Thursday, November 30, 2006

Perverse Incentives in College Football 

So, suppose you were the University of Nevada playing Boise St. last Saturday...

Your 8-3 record has already locked up a bowl appearance regardless of your result against the conference leader. However, with a win, Boise St. would be 12-0 and poised to make a historic appearance in a BCS bowl game. The Western Athletic Conference (WAC) would therefore be poised to take home a $15 million paycheck, which is roughly $14 million more than it would take home if Boise St. lost and had to settle for playing in the designated WAC games: the ever prestigious Hawaii Bowl, the New Mexico Bowl, and the MPC Bowl.

Of course, that potential windfall would get shared among the 8 other members of the WAC resulting in a $1.5 million payment to, guess who, the University of Nevada.

So, suppose you were the University of Nevada playing Boise St. last Saturday...

Well, Nevada did their part to earn a share of prize by losing 38-7 to Boise St. Following the BCS selections next Sunday, we'll have to see if it was worth it.

P.S. Thanks go out to L.A. Times reporter Greg Johnson for posing this little dilemma.

Tuesday, November 28, 2006

More regulatory rumblings 

A few more stories on the proposed intervention to regulate European football emerged today. The Evening Standard, a London paper, carried a story that UEFA is close to reaching agreement with EU ministers to impose a rule that clubs cannot spend more than 70% of their income on player salaries- a move intended to rein in clubs like Chelsea. Presumably this means Abramovitch's subsidies would not be counted as income- although how such a rule could be enforced is hard to imagine. UEFA spokesperson William Gaillard was quoted as saying that regulation is necessary to ensure that at least 8-10 teams are in contention rather than two... clearly he hasn't read the Blue Ribbon Panel or heard of a regularly recurring reasonable hope for the bottom 10-12 teams.

The temperature of the debate is rising, as the vice-chairman of Arsenal and chief executive of Chelsea stated publicly that a related plan to introduce player nationality quotas "runs right in the face of freedom of movement of workers...The courts will be very busy with it." Meanwhile, in an article in the London Times the chief executive of the Premier League said that UEFA had no right to regulate the Premier League and that "European law has no place in the English game" (I guess the Bosman judgment and the European Commission's 3 year antitrust investigation of EPL broadcasting rights had slipped his mind).


Stirring the pot a little more vigorously, I also noticed an article from a month ago suggesting that FIFA and the IOC are upset that UEFA is negotiating the regulation of football with the EU: "We believe that the issue of governance is of outmost importance for the sports movement and that this issue should be dealt with by sports themselves based on the principle of the autonomy of the sports movement.

Meanwhile, UK sports minister Richard Caborn has promised that there should be an agreement between the EU and UEFA by the end of the year. But I'm not sure we're going to see too many friendly exchanges of seasonal greetings.

Friday, November 24, 2006

What Goes Around... 

From the Kansas City Star:

Next year the NFL plans to begin playing regular-season games outside the United States, and the Chiefs want to be first in line.

An overseas game would bring Kansas City a generous helping of publicity. But it also would cost local and state tax coffers more than $500,000, according to sales tax data reviewed by The Kansas City Star.

...The state understands the NFL wants to extend its brand internationally, said Blunt spokesman Brian Hauswirth. But Missouri has invested significant money in Arrowhead and the Edward Jones Dome where the Rams play, and the state expects a return.

According to the article, the Chiefs lease with Jackson County has a clause that states the Chiefs can play one home game per year outside the continental US. But state officials want compensation. When your team gets public subsidies for its stadium, team officials risk losing some autonomy on where the team can and cannot play. What goes around...

Tuesday, November 21, 2006

Hammers’ Saga 

It was announced this morning that West Ham, the English Premier League club has been acquired for £85 million by a consortium of Icelandic businessmen led by Eggert Magnusson, currently the president of the Iceland FA (a post he will now resign). The real money behind the deal seems to come from Bjorgolfur Gudmundsson, chairman of the Icelandic bank Landsbanki. Until recently the club had been in negotiations with another consortium, led by Kia Joorabchian, an Iranian investor, backed by the Israeli property developer, Eli Papouchado. This caused great outrage in the media and among the fans about the threat of asset stripping. Back in August Joorabchian had brokered a deal to bring two of the most sought after young players in the world, Carlos Tevez and Javier Mascherano of Argentina, to the club. The background to this deal seemed shady, and concerns were also expressed about business links to Roman Abramovitch, the owner of Chelsea, and various other Russian and Georgian businessmen.

West Ham is one of the most traditional football clubs in England, and ownership has been passed down among local family businesses for a century, so why the sudden entanglement with exotic investors? The answer is the London Olympics. As I mentioned a couple of days ago, there is controversy over the post games use of the Olympic Stadium The sports minister Richard Caborn appears to want a football club to move in, and West Ham is only a couple of miles away. Caborn’s boss, Tessa Jowell (secretary of state for culture, media and sport), apparently set the condition that it must retain a running track and be sold for at least £100 million- hence the search for investors. Papouchado was an ideal backer, since he had no interest in football but would be well placed to finance the purchase of the Olympic stadium and the redevelopment of West Ham’s existing site. However, the concern that football is losing its identity, being “sold out” to foreign interests and turned into a business led to widespread public opposition.

