Sunday, March 30, 2008
Jock tax bites Wembley
From the BBC:
Wembley Stadium has lost out to Real Madrid's Bernabeu Stadium in its bid to host the 2010 Champions League final because of tax reasons, says Uefa.
Wembley was discounted after failing to provide assurances that players competing in the final would not be taxed by the British government.
"Yes, the reason was the taxes," said Uefa president Michel Platini.
...A British Treasury spokesman said in a statement: "The UK has hosted many sporting events in the past and there has been no change in the tax rules or the way they are applied.
"There appears to be some misunderstanding here and we will obviously be speaking to Uefa to clarify the position and reassure them that the rules have not changed."
...But Platini added: "The concerns we had over players being taxed were minimised by the English FA but not confirmed by the British government."
Uefa maintains that footballers should be taxed in their country of domicile and that taxing them separately in every country in which they play matches would be both unfair and unnecessarily complicated.
How 'bout a beer?
Michael Stetz, in the San Diego Union Tribune on beer prices at Padres games:
The team's organization has raised most beer prices every year since moving downtown to Petco Park in 2004. Opening Day is Monday and guess what: The streak lives on.I've been to the taverns at Petco where the beer lines are three or four people deep, and the atmosphere is boisterous with nary a child in sight. I don't think maintaining a "family-friendly atmosphere" has much to do with the price change.
This season, prices will increase on all beer sold at the stadium, with the most expensive being $9 for premium brands. Last season, they were 50 cents less. The cheapest beer is now $6.50 for a 16-ounce domestic draft, up 75 cents.
...But the Padres say higher beer prices help maintain a family-friendly environment, which is one of the reasons they're more aggressive in raising those prices instead of others, said Richard Andersen, executive vice president in charge of ballpark management.
“We don't want to do anything to encourage excessive alcohol consumption,” Andersen said. “We want people to have a beer or two if they like. We're not interested in attracting people who want six or eight beers.”
Friday, March 28, 2008
Is Torre Worth $4.3M Per Year?
The front page of the WSJ's Weekend Journal section addresses this question today (subscription required). Darren Everton does a nice job observing that
In the end, I tend to line up with the sports economist, J.C. Bradbury, who is quoted:
Baseball managers are tough to grade. Compared with football, basketball and hockey, where coaches are often hired because of their offensive or defensive acumen, a manager's job involves relatively little strategic philosophy. Even the tactical decisions managers make, from how to set a batting lineup to when to take out a starting pitcher, are based on a careworn historical consensus shared by almost all managers.The article mentions various assessment techniques and compiles a table that aggregates three methods for rating managers, i) performance in close games, ii) performance based on number of runs scored and allowed, and iii) how players perform under different managers. Torre comes out 17th. My issue with method (i) is whether it measures incremental manager value or just realized values of the "error term." Method (ii) assesses "technical efficiency" given scoring but does not include contributions to runs scored or allowed. In this respect, Method (iii) complements Method (ii). Interestingly, Torre does relatively well in Method (ii) but very poorly in Method (iii).
In the end, I tend to line up with the sports economist, J.C. Bradbury, who is quoted:
"I think managers are a bit overrated in terms of the impact that they have on their players," To make a team better, he says, "get better players."I'm studying the effects of managers across different sports vis-a-vis general managers. My preliminary results suggest J.C.'s point is especially applicable to baseball.
Thursday, March 27, 2008
NASCAR Duopoly
From Jim Pedley in the Kansas City Star:
Time was, all NASCAR races were held on tracks owned by families or small-time promoters. But as the sport grew, and its economics mutated, track ownership began going corporate.Higher concentration of ownership appears to have efficiencies:
The two corporations that dominate the scene today — International Speedway Corp. and Speedway Motorsports Inc. — were at one time mom-and-poppish themselves. But both started buying up other family-owned tracks and today, they have attained possession of all but three tracks on which the Sprint Cup series races.
This week’s race is at Martinsville Speedway. On the schedule since 1949, the track is a half-mile oval located in the rural back country of Virginia. It had been in the hands of the family of H. Clay Earles until 2004. Then it was sold to ISC.
Martinsville is a favorite of purists who love its size, layout, racing, history and hot dogs.
Clay Campbell, Earles’ grandson, says his family, too, is happy with where it is.
“I think the ownership doesn’t matter as much as your values and the way you approach the families that come to your event,” Campbell said. “This track is not now owned by my family. We still have the same values, and we still approach things the way we did pre-ISC.”
Campbell, who serves as president of Martinsville Speedway, said he has a list of upgrades he would like to see made at the track. The list is lengthy and also costly. They include fan amenities and new safety features for drivers.
Campbell said the upgrades could only be made with corporate backing.
“You know,” Campbell said, “being president of this place before ISC and now, it’s much better now because if I have a problem, if I have an issue, all I’ve got to do is pick up a phone because nine times out of 10 somebody in this company has already experienced it and I can get an answer and I can get it resolved. So I think it’s much better now, and I think it’s the way to go, definitely.”
Labels: NASCAR
Wednesday, March 26, 2008
MLB in Japan & the EPL too?
