The Sports Economist

You'd think in this day and age teams wouldn't take the NFL Scouting Combine and subsequent pro days too seriously. Everyone knows the players spend weeks preparing specifically for the physical and mental tests they'll face. And every year, a few smart teams strike gold by ignoring the kind of measurables that come out of the draft process and focusing instead on college production. But even last year, the combine shaped the very top of the first round. The Texans were quite open about the fact that they drafted Mario Williams No. 1 overall because he was 6-foot-7, 295 pounds and ran a 4.70 40, and they said little about his play at North Carolina State

Labels: other sports, stadium subsidies, ticket prices

The All England Club has gradually reduced the pay gap over the years, but held out against equal prizes as a matter of principle.

[Club Chairman (sic), Tom] Phillips had cited surveys showing that men give better value than the women. The men play best-of-five set matches, while the women play best of three. Also, the women make more money overall because they also play in doubles, while the top men usually play only singles.

"It just doesn't seem right to us that the lady players could play in three events and could take away significantly more than the men's champion who battles away through these best-of-five matches," Phillips said last year. "We don't see it as an equal rights issue."

Last year, men's champion Roger Federer received $1.170 million and women's winner Amelie Mauresmo got $1.117 million.

Labels: discrimination, sex, tennis, Wimbledon

The big question may be whether Beckham is worth the money. He has been the biggest commercial draw in soccer for the last ten years, despite not being rated the best player. He has also opened branches of his soccer academy in LA, giving him another marketing foothold. But 2006 was not a great season for him, and he is clearly on the decline.

Labels: stadium subsidies

Safeco Field opened in 1999 with 67 luxury suites and subsequently added another suite on the press-box level. For the first few years, 98 to 99 percent of the suites were filled, said Aylward. He said last year's percentage was in the mid- to upper-80s.

Aylward then talked to someone with the Detroit Tigers who mentioned the team's success with a new type of premium seating.

"We started talking about how they had discovered a new niche market that people really seemed to spark to," Aylward said.

The 140 seats in the All-Star Club will sell for $100-$125. Tickets are sold in packages of 10, 20, 40 and 81 games. Single-game suites, which include 16 seats, range from $2,400 to $4,000.

The All-Star Club came out of a realization that there was a consumer need that was not being met.

"There is this bucket of people out there that we didn't have a product to offer," Aylward said. "So any business is going to sit there and say, 'Let's create something for them.' "

The All-Star Club has three rows of assigned seating in an open-air terrace and then an indoor dining area and complimentary buffet. Beer, wine and spirits will be sold at a cash bar. Plasma televisions will be located throughout the indoor dining area.

Labels: baseball, luxury boxes

This bill won't make it to King's list of silly bills: student Brian Rude notified me that the Minnesota senate has passed a bill to legalize scalping. A little blurb from the article:

Legalization "would probably hurt my business, but it's a stupid law and it should be changed," said Tom, a Westbrook, Minn., resident who has earned both a living and a criminal record in 10 years as a scalper.

...Repeal of the law may only increase the dominance of Internet sites such as eBay in brokering tickets, Tom said.

Reselling tickets is already legal in all but about a dozen states, Gerlach said, adding that he expects the prices that Minnesota fans pay middlemen for tickets would decline with legalization.

In neighboring Wisconsin, decriminalization has spawned a vibrant legal ticket brokerage industry that pays taxes instead of court fines, Gerlach said.

Legalization also directs tickets to those who value them the most. But what was the driving force for those who voted in favor of the bill: the efficiency of such a market or the potential for increased tax revenues?

Addendum: King has a great story.

My favorite is the purchase of a $75 seat cushion in front of Fenway, onto which two field box tickets were taped, because scalping in Massachusetts was illegal.

Labels: scalping, tax revenues, ticket prices

Dave Checketts, owner of Real Salt Lake, threatened to move the professional soccer franchise to St. Louis if he didn't receive public funding to build a 20,000-seat stadium in Sandy.