Hence the involvement of the seemingly more respectable Icelanders. However, it has also been mentioned that one quarter of the teams in the Premier League are now under foreign ownership. This is only to be expected given the global appeal of the Premier League, and many more foreign investors have been linked with EPL clubs. The question is whether this will undermine support for the existing organisational structure of the “football family”, and in particular support for the release of players to play for their country.

As the great Einar Benediktsson said, Hve blásnautt er hjarta sem einskis saknar.

Monday, November 20, 2006

I Left My Olympic Bid in San Francisco 

The recent collaspe of plans to refurbish or rebuild the San Francisco 49er's stadium (which will always be known in my mind as Candlestick Park, regardless of the current corporate sponsor) has led San Francisco to withdraw as a candidate to host the 2016 Olympics. San Francisco was apparently well aware of the problems associated with promising stadiums for the Olympics that were not yet approved by the city's voters. Look, for example, at the problems NYC's bid had given the uncertainty of the proposed upper west side Jet's stadium, and of course the ongoing financial difficulties of the 2012 Olympics in London were detailed by our esteemed colleague, Stefan Szymanski, last week.

I was, however, very impressed with the city of San Francisco regarding their bid. I was contacted on several occasions by Andrew Murray, Office of the Legislative Analyst for the San Francisco Board of Supervisors, asking about academic research into mega-events. His report to the SF Board of Supervisors, Costs, Benefits, and Considerations of Hosting the Olympic Games, is, in my opinion, a very fair piece that includes both the potential benefits of hosting the games as well as the pitfalls that cities can fall into. It is rare, in my experience, to see government reports for potential host cities that do more than gloss over the potential negative economic considerations of the Olympics and other mega-events, and too often local governments simply become cheering sections for sports leagues or event organizers rather than independent bodies looking out for the overall welfare of their citizens.

Good for SF for backing out of a bid once the costs clearly became prohibitive. I wonder if Chicago and Los Angeles, the two remaining American bidders, will display similar wisdom.

Thursday, November 16, 2006

London bids for Olympic record 

Barely seventeen months after winning the bid, London looks set to deliver the most overbudget games in Olympic history. The bid document produced in 2005 estimated the cost of the Olympic Sports facilities at £2.4 billion; we are now told the estimated cost is £5.1 billion (113% up), equivalent to a monthly increase of just under 5%. At this rate by 2012 the bill will reach £125 billion, equal to over half of London's GDP. Now, that might sound silly if the doubling of costs over the last year was based on a calm and thoughtful reappraisal of the estimates leading to a consensus on the way forward, but in fact it appears that there is widespread confusion in the government and the LOCOG about what to do now. Here are some of the problems:

  • There is still no tenant in sight for the Olympic stadium. The government has set a condition that it must retain a running track and any private sector buyer must pay £100 million. The only potential buyer is a football club, and all of them already have stadiums and have no interest in these kinds of conditions.
  • There are serious concerns about remediation of the brownfield Olympic site. This is a region that has been home to a variety of toxic industries over the last 250 years, including unknown unknowns not to mention a very large number of unexploded bombs from WW2.
  • Start on construction is seriously delayed, provoking a critical comment from former IOC President Samaranch
  • Jack Lemley, the American hired to manage the Olympic Development Authority, resigned last month after less than a year in the job, complaining about political interference

I guess most sports economists are going to just yawn when they read all this. Given that the bidding for the 2012 games pitted, London against Paris, New York, Madrid and Moscow it’s hardly surprising if the winner’s curse soon hoves into to view. On the bright side, the construction of the new 90,000 seat national football stadium at Wembley (in London), due to open next year only cost £800 million (that’s a cool $1.5 billion at today’s exchange rate), is only 145% over budget. But then, Wembley was originally meant to be completed in 2003…any chance of London hosting the 2015 Olympics?

The Purpose of College Athletics 

King Banaian already commented on this issue, but I thought I would toss in my two cents. Myles Brand argued in a letter to Congress that the NCAA should be tax exempt because the primary purpose of college athletics is education.

Economists often argue that we should not focus on what people say, but on what people do. If education is the primary focus of the NCAA, then we should expect that people would be hired and fired on the basis of this objective. We would also expect the highest paid people in college athletics are those that do the most to advance the education of student-athletes.

Obviously this is untrue. According to College Football by Charlie (a neat website on college football, although there is no Charlie at the website), the top ten football coaches in terms of compensation all make more than $2 million per season. Why do these university employees command salaries in excess of the wages paid to university presidents (and more importantly, college professors)? One suspects that high salaries are linked to high revenues, and that high revenues are not driven by graduation rates or other education outcomes. No, revenues are driven by wins. And when those wins don’t happen, these coaches get fired -- whether or not these coaches are graduating a significant percentage of their student-athletes.

For a business to make decisions on what drives its revenue is not surprising. So we should not be surprised that employees are hired and fired based on their ability to enhance the firm’s bottom line. But what is surprising is that a leader of this business would claim that what brings in the money is not the primary objective of the firm.