From today's WSJ:
The number of MLB licensees in Japan has grown to 61 from just six in 2000, according to MLB. Retail sales revenue from licensed products has nearly tripled during that time to $103.7 million, according to MLB figures.So the money is there. No question about that. A similar prospect is roiling the waters across the Atlantic. English fans are out of sorts over the Premier League's consideration of playing "games that count" abroad. In MLB's case it is just two games out of two thousand or so, and the home field advantage is slight. The competition is marginally affected, at best, by playing games abroad at the start of the season. In English football, home field advantage is significant, and every point is precious when relegation is a threat or European places are at stake. But the money tide will be very difficult for EPL owners to ignore.
Local partnerships include Uniqlo, a unit of Fast Retailing Co. and one of Japan's leading clothing retail chains; LB-03, a fashion line for young women; and Toys "R" Us, whose stores in Japan have MLB corners selling branded toys and apparel. MLB apparel is also sold at some 2,000 sporting-goods stores around the country, according to Miki Yamamoto, senior vice president of IMG Licensing Asia, which handles licensing here for the league.
At the 109 shopping mall in the Shibuya neighborhood, a popular hangout for Tokyo's young and fashionable, "you can see kids with very hippy, trendy designs with a Red Sox logo or shocking pink Yankees clothing," Ms. Yamamoto says. "Those girls are buying those products without knowing how Daisuke is doing or how Ichiro is doing. This is not just about baseball; it's a culture now."
In terms of TV viewership, pitcher Hideo Nomo, who joined the Los Angeles Dodgers in 1995, was the wedge in the door, with the public broadcaster NHK showing the games he pitched. But the advent of Ichiro, a center fielder, took things to another level, because a position player plays every day, while pitchers rotate in every few days.
"Now you had an everyday player, who's out playing 162 games a year," MLB's Mr. Small says. "That made great television: Folks could tune in every day knowing he was going to play."
MLB soon negotiated a new six-year TV deal with Japanese advertising giant Dentsu Inc. valued at a reported $235 million, three times as much as the previous deal. The money from the broadcasts, as well as from sponsorship deals and sales of licensed merchandise, is split equally among the 30 major-league teams. Fans also can catch a nightly news feed with highlights of Japanese stars in the majors.
Labels: demand for sports, MLB, soccer
Tuesday, March 25, 2008
What if Nobody Scores?
In the 1982 ACC Championship Game between UNC and UVA, Dean Smith shifts to his "four corners" attack with 13 minutes to go and leading 40-39. The teams score 7 and 6 points, respectively, the rest of the game (see Charlotte Observer summary). In reaction to this game and the strategy trend, the NCAA adopts the 45-second shot clock after 1985.
Is the NCAA headed down this path again? In 1987 (first year of shot clock and 3-point line), 3 games in the tourney finished with a combined score of 120 or less. The 1988 edition had 4 such games. In 2007, there were 11 and 7 so far this year. The IU-UCLA score at the half last year was 20-13 -- not much different from the UNC-UVA last 13 minutes of four corners in 1982.
Physical defensive play rather than offensive tactics now accounts for the low scoring. The development of physical play can be attributed to savvy strategy itself. If a team fouls almost continuously, they place the referees in a dilemma much like overwhelmed police during a riot. Calling all or many of the fouls ejects a lot of players, creating a broo-ha-ha as it did at Clemson in a game when Rick Barnes coached game and a Duke game this season. Or, officials can selectively call fouls, keeping the total below a "normal" maximum (25-30). However, this selectivity not only allows more fouls to go unpunished but it encourages more strategizing and fouling, especially for teams that can spread their fouls among 9-10 players.
Louisville (as a second half strategy) and Georgetown seemed to be two of the pioneers in the 1980s. Then, Kentucky, Arkansas, Duke and others followed suit. As with most successful innovations, lots of teams pursue the strategy leading to a huge overall increase in physicality. In watching games from the 1970s (for example, the 1974 ACC final between Maryland and NC State replayed on ESPN Classic now and then), the difference in physicality is apparent. By those judicial standards, there are at least 4 to 5 fouls committed on each possession now. Beyond lowering scoring, the result is more arbitrary officiating, as somehow the glut of fouls has to be allocated among 20-30 called fouls.
The stalling tactics could be addressed with a black and white change like the shot clock. Reducing physical play is more problematic. For one, there is a tradeoff of the short run and long run. In the short run, permitting physical play can help to equalize unequal opponents. Michael Jordan is not as superior to John Starks if both are in bear hugs. This equalization may lead to closer games and drama. However, the short run gains may be offset by diminished fan interest because of "ugly" games. This short/long tradeoff may explain why even profit-maximizing leagues like the NBA and NHL have tried to reverse the hyper-physical trends of the 1990s but have had trouble sticking by their commitments come playoff time.
The other difficulty is the pressure on referee crews. Coaches and players test whether the officials are genuinely committed to a new regime and try to create or exploit agency problems between the league and officials. The "zero dissent" rule with which the NBA experimented last year is an example where coaches/players broke the league down. A few officials or crews cannot act unilaterally. The league must back the shift consistently and over a substantial time frame. The multi-team, cartel setup of sports leagues, and especially a very large and less cohesive joint venture like the NCAA with not only team but conferences, makes setting up and sticking with a major new agenda for referees much more difficult. Minor "points of emphasis" such as traveling calls may be accepted by coaches/player, but major shifts will be tested.
Is the NCAA headed down this path again? In 1987 (first year of shot clock and 3-point line), 3 games in the tourney finished with a combined score of 120 or less. The 1988 edition had 4 such games. In 2007, there were 11 and 7 so far this year. The IU-UCLA score at the half last year was 20-13 -- not much different from the UNC-UVA last 13 minutes of four corners in 1982.
