Monday, May 29, 2006

? 

Once the World Cup is over, someone should check and see if this is in the data:
Football 'to deliver £1bn kick to spending'
By Neelam Verjee
WORLD CUP-related purchases are expected to boost total consumer spending by an extra 50 per cent to £3 billion during the month of the tournament.

Kevin Hawkins, director of the British Retail Consortium, said yesterday that on top of the £2 billion that is spent each month by consumers, football fans were likely to spend an additional £750 million on items such as beer, spirits, food and audio-visual equipment, as well as £250 million in pubs and clubs. However, the amount spent would depend on the weather and "how long England stays in the World Cup".
50 per cent, is, if I may be so bold, a lot. Since the World Cup spans an entire month, its impact on beer sales might be measurable (unlike the Super Bowl). Could all that soccer have an effect on... birth rates (down, presumably, if sport and sex are substitutes)? ...death rates (by drunk driving)? Betting at Royal Ascot?

Set your Tivos! 

Here are the World Cup TV schedules for American and Canadian viewers. The US team's chance of progressing will likely depend on the result of their first game, against the Czech Republic two weeks from today. That's arguably the must-see game among the initial matches in the group stage.

Sunday, May 28, 2006

A novel promotion 

Phil recently noted the lawsuit which followed the Angels' refusal to give a handbag to Michael Cohn (a man), during a ladies-only promotion, Tote Bag Night.

The Altoona Curve, a minor league team, is responding with their own promotion, "Frivolous Lawsuit Night." On July 2, among other humorous gimmicks, they will give a pink totebag to the first 137 men who enter the ballpark, lukewarm coffee to the first 137 ladies, and to the first 137 kids, a beach ball with a warning not to ingest it. I wonder if that would pass muster under California law....

Thanks to webdoyenne for the link, and I second Kevin Quinn's response in the comments to Phil's post: "God bless the spirit of Bill Veeck."

Saturday, May 27, 2006

Audio on the Twins ballpark 

Participants include economist Andrew Zimbalist and Twins President Dave St. Peter, produced by Minnesota Public Radio. Here's the audio link, and here's MPR's page discussing the efforts of stadium opponents.

The story of a record shark 

This struck me as a pretty interesting tale:
The enormous old shark is on ice now, sitting in a fish house freezer on the Gulf of Mexico. But Capt. Bucky Dennis is still reliving the hours he spent bringing it in, the likely record-breaking catch he had pursued for a decade.

Captain Dennis, a fishing guide in Port Charlotte, caught the 1,280-pound, 14.5-foot hammerhead over nearly six hours Tuesday, during which the shark dragged his 23-foot skiff about 12 miles out to sea. It grabbed his bait, a hefty stingray, around noon in Boca Grande Pass, famous for tarpon fishing.

"When the tarpon come, they come," Captain Dennis, 36, said of the hammerheads that skulk around the pass in May and June, when, for years, he has tried to land a big one. "Each year I learn a little bit more about them."
The rest of the story, by Abby Goodnough in today's NY Times, continues to fascinate.

Update: Pics, and more from Saltwater Sportsman. Thanks to John Jasina for the link.

Friday, May 26, 2006

Product Endorsement Issues 

We are all familiar with the size of product endorsement agreements between sports stars and shoe and clothing companies, sports equipment and sports drinks manufacturers and a variety of other products. Athletes are typically well compensated for lending their name to these products.

Some manufacturers are not so willing to pay for product endorsements though. Consider this case from the world of soccer, where one X-rated business is rushing to capitalize on the upcoming World Cup by naming some of its products after famous German footballers.

Tuesday, May 23, 2006

Performance measurement and effort 

The advent of ProZone -- which identifies where a soccer player is on the pitch at any point in time -- has allowed managers to better monitor effort and assess talent in the English Premier League. I wonder if the following is related to improved monitoring:
What ProZone class as "“high-intensity activities"” -- runs made by players at three-quarters of sprint pace or faster -- have increased from 627 per team per match in 2002-03 to 1,209 in 2005-06, and the ground covered by players while sprinting has increased by 40% over four years. A sprint is classed as a run made at quicker than seven metres per second, equivalent to running 100m in a sharp 14 seconds.
Or perhaps it's just the response of other teams trying to cope with (or mimic) the speed of Thierry Henry. Other data from an interesting piece: midfielders cover the most ground, at just over 7 miles per game. Liverpool's Steven Gerrard, who is a notch about average in distance traveled, covered about 380 miles over the course of the season, 1/10th of it at a sprint.

Scandal fallout 

The corruption scandal in Italian soccer is having financial repercussions. Shares in Juventus have fallen 40% since the news broke, amid repeated trading halts on the Milan stock exchange. At risk are $120m in annual television rights, a Nike sponsorship, and more, should the Club be penalized with relegation. See this story for the financial details.

At first I thought the story was typical press hype, since soccer scandals are not uncommon in Europe. But as events have unfolded, it appears that a regime change may be in the works. Off Wing Opinion was on this early, and has posts and links with more information on the scandal. Could the fall of Berlusconi (who has close links to Italian soccer) have something to do with the timing?

Monday, May 22, 2006

Fit for a game, not for a franchise 

Unlike the Saints, who seem happy to be in New Orleans and who Skip notes are selling tickets like hotcakes, the NBA's New Orleans Hornets are still struggling with coming back to the Crescent City. So it's a surprise to me to learn that New Orleans will host the 2008 All-Star Game.
"The award of NBA All-Star 2008 is our vote of confidence in the progress that is being made in the reopening and rebuilding of New Orleans' tourism infrastructure," Commissioner David Stern said in a statement.

The game is scheduled for Feb. 17. Next year's All-Star game will be held in Las Vegas, marking the first time that a city without an NBA team will host the event the league uses to entertain sponsors.

The Hornets will play 35 home games next season in Oklahoma City and six in New Orleans. A lawyer for Hornets owner George Shinn said 10 days ago the team would leave New Orleans if Louisiana doesn't build a promised $8.5 million practice facility that was part of the 2002 agreement bringing the team from Charlotte, North Carolina.

The Hornets have a lease with the New Orleans Arena through 2012.