Clearly Brand’s behavior was motivated by a desire to avoid sharing this money with the federal government. But a simply study of the behavior of NCAA members suggests that its primary objective has more to do with money than education. And if that is true, it is hard to argue that the business of college athletics should be treated differently from any other business in the United States.

If At First You Don't Succeed, Maybe A Second Stadium Will Do the Trick 

From the Minneapolis Star Tribune comes a real head scratcher:
The Minnesota Vikings and the Metropolitan Sports Facilities Commission announced today plans to study the possibility of building a new stadium for the Vikings that would include a retractable roof and be climate controlled.

The commission said it is seeking to hire an urban planning consultant that would be a local group to look at revitalizing the eastern part of downtown by the Metrodome.

Um, ex-squeeze me? A baking powder? Did that say they want to investigate the viability of invigorating the blighted area around a stadium, an area that was supposed to be invigorated by said first stadium, by building another stadium? Huh? Make the story a little more edgy and humorous, and it could go in The Onion.

HT to Jeff Owen who pointed out the article and the irony to me.

Competing for basketball and football players 

In its written response to a Congressional inquiry over its tax-exempt status, the NCAA reveals that it spends more than twice as much per male basketball student-athlete in Division I ($158,000) than it does for a football student-athlete ($75,000). Is it possible that the larger size of football teams accounts for all of this, or is something else going on?

Certainly scale economies play a role. Separate locker rooms and training facilities exist, but costs are spread over more players in football, even though more space is needed for the latter. Average cost of transportation probably also declines with team size.

But the size of this difference is large enough to wonder if we could see something else. In particular, consider the difference in competition for an 18-year-old basketball player versus a football player. The NFL has strict limits on age and class of student-athletes who can be eligible for the draft (see this from the Maurice Clarett decision, for example), while until very recently high school athletes could enter the NBA. The NBA age limit now at 20 helps colleges, which should lead to a reduction in expenditures on basketball. In short, you don't have to wow each athlete away from the NBA (or Europe) with all the latest in training and dormitory facilities, or promise them the Maui Classic each fall, etc.

But it's never been there for the college football athlete, who now plays an extra game without any additional compensation. NCAA president Myles Brand writes,
Athletics, like every other department on campus, cannot operate without sufficient revenues to meet expectations. Increasing revenue, however, is not the only reason. Some but not all teams were already playing 12 games in football. Permitting a 12th game for all teams was more fair. The stabilization of games in basketball eliminated similar unfair practices in that sport.
In both cases, the season was expanded by a week, which reduces the time devoted to academics. This is justified to get "sufficient revenues"; if I told my faculty that we needed to teach ten additional students each to stabilize our faculty-student ratio, they might wonder what they get in return. Not so the student-athlete.

"Oh, but they earn more after college!" Um, not exactly. Some do, some don't. "Oh, but it is a help to minority students." Not exactly, either. Most athletes are white, but they do little to displace minority students. So when Brand says in its letter that “Athletics contests are the laboratory for lessons taught in practice in the same way theatrical or musical performances provide practical application of the lessons taught in rehearsals,” it's hard to say whether there is a high return on that investment, or why it warrants tax-exempt status.

(Cross-posted at SCSU Scholars.)

RIP, Miton Friedman 

It's not sports, but we'd be remiss in not paying respects to Milton Friedman, who passed away today. He changed the economics profession, and was an inspiration not just to students, but people all over the world with aspirations of economic freedom.

Tuesday, November 14, 2006

Fighting and Scoring in Hockey 

A report on CTV news this morning says hockey teams that fight more score more goals and allow fewer goals, on average. Here is an excerpt from their summary:

... "Major penalties actually help teams win hockey games," said study author Aju Fenn.

Major penalties also decreased the number of goals scored by their opponents.

The study, conducted by Fenn with a team of professors at the Department of Economics and Business at Colorado College in Colorado Springs and the School of Business at the University of Sioux Falls, compared the effect of minor and major penalties.

According to the analysis, major penalties helped win games while minor penalties lowered a team's chance of emerging victorious.

The team of professors crunched numbers based on data for all NHL teams from the 1999-2000 season through to 2003-2004.

...

The professors calculated that for each penalty minute served, a team collected 0.08 points and decreased their opponent's scoring by 0.24 goals.

They attributed the positive effect of a major penalty to the emotional rush sparked by an energizing brawl...
Unfortunately the CTV summary is a bit sketchy, and I have been unable to locate a copy of this study on Professor Fenn's website. If you have a link for this study, please post it. I have some questions that the CTV article didn't answer:
  • In almost every fight, there are off-setting major penalties. How much variation was there?
  • What mechanism is at work that fighters are pumped up but the "fightees" are not? Is this intimidation?
  • Were the data game-by-game or season totals?
I know that some of the co-bloggers here have done work with Professor Fenn. Perhaps they can locate an on-line copy of the paper.