Physical defensive play rather than offensive tactics now accounts for the low scoring. The development of physical play can be attributed to savvy strategy itself. If a team fouls almost continuously, they place the referees in a dilemma much like overwhelmed police during a riot. Calling all or many of the fouls ejects a lot of players, creating a broo-ha-ha as it did at Clemson in a game when Rick Barnes coached game and a Duke game this season. Or, officials can selectively call fouls, keeping the total below a "normal" maximum (25-30). However, this selectivity not only allows more fouls to go unpunished but it encourages more strategizing and fouling, especially for teams that can spread their fouls among 9-10 players.
Louisville (as a second half strategy) and Georgetown seemed to be two of the pioneers in the 1980s. Then, Kentucky, Arkansas, Duke and others followed suit. As with most successful innovations, lots of teams pursue the strategy leading to a huge overall increase in physicality. In watching games from the 1970s (for example, the 1974 ACC final between Maryland and NC State replayed on ESPN Classic now and then), the difference in physicality is apparent. By those judicial standards, there are at least 4 to 5 fouls committed on each possession now. Beyond lowering scoring, the result is more arbitrary officiating, as somehow the glut of fouls has to be allocated among 20-30 called fouls.
The stalling tactics could be addressed with a black and white change like the shot clock. Reducing physical play is more problematic. For one, there is a tradeoff of the short run and long run. In the short run, permitting physical play can help to equalize unequal opponents. Michael Jordan is not as superior to John Starks if both are in bear hugs. This equalization may lead to closer games and drama. However, the short run gains may be offset by diminished fan interest because of "ugly" games. This short/long tradeoff may explain why even profit-maximizing leagues like the NBA and NHL have tried to reverse the hyper-physical trends of the 1990s but have had trouble sticking by their commitments come playoff time.
The other difficulty is the pressure on referee crews. Coaches and players test whether the officials are genuinely committed to a new regime and try to create or exploit agency problems between the league and officials. The "zero dissent" rule with which the NBA experimented last year is an example where coaches/players broke the league down. A few officials or crews cannot act unilaterally. The league must back the shift consistently and over a substantial time frame. The multi-team, cartel setup of sports leagues, and especially a very large and less cohesive joint venture like the NCAA with not only team but conferences, makes setting up and sticking with a major new agenda for referees much more difficult. Minor "points of emphasis" such as traveling calls may be accepted by coaches/player, but major shifts will be tested.
Labels: NCAA; basketball; strategy
Recession and ticket demand
Are baseball fans spooked by the recession talk? The early literature on ticket demand suggested that attendance was not affected much by business cycle swings. Let's take a look at this year's spring training attendance:
Cactus League
The high price of gasoline would seem to make vacation travel to Florida vulnerable, but the Grapefruit League numbers are not off very much:
Grapefruit League:
As for the regular season, it is clearly too early to tell. But the swoon on Wall Street doesn't seem to be affecting Yankee prices or demand very much. From Wallace Matthews:
The bottom line: if you are looking for signs of recession, perhaps you should look somewhere other than the ballpark.
Cactus League
Despite an economy as shaky as a rookie pitcher's first big-league outing, Cactus League baseball fans are showing up in Arizona on a record pace.2007 set an attendance record, so a 2% increase suggests baseball demand is holding up well.
At the season's midpoint, about 550,000 fans have attended 92 games, up nearly 2 percent from the same time last year, said J.P. de la Montaigne, president of the Cactus League Association.
The high price of gasoline would seem to make vacation travel to Florida vulnerable, but the Grapefruit League numbers are not off very much:
Grapefruit League:
Through 173 games, following the slate of 10 games on Sunday, March 16, the attendance total stands at 1,036,797.That's 6,000 fans per game, down 200 from last year's record-breaking total. A 3% decline, which might be due to a change in relative prices (gas) and not an aggregate economy-wide swoon.
As for the regular season, it is clearly too early to tell. But the swoon on Wall Street doesn't seem to be affecting Yankee prices or demand very much. From Wallace Matthews:
As of yesterday, 42 of the 50 luxury suites in the new Yankee Stadium have been sold, at up to $800,000 each. Sixty percent of the park, or more than 30,000 seats, are classified as "premium" seats, priced between $250 and $1,000 each, and right now you couldn't buy one if you knew the mayor.The same goes for tickets costing $2,500 at the new ballpark, for games that won't be played until 2009. "[T]he choicest seats in their new ballpark, right behind home plate, plus waiter services, free parking, free food and access to three private clubs." All 1,800 are sold. Russell Goldman has more on the transformation of Yankee tickets into luxury goods.
The bottom line: if you are looking for signs of recession, perhaps you should look somewhere other than the ballpark.
Labels: attendance, baseball, ticket demand
Monday, March 24, 2008
Eight per cent
The latest estimate of the applications bump from winning the national title in college football or (men's) basketball is 8 per cent. A top twenty-type finish is worth 2 to 3 per cent. The systematic analysis is in a paper by Devin Pope and Jaren Pope, forthcoming in the Southern Economic Journal.