Real Salt Lake is playing at the University of Utah until it can get a permanent venue, a dream that was momentarily placed in doubt when Salt Lake County Mayor Peter Corroon withdrew the county's promise of $30 million to help Real relocate to Sandy. Corroon had been warned by financial advisers that it was a risky investment.

An alternative proposal from Utah County was snubbed. Anderson Development offered to buy the team and base it at the former Geneva Steel site in Vineyard. Checketts insinuated that we're second-class citizens down here and rejected the deal.

In the eleventh hour, the Utah Legislature, goosed by Gov. Jon Huntsman Jr., came through, pledging $35 million in public money. The cash is supposed to come from taxes on hotel rooms and rental cars.

House Minority Whip Brad King, D-Price, called it a chance to promote Utah to the world. "This is worth millions and millions of dollars we will never commit from state coffers to promote us," King said.

Checketts is not the first sports team owner to get help from state government. Utah Jazz owner Larry H. Miller leases the land under the former Delta Center for $1 a year until 2040. Salt Lake City is also using taxes to pay off the center's $25 million bond.

There may be times when it's proper for government to help a business get started, but we are not convinced this is it. A soccer stadium hardly qualifies as an economic kick-start.

This is a subsidy for a special interest, in our view.

We console ourselves with the fact that $35 million is a small amount compared to other stadium deals. But that doesn't change the principle.

Salt Lake County's financial advisers said that revenue projections by Checketts were "too optimistic." Likewise, economists Roger Noll of Stanford University and Andrew Zimbalist of Smith College -- co-editors of the book "Sports, Jobs and Taxes" -- say that stadiums are more of a consumption expense than an economic booster.

Labels: mls, soccer, stadium subsidies

Bank of America's decision to cut back on suites got started last summer. The company examined employees' use of the suites to find out how many of the free tickets were actually going to customers. It found that in certain markets, which the bank declines to identify, the suites weren't attracting enough clients to justify a full-season lease. In response, the bank decided to sublease a handful of its 83 suites, and says it is considering doing the same with as many as 15 more of its suites.

Bank of America employees now have to fill out a form detailing the names and affiliations of the clients they are bringing and why those guests deserve a spot in the suite. The tickets, which are kept in a central location, are assigned a client identification number and are sent only after the company grants approval.

For other companies that are cutting back on suites, different factors are in play. One is a 2004 tax provision that requires executives to pay taxes on business expenses (like entertaining clients in a skybox) that aren't a formal part of their compensation. More broadly in the post-Enron, Sarbanes-Oxley landscape, executives are skittish about accepting both in-house freebies and outside gifts that could be construed as a conflict of interest. In Washington, Congress has already been tightening its rules on gifts such as access to skyboxes.

...In the late '90s, almost all of the more than 120 luxury suites at the Cleveland Indians' Jacobs Field were sold. The team says it has fewer than 90 suites leased for this season. The Seattle Supersonics used to lease more than enough of the 48 suites at KeyArena to cover the team and city's debt on the facility. Now only half of the suites are full and the team is deep in the hole and asking for $300 million in public funds to build a new arena.

Labels: luxury boxes, ticket demand

With pitchers and catchers reporting to the grapefruit and cactus leagues this week, it's time for baseball fans to dust off the equipment they, too, need for the 2007 season. I am referring, of course, to calculators, statistics, economics and multiple regression analysis, which calculates how much one factor (such as market size) contributes to some outcome (team wins).

In the hands of Prof. Bradbury, of Kennesaw State University, Georgia, these techniques lead to counterintuitive results sure to spark a bar fight or two. His coming book "The Baseball Economist: The Real Game Exposed," takes aim at all sorts of baseball lore to separate fact from myth.

Labels: baseball, economic analysis of baseball

Nascar constantly rejiggers the rules in the name of sharing the marketing wealth ...
In fact, the reason stock cars stopped being "stock cars" in the first place is that, since the 1960s, Nascar has increasingly been designing the cars itself to ensure advertisers a "level playing field." This marketing imperative will culminate later this year in a new, Nascar-designed "Car of Tomorrow" to provide safer, more competitive racing. Yes, the cars will still be called Fords, Chevys, Dodges and Toyotas, but for purposes that finally are purely promotional. A question then becomes: How much longer will Detroit throw megadollars at Nascar merely to mythologize the names of its cars?

