at home late this season.

Just how much of a fluke was that stretch from August 12 to September 7, in which the A's lost five straight three-game series at home? A's manager Ken Macha hazarded a guess last week in a chat with Sacramento Bee sports columnist Mark Kreidler: a 512-to-1 shot.
Bialik did a quick back-of-the-envelope calculation assuming each series is a toss-up, which implied that the odds are more like 32-to-1. Still improbable, but not as flukey as Macha let on.

But hold the phone: the A's lost a series to the lowly Royals during that stretch! Incorporating winning percentages into the calculation yields odds of 940-1. Wow.

Bialik has a nice discussion of streaky events and baseball, with quotes from one of the deans of the baseball professoriate, statistician Jim Albert. Interpreting streaks is tricky business, but one thing is clear to this reader. The A's were either lucky at the start of the year, inflating their winning percentage, or very unlucky during the streak. Perhaps it's a bit of both.

Thanks to David Patton for the link. And after last night's comeback win over the Cards, please allow me a little hee-hah: go Astros!!

Wednesday, September 28, 2005

Kinesiology and Curling 

In curling, what if you could come up with some way for sweepers to improve their sweeping techniques and efficiency by 1%? Would that be enough to help your team defeat even the best curlers in the world?

Possibly, if your own team was world class already.

And in that case, it might be well worth your while to examine this approach, currently under development in Scotland. [thanks to Brian Ferguson for the pointer].

The "Sweep Ergometer" ... measures the force and velocity of each upstroke and downstroke, using sensors embedded in the head of the brush that relay information by wireless technology to a computer, where it is processed and analysed.

The information gathered then shows team members how they can work to improve their technique, by revealing whether they have been brushing too hard, not hard enough or too much in the one direction.
How has the idea of using the scientific method in curling been accepted? Reluctantly by some but enthusiastically by others.

Brett Marmo, a post doctoral research fellow at the Edinburgh University centre, said: "Some of the athletes were initially a bit reluctant to embrace the new technology. But having seen that it can give that 1 per cent edge needed to win over the best in the world soon convinced people of its merits.

Olympic champion Martin did have initial doubts, but she has now been persuaded of the device's merits. She said: "We've had the ergometer, we've had cameras filming us, we've looked at fitness, psychology, nutrition, you name it, and notational analysis has been fantastic. "

As soon as we come off the ice, we can call up every shot. We certainly wouldn't be where we are now without the scientists."

But in Canada, where old-time arrogance seems to rule the day too often,
"Our biggest rivals, the Canadians, are highly sceptical."
My guess is that the Canadian teams will not be sceptical for long if this new technique really does add a 1% advantage to the Scottish teams. After all, the lessons of sabremetrics are finally spreading throughout baseball because of the success of teams using them, and this success has led others to start looking more carefully at the new technologies.
Look for the same thing to happen in curling.

Tuesday, September 27, 2005

Economics Podcast Discussion between
Phil Miller and John Palmer 

In his latest posting, James Reese invited Phil Miller and me to discuss some topics of mutual interest for his economics podcast. Here is his summary:

John Palmer and Phil Miller discuss their views on price gouging, scalping and sporting events, stadiums and economic impacts of professional sports on local economies. Both John and Phil contribute to Skip Sauer's The Sports Economist Blog.
This is the link to the actual podcast .

Congratulations to Professor Reese for having his podcasts make the top 100 list in iTunes downloads.

All for One and One for All in Minnesota 

From the Minneapolis Star Tribune regarding the new request for public funding for a new Vikings stadium:

(New Vikings owner Zigi) Wilf's announcement last week that he is planning a $675 million stadium in Blaine means that for the first time, three stadium proposals, totaling at least $1.28 billion, will be vying for public support and money at once.

Not only did Wilf stump for state support for his Blaine proposal, he also endorsed new homes for the Twins and the Gophers as necessary "projects that move the community forward."

Apparently supporters for the Twins and Gophers haven't exactly warmed to the idea of collective stumping:

But neither the Twins nor the Gophers appear eager to join hands with him. Some Twins and Gophers proponents are making it clear they think the Vikings should be at the back of the line for state and local public subsidies. Both teams had hoped for a special legislative session to address their stadium needs before the Vikings entered the fray.
What could be Zigi Wilf's strategy here? My guess is that Wilf strategy is to drum up additional support for his project by showing support for the other two projects. There has been a lot of public resistance to each individual project over the years and some of the opponents to public funding argue that there's not enough in the public coffers to fund one project, let alone three.

Sunday, September 25, 2005

Stadiums as necessary shelters? 

In the wake of Hurricane madness, comes this from Mayor Eric Hersh in South Florida:
Hersh, like the aging Robert Redford in The Natural, has come to the rescue of the Marlins, arguing that South Florida can hardly afford not to build a properly designed, centrally located stadium.

Without it, Hersh warns, there will be hell to pay.

NO MAJOR CENTER

The notion struck Hersh, the mayor of Weston, and City Manager John Flint as they reviewed their city's emergency plans after Hurricane Katrina smashed over the Gulf Coast. Shaken by what was unfolding in New Orleans and at the Superdome, Mayor Hersh and Flint realized there was no comparable structure in South Florida that could serve as a major evacuation center. No place to house thousands of storm refugees, provide emergency power and food and water until the crisis passed.

Suddenly, Hersh said, a new stadium began to make sense....

Hersh wants a deal with the Marlins that would require a Category 5-proof stadium, stocked with emergency supplies and generators, with storm refuge as much a priority as a baseball. In a letter to the governor, state legislators and Marlins management, he suggested that the state subsidize a stadium-shelter, well away from the oceanfront (not in Weston).
I'm not convinced. A case might be made to subsidize various buildings - a few high school gyms perhaps - to bring them up to Cat 5-proof strength. Are South Floridians willing to pay for that? If so, they should be (and probably would be) doing it now. The case for a domed stadium/shelter requires both the willingness to pay by the public, and the technological feature that a domed stadium would be more effective (or cheaper) than a dispersed alternative among smaller buildings.