I always find the anecdotal cases in this subject area informative (I last blogged about this with regard to Rutgers football). This is from the AP story on the paper by Dena Potter, "Schools Score Big When Sports Teams Win:"
For the record, here is the abstract from Pope and Pope's paper:
I always find the anecdotal cases in this subject area informative (I last blogged about this with regard to Rutgers football). This is from the AP story on the paper by Dena Potter, "Schools Score Big When Sports Teams Win:"
For George Mason University, just outside Washington, the positive effects of its unlikely Final Four appearance two years ago were wide-reaching.Potter wrongly states that the evidence was "mostly anecdotal" prior to Pope and Pope, who make no such claim, but that's par for the course I guess. Potter is right to emphasize that the applications boost is temporary (absent any additional investment to capitalize on the increased awareness). Once on the NCAA treadmill, always on the treadmill. Unless you are Chicago.
In addition to increases in fundraising, attendance at games and other benefits, freshman applications increased 22 percent the year after the team made its magical run. The percentage of out-of-state freshmen jumped from 17 percent to 25 percent, and admissions inquiries rose 350 percent, said Robert Baker, director of George Mason's Center for Sport Management who conducted a study called "The Business of Being Cinderella."
Baker also found that SAT scores went up by 25 points in the freshman class, and retention rates as freshmen moved into their sophomore year increased more than 2 percentage points.
"You will certainly have critics who say it would have happened anyway, but I think the general consensus is that it happened faster because of this and that it allowed this university to reach new heights more quickly," Baker said.
Gonzaga was virtually unknown in most parts of the country until it broke into the national tournament in the mid-'90s. The Zags have been in the tournament every year since 1999, and during that time enrollment has grown from just over 4,500 to nearly 7,000, said Dale Goodwin, a university spokesman.
Inquiries have jumped from about 20,000 per year to 50,000, and the Spokane, Wash., school attracts students from eastern states where it doesn't recruit.
"There's no other way they would have heard about Gonzaga," Goodwin said.
The study found that private schools saw even larger increases than public universities.
For the record, here is the abstract from Pope and Pope's paper:
Many analysts question the role of college sports within higher education. However, one hypothesized benefit of high-profile college sports is that they can influence college choice decisions. Empirical studies that have analyzed the impact of a school’s athletic success on the quantity of student applications and the average quality of those students have produced mixed results. This study uses two unique datasets to shed additional light on the indirect benefits that sports success provides to NCAA Division I schools. Key findings include: (i) football and basketball success significantly increase the quantity of applications to a school, with estimates ranging from 2-8% for the top 20 football schools and the top 16 basketball schools each year; (ii) the extra applications received are composed of both low and high SAT scoring students, thus providing potential for schools to improve their admission outcomes, and (iii) schools exploit these increases in applications by increasing both the number and the quality of incoming students.Update: The link to the Pope and Pope paper has been changed to a more recent version.
Labels: academia, college sports, NCAA
Saturday, March 22, 2008
PSLs in NYC
They played in Charlotte, and now it's time to see if they'll play in the Big Apple. Personal Seat Licenses (PSLs) will be used to finance the construction of the new football stadium being built by the Giants and Jets in New Jersey, according to an article in the New York Times.
In economic terms, a PSL is a two-part tariff, where fans pay an up-front lump sum fee for the right to purchase tickets at face value. The PSL allows the team to capture some of the consumer surplus it generates. PSLs were first used to finance stadium construction in the early 1990s by the Charlotte Panthers. Since most PSLs are put in place when a new facility is built, and no new sports facility has been built in NYC in decades, this is the first opportunity for a New York team to implement them.
The key issue is how much the Jets and Giants will charge for a PSL. Historically, teams priced PSLs under $10,000. But Jerry Jones upped the ante last year when the Cowboys priced their PSLs between $16,000 and $150,000 in their new facility that is scheduled to open in 2009. Will the Jets and Giants feel the need to keep up with the Joneses?
In economic terms, a PSL is a two-part tariff, where fans pay an up-front lump sum fee for the right to purchase tickets at face value. The PSL allows the team to capture some of the consumer surplus it generates. PSLs were first used to finance stadium construction in the early 1990s by the Charlotte Panthers. Since most PSLs are put in place when a new facility is built, and no new sports facility has been built in NYC in decades, this is the first opportunity for a New York team to implement them.
The key issue is how much the Jets and Giants will charge for a PSL. Historically, teams priced PSLs under $10,000. But Jerry Jones upped the ante last year when the Cowboys priced their PSLs between $16,000 and $150,000 in their new facility that is scheduled to open in 2009. Will the Jets and Giants feel the need to keep up with the Joneses?
Labels: NFL, PSL, ticket pricing
Wednesday, March 19, 2008
NCAA Tourney: Big v. Big, Mid. v. Mid
A few bloggers have raised the question as to why has the NCAA Selection Committee placed so many like-conference teams against each other. First off, how much of this is really going on? I looked at seeds 5-12 where the good mid-conference teams and mediocre big-conference teams appear. Seeds above 12 are usually the domain of mid and lower level conferences, so matchups there are constrained by seeding. Here is the breakdown of the 16 matchups in the 5-12 range:
Why would the Selection Committee go this route?
Consumer demand? One of the attractions of the tournament is pitting David v. Goliath. That doesn't make a lot of sense. After all, mid-level teams can and do face off in home-away series in the regular season. The same holds for big conference teams. Maybe there are some natural rivalries in the mix that might spark more interest. Yet, nothing really jumps out from that perspective.