Monday, November 13, 2006

Update from "Hostile and Abusive" Central 

The NCAA suffered a setback in its attempt to regulate college sports mascots this week. A district judge in North Dakota granted a preliminary injunction that will allow the University of North Dakota to host a Division II football playoff game later this month. Under current NCAA regulations, UND could not host a playoff game because of the university's use of the "Fighting Sioux" mascot. A copy of the brief filed by UND is available here (in pdf format). In a nutshell, UND claims that the NCAA has no right to prohibit it from hosting a playoff game because:
  1. The policy was enacted by the NCAA Executive Council and not by the NCAA Convention in violation of the NCAA bylaws
  2. The NCAA's appeals process is arbitrary and in violation of the Implied Covenant of Good Faith and Fair Dealing between the NCAA and its member institutions
  3. The NCAA policy eliminates UND's bid to host a Division II playoff game no matter what the bid contains, which is a per se violation of antitrust law.
Meanwhile, here at Hostile and Abusive Ground Zero, Chief Illiniwek made what many think will be his last appearance at a University of Illinois football game. Stay tuned.

Thank God for computer rankings 

So sayeth the voters, who look brilliant this morning. Why? The computer segment of the BCS ranking has Rutgers in 2nd, ahead of Ohio State! My guess is that Ohio State took a tumble in the computer mish-mash with Texas' loss to Kansas State. Two-loss Texas is OSU's top win, versus one-loss Louisville for Rutgers.

I believe it was Churchill who said that democracy was the worst form of government, with the exception of all the other forms that have been tried. The same would seem to apply to college football polls. The computer rankings make the poll voters look mighty good! Thanks to Ray DeGennaro for the link.

Fallout from the boom in collegiate merchandise sales 

Daniel Moore, a painter who specializes in scenes of "signature moments in Alabama football history" is being sued for copyright violation by his alma mater.

Mr. Moore's paintings, reproduced in prints and on merchandise, violated the university'’s trademark rights, the suit said. It asked a federal judge to forbid him to, among other things, use the university's "famous crimson and white color scheme."

Athletes, sports leagues and universities around the nation have become increasingly aggressive in protecting what they say is their intellectual property, and their claims have met with a mixed response from judges and fans. But almost no one here thinks the suit against Mr. Moore is a good idea.

"This lawsuit is the equivalent of the Catholic Church suing Michelangelo for painting the Sistine Chapel," said Keith Dunnavant, an Alabama alumnus and the author of "Coach: The Life of Paul 'Bear' Bryant."

A university spokeswoman, Cathy Andreen, declined repeated requests for interviews with university officials and lawyers, on what she said was the advice of counsel.

James Glen Stovall, who taught journalism at the university for 25 years, said only one sort of person would support the suit.

"I can see why, if you'’re sitting in a roomful of lawyers, you might come to that conclusion," Mr. Stovall said. "But no one outside of that room would say: 'Hey, that's a good idea. Let's sue Daniel Moore.' "

This is an interesting legal conflict. Two decades ago, the revenue from college sports trademarks might not be worth protecting. But images of commercial icons are lucrative these days, and lets face it, a player in an Alabama uniform sacking the Notre Dame quarterback is an iconic and commercial figure in that state [nice painting; see the story here]. Companies like Coke and Disney have an army of lawyers protecting their copyrights trademarks to the word "Coke" and the image of Mickey Mouse. So one can understand where the University of Alabama is coming from - they want to manage and protect their brand just like Coke and Disney.

But Mr. Moore's paintings surely contribute to the lore of Alabama football. People wanting a piece of that are his customers, after all. My opinion: attempting to convert this painter's contribution into a revenue stream is a churlish (he can't use "the famous crimson and white color scheme"???) and short-sighted move by the university's lawyers, regardless of where the case sits on the edge of copyright trademark law.

Sunday, November 12, 2006

The NFL Evaluates Kickers Incorrectly 

Aaron Schatz – of Football Outsiders fame – has penned an interesting Keeping Score column in today’s New York Times. The column makes a simple, yet bold assertion in the title: “NFL Kickers are Judged on the Wrong Criteria.”

Schatz argues there are two aspects to a kicker’s performance – accuracy on field goal attempts and distance on kick-0ffs. Of these two characteristics, field goal accuracy gets you paid in the NFL. To bolster this argument he notes the $5.4 million the Dallas Cowboys are scheduled to pay Mike Vanderjagt over three seasons. Vanderjagt is the NFL career leader in field goal accuracy. He is also, according to Schatz, one of the NFL’s worst kickers in distance on kick-offs. Given the money paid Vanderjagt, it appears accuracy on field goals is what drove the Cowboy’s decision. Yet Schatz says that focus is misplaced.

“There is effectively no correlation between a kicker’s field-goal percentage one season and his field-goal percentage the next. But average kickoff distance shows more consistency from season to season than almost any other individual statistic in the N.F.L.”

At Football Outsiders Schatz expands on this observation.

“Measuring every kicker from 1999-2005 who had at least 10 field goal attempts in two consecutive years, the year-to-year correlation of field goal percentage is .03. ... On the other hand, the year-to-year correlation of average kickoff distance — same time period, same minimum of 10 kickoffs — is .60. That makes average kickoff distance one of the most predictable individual stats in the entire NFL, at any position.”

Still, teams appear to be paying for accuracy. In essence, Schatz argues that the NFL is Fooled by Randomness. Field goal accuracy defies prediction, so noting past accuracy is not useful in determining wages. Yet NFL teams appear to be incorporating this information in negotiating salaries.

