Monday, July 30, 2007
Kling on "Do Sports Franchises Make Money"
On EconLog, Arnold Kling offers a useful commentary on computing profitability of sports teams.
Friday, July 27, 2007
Alan Webb Breaks American Mile Record
With all of the attention on game-fixing, dogfighting, doping in cycling, and the ongoing Barry Bonds story, I didn't find out about Alan Webb breaking the American record for the mile until my Sports Illustrated arrived yesterday. Webb ran 3:46:9 in Belgium on Saturday to break Steve Scott's 3:47:6 that had stood for 25 years. I can only hope there is no doping bomb on this one.
Webb's achievement reminds me, in a backwards way, of a longstanding question that I've had: what happened to American-born middle distance runners? Whether in the 800m or 1500m (and mile), the U.S. once produced major figures. Jim Ryun held the world record in the mile from 1966 to 1975. He won an Olympic silver medal in the 1500 in 1968. Dave Wottle tied the 800m world record in 1972 and won Olympic gold (a very memorable race available on YouTube.) Rick Wolhuter was the world's best 800m around between 1972 and 1976. Steve Scott was the third fastest miler ever when he ran just 0.3 seconds off of the world record in 1982. Marty Liquori ran 3:52:2 in 1975, Todd Harbour ran 3:50:03 in 1981; Jim Spivey ran 3:49:8 in 1986. Earl Jones won a bronze medal in LA in 1984 in the 800m. Johnny Gray ran the still-standing American record of 1:42:6 (within a second of the world record) in 1985. The same kinds of questions can be asked about UK-born middle distance runners where names like Bannister, Coe, Ovett, and Cram are legendary.
These kinds of "where have they gone" questions are not easy to answer. A quick response might be that the growth of middle and long distance running in East and North Africa has pushed American or British runners farther down. That maybe, but that answer is not as simple as it seems. From the late 1960s, African runners, especially Kenyans had already emerged. Further, the really puzzling thing is that American and British times fell off or flattened out relative to American and British times. Other than Johnny Gray and Mark Everett in the 800m, Rick Wolhuter's times of the early to mid 1970s are comparable to what anybody is doing now. Joe Falcon in the late 1980s and Steve Holman in the 1990s, American mile-1500 times are all dominated by guys from the mid 1980s and earlier.
What other answers are out there? The financial incentives, at least internationally, have only grown for elite runners since those days. That leaves the possibility of decisions at young ages influencing the pool of talented runners. Substitution into other sports might occur at young ages precluding a talented young runner from ever developing. Also, the reduction in "status" and visibility of track and field in the U.S. relative to sports such as football might diminish the pool of young runners. However, these effects should show up in high school and junior times. I have not looked rigorously, but these times appear to be advancing more than the times of elite American senior level runners.
Webb's achievement reminds me, in a backwards way, of a longstanding question that I've had: what happened to American-born middle distance runners? Whether in the 800m or 1500m (and mile), the U.S. once produced major figures. Jim Ryun held the world record in the mile from 1966 to 1975. He won an Olympic silver medal in the 1500 in 1968. Dave Wottle tied the 800m world record in 1972 and won Olympic gold (a very memorable race available on YouTube.) Rick Wolhuter was the world's best 800m around between 1972 and 1976. Steve Scott was the third fastest miler ever when he ran just 0.3 seconds off of the world record in 1982. Marty Liquori ran 3:52:2 in 1975, Todd Harbour ran 3:50:03 in 1981; Jim Spivey ran 3:49:8 in 1986. Earl Jones won a bronze medal in LA in 1984 in the 800m. Johnny Gray ran the still-standing American record of 1:42:6 (within a second of the world record) in 1985. The same kinds of questions can be asked about UK-born middle distance runners where names like Bannister, Coe, Ovett, and Cram are legendary.
These kinds of "where have they gone" questions are not easy to answer. A quick response might be that the growth of middle and long distance running in East and North Africa has pushed American or British runners farther down. That maybe, but that answer is not as simple as it seems. From the late 1960s, African runners, especially Kenyans had already emerged. Further, the really puzzling thing is that American and British times fell off or flattened out relative to American and British times. Other than Johnny Gray and Mark Everett in the 800m, Rick Wolhuter's times of the early to mid 1970s are comparable to what anybody is doing now. Joe Falcon in the late 1980s and Steve Holman in the 1990s, American mile-1500 times are all dominated by guys from the mid 1980s and earlier.