"I can't think of a better way to show people that our city is back and revitalized than by hosting the NBA's signature event," Shinn said in a statement.

Shinn is looking to sell up to 49 percent of the team to investors.
And if not that, he'd just as soon keep them in Oklahoma City, or at least use them as leverage for that practice facility (though one might think $8.5 million has better uses in hurricane recovery efforts.) In an AP report two weeks ago, Shinn said the area had seen "very, very little improvement" and that it was discouraging and depressing.

"If you look at our gross before and now our gross here from the arena standpoint is almost double what it was in New Orleans. As a matter of fact, it
is double," Shinn said.

"From a pure business model, if I was just a cold-hearted businessman the decision would be pretty easy but I've got to make the decision based on my head and my heart. I really do. I think it's very important to use good judgment. And if the state's willing to protect us, make sure we don't get hit hard, I'll ride it out."

However, Shinn said he doesn't think that Louisiana should offer to write the Hornets a check to ensure their financial success.

"I don't think they should do that because to me there are more important things to get done than having a basketball team. I think they've got to get the families back first and then worry about a basketball team," Shinn said. "That's my opinion, but I'm not one of the politicians in Louisiana."

And, he argues, tourism stops like New Orleans or Las Vegas are lousy places for sports franchises."
In New Orleans, you've got high crime, you've got a bad educational system. Because of all the tourists, it's hard to keep the city clean. It's just hard. It's entirely two different markets," Shinn said. "They couldn't survive without tourists. The whole city is built on it, and you're not. You're built to draw people that want to grow families.
Is Las Vegas or New Orleans fit enough for an All-Star game but not fit enough for a franchise? If all-star games are revenue generators for leagues, it is in their interest to use them in high-value places. New Orleans and Las Vegas have a lot of flights into the city -- or did, pre-Katrina -- and has loads of hotel rooms wanting customers. All-star organizers typically move their contests from city to city except for the tie-in of the NCAA and Indianapolis.

Colonial Suffers from PGA Success 

Golf gets very little "clock time" on the Sports Economist, so here goes. The Dallas Morning News' Kevin Sherrington writes today about the growing irrelevance of the Colonial Tournament. He offers some comments from two time winner (and Western Kentucky alum) Kenny Perry as to the Colonial's demise. In Sherrington estimation, two other factors stick out -- players' negative reaction to the Annika affair and Tiger Woods' absence.

Example No. 1: Bank of America's enduring legacy as title sponsor will be 2003, the year of Annika. "It was an exciting time, a unique time in Colonial's history," said Marty Leonard, who sits on the club's board and once sat on her father's lap as they watched the pros play the course he built. "And not everybody liked it." Count Singh among the latter. Of all critics, he was the most vocal in saying Annika Sorenstam shouldn't have been allowed to play, adding that he hoped she'd miss the cut if he did ...But Singh hasn't come back. Neither has Price, who called Annika's appearance a publicity stunt. Probably didn't help that she stole all the attention the year he was defending champ.

Example No. 2: Some guys hold grudges. Take Woods. Early in his career, he made it clear to all tour stops that he was week-to-week deciding where he'd play. But after a Colonial release that he was contemplating coming to Fort Worth, he's never been back.

These influences, along with scheduling relative to the big tournaments, likely help divide up the field and audience among the mid to lower tier events on tour. From an economic point of view, it is interesting that the presence and status of legendary founders of events influences field participation. Living and active legends such as Nicklaus and Palmer may be able to exert just enough of a nudge to help swing players to the Memorial and Bay Hill. As legends became inactive, such as Byron Nelson, their influence fades. The death of the legend-founder, such as Ben Hogan with the Colonial, spells trouble.

In the bigger picture, the primary influence on the struggles of tournaments such as the Colonial is simply the effect of income. When growing up in North Texas thirty years ago, a lot of the big names came to Dallas and almost all to Fort Worth, in part, because they played a larger number of tournaments. Nicklaus was really the only one who might skip one or the other on a regular basis. As golf purse money and endorsement money have grown in real terms, the top players opt for more leisure time while still earning much, much more than their PGA predecessors.

Saturday, May 20, 2006

Selling the Saints 

New Orleans does not have the wealth or the population it once had, so it stands to reason that demand for Saints football games has dropped. That does not mean that the stands will be empty next year: textbook economics implies merely that the profit-maximizing price for tickets will fall.

Somehow though, the fact that the Saints have sold 55,000 season tickets for next year strikes people as a surprise. Here is Jimmy Smith, writing in the Times-Picayune:
Observers of NFL marketing trends and economics expressed amazement that the Saints have sold nearly 55,000 season tickets for this season, given the general enmity that existed between fans and the team, the uncertainty of the club's future in New Orleans and the post-Katrina economic conditions.

"I think it probably came as a surprise that tickets have sold so well," said Becky Wallace, executive editor of Team Marketing Report, a Chicago-based trade journal that tracks pricing and attendance trends in sports nationwide. "That's to everyone, especially considering the way it is now compared to the way it was before.

"But you have to give the Saints credit. They've been one of the most preeminent in the NFL in terms of ticket-sales initiatives. They've done a lot to push ticket sales in various regions and throughout the state, with various price ranges."

At the outset of this year's season-ticket sales campaign, the Saints announced a new pricing scale in the Superdome that included major price increases on premium level sideline and club-level seats while offering more than 20,000 seats -- nearly one-third of the Dome's capacity -- at prices of $35 per game or less.

The team implemented 17 pricing zones in the Superdome, including a $14-per-game season ticket.
The curious thing to this economist is the fact that Katrina has led to an increase in the spread in prices. Premium level prices have gone up, and prices for the nosebleed seats have declined. This suggests to me that a) premium seats may not have been fully priced before Katrina; b) the demand decline is concentrated in the mid to lower income levels; and c) these local buyers are being replaced by spreading the "geographic net" outside New Orleans, through targeted marketing and lower prices. So while I'm not "amazed," I do find the story interesting.

Smith also quotes economist Robert Baade, who states that Saints fans are purchasing tickets due "to a desire ... to keep the Saints in New Orleans." That could be true, but if the owner deemed it feasible to move the team, he could foil that desire - and profit - by raising ticket prices.

