The Sports Economist

When I asked Roger Noll, a sports economist at Stanford University, whether it is possible to compete with the N.F.L., he laughed, but hedidn ’t scoff. “The crucial barrier to entry is finding stadiums in the biggest cities,” he replied — something U.F.L. executives insist is not a problem in the places they are considering. “If you can do that, it would be easy to have a league.” Noll pointed out that for wealthy people who want to own a football team, it is far cheaper to start a new league than to try to land an expansion team — which, assuming that the N.F.L. were interested, would cost upward of $800 million. “You need to have enough money to experience losses that will amount to 20 to 30 percent of revenue in the first three or four years,” he said. It’s much cheaper to lose money over that time than to purchase an N.F.L. franchise.

Q: You've said in the past that the Raiders case was the most significant in the history of professional sports law because it allowed franchises to move. But the impression many got was that the NFL did not allow the Saints to even pursue moving after Katrina. Did that supersede the old law?

A: Katrina was a special case. The Raiders case opened up a can of worms in that it lifted the absolute immunity leagues thought they had to control this sort of things. It didn't necessarily say that leagues had no ability to control who owners would be or where franchises would be located. But it creates this enormous risk of antitrust suits, and the league has backed off. I think in the wake of Katrina, knowing the kind of witness Tom Benson would make in court, Paul Tagliabue was willing to take the $1 billion risk because it was inconceivable that the Saints would win an antitrust case under those set of circumstances. The Saints were in no position to the league like Al Davis was back in the 1980s.

Our results indicate that redistribution lowered salaries by approximately 22% without affecting league balance.

Labels: Revenue Sharing; Competitive Balance

Duke has made a request to the NCAA that its men's lacrosse players - who had their season cut short last year by the rape allegations - get that year of eligibility back.

Duke hopes the NCAA will give back the year its men's lacrosse players lost during last season's now-debunked rape scandal.

The school is asking the NCAA to grant an extra year of eligibility for team members, who played just eight games in 2006 before the university canceled the rest of the season amid rape allegations against three players.

Still - as his team prepares for this weekend's Final Four - coach John Danowski figures the proposal is "a long shot."

The university made the decision to cancel the season in the wake of the allegations, not the NCAA. Unfortunately for the players, Duke must deal with the consequences. If the NCAA decides to give the eligibility back, it sets a precedent that penalties for wrongly cancelling seasons won't be as harsh. It is not as if schools will go willy-nilly in cancelling seasons in the future, but it does make a repeat more possible. Universities should not expect a bailout at the hands of the NCAA.

As heinous as the treatment of the players was, the NCAA has no duty to help bail Duke out.

Labels: Duke Lacrosse, eligibility, NCAA

Philip Porter, a University of South Florida economics professor, said $280 million in Super Bowl spending is too much for South Florida -- equaling 72 hours of total economic output throughout all of Miami-Dade County.

''In order to accomplish this, every sales line would have to double,'' Porter wrote in an e-mail. ``This is impossible. You'd have to sell twice as many cars, televisions, washers and dryers, etc., to accomplish this.''

Still, there's no doubt the game brought a major boost to the hospitality sector. Hotel taxes in Miami-Dade surged 15 percent in February and room revenues surged between 11 and 21 percent from Fort Lauderdale to Key West, according to state and industry data.

Labels: economic impact, mega-events, NFL

The payoff for USD is obvious: they get to play a regional in San Diego. For SDSU, they get to showcase their stadium and, probably just as important, they get rental payments from USD. Even cross-town rivals have reservations prices.

Mr. de Oliveira is part of a highly committed global community of horse and history buffs who believe that chariot racing is a sport whose time has come again, after a hiatus of a millennium or so. In the Middle East, France and England, as well as in Brazil, these modern charioteers are enduring bone-jarring bumps to revive the contests that thrilled the ancients and, more recently, launched a whole genre of Hollywood sword-and-sandal movies.

One of the men behind the international buggy boomlet, Swedish-born Stellan Lind, became obsessed with chariots after watching the famous racing scene in "Ben-Hur," the 1959 movie starring Charlton Heston. "Chariot racing was the Formula One of the antiquities," says Mr. Lind, who for years was a pharmaceuticals executive.