Friday, September 23, 2005

What Would Newton Think? 

Would you rather be a Cubs fan or a White Sox fan right now? The downside to being a Cub fan, as it usually is this time of year, is that your team is out of it. The upside, in this little comparison, is that you can sit back, relax, utter the favorite phrase "Wait 'til next year!", and then you can settle down and watch some football.

White Sox fans can rightfully note that their team leads their division with 10 games left. But on the dark, imperial side, what was once a 15 game lead on August 1st has shrivelled like a grape on a Phoenix sidewalk in July to 1.5 games over the Cleveland Indians. Last night, despite a stellar pitching performance by Brandon McCarthy, well, I'll let Mark Gonzales of the Chicago Tribune say it:
McCarthy matched 2004 American League Cy Young Award winner Johan Santana for eight innings, but the Sox soiled his performance in a 4-1 loss to Minnesota in 11 innings that put their division hopes in peril with 10 games left.
Ew. Rick Morrissey has some other thoughts:
If you believe what the White Sox manager told Copley News Service columnist Mike Nadel the other day, he might just up and retire if the Sox win the World Series this year. The way things are going for the South Siders, the qualifier seems a tad out there. It's like starting a sentence, "If Paris Hilton becomes a nun…"
The Sox have three more games against the punchless but over-0.500 Twins and then four against the Detroit Tigers. The Indians have 3 games against the worst team in the majors, the Kansas City Royals, who have already lost 100 games, and then a three game series with the second-worst team in the American League, the Tampa Bay Devil Rays. Advantage Indians.

That sets up a three game series in Cleveland between the Indians and the White Sox. Who woulda thunk back in early August that that series would be meaningful for both teams?

Thursday, September 22, 2005

More Reasons to Dislike the Irish 

With a Southern California birth and a youth spent in North Texas, I grew up pulling for USC and Southwest Conference teams. To a kid like me, Notre Dame embodied evil. No matter who they played, I pulled against them. Over the last twenty years as ND waded through many mediocre years, my hostility dampened quite a bit. However, an article in last Saturday's new Weekend Edition of the Wall Street Journal sent me back in time. The WSJ's Chicago Bureau Chief, Bryan Gruley, wrote on "Why Root for the Irish." Ironically, his appeal for more Irish rooters highlighted both fan-level and economist-level grievances against such an appeal.

For example, Mr. Gruley observes
"Today there's only one school -- my alma mater -- that plays a genuinely national schedule ... and continues to aspire to high academic standards while chasing a national title. There are no names on jersyes, no "football dorms," no corporate boxes."

First off, on a purely factual basis, no schools utilize "football dorms" anymore. They were legislated away by the NCAA. More to the substance of his "ND is different" point, though, is the blindness to the hyper-commercialized nature of ND football in spite of a few superficial elements to the contrary. They may not have corporate boxes, but they still have the only single-school national television contract. When the contract with NBC began in 1991, it sent reverberations through the college football world for its go-for-the-$ emphasis. The official ND athletic website openly recruits corporate sponsorships and alliances. Team clothing advertises corporate logos. The Rockne Heritage Fund utilizes ND athletics to raise money from donors. The point is not that this is good or bad but that it is right down the line with other college athletic powers -- the differences are only in superficial matters.

He continues by saying
"Some people ... have suggested Notre Dame must lower its academic standards to attract blue-chip recruits...There are other schools -- Stanford as an example -- that achieve both on the field and in the classroom. But they can't claim 11 national titles and seven Heisman Trophy winners."
The implicit assumption that Mr. Gruley makes is that Notre Dame's academic standards are a constraint, albeit one that he thinks they have and can overcome. I don't have hard data, but I'm willing to make a strong statement anyway. If one took the top 40 players on ND's team, their average SAT scores would be much closer to those of players at Florida or Clemson than they would to the average ND undergrad. Look, Paul Hornung, Mark Bavaro, Tim Brown, Michael Stonebreaker, Bobby Taylor, and most of the other ND football All-Americans were not at ND because of their 1300 on the SAT. The schools that have undergrad SATs in the ND level but really constrain their football athletes to levels anywhere near the general student body -- schools like Duke or Rice -- have the (poor) football records to show for it. The 11 national championships is, itself, prima facie evidence that ND has not held their football athletes to the standards of the general student population. Moreover, the schools where intercollegiate athletes are genuinely similar to the rest of the campus -- places like Washington University -- play Division III football. Again, one can view this as good, bad, or neutral, but my point is that ND is not different, just pompous.

Mr. Gruley also makes the point that the hullaballoo surrounding the dismissal of Tyrone Willingham before his contract was up is evidence that ND is held to and holds itself to a higher standard. That's nonsense. The degree of attention given to it is because ND has a national presence and because there were racial overtones, at least in the eyes of some, that made the firing very politically incorrect. Eyebrows are raised and scuttlebutt spread even places as far down the pecking order as Western Kentucky when coaches are dismissed after relatively short stints. The only difference is that the discussion appears only in the Bowling Green Daily News and not the New York Times or WSJ.

Furthermore, this idea that ND lives in a pristine world and expects so much from its coaches is laughable. Yes, they expect wins, but the character or methods of the coach are not nearly as scrutinized as Mr. Gruley might want to believe. Lou Holtz, for all of his self-demeaning and humorous schtik, is a win-at-almost-any-cost sort of coach. The stories wafting out of South Bend, one of which made it to Sports Illustrated, during his stay were none too lofty. Even without the resume tampering, George O'Leary's reputation as an abusive coach would best be described as one notch beyond Holtz.

Had Mr. Gruley made his appeal based solely on the real source of ND's troubles -- a series of really poor coaching hires starting with Gerry Faust and interrupted by only Lou Holtz -- I could have at least agreed with him. As he noted, ND has not been much fun to pull against in recent years. Whether Charlie Weiss solves their problems or not, I'm geared back up to pull against the Irish at any and every opportunity. Go SC!

Wednesday, September 21, 2005

Which is more balanced- NFL or Champions League? 