Friday, May 19, 2006

A two part pricing schedule 

Football schools were early adopters of the two part pricing scheme as a method of generating revenue. Actually, the schemes used in ticket pricing are a bit more complicated than simple two part pricing, since they separate demand types by intensity, in addition to capturing the surplus associated with high value buyers though the fixed charge.

This surplus is in the range of $10m or more for top programs. Here are figures from 2005 for the University of South Carolina, as reported in The State. Listed below are the different membership levels in the Gamecock Club, the fee for the right to buy tickets, and the number sold.
  • Golden Spur: ...$15,000 / 218
  • Silver Spur: ......$3,000 / 1,321
  • Full Scholarship: $1,350 / 3,761
  • Half Scholarship: .$ 650 / 4,160
  • Roundhouse: ......$ 350 / 3,294
  • Century: ...........$ 150 / 2,650
  • Other: ................$0 / 2,590
These figures indicate that the top three levels alone generate over $12m, most of this being fees for the mere right to buy tickets. Add the next three levels and you cross the $16m mark. Not bad!

Nevertheless, schools can spend money by the truckload, and the Gamecock Athletic Department has a deficit of $5m over the last two years. So whatever they're raking in, apparently it is not enough.

In its search for additional revenue, South Carolina appears to have an eye on developments at Auburn. The State reports that Auburn's new premium ticket-pricing scheme is expected to raise an additional $3.2 to $3.5 million. But adopting such a scheme means reassigning ticket priorities, which is a tricky issue: the tradeoff between current revenue and fan loyalty is not easy to assess. If you fail to win, the Johnny-come-latelys will desert you, and the displaced loyal fan might not come back.

Here's a listing of the benefits that come with membership at each level in the Gamecock Club, and the lead story which discusses the problem of allocating seats between high revenue buyers and long term loyalists.

Wandering thoughts on the economics of sports 

RF: The field [economics of sports] seems to be gaining popularity within the profession. Why do you think there is more research being done in this area now?

Sauer: I think it comes down to two things. One, economics is data-driven, and there are a lot of good data available in sports. Second, sports are popular and are a market like any other so they present useful opportunities to take economic theory and apply it to issues that interest a lot of people.

RF: Each of the four major North American sports leagues, with the exception of Major League Baseball, has faced a rival league over the past 40 years. In some cases, the rival league has introduced changes that the dominant league eventually adopted. And some of the rival leagues’ franchises eventually became members of the dominant leagues following mergers. But none of those leagues was able to supplant the incumbent. Why? Can you imagine conditions under which one of the incumbents could be driven out of the market by a new entrant?

Sauer: I think it would take a colossal mistake for one of the major leagues to be supplanted by an upstart. There’s a tremendous amount of social capital that is embedded in loyalty to teams, rivalries, and so on. That goes beyond appreciation of the game itself. This is true in the North American leagues, but the best example is European soccer. If you watch the Italian Soccer League, for instance, you will see that the fans are packed behind the goal, which is one of the worst places to actually view the game. You get a much better view from being at midfield. But they are behind the goal for purely social reasons. So it’s something other than the game itself that is capturing the attention and imagination of the fans. That’s an extreme example of what I am talking about, but we see it in almost all sports. It’s not easy to re-create that loyalty even if you introduce a new league with great talent and innovative rules.

I think the existing leagues have figured this out, and they design their competition to take advantage of it. Once upon a time, sport was performance art, like figure skating or boxing. It’s not an event any longer. It’s a drama that unfolds over the course of a season, which is a pretty long time, and leagues have structured themselves accordingly.
That's a clip from an interview produced by Aaron Steelman for Region Focus, the Richmond Fed's quarterly magazine. Talking with Aaron was lots of fun, and there's more here, when you have the time.

Thursday, May 18, 2006

College Football and the Threat Point 

Doc, who's spending the next few months teaching students econ in a castle in England has a great post on the difference between English football and American sports leagues. I want to focus on his stadium comments:

English football teams play in much older stadiums.

A minority of EPL teams but a majority of MLB teams play in stadiums built since 1990. This difference is almost surely because the threat of moving is so much more credible in the U.S. than in England.

To understand the monopoly power of league owners and the effectiveness of the cartel, it's important to outline a few issues. Professional sports leagues are really little more than collections of current franchise owners, so when we talk about league officials, we are really mostly talking about the onwers of the league's franchises. These owners have a stake in each other's economic fortunes that goes beyond competition on the field. Revenue sharing between teams increases the attention that fellow owners give to other teams' revenue streams. As a team's stadium ages, all else equal,the revenues generated by teams falls. Building a new stadium for a team increases that team's revenue streams which, through revenue sharing, flows to the rest of the franchise owners.

There are also barriers (such as exclusive territorial rights granted by league officials, votes of existing franchise owners that must occur before expansion or movement is allowed, expansion fees and relocation fees) that keep existing teams from moving to and new teams from setting up in viable cities. In an open entry NFL, Los Angeles would not be without a football team for 10 years? All of these things are used by league officials to keep the number of teams less than the number that fans could support.

College football programs have no such threat point. Many programs represent state schools and are already explicitly or implicitly subsidized by the state and the politics of threatening to move home games from campus would likely be very nasty politically for these schools. Nebraska AD Steve Pederson can't credibly threaten to move his program to, say Wahoo or Wayne State, if the state doesn't pony up for a new stadium. Think of the politics that would create! But even in the case of private institutions, there is no credible threat that a program will move. Kevin Weiberg, commissioner of the Big 12, can't threaten, say, the city of Waco with the move of Baylor to Santa Fe, NM, if Waco doesn't pony up for a new Bear stadium.

As of 2006, the average age of Big 12 football stadiums is just over 70 years.

Big12stadiums

Granted, some programs have moved the location of their home games. For example, the University of Arkansas will play 2 of its games in Little Rock. But decisions like that of Arkansas' officials is mostly due to bringing games closer to the fan base. In addition, these Big 12 stadiums are not trash dumps. Mizzou officials have invested several 10's of millions of dollars in the past 10 years or so renovating Faurot Field and other Big 12 program officials have done likewise. The Big 12 stadiums that I have visited in the past few years may not be palaces, but they certainly aren't anything close to being dumps either.