Although this story is interesting by itself, one could argue that this is just one more example of the Moneyball phenomenon in sports. Is anyone compiling a list of such examples?

Saturday, November 11, 2006

Unintended Consequences: The College Football Edition 

The NCAA instituted new rules to speed up football games, including starting the game clock when the kicker's foot strikes the ball on a kickoff. We'd expect coaches to use these new rules to their advantage once they've reached sufficient height on the learning curve:

Coaches throughout the league got a kick out of how Wisconsin coach Bret Bielema used the new rules to his advantage Saturday in a 13-3 victory over Penn State. He had his players intentionally go offside on two kickoffs late in the first half to prevent Penn State's offense from getting enough time to run plays from scrimmage.

Because the clock now starts on the kick rather than the catch, Wisconsin was able to burn 19 seconds off the clock with its creative game of keep-away. It's not exactly what the NCAA rules committee had in mind when it changed the rule during the off-season.

Seeing this beforehand would be a tough call for the folks at the NCAA, but its likelihood would definitely have been greater had they further consulted coaches. A simple fix would be to reset the game clock on an offsides penalty. I'm OK with some of the rules, but, in my humble opinion, the clock rule on kickoffs blows. A better fix would be to go back to the old rule where the clock starts when a player on the receiving team touches the ball.

HT to Stephen Karlson at Cold Spring Shops

The External Costs of a New Stadium 

Some Bay Area folks are a bit concerned of additional traffic congestion that's likely to come with a new stadium for the A's in Fremont, Ca (the link below is mine).

Putting aside other negative impacts, the bigger issue is traffic. Interstate 880 between Stevenson Boulevard and Dixon Landing Road is one of the worst bottlenecks in the Bay Area. Putting a stadium there will make things truly hideous. This must be somebody's definition of hell: Put up with the current construction and associated snarls at Mission Boulevard and I-880 until 2008; then as soon as that is done, plunk a stadium down to re-create the tie-ups. Shouldn't the residents of Fremont get to vote on this? Shouldn't builders have to shell out a few billion to widen 880 more? I am an A's fan, but this is crazy.

Would I be able to join the Pigou Club if I stated that the builders should pay some sort of fee/tax/something to widen the roads leading to the new park? Of course the billion dollar question is "how much additional congestion will be caused by events at the stadium?" While it wouldn't be efficient to have the builders/stadium investors/event attendees pay nothing towards new infrastructure, neither would it be efficient to have them pay to expand I-880 to solve the marginal congestion problem and to correct externalities arising from other activities. Although perfection cannot be expected, to do it right, someone would have to identify the marginal congestion caused by events at the new stadium. Someone would also have to see accurately into the future.

Thursday, November 09, 2006

More Goings on In the Bay Area 

Like the NFL's San Francisco 49'ers Skip wrote about, Oakland A's officials are seriously - very, very seriously - considering a move to Fremont, California, another east-bay area city.

The Oakland Athletics reached a deal with Cisco Systems Inc. to build a new ballpark in Fremont, according to city officials who met with the team's owner.

The agreement would create a 32,000- to 35,000-seat ballpark, to be dubbed Cisco Field, on a 143-acre parcel held by the company, officials told the San Jose Mercury News. If the plan is approved by the city, the A's could begin playing in Fremont 20 miles south of Oakland as soon as 2011, the newspaper reported.

A's officials are planning on building a new stadium, with no public funds for the structure per-se, on land currently owned by the city of Fremont and leased by Cisco. One must look for the lucrative land deal when analyzing the public/private share of costs. Cisco, according to the article quoted above, has the option to buy the land in the next three years. Does this not limit the lucrativeness of any land deal the A's will get?

Contrasting styles 

The San Francisco 49ers have apparently determined that both renovating Candlestick Park and building a new stadium in San Francisco are too expensive. So they are considering a site in Santa Clara, 30 miles to the south. The mayor of Santa Clara notes the following about the 49ers approach:
"The 49ers have been clear that their goal is to put together a project that has no impact on the city's general fund and no increase in taxes, and we are ready to give this project our full attention."
Nice to hear. I expect that the ultimate deal may involve a land lease that is implicitly quite lucrative. Nevertheless, the articles' quotes from 49ers owner John York -- e.g., "we are part of the fabric of the region and intend to stay right here where we belong" -- are similarly refreshing. They don't rub a raw nerve in the way of Jerry Jones, or yesterday's gem from the Sonics, that I-91 had "relegated [Seattle] to a second-tier status."

The 49ers are operating in the wake of a series of failed subsidy referenda for the baseball Giants, culminating in the privately financed SBC Park on the edge of San Francisco Bay. Perhaps the difference in rhetoric stems from the existence of an established political equilbrium in the Bay Area that precludes construction subsidies for San Francisco teams. That's my hunch, but credit to York for recognizing it and making public statements accordingly.

Note: In the SBC Park arrangment, the Giants obtained $80m in land improvements from the city and a $1.5m annual lease on the property. So there was, as usual, a public contribution of some sort in the deal. See these articles (1 2) for useful discussions of SBC's development history.