What other answers are out there? The financial incentives, at least internationally, have only grown for elite runners since those days. That leaves the possibility of decisions at young ages influencing the pool of talented runners. Substitution into other sports might occur at young ages precluding a talented young runner from ever developing. Also, the reduction in "status" and visibility of track and field in the U.S. relative to sports such as football might diminish the pool of young runners. However, these effects should show up in high school and junior times. I have not looked rigorously, but these times appear to be advancing more than the times of elite American senior level runners.
Wednesday, July 25, 2007
Bringing the Game Back - The Role of Prices
Responding to some of the doomers and gloomers who see the NBA going to hell in a handbasket, Dave Berri argues that the the association will not suffer any long-term consequences from its current officiating/gambling scandal (King has thoughts here and Tom Kirkendall has some thoughts here).
Dave notes his research with Martin Schmidt about attendance following labor strife in professional sports. This research, published in 2004 in the American Economic Review and discussed in their book with Stacey Brook, Wages of Wins, is relevant because we have an event which some say threatened the long-term health of the sport. Schmidt and Berri show that despite the prediction of doom and gloom, attendance comes back to trend quickly after the strife ends. Why? One possibility is through ticket pricing.
According to average ticket price data obtained from the Team Marketing Report Database*, the average real (BY 2005) ticket price in baseball was 6.8% higher in 1994 than in 1993. In 1995, the average baseball club lowered its real ticket prices by 0.1%. Five clubs raised ticket prices and the other 23 lowered their ticket prices. Colorado began play in Coors Field in 1995 and was only in its third year of existence, meaning there was probably still a honeymoon effect going on with the team and the stadium. When we drop Colorado from the calculations, the average ticket price fell by 1.3%.
In 1996, the average real ticket price went up by 2.1%. Thirteen teams lowered their real prices and the other 15 raised their average real price. In 1997, the average real price went up by 6.4% and only 7** teams lowered their average real ticket price. Certainly there are many things that can affect the prices that teams charge, but it appears that part of the reason fans came back after the strike is that the teams set prices to draw them back. Moreover, to the extent that habit persistence explains the demand for baseball, the long-term health of the game after the strike can be partly explained by the pricing decisions of teams immediately after the strike ended.
The current scandal in the NBA, at least what we know now, is isolated and sends few, if any, signals about the overall integrity of officiating. Even so, we'll be able to see how damaging the NBA thinks the scandal will be on demand by looking at team ticket prices next season.
*For those not familiar with the data, The Team Marketing average ticket price series is a weighted average ticket price calculated using prices per section in each stadium weighted by the number of seats in each section. Canadian prices are given in American dollars. The details of the calculations are given at the Team Marketing website.
**7 teams, not 6 as I originally wrote, lowered ticket prices on average in 1997. I've changed the text and the table.
Labels: NBA, referee scandal, strikes and lockouts, ticket pricing
Tuesday, July 24, 2007
Scandal Effect: Does League Direction Matter?
In Sunday's post ("Needed Perspective"), Dave Berri draws attention to a key question concerning the NBA scandal -- do fans care about such things as much as the media makes out? As Dave points out, they didn't seem to care much about the Black Sox scandal in spite of its magnitude. In our 24/7 sports news world, stories such as a mob-related ref, or Michael Vick's dog fighting involvement, or Barry Bonds' BALCO connections create a media stir that may dwarf genuine fan interest much less backlash.
A second question that comes to mind regarding these kind of sports scandals is whether the impact of the scandal hinges, to some extent, on the direction of league popularity. In 1919, baseball was king with no close rivals. Even the broader entertainment market was quite limited. The NFL may face more competition but is, nonetheless, in a dominant position today so that the Vick business or Pacman Jones' 75th arrest may not have much of an impact, at least in the short term.