In any case, when a pro sports team threatens to move to another city, the problem isn't with voters or representatives not wanting to subsidize professional sports stadiums. The real problem lies with the monopoly power of leagues and the credible threat points league officials and team officials have by keeping viable cities open.

(Cross-posted at Market Power)

Monday, May 15, 2006

Shutdown point 

It's apparently been reached by the US Hockey Hall of Fame in Eveleth, Minnesota, which has decided to move and not open this year.
Findley said the idea of closing the museum had been discussed for about 2 years. Temporary accommodations are being considered to display a portion of the museum's exhibits in 2006, but no arrangement has been announced.

The Hall of Fame is financed through visitor admissions, gift-shop merchandise sales, grants from USA Hockey and the Minnesota Wild of the NHL, and the annual college men's Hall of Fame Game and golf outing, said Scott Auld of Dayton, Minn., the Hall of Fame's marketing and promotion director the past two years. Neither Findley nor Auld would say what the Hall of Fame's annual operating budget is, although Findley did say the venue is debt free after receiving its share from the Frozen Tundra Classic between Wisconsin and Ohio State in February, which served as the U.S. Hockey Hall of Fame Game, and drew 40,890 in Green Bay.

The Hall of Fame has two full-time employees -- executive director Tom Sersha and administrative secretary Michelle Putzel. Their hours will be cut back to three days a week, said Findley. All other work is done by volunteers.

"There will definitely be a museum," said Auld, who works for That Idea! Creative Group. "But where and in what form is to be determined. We appreciate everything Eveleth has done for the Hall of Fame, but we have to find enough funding and a site that is most accessible for fans."
One big problem for the hockey HOF is that its induction ceremonies don't happen there but in Duluth instead, and therefore there's little economic impact on Eveleth itself. Compared to even the NASCAR Hall of Fame being constructed in Charlotte, the contribution of the hockey HOF is miniscule. There's little doubt in my mind that its salvation will involve moving to a new location, perhaps the Xcel Energy Center where the Wild play (paid for by the Wild, since they already contribute to the hall's budget.)

Is Kobe Like Mike? 

Also posted at WagesofWins.com

A few weeks ago the ever insightful Bill Simmons of ESPN.com announced his choice for NBA MVP. Simmons went through each of the players he thought were the top candidates and settled on Kobe Bryant.

If we look strictly at player productivity, or Wins Produced, one can see that Kobe was not the most productive player in the NBA during the regular season. This past season he produced 14.3 wins, which ranked 17th in the NBA. Among shooting guards, he ranked third, behind Dwayne Wade – 18.2 Wins Produced – and Paul Pierce – 17.3 Wins Produced. It is important to remember that nearly 460 people played in the NBA this past season, so Kobe ranked in the top 5% of all basketball players. The data tells us, though, that he did not offer the highest level of productivity.

In voting for the MVP award Kobe finished fourth, behind Steve Nash, LeBron James, and Dirk Nowitzki. When we look at Wins Produced we also see Kobe trailing these three players. King James produced 20.4 wins in the regular season, Nash finished at 18.6, and Nowitzki produced 18.0 wins. In sum, Kobe was very good, but not the very best.

What about the playoffs? One of the myths we explore in The Wages of Wins is that star players raise their level of play in the playoffs. In the excerpt to Chapter Eight, posted on our website, we discussed Michael Jordan’s performance in the playoffs vs. what he offered in the regular season. Utilizing a metric we introduced in the book – Win Score – we offered evidence that although Playoff-Jordan was very, very good, he was not as good as Regular Season-Jordan. In other words, like most stars we investigated, Jordan’s performance in the playoffs tended to dip slightly.

If we look at Kobe in 2006 we see that he was indeed like Mike, at least in the sense that his performance dipped slightly in the playoffs. His per-minute Win Score in the regular season was 0.199. In his seven games in the playoffs this year his Win Score was 0.165. I would add that in Kobe’s eight other trips to the playoffs his per-minute Win Score dipped six times. So this year was not any different. And again, I would emphasize, this is what typically happens to stars in the NBA. Performance in the post-season tends to dip slightly, even after we control for the general dip we see in all player performance when the NBA moves to its second season where only good teams get to play.

Of course one might ask, what exactly is Win Score? It is a simple measure of player performance, easier to calculate than Wins Produced – although not quite as intuitive. The correlation between Win Score and Wins Produced, if you bother to adjust the former for position played, is quite high. Details of each metric are offered in our book, which should be available in book stores in the next two weeks.

Saturday, May 13, 2006

Bag Lady 

From the LA Times:

A Los Angeles psychologist who was denied a tote bag during a Mother's Day giveaway at an Angel game is suing the baseball team, alleging sex and age discrimination.

Michael Cohn's class-action claim in Orange County Superior Court alleges that thousands of males and fans under 18 were "treated unequally" at a "Family Sunday" promotion last May and are entitled to $4,000 each in damages.

$4,000... for not getting a bag and being treated unequally? For this?

Angelstotebag

My first reaction is that this is a nuisance suit. My second reaction is that this is more evidence of PC run amok. My third reaction is that the bag is very tacky. That sort of thing's not my bag, baby.

So, what are the Angels doing this year for Mother's Day?

This year's Family Sunday promotion, to be held this weekend, will not specifically cater to women 18 and older. The first 25,000 fans — male or female — 18 or older will be given a red "Mother's Day Ladies Tote Bag."

Mead declined to say whether the change to this year's promotion was made in response to Cohn's complaint.

"It was done after a lot of internal discussions," he said.

And, no doubt, a lot of rolled eyes.

HT to Sports Business Daily.

Addendum 1: Kip notes in the comments to my Market Power post that this suit legitimately falls under California's Unruh Civil Rights Act. Here's some information on that act.

(Cross-posted at Market Power)

Addendum 2: Here's a Market Power post on a similar lawsuit filed against the A's by the same lawyer who is handling Mr. Cohn's case.

The Peeps Have Spoke! 

Read my lips: No New Taxes*!