Even a competitive balance sceptic like myself would grudgingly admit that the NFL is more balanced, so I thought I would check what the market was saying by looking at some betting odds. If you go to internet betting sites such as "odds checker" you can compare what the bookies are offering for each of the clubs (as you would expect, the bookies are all pretty much in line with each other).

So, I looked at the odds on winning the Superbowl and the Champions League last week just before competitions started, imagining that I would see much more balance in the odds on the former. But not a bit. According to Sporting Odds, the probabilities of winning for the three favourites in the Champions League are 15%, 11% and 10% (Chelsea, Barcelona and AC Milan). The odds of the three Superbowl favourites are 14%, 12%, and 11% (Indianapolis, New England and Philadelphia). Each competition has 32 teams, and the odds on the top three are almost identical. If we look at the bottom, then the Champions League outsiders are FC Thun and Artmedia Bratislava - each quoted at 500/1- but how much worse is that than Cleveland and San Francisco, each quoted at 200/1? In probability terms there is little difference.

Now, if a competition were perfectly balanced, the odds would be 31/1, or roughly 3% for each team. However, in the NFL there are 10 teams with odds better than this, and the joint probability that one of these teams will win is 68%. In the Champions League there are 11 teams with better odds than 31/1, and they account for 81% of the total probability. Overall, the distribution of probabilities between the two competitions looks remarkably similar.

Now, all this does not mean that NFL socialism is not working, just that the balance it creates is not markedly greater than that of the Champions League. The ratio of income of the top to the bottom teams in the NFL is about 2:1, while in the Champions League exceeds 100:1 (Manchester Utd £171m last year, Artmedia Bratislava £1.5m). If the NFL had similar income disparities then it would probably not be safe for teams to play. Moreover, the technology of soccer is such that results are much more uncertain (As England can testify after losing to Northern Ireland the other week, despite a gap of 109 places in the FIFA rankings prior to the game). And of course, the 49ers have won Superbowls before and probably will again while, without wishing to sleight Artmedia Bratislava or FC Thun, these teams have never won much in Europe and probably never will.

Sunday, September 18, 2005

Risk and NFL contracts 

In contrast to most leagues, NFL contracts are not guaranteed. By rule, if a player suffers a career ending injury, the team's obligation to make future payments terminates in the current year.

This might be viewed as heartless and unfair, a charge made by Joseph Nocera in the New York Times. I once agreed with Mr. Nocera, but I now believe this charge is inaccurate, and incomplete at best.

Why? Well, first consider what teams and players would agree to in a competitive labor market. Absent limitations on pay, player wages would equal (or perhaps exceed) their expected marginal revenue products. Some players might get injured and continue to receive their paychecks. These players would, on average, receive more than they produced, whereas those who were not injured would receive less. Wages in total would equal the marginal contribution of players to NFL revenues.

That contracts do not guarantee future salaries does not imply that injury risk is fully shifted to the player. Given the tendency of teams to terminate contracts, the risk-sharing solution is to front-load the contract with a signing bonus. If players are risk averse and teams are not, the injury risk can be priced into such a contract whose total value is lower than the expected marginal revenue product of the player. This can be mutually beneficial to both player and team.

My sense is that signing bonuses are a much greater proportion of a contract's total value in the NFL than in the NBA or MLB. Given the differential behavior in guarantees between leagues, high bonuses (e.g. Peyton Manning's $34.5m bonus, and injured center Matt Birk's $6m bonus, both discussed in the Times' article) in the NFL are a predictable consequence of the policy.

Where NFL policy hits players is in the draft, where competition in the labor market is deliberately curtailed. Those players who never make it to free agency, and whose careers are cut short by injury, bear the costs of the NFL's heartlessness.

Thursday, September 15, 2005

Demand Curves Slope Down 

From the Charlotte Observer (membership req'd):

In two months, the Charlotte Bobcats begin playing in a new, publicly funded uptown arena. Typically, new arenas boost home attendance for NBA teams, but so far that's not the indication for the Bobcats.

Two informed sources say the Bobcats have sold about 7,000 season tickets -- roughly 2,000 behind last season's season-ticket base, when they had the third-lowest home attendance in the NBA. Several fans said they dropped their tickets in part because of a steep rise in ticket prices.

... So far this new building hasn't created much buzz for the Bobcats. That could be because of the ticket prices -- most jumping 25 percent to 100 percent -- that accompany the move to the new building.

Mark Thompson, a Charlotte-based money manager, was part of a group last season that bought two Bobcats season tickets. The seats were close to the floor, at center court, and each ticket cost $75. Thompson bought a pair of tickets to 10 games.

He seems like the Bobcats' target customer -- young, affluent and a sports fan who buys Carolina Panthers and Davidson basketball tickets. But he passed on Bobcats tickets this season because he felt the cost exceeds the value.

Earlier in the piece:

Sixteen of the past 17 NBA teams moving to a new arena in the same city saw home attendance rise in the first season. Most recently, the Houston Rockets sold an extra 1,844 seats per game, moving into the Toyota Center. The only team that saw home attendance fall -- the San Antonio Spurs -- did so intentionally, moving out of the Alamodome, a football stadium with poor sight lines for basketball.

On average, those teams increased home attendance by 2,366 per game -- an extra 97,000 tickets, per team, over a 41-game home season.

The hope for teams is that new arenas will have amenities that fans are willing to pay extra for, so the hope is that the new arena will increase demand for the team's games. But demand curves still slope downward, and this is borne out by the article.

Price-setting is largely a trial-and-error process since businesses never really know what the demand for their product would be. But one would expect that the Bobcat officials would have a decent handle on the demand for their team's games, even in the new arena.

Cross posted at Market Power.

Wednesday, September 14, 2005

The Stadium Game Continues in Minnesota 

New Vikings owner Zigi Wilf has announced a rough estimate on the cost of a new stadium for his new team:

Minnesota House Speaker Steve Sviggum said he was told by new team owner Zygi Wilf that a new Vikings home would cost between $700 million and $760 million, with the Vikings and Anoka County each paying $250 million to $280 million for the actual building.