In the meantime, what's not illusion about Nascar is its near-monopoly on oval racing, a genuinely interesting variant of motor sports.What's not illusion are the high speeds and risk of serious injury or death, which strangely help to rescue the sport from terminal phoniness.What's also not illusion is that cars, beer and other products these days are increasingly sold by the images and reputations of Nascar's drivers, who are better known, more accurately judged and provoke stronger fan attachments than performers in any other sport or realm of show business.

Excitement about New Jersey's 50,000-student university became palpable after the Scarlet Knights' defeat of then-No. 3-ranked Louisville in November, McAnuff said. His office was flooded with requests for campus visits, prompting him to add 3,600 seats on the fall bus tours, on top of the 5,600 slots already planned. The university's admissions Web page also experienced a 33 percent jump in visitors over the previous fall semester.

...Applications for admission to Rutgers by first-year and transfer students for the fall 2007 semester increased from 28,983 to 30,429, and hundreds more are still pouring in, McAnuff said. That's on top of a similar increase last year, when the football team reversed a perennial losing record and went to a bowl game.

...Carol Herring, president of the Rutgers Foundation, said football frenzy likely factored into a 35 percent increase in overall giving to the university compared to the same period as last year.

Labels: intercollegiate athletic success

NBA commissioner David Stern said yesterday that he's "positive" the All-Star Game in Las Vegas this weekend will lead to "initial discussions" about allowing a team to relocate permanently to that city.

In an interview with Newsday, Stern said he has not dropped his objections to having a team in Las Vegas while NBA games are on the city's gambling books. But in a significant change in position, Stern said he would not stand in the way if league owners voted to move a team to Las Vegas without taking games off the betting lines.

"Absolutely, not, I wouldn't," Stern said in a 20-minute phone conversation advancing the league's first All-Star Game in a non-NBA city.

So, let's see, the Maloofs just lost in a landslide election in Sacramento, there are no new prospects around here, the Maloofs have stronger ties to Vegas than to Sacramento, and are hosting the All Star game in Vegas this coming weekend, and all the early-exit clauses that went with the original Kings loan expire this coming summer...

Nah. All just a long sequence of pure coincidences. There's no connection here. Nothing to see here, ladies and gentlemen. Move ahead, please.

Har.

Labels: David Stern, NBA, relocation

From Dennis Rodman to Lindsay Lohan to Paris Hilton, traditional boundaries of public behavior seem a thing of the past. Why do celebrities tend to be such boors? A study by Clemson University economist Todd Kendall sheds fascinating new light on the question.

Kendall considers a number of competing economic theories of boorishness. The first, the "Beautiful Mind" theory, is that people who perhaps genetically disregard norms are more likely to have a creative impact. These same people might well behave more poorly than a typical conformist.

Alternatively, it might be that high income makes an individual insensitive to the normal disciplines of society. A third possibility is that celebrities tend to be young, and youths are much more likely to indulge in destructive conduct. Finally, it might be that individuals who can't be easily replaced tend to be the misfits.

...

To establish which explanation of bad behavior works best, Kendall gathered data from the National Basketball Association. Players in that league have been notorious for their rude and at times even criminal behavior. Fights on the court, brutish fouls, and even rape have been in the news in recent years. Kendall set out to discover which players behave the worst.

The NBA is a fine place to test these competing theories. Its players are young, have high incomes and guaranteed contracts. There is also significant variation in ability. Some players, like Kobe Bryant of the Lakers, have such preternaturally special skills that they fundamentally change the competitive level of their team. Others play their positions adequately, yet could be easily replaced. Do the irreplaceable stars tend to misbehave more?

Labels: celebrity, Clemson, NBA

"There is and has been no relationship" with Smith. Since when? "How long's he been here?' ...

Schottenheimer tightened up the time frame a bit, saying: "In the last couple of years, there has been very little, if any, dialogue."