The NBA finds itself in a very different position. Although live attendance continues to do well (as it does in the NHL), television viewing of the NBA has been tanking. Here are Nielsen Rating figures for the NBA Finals (from Wikipedia on NBA Nielsen Ratings):
ESPN's Bill Simmons takes up the impact on the context of NBA problems in his column, One Man out, One League in Trouble. His article does not try to blow the Ref scandal up; instead, it details how the league faced, and had not dealt with, a number of important issues before it including referee performance, a troubled playoff system, backward incentives from the lottery system, and so on. A couple of years ago, I discussed some of these issues (A College Lesson for the NBA) when I noticed that the Shell Houston Open had outdrawn the TV audience for the NBA playoffs at the same time.
Whether the current problems will influence enhance these TV troubles for the NBA, I can't say for sure. Simmons raises the possibility that the scandal might even encourage managerial decisions that help the league in the long term:
A second question that comes to mind regarding these kind of sports scandals is whether the impact of the scandal hinges, to some extent, on the direction of league popularity. In 1919, baseball was king with no close rivals. Even the broader entertainment market was quite limited. The NFL may face more competition but is, nonetheless, in a dominant position today so that the Vick business or Pacman Jones' 75th arrest may not have much of an impact, at least in the short term.
The NBA finds itself in a very different position. Although live attendance continues to do well (as it does in the NHL), television viewing of the NBA has been tanking. Here are Nielsen Rating figures for the NBA Finals (from Wikipedia on NBA Nielsen Ratings):
ESPN's Bill Simmons takes up the impact on the context of NBA problems in his column, One Man out, One League in Trouble. His article does not try to blow the Ref scandal up; instead, it details how the league faced, and had not dealt with, a number of important issues before it including referee performance, a troubled playoff system, backward incentives from the lottery system, and so on. A couple of years ago, I discussed some of these issues (A College Lesson for the NBA) when I noticed that the Shell Houston Open had outdrawn the TV audience for the NBA playoffs at the same time.
Whether the current problems will influence enhance these TV troubles for the NBA, I can't say for sure. Simmons raises the possibility that the scandal might even encourage managerial decisions that help the league in the long term:
If you're a diehard NBA fan, you're horrified but strangely hopeful, because we needed a tipping point to change a stagnant league that was headed in the wrong direction ... and maybe this was it.
Monday, July 23, 2007
Referees and the Power of Statistics
We all remember the furor that erupted a couple of months ago regarding the Price and Wolfers paper that found a subtle racial bias in referee decisions in the NBA. Wolfers and Price were absolutely pilloried by the NBA and basketball insiders, all of whom claimed that NBA officials are consistently watched by trained assessors who have never observed any racial discrimination.
Astute economists here and elsewhere noted that the level of bias observed in the paper amounted to a maximum of .1 or .2 fouls per game per player, a number unlikely to be uncovered by even careful watching of games and video tapes. (Similarly, as noted in Moneyball, the difference between a .300 hitter and a .275 hitter is 1 base hit every two weeks. Hence, Billy Beane relies on his statisticians rather than his scouts.) Of course, the whole reason the field of inferential statistics has been developed is to help discover relationships that cannot be identified through casual (or even intense) direct observation. While there may be valid arguments why Price and Wolfers are wrong, the NBA's claim that "We can't see it with our naked eyes" was always ignorant in the extreme.
Now it comes out that one of the NBA's men in black was apparently on the take, a fact that went unnoticed by the NBA's trained observers until they got a call from the FBI. If the naked eye can't even pick up a guy trying to throw games for the mob, how can there be any hope, aside from well-designed statistical experiements like that of Price and Wolfers, of discovering subtle (and almost certainly, subconcious) racial bias in the NBA?
Astute economists here and elsewhere noted that the level of bias observed in the paper amounted to a maximum of .1 or .2 fouls per game per player, a number unlikely to be uncovered by even careful watching of games and video tapes. (Similarly, as noted in Moneyball, the difference between a .300 hitter and a .275 hitter is 1 base hit every two weeks. Hence, Billy Beane relies on his statisticians rather than his scouts.) Of course, the whole reason the field of inferential statistics has been developed is to help discover relationships that cannot be identified through casual (or even intense) direct observation. While there may be valid arguments why Price and Wolfers are wrong, the NBA's claim that "We can't see it with our naked eyes" was always ignorant in the extreme.