On top of the team and county shares, the state would create a tax increment financing district to capture $200 million for construction of surrounding infrastructure, Sviggum said he was told.

... The Vikings and Anoka County want to build the stadium as part of a $1.5 billion commercial development on 740 acres at Interstate 35W between 101st and 109th avenues. The county has been focusing on a roofed stadium so events could be held throughout the winter. Wilf has said he's partial to an open-air stadium to bring back a tradition lost when the team moved into the Metrodome.

The Twins want a new stadium and the Gophers want a new on-campus stadium, so we'll wait and see what is to come.

Quick notes on Katrina & emergency response 

1. Brownie's gone (bravo), but he's just the face on the problem: wrong face, wrong time.

2. Two articles in today's WSJ are well worth reading. The first is about Jay Roberts, a property owner in Luling, Louisiana, whose business now operates out of The Sailfish, a bar in the Mississippi River town. It's a great story, but here's the anecdote I find most interesting, which stems from Roberts' rental of an empty Kmart store to State Farm Insurance. The building is now stuffed with desks and 500 claims adjusters processing claims. State Farm didn't waste time setting up shop:
Two days before Katrina hit, Joe Green, an assistant manager for administrative services for State Farm Insurance in Tulsa, Okla., was watching a weather report when it became apparent he and his nine-man crew were about to enter a race toward the storm. Mr. Green's job is to set up the company's catastrophe, or "cat," office near the epicenter of major disasters. Mr. Green drove for three days, splitting the team in half to scour Louisiana and Mississippi on a desperate search for office space and hotel rooms.

At almost every turn, the team found itself competing with nimble electric company crews, who were after the same commodity. Mr. Green blew into the Sailfish the day after the storm, having been directed there by the local Wal-Mart manager. Mr. Roberts was inside and the negotiations began. The Kmart went for $25,000 a month, plus an upgraded climate system, for which State Farm is paying.
This story encapsulates the differential speed of response between private and public agencies. The former are quick on their feet, less burdened by red tape, don't waste precious time grappling over questions of authority, turf, etc.

The second, by former GE CEO Jack Welch, adds more perspective on this issue. Welch discusses the "Five Stages of Crisis Management," in which "Containment" is stage two.
Containment: For this second predictable phase in crises, Katrina was no exception. In companies, containment usually plays out with leaders trying to keep the "matter" quiet -- a total waste of energy, as all problems, and especially messy ones, eventually get out and explode. In Katrina's case, containment came in a related form, buck-passing -- pushing responsibility for the disaster from one part of government to another in hopes of making it go away. The city and state screamed for federal help, the feds said they couldn't send in the troops (literally) until the state asked for them, the state said it wouldn't approve the federal relief plan, and round and round went the baton.

No layer is a good layer. Bureaucracy, with its pettiness and formalities, slows action and initiative in any situation, business or otherwise. In a crisis like Katrina, it can be deadly. The terrible part is that Katrina might have avoided some of its bureaucratic bumbling if FEMA had not been buried in the Department of Homeland Security. As an independent entity for decades prior, FEMA fared better. But inside Homeland Security, FEMA was a layer down, twisted in and hobbled by government hierarchy. And to make matters worse, its head, Michael Brown, appears to have been an inexperienced political operative -- making his appointment an example of bureaucratic inefficiency at its worst.
Restoring FEMA's independence from DHS should be explored, but don't get your hopes up: that's just one layer in a multi-layer government failure.

Premier League Broadcast Rights saga moves toward new chapter 

There was no live league football on TV in England until 1983. Between 1983 and 1992 a relatively small number of games were sold by the Football League to the two main terrestrial channels, ITV and BBC. The last such contract, between 1988 and 1992, exclusively with ITV, was to show 18 games per season for £11m per season. Then came the Premier League breakaway, the only purpose of which was to give the top division control of the broadcast rights, which were sold to the new satellite TV provider, Sky. In 1992 Sky's 5 year contract was worth £49m per season to show 60 games per season. more games, but now sold as premium pay TV content rather than free-to-air. In about 1995 the UK antitrust enforcement agency, the Office of Fair Trading (OFT), started investigating the deal. the OFT objected to the principles of collective selling and exclusivity, claiming that they distorted the market for premium sports rights and the downstream broadcast market.

Since 1992, the Premier League has continued to renew its contract with Sky, the value of which is currently about £333m per year for 138 games. Since 1995 the antitrust authorities have maintained a steady stream of complaints. The OFT lost a court case in the UK in 1999, where it was held that collective selling and exclusivity were pro-competitive. In 2002 the European Commission started antitrust proceedings against the Premier League, which led to an agreement that at least some games should be made available to a broadcaster other than Sky. In the event, Sky offered 8 games for sale and no broadcaster was willing to meet Sky's reserve price.

The current Sky contract expires at the end of the 2006/07 season, and the Premier League is preparing to tender the rights for the season 2007/08 onwards. The European Commission has tried to obtain undertakings from the Premier League that it will permit a significant fraction of games to go to a rival broadcaster, but negotiations seem to have broken down, and so the Commission is preparing another "Statement of Objections", which triggers a full antitrust inquiry.

The economics of this is pretty involved, since it deals with two markets: premium football (or however you like to define the market for the games themselves) and the downstream market for broadcast channels, an issue complicated by the proliferation of broadcast platforms. But for those not familiar with the EU sports law landscape, you need to know that there is no antitrust exemption for collective selling as in the US. In the end, the key antitrust issues are the welfare impacts of collective selling and exclusivity.

Tuesday, September 13, 2005

Hoops buyout investigation? 

The American Antitrust Institute has petitioned the FTC and the Department of Justice to investigate the NCAA's purchase of it's lone competitor in post-season basketball, the NIT. And just to make sure, they threw in New York AG Elliot Spitzer - I presume on the off chance that he's running low on Wall Street cases and needs a high profile lawsuit to fuel his publicity machine.