Mr. Lind saw his chance to resurrect racing several years ago when he stumbled onto a Roman hippodrome in Jerash, Jordan, that was being restored by archaeologists. He got financial backing from the Jordan Tourism Board to hold re-enactments of races and gladiator fights there. To help him design chariots that were functional as well as historically faithful, Mr. Lind tracked down a former "Ben-Hur" prop man who was keeping several of the chariots used in the film in his barn in Rome. In 2005, Mr. Lind and his company, the Roman Army and Chariot Experience, or RACE, started entertaining tourists in Jerash with Roman exhibitions.

Last September in Paris, director Robert Hossein staged five performances of a $17 million Ben-Hur re-enactment at the Stade de France, featuring hundreds of extras appearing as charioteers, gladiators and pirates. It drew close to 300,000 spectators.

Labels: horse racing, niche sports

Hayward, 83, who used to crawl under the turnstiles at Molineux to watch the team as a boy, bought the club 17 years ago for £2.1 m from Gallagher Estates, and spent around £50m in the first 10 years in unsuccessful attempts to take Wolves back to the old First Division, and latterly the Premiership.

Four years ago he retired as chairman, handing over to elder son Rick, and taking the title of life president, which he will retain. He promised he would stand aside if the right person came along, and a number of potential suitors showed interest, including Milan Mandaric, before he took over at Leicester, and a consortium led by Graeme Souness. All were rejected until yesterday's news from Wolves that Hayward had taken the "unprecedented step of 'gifting' the shares" to Carden Leisure Ltd, who are controlled by Morgan.

Labels: english football, finance

Reno: You attribute African-Americans’ fading interest in baseball to a number of economic and cultural factors, which you refer to as the Three C's: cost, continuity and competition. Can you briefly explain that?

Winfield: There are scores of reasons why African-Americans have set the sport aside to a large extent—and I’m talking about fans as well as players. But most of these reasons fall under these three categories. I’ll start with competition. When I grew up, baseball was No. 1. There was a glove in everyone’s crib. No one thought football would have such a huge impact on society. Young people didn’t aspire to be NBA players when [Bob] Cousy and [Bill] Russell were winning championships. These sports have done a good job marketing players and their sport. As for cost, baseball was free when I was a kid—in every park and “rec,” every school system. Now it costs money. And to be good at it, parents have to pay for training, for travel, etc. Can a single parent in an urban setting on a fixed income pay for that? No. And then there’s continuity. Used to be, baseball was a constant from age 8 to 18. There’s a disconnect now in the neighborhoods.

Baseball used to be like a vast ocean, it was broad, deep and connected to everything. Today it isn’t like that. There are many big lakes, rivers, tributaries, ponds, streams, you name it, but it’s not all connected. But if you go to a Southeastern Conference baseball game, look at the ballpark, look at the enthusiasm, Go to Omaha and check out the College World Series. Go to Williamsport for the Little League World Series. There are a lot of places where baseball is still very strong, in big cities and small towns.

Labels: baseball, race

Part of the allure of the recent retro parks has been asymmetrical playing fields. In place of the bland,
uniform dimensions that came with multipurpose stadiums from the 1960s to the 1980s, the new fields have varying outfield distances, walls of differing heights and assorted peculiar angles. It certainly provides these new ballparks with added character.

But a little history shows that this is a manufactured character, as opposed to the organic kind that sprang from the original ballparks of yesteryear.

...[W]here did the special dimensions come from? Well, teams had to make their
stadiums fit on a particular piece of urban land, often within a set of city streets and having to accommodate many neighbors.

For example, Griffith Stadium in Washington, D.C., which was home to the
Senators, had a center-field wall that jutted in towards the playing field. Why? Because, PhilipLowry reported in "Green Cathedrals," there were five houses and a large tree on the other side.

...What a difference a century makes. Developers, sports team owners and players now reap rewards not only from taxpayer-subsidized stadiums, but also from the government's muscling homeowners and small businesses off their properties to enrich the politically connected.