Although there's more momentum than ever at the Capitol to build stadiums for the Twins, Vikings and Gopher football team, none of the proposals has large public support, a new Minnesota Poll has found.

...When asked which team needs a stadium most, the poll found that the Twins had about as much support as the Gophers -- 23 percent and 21 percent, respectively. Only 13 percent favored a new stadium most for the Vikings. The largest group, 29 percent of those responding, volunteered that none of the teams need a new stadium.

That's not surprising at all. The Metrodome is less than 30 years old and properly-constructed stadiums last a long, long time (the average Big 12 football stadium is over 70 years old) and when renovated, give fans a nice place to watch a game. I realize that it's not how old the stadium is. It's the cash that fans are willing to spend on its amenities. In any case, it's no wonder the various supporters of the stadiums don't want the vote to go to a referendum! It'll go down faster than a Cubs season.

(Cross-posted at Market Power)

*Update: Dennis Coates noted that the original link to the Star Tribune article was dead. I've found an updated link to the article and fixed it above. Thanks, Dennis.

Friday, May 12, 2006

Some Observations on the Differences between N. American Sports and Soccer/Football in England 

An anonymous reader and I have corresponded considerably over the past month or two about the economics of North American professional sports, as compared with English Soccer/Football, especially at the Premiership level. Much of what follows is lifted shamelessly (but with his permission) from his e-mail messages.
  • In the U.S., the only way for a city to get a major league team in any sport is to either get the league to expand or to lure a team away from another city. Both are expensive processes fraught with politics.

    In England, a city can get a Premiership team by supporting its local lower-division (minor-league) team, increasing its revenues, hoping the team's managers use the revenues to buy the rights to good players, and winning enough games to get promoted to the Premiership. Expansion and moves are almost unheard of--why go through that when you could just build up the lower-division team in the area instead? (Wimbledon did move to Milton Keynes several years ago, but that was an anomaly.)

    Furthermore, even if a city could purchase a franchise and move it, there is no guarantee they could keep it. The teams that finish at and near the bottom of the league each season are "relegated" to the next lower division. It'd be sort of like declaring Tampa Bay or Kansas City to be a AAA team if they finished last in a given season, and then promoting the top AAA team to the majors (Imagine what would happen if the Yankees finished last one season!). Or like promoting the best AA teams to AAA and relegating the worst ones to single A.

    Needless to say, under the promotion and relegation system, the lower-division teams are always potential competitors; they definitely are not farm clubs for the top level clubs.

  • English football teams play in much older stadiums. From Wikipedia, here are lists of the home grounds of the 20 English Premier League (EPL) teams and the 30 Major League Baseball (MLB) teams:
    http://en.wikipedia.org/wiki/List_of_Premier_League_stadiums
    http://en.wikipedia.org/wiki/List_of_Major_League_Baseball_stadiums

    A minority of EPL teams but a majority of MLB teams play in stadiums built since 1990. This difference is almost surely because the threat of moving is so much more credible in the U.S. than in England.

    A lot of the English football stadiums are old, but a lot of the stands in the stadiums are new, and it's rare for a stand from before 1970 to still be in use. So renovation of the stadiums is common--it's entirely new stadiums that are uncommon. Since North American baseball teams usually scoff at offers to renovate their old stadiums and demand entirely new stadiums, this observation about stadiums and threats of moving is still true.

  • Geographic concentration in the EPL is much greater than that in MLB.

    In the EPL, 19 or 20 teams are either in the London, Birmingham, Liverpool-Manchester, or Newcastle areas--the only exception is Portsmouth. The teams are much more dispersed in MLB. However the system of promoting the best football clubs to the next higher division and relegating the worst teams to a lower division means that geographic dispersion can change considerably, as it will next season. Two Birmingham-area teams (Birmingham City and West Bromwich Albion) and one Newcastle-area team (Sunderland) are being relegated from the top division to the next lower division. In their places will be a team in Reading, a team in Sheffield and possibly (depending on how the playoffs go) a team in Leeds. Still more concentrated than in North American leagues, but not quite as drastic as it was this past season.

    This difference is almost surely because it is difficult in U.S. major leagues to expand in or move to an area that is already served by a team. It took forever to get baseball in D.C. again because of the objections of the Orioles' owner. New Jersey could probably support a baseball team, but surely won't get one as long as the Yankees, Mets, and Phillies have any political clout. In England, on the other hand, if an area can support an extra-top division team, you're likely to see a lower-division team get supported and ultimately promoted to the top division--and there's not much that other top-division teams in the same area can do about it. So you get a lot more teams close to other teams and clustered in big population centers.

    Under the English system of promotion and relegation, New York would almost surely have three, four, or more teams and Boston and Philadelphia would each have two (as they did into the 1950s), and that those teams would be better-supported than the existing single teams in Milwaukee and Kansas City.

    Alternatively, if the NHL operated under the English system, would there be a restored Montreal Maroons to compete with the Canadiens?

    Note that being in the Premiership League for English football is worth a great deal of money to a club. If they are relegated, they often disperse the star players for cash and try to rebuild. It boggles the mind to think of this arrangement in American baseball. I cannot imagine that a major league team would be willing to risk major loss of funds and status by being relegated to the minors.

  • The sharing of revenues in English football seems to lie somewhere between MLB and the NFL. Much of the television revenue is shared between the teams. But the clubs get to keep most of their other revenue sources. The result is that teams that draw huge numbers of fans have much higher revenues than the others. And of course those that win more tend to draw more fans both at home and away.

    At the same time, the revenue sharing from television revenues means that even bad teams have a strong incentive to try to remain in the top league and not be relegated to lower divisions or leagues. This incentive makes some of the games between rum-dumbs near the end of the season almost as exciting as games between the top teams.

Thursday, May 11, 2006

Jason Kidd or Steve Nash? 

Also posted at WagesofWins.com

For the second consecutive season point guard Steve Nash has won the NBA’s MVP award. With two MVP awards can anyone question that Nash is the greatest point guard in the NBA today? Well The Daily Dime at ESPN.com has reached a different conclusion. The Daily Dime asked thirteen of ESPN’s NBA experts: Who are the greatest point guards in NBA history? Of the top ten players chosen, only three currently play the game: Jason Kidd, Steve Nash, and Gary Payton. Sixteen year veteran Payton is no longer a starting point guard in the NBA. Kidd and Nash, though, are still the leaders on their respective teams. And of these two, ESPN’s NBA experts rank Kidd the highest. This is odd, since Kidd received no votes for MVP this season.