Antitrust complaints of this sort typically draw a big yawn from me, but it's at least amusing when "America's best monopoly" is involved (source: Robert Barro). So I'm sympathetic to the complaint, as my update to this earlier commentary suggests. But given the politics involved, I don't see much coming from it. Thanks to the "haiku ethicists" at Harvard Law for the link.

San Antonio Takes the NFL for a Test Spin 

The city of San Antonio, Texas, has opened up its Alamo Dome to the New Orleans Saints (membership req'd).
The New Orleans Saints will head back to their home state for four games at Tiger Stadium in Baton Rouge, La., and will play three others in San Antonio's Alamodome, their headquarters since being displaced by Hurricane Katrina.
While I doubt that NFL proponents from San Antonio are trying to lure the Saints there, there is little doubt that San Antonio officials are going to show NFL officials what their town has to offer as an NFL host city. From the Sports Business Journal ($$$ req'd):
In San Antonio, David Flores notes the city “made a pitch to join the NFL” in ’93; the league added Charlotte and Jacksonville as expansion markets in ’95. Former San Antonio Mayor Nelson Wolff said that the city “is much better off economically than it was then,” citing the city’s Toyota plant, a Washington Mutual regional operations center and the TPC golf complex. Former San Antonio Mayor and former U.S. Secretary of Housing & Urban Development Henry Cisneros said of this season’s Saints games, “I think we’ll fill [the Alamodome] up” (SAN ANTONIO EXPRESS-NEWS, 9/13). Regarding the prospect of San Antonio becoming a future NFL market, Hardberger said the three games in San Antonio “could lead to something bigger, but first we have to ... make sure we sell out these games.” Cisneros said, “It ought not be judged as a lead-in to getting an NFL team. But it is an opportunity for us to show we are a bona fide NFL city.”
The SBJ article goes on to say that going after the Saints would be a public relations nightmare. But having an opportunity to give NFL officials a test drive is a unique opportunity for football proponents in San Antone.

Monday, September 12, 2005

England win Ashes 

The England cricket team beat Australia 2-1 in the five match series that has been going on for the last two months, the final game today ending in a draw. Because England only needed a draw in this game, there were huge celebrations in the sell-out crowd when play had to stop yesterday because of rain and bad light. Cheering the end of a match is one thing, but buying a very expensive ticket and then cheering because the players are unable to play during regulation time must be almost unprecedented.

I say "England", and England is undoubtedly celebrating tonight, but the England team was picked by an Australian, managed by a Zimbabwean, and the team contained two men born in South Africa, and one brought up in Australia, not to mention a Welshman. Moreover, while every self respecting Scot and Welshman would cheer roundly for any team that could beat England at soccer or rugby, they cheer wholeheartedly for England at cricket. Nationality has always been a fairly fluid concept in cricket, particularly given the better opportunities for cricketers to make a living in England. However, the nationality issue is considered much more worrying in soccer, and FIFA are holding a conference later this year to discuss what should be done to control migration.

Already the pundits here have dubbed this the greatest cricket series ever, but one suspects that this has a lot to do with England winning for the first time 16 years. The cricket was spectacular, and most of the games were incredibly close. The series it is most often compared with is the one played in 1981, when England also won some very close games. I watched that series as an undergraduate, and the most striking difference to me is the fact that all the players now wear protective headgear. Given that the ball was being thrown today at over 96 mph in some cases, that seems like a sensible precaution- but 25 years ago most cricketers did not wear helmets. Over this period, GDP per capita in the UK has almost doubled.

The reaction of the media in the UK has been predictably over the top. The story made the lead item on the main evening news bulletin of the BBC, and most of tomorrow's newspapers will be full of it. At times like these journalists who do not usually cover sport are pushed by their editors to find a relevant connection. Hence I anticipate a couple of phone calls tomorrow from bemused economics correspondents (who probably have no interest in cricket or any other sport) asking what the connection will be between UK productivity and the cricket result. These calls normally come in about the time of the World Cup or the Olympics. Of course, there is no evidence that these events have any effect whatever, but my preferred line is to claim the effect will be negative, since all the fans will have skipped work to watch the match and will have a hangover when they return tomorrow. But as I always add, you should not confuse money with utility.

Friday, September 09, 2005

NFL salaries 

Jon Weinbach discusses NFL salaries in today's WSJ (free column). At the top of the heap: Michael Vick at $23 million. The top running back? Rudi Johnson (who?) at $12 million. Weinbach reports an average salary of $1.4 million, which though considerably higher than in 1999, still trails the average in MLB and the NBA by a wide margin.

The numbers are interesting, but Weinbach doesn't tell us where he got them. This is a bit problematic. As Weinbach states,
Thanks to the NFL's salary cap, the accounting practices governing player contracts are enormously complicated. For teams, the main concern isn't how much a player is actually paid, but how much of his salary counts against the cap. Any money designated as a bonus can be prorated over the life of a player's deal to reduce his cap liability. This rule encourages teams to offer big bonuses, often paid up front in cash, attached to artificially long contracts. The result: the announced numbers of an NFL deal (seven years, $40 million, for example) bear little resemblance to what a player actually pockets from season to season.
I'd like to know more about how such numbers are generated. The NFL and the players association both refuse to make contract data public. What we get comes at the discretion of teams and agents. What is their incentive to provide accurate information to the public?

Another fake vita 

George O'Leary was quickly "unhired" by Notre Dame when it emerged that he had not completed a degree that was listed on his vita. Now it emerges that our current foil, Michael Brown, has a similar problem.

His bio at the FEMA website currently states that his position as "assistant city manager" had "emergency services oversight." Not so, according to Time - his position there was as an intern.

Time alleges that Brown's self-reported information at Findlaw.com has similar embellishments and inaccuracies.

Findlaw's information states that Brown was given an Outstanding Professor of Political Science award. Says a University administrator: "not [even] on the faculty."

It also says that Brown has been a director of a nursing home since 1983. Says a veteran of the home: he "was never director here, was never on the board of directors, was never executive director. He was never here in any capacity."