Now it comes out that one of the NBA's men in black was apparently on the take, a fact that went unnoticed by the NBA's trained observers until they got a call from the FBI. If the naked eye can't even pick up a guy trying to throw games for the mob, how can there be any hope, aside from well-designed statistical experiements like that of Price and Wolfers, of discovering subtle (and almost certainly, subconcious) racial bias in the NBA?
Sunday, July 22, 2007
Some Needed Perspective on the NBA Referee Scandal
On Friday we learned that NBA referee Tim Donaghy is under investigation by the FBI for betting on NBA games. Here is how this story has been described by various members of the media.
Adrian Wojnarowski, Yahoo! Sports
The nightmare has forever lurked in the reaches of commissioner David Stern's mind... As the sun rose on the Vegas Strip this morning, where the best players in the world had gathered for a Team USA mini-camp, the doomsday scenario of fixed games hung over the league like an anvil.
Marc Stein, ESPN.com
There have been some scandals through the years in the league, but nothing like this. Nothing close. Sooner than later, all hell is going to break loose. The NBA will never be the same again.
Jack McCallum, Sports Illustrated.com
This can only be described as a horrific Friday for Stern and his National Basketball Association. The New York Post's disclosure that a referee is being investigated by the FBI for betting on games and making calls to manipulate point spreads -- a referee later identified by multiple ESPN sources as 13-year vet Tim Donaghy -- will haunt this league for the foreseeable future.
In reading the coverage of this scandal you sense that the very future of the NBA is at stake. Here is a different perspective on this story.
The Black Sox Scandal
Let’s go back in time to the worst gambling episode in sports history. In 1919 members of the Chicago White Sox conspired to throw the World Series. This was not a few regular season games. This was the championship of baseball pre-determined by players and gamblers.
One would suspect that such an event would threaten the very survival of Major League Baseball. Fans of baseball would express their disgust with the sport and stay away in droves.
When we look at the data, though, this is not what we see. Here is a snapshot of average annual attendance of a Major League Baseball team, beginning in 1919 and ending in 1933.
- 1919: 408,277
- 1920: 570,055 (record)
- 1921: 537, 957
- 1922: 551,011
- 1923: 542,025
-1924: 599,755 (record)
- 1925: 596,285
- 1926: 614,561 (record)
-1927: 620,179 (record)
- 1928: 568,893
- 1929: 599,261
- 1930: 633,266 (record, not broken until 1945)
- 1931: 529,194
- 1932: 435,910
- 1933: 380,564
The scandal occurred in 1919, but was not made public until the latter 1920s. So the first year we would see a significant impact is 1921. The average attendance drawn by a Major League Baseball team did drop in 1921 by 31,098 fans. But one should remember that there was a significant recession in 1920-21, with real per-capita Gross Domestic Product dropping more than 5% (comparing 1921 and 1919). So it’s possible that the drop was caused by changes in the economy.
Further evidence of the role the economy played can be seen when we look at the next decade. A new record was set in 1924, 1926, 1927, and 1930. And then attendance – with the advent of the Great Depression -- went into a decline. By 1933 average attendance was nearly 40% below what we saw in 1930. It wasn’t until 1945 that the record seen in 1930 was surpassed.
What is the point of bringing up all these numbers? The data tells us that the Black Sox scandal did not have much impact on consumer demand. At least, it appears that changes in the overall economy are much more important.
Apparently if you take away the fan’s money, the fans stop coming to the games. But as long as the fans have money – gambling scandals, player strikes, owner’s lock-outs, and even steroids – don’t seem to threaten professional sports.
This would be clear, if we understood the true nature of the game. The game that professional team sports are playing is providing entertainment to their customers. As long as the product is entertaining, and the fans have money, one should expect fans to be in the stands. And clearly fans are finding professional sports to be very entertaining lately. Major League Baseball, the National Football League, the National Hockey League, and the NBA have all set attendance records for their most recently completed seasons.
The NBA’s Integrity Problem
That the NBA is setting attendance records should be surprising to the “doomsday” voices in the media. Long before the referee scandal broke academic research had already questioned the integrity of the NBA’s contests. Beck Taylor and Justin Trogdon published research in the Journal of Labor Economics in 2002 detailing how NBA teams were systematically losing to enhance the team’s draft position. The research of Joe Price and Justin Wolfers suggested that the calls NBA referees made were influenced by the race of the player.