Who is right – the MVP voters or ESPN’s experts? People can talk about leadership, attitude, hustle, etc..., but outcomes in basketball depend primarily on four factors: Shooting efficiency, rebounds, turnovers, and steals (or the ability to create turnovers). This past season Nash was clearly the more efficient scorer, and if we throw in Nash’s advantage in assists, he had a greater impact on the efficiency of his teammates as well. With respect to gaining and maintaining possession of the ball, though, Kidd was the better player. Kidd garnered more rebounds and steals, and committed fewer turnovers.

So who is better? In The Wages of Wins we explain how to measure a player’s Wins Produced, which takes into account all the statistics tabulated for the player. Analyzing the 2005-06 season we see that Kidd produced 23.7 wins, while Nash’s Wins Produced equaled 18.6. Both ranked in the top ten in the league, but of the two, Kidd ranked the highest.

If we extend our analysis back in time, looking at each season since 2000-01 – when Nash first became a consistent regular season performer – a similar story is told. From 2000-01 to 2004-05, Nash had 60 Wins Produced, a performance that ranks him among the top performers in the game. Kidd, though, produced 94.5 wins across this same time period. Again, Kidd is more productive.

Does this mean Nash should not have been chosen MVP? There does not seem to be any consensus on what “most valuable” means, so I guess one can argue that by some definition Nash is the MVP. If we look strictly at “most productive”, though, ESPN’s NBA experts had it right. Of course, many of ESPN’s experts probably voted for the MVP award. So some of these people might have had it wrong also. Then again -- and this is getting confusing -- maybe “greatest ever” is defined differently from “most valuable.” Perhaps we could settle this debate easily if people took one of the first steps we are taught to take in research: Define your terms!

Tuesday, May 09, 2006

Food for thought 

At Sabernomics, JC has a great post examining the variation in home run hitting over time. It comes complete with data in the form of charts, and offers an alternative to the steroid theory. One implication of JC's theory, I think, is that the age of relief pitchers should have increased during the 1990s, relative to the age of an average player. That too, is testable, and perhaps a bit easier to execute than other auxiliary implications.

Monday, May 08, 2006

Aahs and ohs for Barbaro 

Barbaro's performance in the Kentucky Derby has the racing world looking at the history books. It was a spectacle to watch, and the historical data confirm that the excellence on display was not an illusion. Andrew Beyer points out that Barbaro's final quarter mile was the fastest since Secretariat in 1973. His winning margin of six and one half lengths is the largest since Assault in 1946. Of course, both Assault and Secretariat are Triple Crown Winners and racing legends. Joe Drape senses that Barbaro is a horse that has been "transformed into a burgeoning legend," i.e. on the cusp of greatness himself.

Casual observers of the Triple Crown will no doubt think that racing's hype machine is just being wound up again for publicity's sake. We've had a series of near misses in recent years, capped by Smarty Jones' disappointment in the 2004 Belmont Stakes. But Barbaro's case is different. Here are the horses since 1989 who won the first two legs before getting beat in the Belmont:
2004 -- Smarty Jones (2nd to Birdstone)
2003 -- Funny Cide (3rd to Empire Maker)
2002 -- War Emblem (8th to Sarava)
1999 -- Charismatic (3rd to Lemon Drop Kid)
1998 -- Real Quiet (2nd to Victory Gallop)
1997 -- Silver Charm (2nd to Touch Gold)
1989 -- Sunday Silence (2nd to Easy Goer)
Of the most recent four, only Smarty Jones went into the gate at Belmont with the credentials for greatness. The rest were merely good horses and Triple Crown impostors masquerading behind a cute story. Smarty Jones might have won the mile and a half Belmont with a better timed ride, but regardless, the defeat to Birdstone exposed his weakness. Smarty was essentially a miler who could carry his speed a few extra furlongs under the right conditions.

Barbaro brings back echoes of the three prior attempts. Real Quiet, Silver Charm, and Sunday Silence were tremendous horses that won top races after the Triple Crown. Sunday Silence had the misfortune to run second to Easy Goer -- another great horse on his hometown track -- in the second fastest Belmont in history. His experience illustrates how tough it is, even for a great champion, to run three winning races against top class competition five weeks apart. Silver Charm and Real Quiet were both nailed in the final strides by very good horses suited by the race.

If Barbaro is healthy in five weeks he will win the Belmont. His sire Dynaformer could run all day long at a high cruising speed, and Barbaro appears to have inherited that trait. In contrast, his competitors will get weaker as the distance gets longer.

The tougher test for Barbaro will be in the Preakness, the shortest of the three races, and I think it will come from Brother Derek, the Santa Anita Derby winner. Brother Derek's fourth in the Derby is much better than it looks on paper, and he proved the doubters wrong: he does not need the lead, he can rate and fire. The Derby proved that Brother Derek can't make it to the finish line as fast as Barbaro when forced to steady twice, and run six and nine horses wide on the turns. He had a terrible trip, and still managed fourth.

Barbaro will be odds-on in the Preakness, but Brother Derek will make him earn the money. The Preakness is a traditional horse race and not the rodeo lottery that is the Derby. So racing luck will play less of a role, and we can anticipate a battle between two very fine racehorses.

The bottom line: Barbaro, more than any horse in recent years, comes out of the Derby as a genuine candidate to win the Triple Crown. Barbaro's Derby performance already puts him well above the likes of Charismatic, War Emblem, and Funny Cide. But the sense that this is a talented crop of horses remains, and racing greats like Silver Charm and Sunday Silence could not quite get the job done in the Triple Crown. So there's still plenty of work to do for Barbaro. His breeding and running style give him a big edge in the Belmont, and the tougher test looks to be the Preakness.