Sense a pattern? It looks to me like Michael Brown lied his way to the top.

O'Leary didn't last a week as football coach at Notre Dame. How long can Brown last at FEMA?

Too Many Chiefs 

The English National Team bears out a longstanding maxim --team production does not equate to the sum of individual production. The U.S. Olympic basketball squad provided recent testimony to this principle. Of course, the degree of interaction required among players matters. In baseball, output is close to the sum of the individual parts. Sports such as soccer, football, and basketball require much more complex interactions and call for players who can complement each other's skills. Polish striker Maciej Zurawski observed
Maybe England have got too many superstars. Maybe that is their problem. It's difficult to understand what is happening to them ...'England have a lot of individuals to open up a game. But when they don't play as a team, then that is something we can take advantage of.
England's coach, Sven Eriksson, has searched for ways and formations to plug in all of his big names with disastrous results in a 1-0 loss to Northern Ireland before just scraping by against a lowly Wales club in the preceding game. ESPN Soccernet observes the most glaring of the issues,
His first priority should be ditching the 4-3-3 system that has caused such confusion and returning, when Rooney is available again, to 4-4-2 with the other striker playing in behind Michael Owen...[Steven] Gerrard must be ordered to stay in the holding role or moved out to the left flank, with Owen Hargreaves or Scott Parker brought in to play that specialist role - unless [Frank] Lampard's form fails to improve and he is dropped instead, that is.In addition,
It is a certainty that had Chelsea landed Steven Gerrard, they would not have sat Claude Makelele in favor of Gerrard. Instead, Gerrard would have played some other role because Makelele is Jose Mourinho's main man. He credits Makelele's defending and holding role in the midfield as one of their most important keys to success.

No doubt, Eriksson grasps these points. Then, why would he so doggedly pursue the Gerrard-Lampard midfield tandem or squeezing Wright-Phillips at the risk of diminishing the impact of Wayne Rooney? It comes back to the basic point of public choice, that is, politics is inside the game. Eriksson, or any English coach, faces huge pressures from media, fans, and the players to make ues of the biggest names. The upside to England's debacle may be that it will provide Eriksson with the opportunity to make some of these tough decisions. As he put it, England's got a "knife to our throat." Under such circumstances, big name players and media will accept moves that might not as easily when times are good.

Thursday, September 08, 2005

Irrational Exuberance? 

Craig Newmark wonders why first-round NFL draftee holdouts follow this strategy if they end up, on average, worse off:
Gregg Easterbrook argues that first-round NFL draft choices who hold out cost themselves lots of money. While more data would be welcome, I think Easterbrook poses an interesting question.

One part of the explanation might be that many highly-touted prospects, given injuries and ordinary "couldn't cut it," don't get a lucrative second contract. Another might be that establishing a reputation for being a tough bargainer is also worth a lot of money.
Another possible explanation might involve biased information and expectations. If a player is drafted in the first round, he is probably an extremely good player. He and his agent and his family and his college coaches all have extremely high expectations for him.

These friends and advisors expect little gain from being realistic and encouraging the player to be realistic in his negotiations because that is like telling him he isn't so good after all. Telling him that could easily lead to being dropped as a friend and advisor and member of the retinue and beneficiary of the big bucks. So these folks, instead, have an incentive to encourage unrealistically high expectations. And when they do not come to fruition, it isn't their fault. They know the player is good; they keep telling the player he is good. It's somebody else's fault.

Eventually, though, won't some coaches get this empirical result across to the players? And once they do, won't being a hold-out be a more lucrative gaming strategy?

Wednesday, September 07, 2005

Trev Alberts Done at ESPN 

When professional sports players are unhappy with their contracts or their role on their teams, they will sometimes hold out or fail to report for workouts. This doesn't work with broadcast networks:

ESPN fired Trev Alberts on Sunday after the college football analyst failed to show up for work at ESPN's studios in Bristol, Conn.

"He phoned and said that he wasn't going to show up," Mark Shapiro, ESPN's Vice President of Programming and Production, told SI.com on Tuesday night, "and when he didn't, he was in breach of his contract and we terminated him."

... ESPN fired Trev Alberts on Sunday after the college football analyst failed to show up for work at ESPN's studios in Bristol, Conn.

"He phoned and said that he wasn't going to show up," Mark Shapiro, ESPN's Vice President of Programming and Production, told SI.com on Tuesday night, "and when he didn't, he was in breach of his contract and we terminated him."

Terrell Owens can get essentially get away with lamblasting his teammates because there's very few who can do what TO can do on the field. But there are a lot of folks who can do what Trev Alberts did with ESPN.

Fire Michael Brown - update #2 

My position from two days ago is unchanged. In support, please read these observations from T. Bevan of RealClearPolitics, a blog notable for real clear thinking. First:
Katrina really was a perfect storm in that she struck a city that was extremely vulnerable to flooding; a city with significant crime, drug, and poverty issues that was effectively rendered lawless for three days causing a complete social breakdown, and a city (and state) government with a long and notorious tradition for corruption and incompetence. All of the tragedy resulting from these things was compounded by a less than perfect response by FEMA.
Less than perfect is an understatement, a fault to which I also am guilty. But prior to that, Mr. Bevan states, with regard to Michael Brown:
He's got to go. The bottom line is that as the man in charge of coordinating federal relief efforts the results produced on his watch were simply not good enough. Again, we don't know all that went on behind the scenes so there may be a number of mitigating factors, but from what we have seen in the press Brown looks from the outset to have been extremely ineffective if not downright confused some of the time.

The other reason Brown should be fired is because he didn't belong as director of FEMA in the first place. As everyone knows by now, Brown got his original job as the General Counsel for FEMA because of a personal connection with Joe Allbaugh. That's fine, because at least Brown was qualified to hold that position. But lives aren't at stake when you're FEMA's lawyer, they are when you're FEMA's director. Joe Allbaugh bears a great deal of responsibility for promoting Brown to deputy director and for (I assume) recommending his appointment to director to President Bush.
Many in the administration and in the Republican party are saying that now is not the time for finger-pointing. Maybe so, but when the obvious is staring you in the face, what else can you do? It may be that Brown has been pushed aside and that competent administrators have taken over, but for way too many people, it's way too late.