The research of Taylor and Trogdon –to the best of my knowledge – has never been addressed by the NBA. The NBA did commission a study to contradict the Price-Wolfers story. Initially it was reported that the NBA’s study refuted the Price-Wolfers research. Later on, though, it was revealed that the NBA’s results could be interpreted as being consistent with the Price-Wolfers study.
What has been the impact of all this research questioning the integrity of the NBA? My sense is nothing has happened. The NBA either ignores it or dismisses its claims.
And why does the NBA take this action? The NBA is not in the “truth” business. The NBA is in the “entertainment” business. Because providing entertainment is the actual game the NBA is playing, these stories – which clearly question the integrity of the game – are swept under the rug.
And these efforts are largely successful. Again, the NBA set an attendance record in 2004-05. This was followed by another record in 2005-06 and 2006-07. Taylor and Trogdon have found evidence that the NBA’s losers were not doing their best to win games since the 1980s. But like the Black Sox scandal, the NBA’s integrity problems have had no apparent impact on consumer demand.
Crying Wolf
The media has an incentive to sensationalize each story it covers. We have heard that player strikes and lock-outs threaten the future of sports. Competitive balance in baseball must be resolved or baseball will be doomed. Steroids must be addressed or baseball will be forever harmed. And now, the NBA will never be the same because a referee has a gambling problem.
When we look at the attendance data we see that the media is often “crying wolf.” The reaction of fans is just not consistent with the dire predictions of media members. And this is a problem. Although the media is also in the entertainment business, its consumers expect that journalists are also interested in the “truth.” But time and time again, members of the media exaggerate the significance of the stories they cover. Perhaps that is the true “integrity” problem we should be talking about.
Adrian Wojnarowski, Yahoo! Sports
The nightmare has forever lurked in the reaches of commissioner David Stern's mind... As the sun rose on the Vegas Strip this morning, where the best players in the world had gathered for a Team USA mini-camp, the doomsday scenario of fixed games hung over the league like an anvil.
Marc Stein, ESPN.com
There have been some scandals through the years in the league, but nothing like this. Nothing close. Sooner than later, all hell is going to break loose. The NBA will never be the same again.
Jack McCallum, Sports Illustrated.com
This can only be described as a horrific Friday for Stern and his National Basketball Association. The New York Post's disclosure that a referee is being investigated by the FBI for betting on games and making calls to manipulate point spreads -- a referee later identified by multiple ESPN sources as 13-year vet Tim Donaghy -- will haunt this league for the foreseeable future.
In reading the coverage of this scandal you sense that the very future of the NBA is at stake. Here is a different perspective on this story.
The Black Sox Scandal
Let’s go back in time to the worst gambling episode in sports history. In 1919 members of the Chicago White Sox conspired to throw the World Series. This was not a few regular season games. This was the championship of baseball pre-determined by players and gamblers.
One would suspect that such an event would threaten the very survival of Major League Baseball. Fans of baseball would express their disgust with the sport and stay away in droves.
When we look at the data, though, this is not what we see. Here is a snapshot of average annual attendance of a Major League Baseball team, beginning in 1919 and ending in 1933.
- 1919: 408,277
- 1920: 570,055 (record)
- 1921: 537, 957
- 1922: 551,011
- 1923: 542,025
-1924: 599,755 (record)
- 1925: 596,285
- 1926: 614,561 (record)
-1927: 620,179 (record)
- 1928: 568,893
- 1929: 599,261
- 1930: 633,266 (record, not broken until 1945)
- 1931: 529,194
- 1932: 435,910
- 1933: 380,564
The scandal occurred in 1919, but was not made public until the latter 1920s. So the first year we would see a significant impact is 1921. The average attendance drawn by a Major League Baseball team did drop in 1921 by 31,098 fans. But one should remember that there was a significant recession in 1920-21, with real per-capita Gross Domestic Product dropping more than 5% (comparing 1921 and 1919). So it’s possible that the drop was caused by changes in the economy.
Further evidence of the role the economy played can be seen when we look at the next decade. A new record was set in 1924, 1926, 1927, and 1930. And then attendance – with the advent of the Great Depression -- went into a decline. By 1933 average attendance was nearly 40% below what we saw in 1930. It wasn’t until 1945 that the record seen in 1930 was surpassed.