Increasing chances of advancement for big conference teams? It ensures mid majors reach the second round, but does it reduce their chances of going farther? I calculated the likelihood of advancing to the sweet 16 a couple of different ways -- using historical winning percentages from seedings. There was no clear advantage one way or the other. Pitting mids against mids ensures that both teams cannot reach the sweet sixteen, but the same effect holds for the big conferences.
Big v. Big: 7I've included in the Big v. Mid category matchups that fall on the margin such as Michigan St. v. Temple or Oklahoma v. St. Joseph. Even doing so, 11 of the 16 place teams from similar conferences against each other. The 2007 tourney arrangement is similar.
Mid v. Mid: 4
Big v. Mid 5
Why would the Selection Committee go this route?
Consumer demand? One of the attractions of the tournament is pitting David v. Goliath. That doesn't make a lot of sense. After all, mid-level teams can and do face off in home-away series in the regular season. The same holds for big conference teams. Maybe there are some natural rivalries in the mix that might spark more interest. Yet, nothing really jumps out from that perspective.
Increasing chances of advancement for big conference teams? It ensures mid majors reach the second round, but does it reduce their chances of going farther? I calculated the likelihood of advancing to the sweet 16 a couple of different ways -- using historical winning percentages from seedings. There was no clear advantage one way or the other. Pitting mids against mids ensures that both teams cannot reach the sweet sixteen, but the same effect holds for the big conferences.
Labels: NCAA; college sports
Tuesday, March 18, 2008
Sunday Beer Sales at the Ballpark
E. Frank Stephenson at DOL writes on an attempt to allow Sunday beer sales at minor league baseball games in Georgia:
The legislative kerfuffle over Sunday beer for Gwinnett brought to mind my recent IJSF paper (with math colleague Ron Taylor and former student Andrew Chupp). Rome's 2004 referendum created a natural experiment for us to assess the effect of alcohol availability on attendance. We compared the Rome Braves 2003 and 2004 Sunday attendance (before beer sales were allowed) to their 2005-2006 Sunday attendance when beer was available. (We controlled for lots of other factors that might influence attendance--promotions, rehab appearances by Chipper Jones, ...) We found that allowing Sunday sales resulted in a small (2%) and statistically insignificant increase in attendance. Attendance does seem to be influenced by cheap beer--the team offers two for one beverages on Thursdays and draws about 8% more fans than on other weeknights. While Rome's experience may not carry over to other communities, our paper does call into question the conventional wisdom about beer and attendance.
This calls into mind Oi's "Disneyland Dilemma" QJE paper. If concession pricing is indeed part of a two-part pricing scheme aimed at capturing consumer surplus and the team priced tickets and beer "correctly", then allowing beer sales would not be expected to alter attendance. Or as Steven Landsburg could have written in his Armchair Economist: Economics and Everyday Life 
Cross-posted (a few days ago) at Market Power.
Labels: beer, Steven Landsburg, two-part tariff, Walter Oi
Sunday, March 16, 2008
The Madness Grows
Selection Sunday has arrived. By nightfall the field of 65 teams that will participate in the spectacle known as the NCAA Division I Men’s Basketball Tournament will be revealed. The much-discussed “bubble” will burst.
In the olden days, those left out of the field of 65 would skulk off to the National Invitational Tournament (NIT) for a couple of additional home games and, if they shake off the disappointment of missing the Big Dance and play well, a potential trip to Madison Square Garden for the NIT finals. Those days are gone. The 2007-2008 college basketball season features a new entrant into the post-season men’s basketball tournament market, the College Basketball Invitational, a sixteen team elimination tournament sponsored by the Gazelle Group, a sport consulting firm that organizes several early-season college basketball tournaments like the College Hoops Classic in November.
The College Basketball Invitational has a television contract, albeit with Fox College Sports which is available on cable television providers that have roughly 46 million subscribers (I have no idea if the Fox Sports Channel is part of the basic cable package on these providers). The games will be played at on-campus sites, and the championship “series” consists of three games in a home-away-home format to be played on March 31st, April 2nd and April 4th (if necessary). The addition of the College Basketball Invitational means that 113 Division I men’s basketball teams will participate in some sort of postseason tournament this season.
The existence of a new entrant in this market raises some interesting economic questions. This tournament is in direct competition for teams with the NIT, and it will be interesting to see if it is able to induce any teams to defect from the NIT field in the first year. I have no idea what sort of payouts are made by the NIT to participating schools, but they are likely larger than those offered by this start-up tourney. The winner of the College Basketball Invitational could host up to five additional post-season basketball games which could generate substantial additional revenues, if there is demand for tickets. The long-run viability of any new entrant into a sports market is inevitably tied to television revenues, so the value of the television contract with Fox College Sports will likely have a large impact on the long-run viability of the College Basketball Invitational. It will be interesting to see if it can survive. Anyone interested in joining a CBI pool?
In the olden days, those left out of the field of 65 would skulk off to the National Invitational Tournament (NIT) for a couple of additional home games and, if they shake off the disappointment of missing the Big Dance and play well, a potential trip to Madison Square Garden for the NIT finals. Those days are gone. The 2007-2008 college basketball season features a new entrant into the post-season men’s basketball tournament market, the College Basketball Invitational, a sixteen team elimination tournament sponsored by the Gazelle Group, a sport consulting firm that organizes several early-season college basketball tournaments like the College Hoops Classic in November.