Labels: coaches, NFL

The Los Angeles Dodgers are providing all you can eat Dodger Dogs this year in an example of mixed bundling in the sports industry:

You won't be able to buy a ticket for under $10 on game day at Dodger Stadium next season, but you will be able to pay $40 for a bleacher seat and an endless supply of Dodger Dogs.

The Dodgers are converting the right-field pavilion into an all-you-can-eat section. They also are raising the price of the cheapest game-day ticket, in the top deck, from $6 to $10, matching the price in the left-field pavilion.

A ticket to the right-field pavilion — at $35 in advance and $40 on game day — will entitle fans to an endless supply of ballpark staples, including hot dogs, peanuts and soda but excluding beer, which hasn't been sold in the pavilion for years. The Dodgers tested the concept several times last season.

With free Dodger Dogs*, I'd excuse the explicit cost of beer.

"The fans really liked it," spokeswoman Camille Johnston said. "We know it's a good option for groups."

Fans spend an average of $12.30 on food and drink per game, a major league executive said. The all-in-one package affords fans the opportunity to "spend a few extra dollars and have everything taken care of," said David Carter, executive director of the USC Sports Business Institute. "Most people probably believe they're into a ballgame for $40, even if they're just in general admission."

This is an example of mixed bundling because fans still have the choice of paying $6 - $10 to sit in the left field pavillion (depending on when you buy your tickets) and paying for Dodger Dogs and other concessions.

This example also underscores the trial-and-error nature of pricing strategies. The Dodgers tried a bundling strategy that fans liked, so they made it a permanent feature of their pricing structure.

*In the interest of full disclosure: I've never had a Dodger Dog. Have I even begun to live?

The level of violence—some of it politically motivated—at Italy’s football grounds is said by the interior minister, Giuliano Amato, to be still rising. Despite this, club presidents have been pressing hard for a re-think on the government’s draconian measures. Ivan Ruggeri, the chairman of one team, Atalanta, said clubs should simply stop playing till the government changed its mind. “Italy’s third-biggest industry cannot be penalised in this way”, stormed Aldo Spinelli, who chairs Livorno, another Serie A side. [emphasis added]

tourism, machinery, iron and steel, chemicals, food processing, textiles, automobiles, clothing, footwear, ceramics

Labels: Italy, soccer

Many trainers use whatever medications are permitted whether or not they believe a horse needs it. If they don’t, the thinking goes, they will be giving an advantage to a competitor.

By order of the National Football League, those items are never to appear on television or on eBay. They are never even to be seen on American soil.

They will be shipped Monday morning to a warehouse in Sewickley, Pa., near Pittsburgh, where they will become property of World Vision, a relief organization that will package the clothing in wooden boxes and send it to a developing nation, usually in Africa.

This way, the N.F.L. can help one of its charities and avoid traumatizing one of its teams.

"Where these items go, the people don’t have electricity or running water," said Jeff Fields, a corporate relations officer for World Vision. "They wouldn’t know who won the Super Bowl. They wouldn’t even know about football."

The gear is flown, along with school and medical supplies, into a major city. It is then driven to one of the villages where World Vision staff members work. They distribute the shirts and caps at a community center, about two per family.

Don Coffin emailed me a link about Indianapolis's mayor's announcement that city officials are going to make a bid on the 2011 Super Bowl (here's the Cliff's Notes version with links to audio files). There's the obligatory economic impact numbers being thrown around: 98,000 visitors and $262,000,000 in direct spending from the event. There's also the mention of the tag line that the game will validate Indy officials' belief that their fair city is big-time and that the Super Bowl would have development value.

But there's no critical assessment of these numbers - whether they were correctly estimated (were leakages accounted for?), whether they are real or nominal (and what year's price index was used to deflate or inflate these numbers?), and whether they are gross or net (including acknowledgment that city resources have opportunity costs). But what would you expect from cheerleaders?

Here's a more honest look at the impact, an article which mentions TSE's own Victor Matheson.

Addendum: In that last article, a critic of the low economic impact numbers put forth by most sports economists suggests that we don't do enough field work. Perhaps John List would like to join our specialty?