What is the point of bringing up all these numbers? The data tells us that the Black Sox scandal did not have much impact on consumer demand. At least, it appears that changes in the overall economy are much more important.
Apparently if you take away the fan’s money, the fans stop coming to the games. But as long as the fans have money – gambling scandals, player strikes, owner’s lock-outs, and even steroids – don’t seem to threaten professional sports.
This would be clear, if we understood the true nature of the game. The game that professional team sports are playing is providing entertainment to their customers. As long as the product is entertaining, and the fans have money, one should expect fans to be in the stands. And clearly fans are finding professional sports to be very entertaining lately. Major League Baseball, the National Football League, the National Hockey League, and the NBA have all set attendance records for their most recently completed seasons.
The NBA’s Integrity Problem
That the NBA is setting attendance records should be surprising to the “doomsday” voices in the media. Long before the referee scandal broke academic research had already questioned the integrity of the NBA’s contests. Beck Taylor and Justin Trogdon published research in the Journal of Labor Economics in 2002 detailing how NBA teams were systematically losing to enhance the team’s draft position. The research of Joe Price and Justin Wolfers suggested that the calls NBA referees made were influenced by the race of the player.
The research of Taylor and Trogdon –to the best of my knowledge – has never been addressed by the NBA. The NBA did commission a study to contradict the Price-Wolfers story. Initially it was reported that the NBA’s study refuted the Price-Wolfers research. Later on, though, it was revealed that the NBA’s results could be interpreted as being consistent with the Price-Wolfers study.
What has been the impact of all this research questioning the integrity of the NBA? My sense is nothing has happened. The NBA either ignores it or dismisses its claims.
And why does the NBA take this action? The NBA is not in the “truth” business. The NBA is in the “entertainment” business. Because providing entertainment is the actual game the NBA is playing, these stories – which clearly question the integrity of the game – are swept under the rug.
And these efforts are largely successful. Again, the NBA set an attendance record in 2004-05. This was followed by another record in 2005-06 and 2006-07. Taylor and Trogdon have found evidence that the NBA’s losers were not doing their best to win games since the 1980s. But like the Black Sox scandal, the NBA’s integrity problems have had no apparent impact on consumer demand.
Crying Wolf
The media has an incentive to sensationalize each story it covers. We have heard that player strikes and lock-outs threaten the future of sports. Competitive balance in baseball must be resolved or baseball will be doomed. Steroids must be addressed or baseball will be forever harmed. And now, the NBA will never be the same because a referee has a gambling problem.
When we look at the attendance data we see that the media is often “crying wolf.” The reaction of fans is just not consistent with the dire predictions of media members. And this is a problem. Although the media is also in the entertainment business, its consumers expect that journalists are also interested in the “truth.” But time and time again, members of the media exaggerate the significance of the stories they cover. Perhaps that is the true “integrity” problem we should be talking about.
Monday, July 16, 2007
45 Seconds a Day
The NFL gets draconian on media coverage, by Jason Fry. When will they have the good sense to grant a waiver? Hopefully soon, or they'll have a PR disaster.
Adam Thompson has more, also on the public page of the WSJ, on the collision between sports as property and media coverage.
Adam Thompson has more, also on the public page of the WSJ, on the collision between sports as property and media coverage.
Antitrust and European Football
The Economist weighs in. They note the clubs' petition for an exemption to antitrust law, and give a nod to co-blogger Stef Szymanksi.
West Ham has been weighing plenty of arguments themselves in court in recent weeks. Last season's blessing, Carlos Tevez, has turned in to an off-season nightmare. The problem is that Tevez' "economic rights" are owned not by himself or another club, but a financial operator of sorts, Kia Joorabchian.
Some clubs wanted West Ham relegated for participating in Tevez' arrangement. They dodged that bullet, but not a $10 million fine. Now Tevez wants to play for Manchester United, and the feeling is shared by Man U. But West Ham is holding up the transfer, claiming that Joorabchian's contract with Tevez is an unlawful restraint of trade. What a hoot! While it's a contract that makes you squirm - it has a whiff of slavery about it - it is no more a restraint than the contracts used by clubs themselves.