The College Basketball Invitational has a television contract, albeit with Fox College Sports which is available on cable television providers that have roughly 46 million subscribers (I have no idea if the Fox Sports Channel is part of the basic cable package on these providers). The games will be played at on-campus sites, and the championship “series” consists of three games in a home-away-home format to be played on March 31st, April 2nd and April 4th (if necessary). The addition of the College Basketball Invitational means that 113 Division I men’s basketball teams will participate in some sort of postseason tournament this season.
The existence of a new entrant in this market raises some interesting economic questions. This tournament is in direct competition for teams with the NIT, and it will be interesting to see if it is able to induce any teams to defect from the NIT field in the first year. I have no idea what sort of payouts are made by the NIT to participating schools, but they are likely larger than those offered by this start-up tourney. The winner of the College Basketball Invitational could host up to five additional post-season basketball games which could generate substantial additional revenues, if there is demand for tickets. The long-run viability of any new entrant into a sports market is inevitably tied to television revenues, so the value of the television contract with Fox College Sports will likely have a large impact on the long-run viability of the College Basketball Invitational. It will be interesting to see if it can survive. Anyone interested in joining a CBI pool?
Labels: college sports, intercollegiate athletic success, television
Saturday, March 15, 2008
Do red shirts lead to more wins?
OK, so maybe this post belongs over at Improbable Research because it amused and bemused me in equal measures, but this article is worth noting for how anthropologists get published.
In the latest edition of the Journal of Sports Sciences, Attrill, Gresty, Hill & Barton have reported in "Red shirt colour is associated with long-term team success in English football" that:
Is it possible we can stretch the marketing literature to the extreme to build the argument that red shirted teams were initially more attractive to fans/sponsors and this created a positive feedback loop and the current distribution of on-field success? Could shirt colour be the missing variable in our models of attendance, wins and club profits?
In the latest edition of the Journal of Sports Sciences, Attrill, Gresty, Hill & Barton have reported in "Red shirt colour is associated with long-term team success in English football" that:
Since 1947, English football teams wearing red shirts have been
champions more often than expected on the basis of the proportion of clubs
playing in red. ... Across all league divisions, red teams had the best home
record, with significant differences in both percentage of maximum points
achieved and mean position in the home league table. ... No significant
differences were found for performance in matches away from home, when teams
commonly do not wear their "home" colours.
Is it possible we can stretch the marketing literature to the extreme to build the argument that red shirted teams were initially more attractive to fans/sponsors and this created a positive feedback loop and the current distribution of on-field success? Could shirt colour be the missing variable in our models of attendance, wins and club profits?
Friday, March 14, 2008
Stadium finance and the auction-rate market
The last month or so has seen some dramatic changes in the auction-rate bond market. This is a market in which some recent stadium and arena financing has been acquired by state and local governments, Louisiana and Indianapolis being two examples. What has happened is that average rates of interest have jumped enormously.
Bloomberg.com cites the Securities Industry and Financial Markets Association, "Auction rates jumped to 6.73 percent this month from an average 3.94 percent in the previous year". Some reports I read indicated rates on these bonds jumped as high as 20%. Bonds in this market are of long term maturity, but the interest rates are determined in the short term via an auction mechanism.
Consider an auction in which sellers offer items for sale that buyers don't bid on. The items obviously won't sell and the auction fails. Suppose that the seller can make the unsold item more attractive and try again. Then the sale may go through, but obviously the seller does not do as well as if the sales had proceeded without sweetening the deal. Alternatively, some buyers might see the auction is failing and rush in to buy up the unsold items, in effect guaranteeing the sellers can sell their items. In the auction-rate bond market, this has been the history of the market. If sales were not proceeding, large institutional investors came to the rescue. Now they are not doing so. The drop in demand, it seems, is partially a consequence of the sub-prime mortgage mess, but also related to a change in the way such investments are recorded on firm balance sheets and cash-flow statements following a change recommended by the Financial Accounting Standards Board. The consequence is that sellers, the state and local governments, have effectively had to sweeten the pot to get buyers, which has meant paying higher interest rates.
What this means, therefore, is that bonds floated on this market by state and local governments to finance stadiums saw their interest rates rise substantially. Think of it this way, if the benefits of a stadium were about equal to the interest payments the financing required when interest rates were 3 or 4 percent, then those benefits are well-below the interest payments now that rates are over 6 percent.
The auction-rate market had been a pretty stable one, so in one regard it is hard to fault state and local governments for failing to predict a highly unusual event. On the other hand, there were rumblings of bid-rigging in the last few years and there is always risk that rates will rise with a variable rate instrument. The FASB recommendation came down in March of 2007, so there has been some advanced warning of likely changes in this market that made state and local government debt managers more cautious.
A 2004 California government document on Auction-rate debt concluded with this:
I hope the states that used this debt to finance their stadiums followed this advice.
Bloomberg.com cites the Securities Industry and Financial Markets Association, "Auction rates jumped to 6.73 percent this month from an average 3.94 percent in the previous year". Some reports I read indicated rates on these bonds jumped as high as 20%. Bonds in this market are of long term maturity, but the interest rates are determined in the short term via an auction mechanism.