Sunday, May 07, 2006

On the Importance of Competitive Balance 

Also posted at WagesofWins.com

The first round of the NBA playoffs ended on Saturday night. In eight first-round match-ups the team with the best regular season record won every time. Contrast that with the NHL playoffs where every top seed in the Western conference lost in the first round. The list of losers included the Red Wings, who are the 14th team in the past 20 years to take home the President’s Cup but fail to win the Stanley Cup.

And hockey is not the only place where the regular season best falter in the post-season. In baseball the team with the most wins at seasons end has only taken the corresponding World Series title once in the past ten years. Football’s best do a bit better. Over the past ten years the team on top at the end of the regular season won the Super Bowl three times.

How about the NBA? Over the past fifty years, the NBA champion has been either the best or second best team 80% of the time. If we look at the dispersion of wins in the regular season, we also see – again relative to the other sports – a wider spread in the NBA. Whether we look at regular season outcomes or the playoffs -- relative to the other major North American sports -- the NBA appears to have a problem with competitive balance.

Competitive balance has been the rallying cry of sports league owners for more than a century. The story has been that leagues without balance will not have uncertain outcomes, and thus fan support will dwindle. Consequently players have been asked to accept rules that limit player compensation in the name of league survival.

If the argument of owners is to be believed, the NBA should be dying at the gate. But this season the NBA set a record for attendance. And this follows the 2004-05 campaign where the previous record was set.

So what do we know? The NBA does appear to have a problem with competitive balance. The NBA does not, though, have a problem with attendance. Could it be that the story owners have told this past century is just another tall tale?

Baseball is scheduled to once again open negotiations with its players. If past behavior is an indictor, Bud Selig will again raise the specter of competitive balance. When this subject arises, perhaps an enterprising reporter could ask “How does the NBA – a league without the benefit of balanced competition – keep setting records at the gate?” And here is the follow-up: “If competitive balance is not necessary for the survival of a sports league, aren’t the rules designed to promote balance just an attempt by owners to take money away from players?

Friday, May 05, 2006

Racing sperm 

Three Chimneys Farm has the wackiest, coolest commerical for their stud farm running on ESPN's Kentucky Oaks coverage. The farm's sires are represented by sperms charging through the stretch, to a race call from Tom Durkin. Superb animation, simply brilliant.

On the edge, without crossing the boundary to bad taste, it's wacky but classy at the same time. It ought to win an award of some kind.

An impossible Kentucky Derby 

The 132nd edition of the great American horse race is upon us, with an incredible collection of talented horses set to go. As folks in the industry say, this years' is an exceptional crop.

The corollary is that this is a tough race to handicap.... there are too many good horses, most with the tendency to be near the lead:
Barbaro, undefeated front-running winner of the Florida Derby.

Brother Derek, impressive winner against all comers since a good performance in last fall's Breeders Cup Juvenile, including a sharp win in the Santa Anita Derby.

Lawyer Ron, a horse jumping out of his skin the last two months, winner of 6 straight. His last race at Oaklawn Park, suggested the reign of Arkansas Derby winners in the Triple Crown (Smarty Jones, Afleet Alex) may not be over.

Sinister Minister, runaway winner of the Blue Grass Stakes, and heir in waiting, perhaps, to front-running, Bob Baffert-trained War Emblem, the runaway winner of the 2002 Derby.

Sweetnorthernsaint, a heels-in-the-air sort who has a penchant for leaving the opposition in the dust, as he did in his quicksilver fast, 9 length Illinois Derby triumph.
All of these boys like to be on or near the lead, along with a group of less accomplished, but still very talented speedsters. As in Keyed Entry, who is my candidate to pop and stop (i.e. finish last), and Sharp Humor, who figures to last a while longer.

What does this mean? Rodeo!! Specifically, the race for position in the 1/4 mile run to the first turn could be as wild as ever.

All of this is obvious to anyone who follows the sport. The result is a real crap shoot: the winner is likely to be among the quickest horses, listed above, all who have some degree of the required stamina. But noone knows which horses will stand up to the unprecedented pressure they will face, and which ones will have a bad trip. Several will have their chances compromised by racing luck - that is the only certainty in the race.

The "wise guy" horse is Point Determined, 2nd behind Brother Derek in the Santa Anita Derby. He's finished strong in his last two races and figures to avoid some of the early traffic. I hate the wise guy tag, but I love the horse. I'll take him, along with his California compadre, to complete the Derby exacta. But both will need good trips in the race, and Brother Derek drew an awful post position. Brother D looks to be three or four wide in the first turn and may come under pressure early, which compromises his chances. Barbaro is the prime beneficiary of the post-position draw. He'll leave from post 8, and he's been an awesome sight in this week's workouts. Jazil should be running late, so there's a quartet to play with in the exotics.

And did I leave out Lawyer Ron? Ugh. More than any Derby in memory, this seems an impossible race to handicap.

But it should be a great spectacle. Happy Derby Day!

Wednesday, May 03, 2006

Agents, at it again 

Agents provide services in markets where transactors may be poorly informed. This fact provides agents an opportunity to serve potential customers, but also a chance to take advantage of a customer's ignorance.

In his research with Chad Syverson, and with Stephen Dubner in Freakonomics, Steve Levitt has presented evidence that real estate agents, in the aggregate, profit not just from serving customers, but by taking advantage of them. One might hope that market forces would curtail this behavior, but customer ignorance coupled with infrequent transacting are factors which limit the market's effectiveness at policing.

Joe Drape's story in the New York Times about a lawsuit in horse racing shines the spotlight on agents in the sport of kings. Shady agents are part of the woodwork in racing, but this time, the accused apparently took advantage of a newcomer with enough cash, passion, and experience to fight back. That would be Jess Jackson, multi-billionaire developer of Kendall-Jackson Vineyards, and part-owner of last year's Triple Crown star, Afleet Alex.
In court filings in California, Jackson says his advisers overcharged him for the purchases of 30 horses and took undisclosed payments from sellers at thoroughbred auction sales.

...At 76, Jackson is a relative newcomer to the industry. But many old-line breeders agree with him. Although he has been involved in the sport since just 2003, he has successfully lobbied for legislation in this state that prohibits a practice known as dual agency, in which an agent receives money from the buyer and the seller in a horse trade.