This negotiation will most likely end with West Ham achieving their aim of pocketing a few million pounds from Manchester United. Joorabchian - now under indictment in Brazil - may get frozen out. This is dirty pool if you ask me. But it would be interesting to see the case argued in court just to see how the law deals with West Ham's claim.
West Ham has been weighing plenty of arguments themselves in court in recent weeks. Last season's blessing, Carlos Tevez, has turned in to an off-season nightmare. The problem is that Tevez' "economic rights" are owned not by himself or another club, but a financial operator of sorts, Kia Joorabchian.
Some clubs wanted West Ham relegated for participating in Tevez' arrangement. They dodged that bullet, but not a $10 million fine. Now Tevez wants to play for Manchester United, and the feeling is shared by Man U. But West Ham is holding up the transfer, claiming that Joorabchian's contract with Tevez is an unlawful restraint of trade. What a hoot! While it's a contract that makes you squirm - it has a whiff of slavery about it - it is no more a restraint than the contracts used by clubs themselves.
This negotiation will most likely end with West Ham achieving their aim of pocketing a few million pounds from Manchester United. Joorabchian - now under indictment in Brazil - may get frozen out. This is dirty pool if you ask me. But it would be interesting to see the case argued in court just to see how the law deals with West Ham's claim.
Wednesday, July 11, 2007
European Commission White Paper: Economists 1 UEFA 0
The much awaited and repeatedly delayed European Commission white paper on sport was published today and delivered almost nothing that UEFA and some would-be sports regulators were asking for. Back in September last year a Commission sponsored report called for an antitrust exemption for soccer and the granting of special status to UEFA, the European governing body. But the white paper reaffirms that, although the “specificity” of sports must be recognised, compatibility “with EU competition law can only be made on a case-by-case basis”. Hence there will be no “general guidelines on the application of competition law to the sport sector”. This leaves the big clubs free to challenge proposed restraints on player mobility and income redistribution in the courts. The Commission made clear it is sympathetic to arguments based on “solidarity” and competitive balance when sporting rules are applied, but this is a long way short of an antitrust exemption.
In fact, the document says very little about these issues and is mainly devoted to issues such as promoting the health benefits of sports and the role of sport in society. However, it gives no clues about how to deal with state subsidies to sports, which currently operate in most member states through national lotteries that are also state monopolies- this is a problem since there is increasing pressure to permit competition in the gambling sector.
The big winners from the white paper appear to be economists, since section 3 of the report promises sponsor research on measuring the economic contribution of sport to the EU, which is states could be as large as 3.7% of EU GDP. One stated aim is “to develop a European statistical method for measuring the economic impact of sport as a basis for national statistical accounts for sport”. So we can all start sharpening our pencils.
In fact, the document says very little about these issues and is mainly devoted to issues such as promoting the health benefits of sports and the role of sport in society. However, it gives no clues about how to deal with state subsidies to sports, which currently operate in most member states through national lotteries that are also state monopolies- this is a problem since there is increasing pressure to permit competition in the gambling sector.
The big winners from the white paper appear to be economists, since section 3 of the report promises sponsor research on measuring the economic contribution of sport to the EU, which is states could be as large as 3.7% of EU GDP. One stated aim is “to develop a European statistical method for measuring the economic impact of sport as a basis for national statistical accounts for sport”. So we can all start sharpening our pencils.
Saturday, July 07, 2007
Stat of the day
The final of last month’s Gold Cup, a regional tournament that featured the United States and Mexico in the championship game, drew 40 percent more television households than did the concluding game of the N.H.L.’s Stanley Cup finals.Still skeptical? Ok, then. Here's another:
The combined American television audience for the final of the 2006 World Cup on ABC and Spanish-language Univision was 16.9 million viewers, compared with an average audience of 15.8 million viewers for the 2006 World Series on Fox.These are from Jere' Longman's story on the impending arrival of David Beckham in LA. MLS has a long way to go, but these are signs that there is latent demand for big time soccer in the U.S. It will be interesting to see if MLS decides to provide it. Who knows how the Beckham experiment will turn out? But its a step in the right direction.