Tuesday, September 06, 2005

The umpire's decision is not final 

This could be bigger than the Supreme Court's ruling in 2000 that stopped the counting in Bush v Gore. FIFA have ordered a game between Uzbekistan and Bahrain to be replayed after the referee made a mistake. Uzbekistan were awarded a penalty, the penalty was scored but the Japanese referee ruled that another Uzbek player had illegally encroached while the penalty was being taken. Instead of re-taking the penalty as the rules require, the referee awarded a free kick to Bahrain.

Surely this must open the floodgates to litigation in world football. There are so many disputed calls it's hard to know where it will end. If I were a lawyer I'd be thinking about expanding my practice.

Monday, September 05, 2005

Fire Michael Brown 

I don't jump on every blog-bandwagon, but I'm with Michelle Malkin, Andrew Sullivan, and BT in Ohio who started the Fire Brown Now blog.

I lost faith in Brown as early as last Tuesday - before the enormity of the flooding set in. In a television interview he repeatedly used "I" to refer to the things that would be done, and that ultimately were not done. "I am doing this... I am going to do that... I'm in control." Ugh. No one person can do such things alone, and ego-maniacs with an "it's all about me" attitude are useless as leaders.

In those few minutes of a TV interview Brown displayed the fatal conceit of a government bureaucrat in its worst possible form. His presence compounded an already disastrous situation.

The aforementioned bloggers have stated that in order to show that he "gets it," Bush must fire Michael Brown. That's very true, but more importantly, the relief effort requires that Brown get out of the way.

Update: It is possible that this has already happened, in effect. From today's Washington Post:
Brown has been eclipsed by his boss, [Homeland Security Secretary Michael] Chertoff -- who flew overnight Sunday to take charge of integrating military with civilian efforts -- and by a new deputy, U.S. Coast Guard Vice Admiral Thad Allen, whom Chertoff named yesterday to take charge of federal recovery efforts in New Orleans.

Sunday, September 04, 2005

Katrina and inland Mississippi 

Here's a report from someone who made the trip to Hattiesburg on Friday. Hattiesburg and environs appear to have been hit with significant hardship, but not utter disaster.

I'm posting this because the narrative is informative and interesting, and different from what you find in the newspaper or on TV. Since the post is long, I'm highlighting passages with interesting facts that people short on time might want to see. (Note: names have been redacted and altered for the sake of anonymity).
Took a load of stuff over to Mississippi on Friday. Returned on Saturday. Some thoughts and observations.

It is not clear why we did it. In Hattiesburg by the time we got there, two or three lots full of electric generators were available. Inflated prices, of course, but probably not much more than we spent going over. We did bring with us some expertise in connecting them, and that is valuable. R seemed genuinely pleased with his (new 7.8kW, electric starter, woo-woo), but I am not sure how he will manage the gasoline that it takes to run it. We ran the generator all night Friday. It ran his whole house without a problem including the a/c and water heater. So Saturday morning, we had hot showers in a cool house and felt good about life. We got the other one (my old one, 5.5kW) hooked up at J's house out in the country, but we couldn't get the a/c to start up. Probably some relay messed up. He doesn't have water out there either, so even with the generator, he is not likely to stay out there.

Stuff was available, but the lines were long. Gas lines were 1.5 hours on Saturday and that at the stations that rationed to 10 gallons. But the grocery stores were open and food was there. It wasn't as bad in Hattiesburg as it was in Gulf Breeze last year after Ivan.

We left most all of the stuff that we took, but not because they really needed it. When we provisioned on Thursday, we had not had communications with them and didn't know what to expect. However, by Thursday afternoon, it was clear that the only things that they really needed were the two generators, fuel, and vodka, and we had that. All the canned food, lamps, candles, peanut butter, etc., was not really needed (until they get hit next week).

The fuel mission was encumbered by the run on gas that occurred in SC and GA on Wednesday and spilled over into Friday. We were able to buy fuel all the way to Mississippi, but the biggest problem was that on Thursday, there were no fuel cans left in the upstate of SC. I ended up buying 16 one-gallon cans to round out the supplies that we took. So we ended up paying $5 per gallon, plus the cost of getting it there. On the flip side, most of the diesel that we took and left was farm-use, untaxed. So we got a deal there.

E was a sport to lend his truck to the mission and a real gent to go himself. I would have enjoyed having F along, but W went and was a champ.

We didn't drive south of Hattiesburg and it was clear that the devastation was increasing at an increasing rate. The clean up rescue seemed to be going along efficiently. First reports on Wednesday said that we couldn't get to Hattiesburg. By Friday the main roads were clear, but not cleaned up. Open to travel with the least possible effort. My guess is that we could have gotten near Gulfport, though thankfully we were not asked to do that.

Many odd things observed along the way. On Friday there were only 3 army vehicles observed. Returning on Saturday we saw numerous convoys. This is all coming out now in the news and apparently the governor of LA is mostly to blame.

There were a few reports of looting and lawlessness in Mississippi, but very few. Everyone that we talked to in Mississippi and all the reports we got indicated that a large supply of personal weapons and a shoot-to-kill directive from the Mississippi governor more or less ensured that only the people who were supposed to be in places were there. J was/is living in one of his stores because he has power and water there. His neighbor, a Subway store owner, is doing the same (and has an ice machine). Some fellow happened to walk unexpectedly into the Subway, which wasn't open. B immediately told the guy to "Get the **%% out," and then grabbed his .223 military rifle, jammed a 60 round clip in, picked up another and started loading it up as he chased the guy off his property.

Not that there is hatefulness. A large black lady came into J's store while we were all standing around Saturday morning and asked to use the restroom, which J obliged. She was in the gas line out front and underestimated the situation.