Wednesday, November 08, 2006

I-91 passes in Seattle 

Seattle voters approved I-91, the initiative which would require the city's investments in professional sports facilities to earn a positive rate of return. The vote was not close: I-91 was approved by a 3-1 ratio. In Sacramento, measures to raise the sales tax and spend the proceeds on a new arena for the Kings failed by even greater margins.

Monday, November 06, 2006

Club organization & the decline of German football 

In The Times, Gabriele Marcotti examines the decline the Bundesliga, something that has puzzled me for some time. The data, based on success in European competition, are unequivocal. Bayern Munich, Germany's standard bearer, rank no better than 17th among European clubs. How the mighty have fallen.

This could be a temporary blip, but the theories discussed by Marcotti imply permanent effects. Marcotti points out that "German clubs are set up as 'not-for-profit' social entities." Thus, the clubs are inherently less entrepreneurial, and as a group do not face the competitive pressure that comes from Abramovich-style expenditure at Chelsea or Juventus. As money has become increasingly important in the post-Bosman (free agent) era, the organizational setup of German clubs has restrained their ability to compete with the best teams in Europe. The playing talent is flowing elsewhere.

An implication of this theory is that German clubs are more likely to favor proposals to restrict the market for imported talent, as discussed by Stef last week. Such a rule would make it easier for Germany to keep talent such as Ballack (at Chelsea) and Lehmann (at Arsenal), while weakening the leagues in countries which make greater use of imported talent -- England, Italy, and Spain.

Election day 

In the NY Sun, Evan Weiner has a nice discussion of the key sports referenda to be voted on Tuesday. The package for a new basketball arena in Sacramento is trailing in the polls. In Seattle, a group called "Citizens for More Important Things" is behind ballot initiative I-91, which would require public funding of stadium projects to earn a positive rate of return, exclusive of any intangible or non-monetary benefits to the city.

Some politicians are skeptical that I-91 will change the stadium funding game. But it does represent a new approach to the problem. I-91 is a quasi-constitutional fix which addresses a well-documented weakness in the democratic process. I'll be watching for that result come Wednesday.

Saturday, November 04, 2006

Title IX Doesn't Kill Lesser Sports. ADs Do. 

USAToday's Erik Brady (the article) and The Washington Post's Alan Goldenbach (the article) report on protests aimed at Title IX as the cause of program cuts in men's and women's (!) sports at James Madison, Maryland, Howard, and William & Mary.

The College Sports Council (student athletes and supporters) advocates reform of Title IX because ADs are cutting lesser men's and women's (still worth emphasizing this weird twist) sports in compliance efforts. I have argued here and elswhere that it is not Title IX's fault that athletic directors choose to comply this way. In fact, economists should expect them to choose this route rather than rearrange the revenues generated by college athletes.

I have also argued that, since there are rents included in the salaries of ADs and coaches, earned on the backs of "amateur" athletes, a tax system for funding other goals seems a natural. College presidents could, for example, work through the NCAA to tax the true beneficiaries of the NCAA amateur requirement, coaches and ADs, to comply with Title IX. A carefully chosen tax would leave the distribution of ADs and coaches pretty much unchanged; as long as there truly are rents, taxing them shouldn't change the marginal considerations of coaches and ADs.

And JMU's June 30, 2003 audit of intercollegiate athletic programs offers a bit of insight into such a tax.

JMU is I-AA. In 2003, football coaches combined for a salary total of $523,119. The total of all coaches' salaries, including football, was $2.3 million. Administrative salaries were almost exactly $2 million. The sum of all salaries was about $4.6 million. There was also another $1.1 million in fringe benefits (retirement and insurance). All operating revenues were about $1.4 million. Adding in about $13.6 million in student fee allocations, the department about broke even on its $15.1 million spending.

JMU officials claim that cutting seven men's and three women's (I still can't get over it) varsity sports will save them 2.7% of its current $21 million budget (WOW, that's about a 32% increased budget since 2003), or about $546,000. If it really is true that the aim of cutting these sports was to save this amount, as well as moving toward Title IX compliance, the same could be accomplished by taxing "salaries and benefits" by about 10% based on the 2003 reports. No doubt the percentage is smaller now in 2006 with a spending budget at $21 million.

It doesn't seem unreasonable to me that the rents earned by the football coaches at JMU are on the order of $52,312 (10% of 2003 football coaches' salaries), or that the rents going to administrators are on the order of $197, 926 (10% of administrative salaries).

Different factions can argue about the fairness of taxing coaches and ADs. But the law of the land, Title IX, already imposes a fairness requirement on athletic departments. And it is long past time for University administrators, the overseers of college athletics, to recognize that the money is already there. And quit blaming Title IX for the choices made by ADs.

The Short Term Impact of Making the Final Four 

Getting to the Final Four last year has, apparently, been good for the good folks at George Mason:

(GMU President Alan) Merten said there were 300 to 400 more freshmen enrolled at George Mason this fall. He said he anticipated an increase but wasn't prepared for the number, forcing the university to house students in a hotel.
..."We won't know until December [at the end of the calendar year] the financial figure [of the impact of the Final Four]," Merten said. "But there's a buzz. The faculty really feels it, too."

George Mason athletic director Tom O'Connor said merchandise sales are up, ticket sales are soaring and fund-raising is up, too.