That's what looms with Mayor Michael Bloomberg's Willets Point proposal to move some 100 small businesses and one resident to alter the area near the new Mets home to fit his political vision. Eminent domain also is a weapon to grab property provided by government to Bruce Ratner for his multibillion-dollar Brooklyn residential, office and retail project, including an arena for the Nets.

Labels: MLB, stadiums

[T]his is Southlake Carroll - three-time national champs, state champs four out of five years.

You want season tickets, roll up your sleeves.

Demand is so high, they will pay $90 just for a license, a permit giving them the right to buy tickets for the next three years.

Labels: ticket demand

I was wondering what makes a city major league. I assume you don't mean the tautology that a city is major league because it has major league sports. In that case, the concept of major league city becomes analytically meaningless. It does beg the question, however, of whether one major league franchise is sufficient to be major league, or if two, three or four are really necessary for a city to be major league. If it takes four, LA is not a major league city. That seems rather hard to accept. If it only takes one, then Green Bay, WI is a major league city, and that too is hard to accept. More importantly, what exactly are the benefits to the citizens of being a "major league city", however that term is defined?

Studies have been conducted of the value of having professional sports franchises using a variety of methodologies. Very few have found the benefits to outweigh the costs, and some have specifically addressed the major league city issue. For example, Bruce Johnson, Mike Mondello, and John Whitehead conducted a contingent valuation method analysis of the value of the Jacksonville Jaguars to the citizens of Jacksonville and, at the same time, of the value to those same citizens of attracting an NBA franchise. Their technique allows them to separate the value from attending games from the value from the mere existence of the franchise. The existence value can be likened to the "major league city" benefits. For neither the Jaguars nor the proposed NBA franchise did this existence value come anywhere near the cost of stadium or arena construction. Moreover, after adding in the benefits from attendance at Jaguar games, the value of the franchise to the city still was well below stadium costs.

Johnson, Groothuis, and Whitehead performed the same analysis on the value of the Pittsburgh Penguins. Again, the value from existence of the franchise was far below the cost of an arena. Aju Fenn and John Crooker conducted a similar analysis on the Minnesota Vikings with the same basic conclusions.

So, while I agree that NBA basketball and NHL hockey provide enjoyment and benefits to fans of all types, those benefits rarely are sufficient to justify millions of dollars of public spending on a new arena.

Studies like that done by KPMG about a new arena for Baltimore have been thoroughly discredited by independent observers. They are much like the predictions of psychics. While a psychic's predictions of the future are rarely assessed for their accuracy, the predictions of stadium benefits have been thoroughly scrutinized by a wide array of independent researchers. There is almost no support for any of the predictions made by the stadium and arena benefit psychics when those predictions are compared to data on what actually happened. The bottom line is the feasibility studies are more a PR process than a fact finding one. I urge you to not buy into the PR as if it is objective science.

It had been around one shilling for nearly 20 years until the advent of decimal coinage in 1971 when it doubled to 10p. As recently as 1981 it was less than a £1 and in 1987 it was only £2. However, the increases came thick and fast during the last decade and a half, from £3 in 1990, £4 in 1991, £5 in 1994 to £8.50 in 2006.

It is a far cry from Wembley's opening day in 1923. That 3d (penny) piece of paper is now sufficiently collectable that it can reach four figures at auction.

Great newspapers are great because talented, ambitious reporters and writers seek them out to work for them, not just because the owners have laudable intentions. The Dow Jones legacy has been terrific but what about the future? The world will continue to spawn alternatives to its franchise, and the Journal is in danger of becoming less and less central to the world's business life (and, sadly, that's regardless of any willingness by the controlling shareholders to become poorer and poorer to protect the Journal).

Between 2.8 and 5.4 million visitors are expected to view matches, either at the stadiums or at the public viewing areas, helping to generate up to 1.11 million overnight stays.

The study estimates that Euro 2008 will provide employment equivalent to up to 7,350 full-time jobs, although the majority of extra work generated will be a result of overtime rather than through the creation of new jobs.

In other words, Euro 2008 will be a bonanza for bartenders and hotel-workers.