I saw a picture in the paper about a store owner in NO who had painted the following on his store window: "Don't think about it. I am sleeping inside with a big dog, an ugly woman, 2 shotguns, and a claw hammer." This inspired us to put out our own sign Friday night, since we had a noisy generator and the only porch light in the neighborhood: "We have shotguns & .357's. Go ahead. Make our day."

I wanted to go further south but our schedule and situation just wasn't right. I don't like lines and we were set to get in and out on our own resources. Even so, the power of nature was all too apparent. There were fields of pine trees all snapped about 15-20 feet up. It looked like god came down with an over-sized bushhog. Mississippi is so full of pine trees so those were the most apparent in the felling. The big ones just come over. The smaller ones snap.

We decided that nature specializes. Tornadoes have the rights on the trailer boxes and hurricanes respect that. We did not see a trailer in shambles and we saw several that were surrounded by downed trees. On the other hand, we saw one brick house that had only one tree nearby. Nice house. Of course that one tree cleaved it. This is all 80 miles inland.

Truck after truck on the highway was just like us going in. Loaded up with obvious relief stuff. We started tallying up license plates. Mostly from neighboring states: GA and TN, but some from further off. Coming out the next day, there was an odd thing. Several trucks with Louisiana plates and a couple with Mississippi plates were coming out with us, but they had generators in the truck beds. In one case, I hypothesized that they had ridden it out until they could get out and that was what they were doing. I said this because they had some furniture, though precious little. E was unconvinced and then we saw these other trucks that were just loaded with what would seem to be rescue stuff: generators, chain saws, fuel cans. Our final thought was that they were driving far enough to get fuel to go back in and were not willing to leave the generators down there. We never found any of them to talk to and didn't see them past Tuscaloosa, so that was probably it.

The clean up will take a while. It always does, but life goes on. All family and friends in Hattiesburg are fine and moving back toward normal albeit at a slow pace. New Orleans is a mess largely because they have to figure out how to stop the flooding and then prevent it. That is a big problem, but my guess is that on the basis of pure destruction, the Mississippi coast sustained more damage.

Taking defeat gracefully 

Mexican soccer coach Ricardo Lavolpe, after losing to the US 2-0 last night: "The U.S. is a small team," he said. "They play like my sister, my aunt and my grandmother." Like a river, the vitriol just keeps on flowing from the Mexican national team.

It starts at the top. As a leader, a coach's behavior sets the stage for his players to act in the same fashion. Mexico's coach is a national disgrace, an embarrassment to his fine people. Why is he coaching their national team?

Friday, September 02, 2005

The Saints Go Marching On 

While New Orleans festers, life in the NFL goes on. The NFL's Official Website, while mentioning the problems and "heavy hearts" of the club, did not even hint at the possibility of a cancellation of the preseason game with the Raiders. From a normative perspective, one can wonder about the Saints playing a preseason game, of all things, while Rome burns. An odd thing to say the least. Sean Salisbury and Mark Schlereth criticized it on ESPN Wednesday night, but I have not heard or read other dissenting voices.

The relative lack of attention given to whether the Saints would play the final preseason game, much less miss a regular season game, leads into my main and non-moralistic point -- sports is different. The explicit revenues spent on games provide only a partial, maybe even tiny, indication of its value. This is a theme that I would like to explore more down the road. Even when the rest of the counrty, or a specific region, screeches to a halt over some tragic event, sporting events keep right on going unless there is no other alternative. Here and there, some second guessing about whether it should surfaces, but by and large, the games go on as scheduled. The very fact that this happens with public support -- people show up and tune in with clocklike regularity -- affirms sport's uniqueness as a product or service. Even though sports is just a form of entertainment, the public place sports on a pedastel up there with "essential" activities.

An anecdote here in Bowling Green from the early 1990s provides a specific illustration. When a devastating ice storm struck Kentucky, the Governor closed down all interstate highways to traffic. Basically, only emergency and law enforcement vehicles were pemitted access. A guard on the WKU basketball team had been at home about 70 miles away when the storm hit. He petitioned for and was granted a special exemption from the restriction so that he could rejoin the team. His hooking up with the team equated roughly with a heart surgeon making it back to Louisville to perform a transplant. The general feeling around town was, "Well, he's got to get back -- it's basketball after all and the team has practice and a game."

Katrina and gas prices 

While people in New Orleans are dying by the hour, people elsewhere in the country, along with mouthpieces like the partisan New York Times and the disgusting Bill O'Reilly, have been moaning about $3 gasoline. Even President Bush warned gas stations not to engage in price gouging.

It's a hopeless cause I suppose, but I wish all of these people would shut up. There is less gasoline for the country to work with in the next weeks (or months), and somehow we must cope with it. The necessity of cutting back on gasoline consumption is a physical fact. Higher prices will change behavior, and sharply higher prices earlier this week would have kept some people from tank-topping and draining the system of valuable gasoline.

Two of my buddies are hauling generators and water to Mississippi today - along with enough fuel to ensure they make it back. The truck is a traveling bomb, in a sense, because political forces don't allow the price system to allocate gasoline properly, and they can't be sure of buying enough fuel while on the road to get back home. Yet every car in town has a full tank of gas. What a waste. The opportunity cost of every five gallon can of fuel in that truck is five gallons of water, and there is no running water where they're going.

Today's newspaper brought the good news that a large local gasoline retailer will donate his profits over the next few weeks to the American Red Cross for hurricane disaster relief.** He's getting my business. Call it "gouging for charity" if you like, but it surely blunts any criticism of the prices at this retailer and, if the practice spread, it might affect the national argument over gas prices.

Then I read an incomprehensible screed on gas prices in the New York Times. The authors largely absolve retailers of guilt for gouging, referring to the higher wholesale price of fresh supplies. But they merely push the problem back to the villainous oil companies. I see: if we can just keep "oil companies" from raising wholesale prices there won't be a problem.

Uh uh. That won't get water to Mississippi. The more you get government in the gasoline business the more that market works like Federal Disaster Relief - not very well.

**My donation went to the Red Cross' Houston Chapter, to assist their work with the refugees.