Friday, July 06, 2007
Downsizing while going upscale
In his review of the career of MLB's Bud Selig, Tim Marchman closes with the "milking the cow, but not feeding it" theme:
Despite Marchman's critique of downsizing, his review [part one, part two] credits Selig for successfully steering baseball through significant periods of economic change. It's a savvy account too, as shown by his take on the public subsidy game. "Blame the city councils, not Selig, for the waste of your money."
Across the nation, virtually every ballpark in the game has been replaced or scheduled for demolition over the last 15 years; those few that haven't, like Fenway Park and Wrigley Field, have been carefully renovated. The purpose of this new construction has always been the same: To build smaller, more intimate parks specializing in providing more high-end service to businessmen. Money isn't made these days from the family out to take the annual trip to the local park; it's made from clients who spend hundreds of thousands of dollars on luxury suites in which they entertain clients.I'm obviously sympathetic to Marchman's point. But while the risks of catastrophe are notoriously difficult to quantify, they must be quite small, at least over the next two decades. For the time being, electronic media will supply the product to the masses and generate future demand.
This is a broad conceptual shift, and I don't think it was inevitable. There is a great tension in marketing a mass entertainment as a boutique product, and a different commissioner would have made different choices, handling that tension differently. Selig has come down on one side, firmly and consistently.
You can see the ultimate example of this in California, where the Athletics are moving from a football field in relatively low-rent Oakland to a 35,000-seat park in Fremont, which isn't, by baseball's historical standards, even a definable place. It's the most extreme manifestation of the shift the sport has made toward valuing quality over quantity — to cater to the relatively few at the expense of the many. It was inevitable that baseball would move in this direction, but under Selig the sport has become totally committed to it. Even in New York, a city with enough passionate fans to support five successful teams, the new stadiums are limiting supply to increase demand and better serve the wealthiest patrons — the Mets' new field, for instance, will have 10,000 fewer seats than Shea Stadium does, and that's not because they have a problem moving tickets.
Only the years will tell, but I think this could prove to be a catastrophic choice.
Despite Marchman's critique of downsizing, his review [part one, part two] credits Selig for successfully steering baseball through significant periods of economic change. It's a savvy account too, as shown by his take on the public subsidy game. "Blame the city councils, not Selig, for the waste of your money."
Labels: luxury boxes, MLB, stadium subsidies
Tuesday, July 03, 2007
Report: Selig Squashed the Jacque Jones Deal
The New York Daily News reports on why the Cubs' Jacque Jones has been left twisting in the wind:
According to various baseball sources, it was Bud Selig who kiboshed that trade of Jacque Jones from the Cubs to the Marlins last week - and not a matter of the Cubs simply having second thoughts. Seems Selig deemed the money the Cubs were to absorb on Jones' contract as excessive. Apparently, the pending sale of the Cubs has prompted a "no more debt" edict from Selig, which may explain why there have been no further contract talks with free agent-to-be Carlos Zambrano. The fact that John Canning Jr., the billionaire CEO of Madison Dearborn Properties and a close friend of Selig's (with an 11% stake in the Brewers) has emerged as the potential frontrunner in the Cubs' ownership sweepstakes may also explain why the commissioner doesn't want any more onerous contracts at Wrigley in the aftermath of the Tribune Co.'s wild spending spree last winter.
I am not convinced that if Selig blocked the trade, he did it to keep the franchise value low for his friend. The values of franchises are related to the expected future profits of the club (assuming that both buyers and sellers are motivated solely by profits). In the simplest case where a seller and a buyer have the same information, are pure profit maximizers, and have perfect foresight, the seller would never take less than expected profits and the buyer would never pay more than expected profits. This drives the franchise value to be equal to expected profits. In reality, people don't have perfect foresight and can be motivated by things other than profits, driving a wedge between franchise values and expected profits. The ability to "play poker" in negotiations also matters. But expected profits still matter.
Taking on more debt, all else equal, obviously lowers the value of the franchise. But all else is not equal because taking on more debt can translate into a better club, which can increase long-term profits. The effects offset.
Moreover, not allowing this trade can lead to a lowering of the franchise value of the Marlins as well. They presumably felt they would be better off (i.e. more profitable) by having Jones on their roster. Why would he stiff the Marlins and the Cubs for the benefit of his buddy?
Labels: franchise values