...Long before Jackson founded his winery in 1982, he worked as a police officer while in law school at the University of California, Berkeley. He was also an investigator and eventually a lawyer for the California attorney general's office. Those skills and sense of justice, he said, were piqued in the spring of 2005, when a member of his organization ran into John Silvertand, the breeder of last year's Preakness and Belmont Stakes winner, Afleet Alex.

Jackson had bought Afleet Alex's mother, Maggy Hawk, from Silvertand for $750,000. At least, that was the price that [agents] de Seroux and Narvick told Jackson that they had paid on his behalf, according to the lawsuit. Silvertand, however, told Jackson's associate that he had sold Maggy Hawk for $600,000.

Jackson terminated his relationship with de Seroux and, concerned about the discrepancy in prices, traveled to Argentina and Chile to meet with other sellers of horses that he had purchased through de Seroux. He found similar discrepancies in the prices for those horses, according to his lawsuit.
Part of what makes the story compelling are quotes from famous breeders who back the allegations, and believe that these practices keep potential owners from investing in the sport.
Several [breeders] acknowledged that agents of buyers had approached them, seeking to inflate prices on their horses.

"We don't do that and have lost business because of it," said Arthur Hancock Jr., whose Stone Farm has produced three Derby winners. "When you tell them no, you understand that they are never coming back to buy one of your horses. Honest sellers can't compete with those who cheat. I'm a fourth-generation horseman, and I'm ashamed that a winemaker has to clean up our sport."
Hancock's take is quite different from that of former Governor Brereton Jones, also a breeder, who is involved in the case. Jones defended the agents' behavior and said he'd pay them again: "That is the beauty of the free-enterprise system, that you have the right to reward people who do business with you." I'd wager the Governor did business the same way when he was in office, but that doesn't make it right!

Tuesday, May 02, 2006

Losing to Win in the NBA in 2006 

One of the best recent articles written in the field of sports economics was “Losing to Win: Tournament Incentives in the National Basketball Association.” by Beck Taylor and Justin Trogdon. This paper, which appeared in The Journal of Labor Economics in 2002, offered evidence that before the institution of the draft lottery, non-playoff bound NBA teams actually played to lose towards the end of each season.

Although the NBA denies that teams ever tried to lose to secure better draft picks, the league did institute a draft lottery to lower a team’s incentives to try and lose games. Although the draft lottery might change the incentives of non-playoff teams today, the current playoff format offers a new problem. When the Memphis Grizzlies faced the LA Clippers on April 18, the winner secured the 5th seed in the Western Conference playoffs while the loser was seeded 6th. The better seed, though, was not much of an award. The 5th seed earned the right to play the formidable Dallas Mavericks while the loser got to face the less impressive Denver Nuggets.

In the game both teams appeared to do their best to act on their incentives. The Grizzlies sat their best player Pau Gasol. Gasol led the team in Wins Produced, producing 28% of the teams wins in 2005-06. Memphis also reduced the minutes of Eddie Jones, who produced 8.3 wins this past season. The Clippers countered by sitting Chris Kaman – 8.6 Wins Produced – and Sam Cassell – 7.1 Wins Produced. Furthermore, Elton Brand, who produced 17.7 wins this past year, only played 22 minutes. In the end, the Clippers managed to sit more talent than the Grizzlies and LA lost the game by six points.

As expected, Memphis reaped its reward in the playoffs. Last night the Grizzlies were swept out of the playoffs by the Mavericks. Meanwhile the Clippers eliminated the Nuggets last night, moving on to the second round for the first time in 29 years.

So this all begs the question: Should Memphis have tried harder to lose to the Clippers on April 18? If Memphis started all of its bench players, would the Clippers have tried to play their cheerleaders? Given the behavior of these teams, and the results we saw last night, clearly the NBA needs to re-think their playoff format if it wishes to avoid teams playing to lose in the future.

Super Bowl tax receipts 

John Gallagher provides the numbers in the the Detroit Free Press:
New figures released by the Michigan Department of Treasury show that the state's sales tax receipts for February and March -- the two months when most Super Bowl-related sales would have been reported -- were up just 2% over the year before.

That 2% statewide gain -- representing about $20 million more in sales tax revenue on a base of almost $1 billion -- could be too negligible to draw any conclusions about its source, because it came from throughout the state.

Meanwhile, statewide use-tax revenues levied on hotels were up less than 0.5% for February and March.

A Detroit-area convention facility tax, which essentially is a hotel tax for the tri-county area, showed a 70% jump in February. But even that increase represented less than $1 million in net new tax revenue.

Terry Stanton, a spokesman for the Treasury Department, said detecting Super Bowl impacts in the tax figures would be difficult. Tax receipts can be volatile from month to month and subject to timing issues regarding filing dates and times.
This is consistent with prior evidence, although the 70% gain in hotel related taxes is novel, and illustrates the consequence of shifting the game to a cold-weather city. Thanks to Jason Winfree - who was there on game day and "spent about $10 for lunch" - for the link.

Draft Follow-Up 

In my NFL draft overview last week, I overlooked this column by CNN.SI's Jeffri Chadiha. Summarized in my words -- the first round is much like buying a Powerball lottery ticket and the later rounds are real attempts at investing. Chadiha adds

Last week I asked an old friend of mine -- a man who spent nearly 20 years coaching, scouting and making personnel decisions in the NFL -- about my theory, and he agreed. He told me that in his experience, teams spent the first round searching for players with the appropriate measurables. They wanted physical freaks, and if they couldn't get those guys, they wanted prospects that came as close as possible to being freaks. It was easier to justify the money for such talents.

"Professor of the pitch" 

Sunil Gulati, Columbia Econ Professor and head of US Soccer, is profiled in this piece in USAToday.

There are lots of interesting facts in the story, but this one will make us sports econ bloggers envious:
In the fall, Gulati teaches a senior seminar on sports economics, which has featured guest speakers including NBA Commissioner David Stern. The class is so popular, students clamor for admission. In the school newspaper, a student chronicled how the night before registration he slept in a corridor for 13 hours to secure a spot.
He's also referred to as "the single most important person in the development of soccer in this country." I hope he succeeds.