"When you win, everybody smiles more," O'Connor said.

Early Wednesday, O'Connor noted that he was curious how many fans would turn out for that night's exhibition game against Division III Marymount (Va.). Well, the Patriots drew 3,679 fans (capacity in Patriot Center is 10,000) -- that's three times more than an exhibition a year ago and more than the team drew for seven home games last season. The Patriots had an estimated 6,000 for Midnight Madness on Oct. 13.

The ticket sales numbers and other athletic department what-nots seem reasonable, especially for a traditionally non-power school like GMU. I'm not an expert on the relationship between making making the Final Four and its short-term effect on academics, but it would be interesting to know how many of those "300 to 400" freshman saw making the Final Four as the marginal reason* for going to GMU.

*It would also be interesting to know how many incoming students at GMU chose that school because of the various GMU blogs that dot the landscape, like Marginal Revolution and Cafe Hayek.

A historic day for football 

Association football, that is. FIFA, the world governing body, has announced that it has reached agreement with FIFPro, the international players' union, over a range of initiatives (NB FIFPro is a fairly weak organization and there is no equivalent of the exemption from antitrust law for collective bargaining which gives the American player unions such power). The most important of these seems to be an agreement to restrict the number of foreign players on a team. The proposed rule would be that at least 6 players on the field would have to be eligible to play for the national association. Now, either this is kite-flying, or there are serious moves afoot to change the legislative treatment of sport in the European Union. In 1995 the Bosman verdict of the European Court of Justice upheld the right of citizens of the EU to play anywhere inside the EU, rendering such restrictions unenforceable. There is an ongoing process organised by the sporting governing bodies, supported by several member states, to change the law. But overruling freedom of movement of labour would be a drastic step.

Thursday, November 02, 2006

Does NHL "talent-hogging" harm international hockey? 

That is the claim of a report issued last week by the International Ice Hockey Federation. Here are the bullet points from the IIHF's press release:
++ Too many Europeans who are not of NHL-calibre are signed by NHL-clubs.

++ Too many Europeans who are potentially of NHL-calibre but not yet NHL-ready, are signed prematurely.

++ The average quality of European-trained NHL players remaining in their European clubs until they are NHL-ready is vastly superior to the quality of Europeans spending significant time in the minor leagues or who go through the major junior system.

++ The often repeated theory that a European player needs 'adjustment' and 'time to learn' the North American game is not supported in the data from the research.

++ The recruiting of European players under development is a threat to the quality of the top European leagues and to the European development system as the European clubs are not able to adequately replace the players. This is also a threat to the NHL as a decline of quality of the European leagues will put in danger further development of players of NHL-calibre.
Can it profitable for the NFL to "waste talent?" Perhaps the NHL is making a mistake as the last point suggests, or alternatively, the IIHF could just be politicking and cartelizing. The full report is available at the above link. My null hypothesis is the last-mentioned possibility. Reducing competition for players is a perennial list-topper on the agenda of sports leagues.

The Wisdom of Red Auerbach 

Legendary basketball coach Red Auerbach passed away last Saturday. In reading and watching about his life on Sunday I was struck by his take on the game of basketball. Consider the following from a biographical sketch posted at ESPN.com.

Auerbach didn't focus on the individuals on his teams. He looked at the "whole package." While many of his players were outstanding, the Celtics were the first organization to popularize the concept of the role player. "That's a player who willingly undertakes the thankless job that has to be done in order to make the whole package fly," Auerbach said.
.... Auerbach said that the Celtics represent a philosophy that in its simplest form maintains that victory belongs to the team. "Individual honors are nice, but no Celtic has ever gone out of his way to achieve them," he said. "We have never had the league's top scorer. In fact, we won seven league championships without placing even one among the league's top 10 scorers. Our pride was never rooted in statistics."


Auerbach also bemoaned in an interview broadcast on ESPN Classic that the focus of today’s players is on statistics, as opposed to winning. In Auerbach’s view, Bill Russell was a great player because he didn’t obsess on his own statistics, but rather sacrificed his stats so the team could win.

If we look at Russell’s career, though, Auerbach’s viewpoint seems a bit hard to understand. Russell averaged 22.5 rebound per game in his career. Only Wilt Chamberlain bested this mark. From what I can tell, rebounds are a stat. And clearly Russell must have thought these to be important to spend his time on the court capturing so many.

Russell did average a mere 15 point per contest, and looking over Auerbach’s quote it does appear that for Auerbach statistics meant scoring. And Russell, as Auerbach claimed, did not appear to focus on scoring.

One wonders, though, if Auerbach’s view with respect to players today is correct. Do players today put scoring ahead of winning?

Economics teaches that people respond to incentives. What incentives do players face in the NBA? Certainly players would prefer winning to losing. But players probably also prefer getting paid more to less. And when we investigate what determines pay in the NBA we see that Auerbach was on to something.

Economists have offered numerous studies examining what determines wages in the NBA over the past two decades. Most of these investigations were designed to measure the prevalence of racial discrimination in The Association. Although the results with respect to race are quite mixed, these studies did return one clear finding. The primary determinant of pay in the NBA is scoring. And factors like shooting efficiency, rebounds, and turnovers – all factors that impact wins -- were not found consistently to lead to higher wages. No, the basic finding is that the more a player scores, the more likely he will score a big payday (for a quick summary of this research and other NBA findings one can look HERE).