Update: Here's the Reuter's article quoted above. This AFP story emphasizes the additional boost from people who can't afford to buy tickets (i.e. people attracted to city centers for the party atmosphere surrounding the big screen telecasts), but doesn't say anything about the differential spending patterns of the ticket buying vs. freeloading types. The AFP story does note that most of the impact "will come from spending on accommodation, food [and] drink." Which brings to mind the benefits and costs of selling beer to the fans from Engerland.

Jason Hughes, a senior at the College of Charleston in South Carolina, decided to skip his May 13 commencement ceremony. Instead, he sold one of his three tickets to a friend for $40 in gas money and auctioned off the other two for a combined $192.50 on eBay. "I'm taking what I learned about capitalism and applying it to life," Mr. Hughes says.

...Princeton University's student newspaper in April reported that students were trying to sell tickets for the June 5 commencement for prices typically between $70 and $100 each -- and ranging up to $250. The school responded the next day with an email warning to the class of 2007 from Tom Dunne, the associate dean of undergraduate students. "The University does not sell these tickets, and they are, strictly speaking, University property, not students' property," the email said. "Students who try to sell tickets, and students who buy them, are subject to disciplinary action." Says Cass Cliatt, a Princeton University spokeswoman: "Our interest is in making sure that every student can attend commencement, and there should not be a financial component to that."

Teuflesberg may not be the fastest or most talented horse in this year’s Derby, but he has clearly been the biggest bargain among the 20 entered. He has already earned $385,431 and has won two stakes races.

“He’s not a $9,000 horse,” said [ed: trainer Jamie] Sanders ... “He was just overlooked. He looked beautiful when we looked at him at the barn. Donnie and I thought there was no way we could get close to this horse. He was just a standout. We thought he’d go for $200,000 at least.”

Sanders believes Teuflesberg sold for so little because he was among the last of nearly 1,000 horses to go through the sale, and he sold on a day the weather was bad.

“The only reason we got him for that was because everyone had left,” Sanders said. “He was one of the last horses in the sale, and it was snowing. Everybody was tired and wanted to go home.”

You have probably seen the recent article by Alan Schwarz on a working paper by Joseph Price and Justin Wolfers on racial bias by officials in the NBA. Skip Sauer has some comments here. Dave Berri has some comments here. One of the problems that has been raised is that Price and Wolfers did not examine individual officials and their calls. Instead, they examined officiating crews and the calls of the crews (that issue is raised in this article). Others are concerned that the authors didn't control for the race of the player being fouled (see Brian's post below).

Econometric questions aside and assuming that Price and Wolfers have identified something that truly exists, we must ask the following: why referees would let their biases affect their calls? Orley Ashenfelter developed a model of arbitrator behavior that might be useful in understanding referee behavior.

Arbitration is a dispute resolution system in which a third party, the arbitrator, hears arguments by two disputants and renders a binding decision. The two sides are bound to honor that decision. How do arbitrators get chosen to hear particular cases? They are chosen like people are chosen for juries. Disputants are given a list of potential arbitrators and each takes turns striking names from the list. In the end, perceptibly biased arbitrators will get struck from hearing case. Because of the lucrative nature of being an arbitrator, arbitrators will have it in the back of their minds that their decisions in particular cases will be used in future selection processes. So the arbitrator will want to appear to be unbiased, at least relative to other arbitrators, in the future.

In black and white cases, the arbitrator has an incentive to make the right call. Going the other way is evidence of bias and increases the chances that the person will get struck from future lists. In the very gray cases, the decision would basically come down to a mental coin flip. But if an arbitrator is more likely to side with, say, an employer in a wage case with an employee, that is evidence of bias towards the employer and the arbitrator is more likely to be struck from future cases and to be struck by employers. Therefore, such arbitrators will have difficulty finding gainful employment as arbitrators in the future.

So it would seem to be with referees - especially in the technology age where multitudes of television cameras and other technology monitor officials constantly. Referees make calls in black and white cases and the gray cases. In such cases, if a referee makes the wrong call consistently, then he appears biased. In the gray cases, if the calls go against players of another race consistently, the referee appears biased. If so, then the referee will have difficulty finding gainful employment as referees. Moreover, referees are smart people and would know that they are officiating in a fishbowl. If bias does affect calls, it must largely occur in the subconscious mind of referees and it shouldn't appear very often.