Consider an auction in which sellers offer items for sale that buyers don't bid on. The items obviously won't sell and the auction fails. Suppose that the seller can make the unsold item more attractive and try again. Then the sale may go through, but obviously the seller does not do as well as if the sales had proceeded without sweetening the deal. Alternatively, some buyers might see the auction is failing and rush in to buy up the unsold items, in effect guaranteeing the sellers can sell their items. In the auction-rate bond market, this has been the history of the market. If sales were not proceeding, large institutional investors came to the rescue. Now they are not doing so. The drop in demand, it seems, is partially a consequence of the sub-prime mortgage mess, but also related to a change in the way such investments are recorded on firm balance sheets and cash-flow statements following a change recommended by the Financial Accounting Standards Board. The consequence is that sellers, the state and local governments, have effectively had to sweeten the pot to get buyers, which has meant paying higher interest rates.
What this means, therefore, is that bonds floated on this market by state and local governments to finance stadiums saw their interest rates rise substantially. Think of it this way, if the benefits of a stadium were about equal to the interest payments the financing required when interest rates were 3 or 4 percent, then those benefits are well-below the interest payments now that rates are over 6 percent.
The auction-rate market had been a pretty stable one, so in one regard it is hard to fault state and local governments for failing to predict a highly unusual event. On the other hand, there were rumblings of bid-rigging in the last few years and there is always risk that rates will rise with a variable rate instrument. The FASB recommendation came down in March of 2007, so there has been some advanced warning of likely changes in this market that made state and local government debt managers more cautious.
A 2004 California government document on Auction-rate debt concluded with this:
ARS, like other variable rate debt instruments, require a greater commitment of time and expertise by staff managing the program.
I hope the states that used this debt to finance their stadiums followed this advice.
Sports and the Economy
Some say we're in recession, some say we're not (yet anyway). Meanwhile, the Cactus League is doing fine, thank you.
This season, Cactus League visitors are on track to eclipse the more than 1.27 million record fans in 2005, said Robert Brinton, Cactus League Association vice president.Early evidence (i.e. dated papers that could be re-examined) indicates that attendance at sporting events is resilient to economic downturns. Recession or not, this story is consistent with that conclusion.
He said that sports-related tourism seems more resistant to the ebbs of flows of the economy than other travel.
An increase in more locals attending games could also account for the strong turnout through the first half of the Cactus League.
The Chicago Cubs in Mesa, the perennial Cactus League leader at the box office, could set a record for average attendance, Brinton said.
The Cubs have drawn almost 11,000 fans per game the past two seasons.
Labels: attendance, baseball
Thursday, March 13, 2008
The strange world of the NFL Salary Cap
If you write player contracts with incentive bonuses that are likely to be met (i.e. with application, effort and good fortune), you create cap room for next season. Paid bonuses -- normally a happy, desirable outcome of incentives -- reduce allowable spending in the following year. Enter crafty management, and incentive clauses purposefully designed to not be attained. And coaching decisions to ensure this result when cap room next year is more valued than your best effort now. I detect a slight whiff of rent dissipation: the cap creates rent for the owners, and the accountants dissipate it. Reuben Frank has the details.
Via Newmark's Door.
Via Newmark's Door.
Labels: NFL, salary cap
Wednesday, March 12, 2008
Economics and tournaments
Last weekend Charles Knoeber, Theofanis Tsoulouhas and Tomislav Vukina of North Carolina State organized an excellent conference on the economics of tournaments and contests. The keynote speaker was Ed Lazear, presently chairman of the President’s Council of Economic Advisers and one of the founders of tournament theory. Sixty papers were presented, ten of which were explicitly about sports, and pretty much every speaker I saw mentioned sports as one of the principal applications of contest theory. For anyone interested I recommend browsing the conference webpages, At the risk of offending the presenters of some excellent papers, I thought I’d pick out two that might be of general interest.
First, Mike Maloney from Clemson presented a great paper (joint work with Bentley Coffey) comparing the performance times of horses and dogs at the racetracks. Riders, if not horses, they show, respond to incentives. One interesting piece of evidence is that the variance of times in a race for horses is much greater than for dogs (although it turns out the two species travel at similar speeds), suggesting that riders slack off when they are far behind in race. They argue that bigger prizes are also associated with higher speeds for horses, controlling for ability. In other words, it’s not just that large prizes attract better horses, the jockeys also try harder when there’s more at stake.
Second, Jennifer Brown from Berkeley, showed something similar in relation to golf. The presence of Tiger Woods in a golf tournament is similar to reducing the size of the prize, so dominant is his performance in most tournaments. You may or may not find this amazing, but exempt players (those good enough not to have to qualify) record scores that are about 1 stroke higher when Tiger plays than when he does not. Moreover, non-exempt players (who are extremely unlikely to win) are not significantly affected. The importance of this paper is that it sheds further light on whether prizes are just mechanisms for attracting the best contestants (who always try their hardest) or whether athletes rationally adjust their effort contribution in the light of incentives.
First, Mike Maloney from Clemson presented a great paper (joint work with Bentley Coffey) comparing the performance times of horses and dogs at the racetracks. Riders, if not horses, they show, respond to incentives. One interesting piece of evidence is that the variance of times in a race for horses is much greater than for dogs (although it turns out the two species travel at similar speeds), suggesting that riders slack off when they are far behind in race. They argue that bigger prizes are also associated with higher speeds for horses, controlling for ability. In other words, it’s not just that large prizes attract better horses, the jockeys also try harder when there’s more at stake.