Regression results are nice, but one can illustrate this finding by just looking at the highest paid players in the NBA. CBS Sportline – via hoopshype.com – reported the thirty highest paid players in the NBA this season.

It is interesting to note what these players do well. Looking at the career per-minute averages of these players (through the 2005-06 season and adjusted for the position these players have played), we see that 67% are above average with respect to shooting efficiency. With respect to rebounds, 70% are above average. For turnovers and steals, 30% and 40% are above average (turnovers are a negative stat, so this means 30% were below the average at their position).

When we turn to scoring, though, we see that 93% are above average scorers. The two exceptions – Brian Grant and Joe Johnson – may have career scoring averages that are below the mean, but scoring is still a part of their stories. When Grant signed the contract that gave him his major payday he had a career scoring average above the mean for his position. Johnson has a similar story. He was not a prolific scorer early in his career, but the year before he signed his major payday he was also above average.

Perhaps no player illustrates the focus on scoring more than Allan Houston. In his career Houston was below average with respect to every statistical category except points scored and shooting efficiency. Except for these two stats, he did nothing else well. Yet he received more than $100 million in his career to play NBA basketball.

Certainly NBA coaches, like Auerbach, are aware that rebounds, shooting efficiency, and taking care of the ball are important. But players can see that the highest paid are the scorers. And players also see that the money still comes even if they perform poorly with respect to many of the other parts of the game Auerbach knew led to wins and championships.

So next time you see a player focus more on how many touches he has and less on winning, remember the incentives the players face. And ask yourself, what would you rather do, collect millions or win a basketball game?

Parity vs. Dominance in MLS 

In an interesting recent interview, former U.S. Soccer national team coach Bruce Arena talks about competitive balance in Major League Soccer. While we sports economists talk about the subject all of the time, and the conventional wisdom seems to be, at least in the U.S., that competitive balance is crucial to the success of a sports league, Arena has different views.
"Parity doesn't bring fans to games. Fans want to see good teams," he said. "They want to see dynasties and they don't mind seeing teams struggle and other teams excel. It's a flavorless product at times, but we do need to have years where there's the New York Yankees and whoever's at the bottom in baseball. That's natural."

"Parity is a stupid concept," Arena said. "I really believe that. Two or three dominant teams in this league will be good for the league. I think everyone likes chasing Manchester United, Chelsea, Arsenal, those type of teams. I think it's great."
I'm not the reigning expert around here regarding competitive balance, but I think much of what Arena says is supported by the academic literature. I mean, with the dozens of published studies of attendance and league success out there, is competitive balance consistently a significant predictor of league popularity?

Wednesday, November 01, 2006

Buschwhacking 

Tigers fall to Cardinals in World Series, dominate Toledo Mud Hens for International League title. Fantasy? Not in the world of stock car racing, where drivers and teams from the top division (Nextel Cup Series) took the top six places in the standings for the second-tier Busch Series. The lead sentence above reflects my initial reaction to this "buschwhacking" -- it seems grossly out of step with common practice in other professional sports. Soccer has special "cup" competitions involving teams from different levels of domestic leagues, but that's very different from what occurs in NASCAR.

In talking the topic over with some NASCAR followers from the marketing department here and one of my MBA students who works for a Busch series team, I realized that the matter is complicated. A recent article by ESPN.com's Terry Blount outlines several key issues and tradeoffs.

  • (+) Nextel teams generate extra attention for Busch races. This raises demand for the series as a whole, so Busch tracks support the practice and even Busch-only teams like the extra visibility.
  • (+) Sponsors of Nextel teams like the additional exposure.
  • (+) Nextel teams, with limited practice track time to experiment, use the Busch races to do the experimenting.
  • (+) Busch drivers gain more experience against top drivers.
  • (-) Busch-only teams cannot compete very effectively versus Nextel teams dropping down, so over the long haul, fewer Busch teams and drivers survive.
  • (-) Nextel drivers get "overexposed" reducing the long term value of the Nextel series
The first four points seem to make a strong case for the continuation or even expansion of buschwacking. The more I considered them, however, the more that they would all make great arguments for interdivisional "whacking" in almost any sport. Wouldn't the lower division teams of any sport get a boost in attendance and exposure from games against the top division? Wouldn't it provide sponsors with more exposure? Wouldn't it provide opportunity for more experimenting with younger players? Yet, I doubt that it would be a great idea for MLB, the NFL, or other leagues.

Now, there are inter-sport differences -- number of games per week, use of capital (cars) versus labor, relative maturity of the sport ... -- that may make the best decision different from sport to sport. Still, it strikes me as a case where a sport faces tradeoffs between what may be best in the long term and in the short term. These kinds of situations make for very, very difficult management decisions because the long term prospects are so uncertain. Hockey's conundrum regarding fighting fits this kind of dilemma. Fighting feeds many current fans but may limit long term fan development. Buschwacking certainly seems to be a net gain now, but is that just a short-sighted view?