Second, Jennifer Brown from Berkeley, showed something similar in relation to golf. The presence of Tiger Woods in a golf tournament is similar to reducing the size of the prize, so dominant is his performance in most tournaments. You may or may not find this amazing, but exempt players (those good enough not to have to qualify) record scores that are about 1 stroke higher when Tiger plays than when he does not. Moreover, non-exempt players (who are extremely unlikely to win) are not significantly affected. The importance of this paper is that it sheds further light on whether prizes are just mechanisms for attracting the best contestants (who always try their hardest) or whether athletes rationally adjust their effort contribution in the light of incentives.
Labels: tournament theory
Tuesday, March 11, 2008
Joint selling and antitrust in the Bundesliga
The new TV contract for the Bundesliga, like many in the States and elsewhere, is a joint selling arrangement, although revenue sharing appears to be more complicated than a simple 1/N rule. This sets the stage for a massive wrangle over just what the shares will be, with redistribution from the large to small clubs being the key issue. Enter the antitrust agency:
A new lucrative television contract for the Bundesliga was criticized by Germany's anti-trust agency on Monday.So, the threat of a price fixing charge is the leverage for squeezing more money out of Bayern Munich. No wonder the German giants are playing in the B-league European competition (the UEFA Cup), rather than the Champions League. Germany's politics won't allow Bayern the funds to compete at the top level any more. And yes, Bayern are currently leading the Bundesliga and are thus likely to return to the Champions League next season. But they will do so with a revenue handicap of about €75m, if the article's figures are accurate.
The federal office said the €3 billion (US$4.5 billion) contract will only be allowed if small clubs are awarded more money. The agency has investigated the central marketing policy of German top division clubs for several years.
"Central marketing of media rights has the same effect as controlling prices," Ralph Langhoff, an anti-trust agency official, was quoted as saying in the trade magazine Kicker.
Media mogul Leo Kirch's new company, KF 15, has offered the Bundesliga a sizable increase in television revenues with the €3 billion spread over six years.
The Bundesliga, composed of both the first and second division leagues, splits TV revenues and is regarded as more equitable than the other top European leagues in England, Spain and Italy.
Labels: antitrust, soccer, television
Wednesday, March 05, 2008
Oklahoma City Voters Say OK!
From ESPN:
Oklahoma City voters approved a sales tax extension Tuesday to fund $121.6 million in improvements to a downtown arena and build a practice facility in hopes of luring an NBA team.The proposal received support from 44,849 voters, or 62 percent of those who cast ballots, according to final results from the Oklahoma County Election Board.
The plan calls for a one-penny sales tax to be extended by 15 months to pay for $97 million in upgrades to the Ford Center and another $24.6 million for a brand new NBA practice facility.
This in spite of the recent announcement that the Supersonics have had no impact on Seattle. Surely the good folk of Oklahoma City have other entertainment options.
The politicians can claim "no new taxes" were used in luring an NBA team should one come. Other than political rhetoric, what's the difference between extending a 1-cent sales tax and letting a 1-cent tax expire and immediately enacting a new one?
Tuesday, March 04, 2008
Wrigley to the State
The State of Illinois is considering buying Wrigley field and Lynne Kiesling thinks we sports economists need to keep touch with this base.
There is no economic model that can support the state buying Wrigley Field. The sports economists have to pay some attention to this one. It all stinks to me of political gambit. Heck, Wrigley sells out most games, and that's even when the team's having a crappy year. I am not persuaded by the argument that Wrigley's renovation requires so much capital that it exceeds the levels of private investment that a private owner can undertake.
Disgusting.
There's got to be something from Public Choice theory that would work, but I don't think that's what Lynne had in mind. Mayor Daley quipped this morning:
The mayor said he doesn't buy the argument that Wrigley can't be modernized and turned into a "productive ballpark" without lifting landmark status. The designation didn't stand in the way of a 1,791-seat bleacher expansion.
"You can't put new washrooms in? You can't put new seats in? . . . You have to find out what they're going to change," the mayor said.
Perhaps the "landmark" of value to Illinois is not just the building itself, but the name of the stadium, something that may be up for sale. Wrigley Field is synonymous with Chicago and Illinois and calling it Sears Stadium or whatnot will obscure that to some extent.
Sunday, March 02, 2008
Will cricket outpay soccer?
The Indian Premier League (IPL) is creating some interesting financial headlines. Today at foxsports.com.au and in the Melbourne Herald Sun newspaper, the head of the IPL, Mr Lalit Modi declared:
"We set a salary cap of $5 million [for the eight IPL franchises] for the first season ... but if we hadn't done that, I can tell you that our players would already be the highest-paid across any sport in the world".
I recall Preston, Ross & Szymanski arguing for a pro cricket league a few years ago, in part on the grounds that cricketers were relatively underpaid. Pandora's box is now officially open!
"We set a salary cap of $5 million [for the eight IPL franchises] for the first season ... but if we hadn't done that, I can tell you that our players would already be the highest-paid across any sport in the world".
I recall Preston, Ross & Szymanski arguing for a pro cricket league a few years ago, in part on the grounds that cricketers were relatively underpaid. Pandora's box is now officially open!
The Rate of Return on Sports Franchises
Over on Newmark's Door, economist Craig Newmark discusses a recent New York Times article by Joe Nocera about why bad team owners want to own professional sports teams. Both the Nocera article and Newmark's comments make for interesting reading. The argument comes down to this: Nocera claims that even bad owners of lousy teams make big money from capital gains when they sell the team; Newmark points out that the rate of return in Nocera's example (prototypical bad owner Donald T. Sterling bought the LA Clippers for $13.5 million in 1981 and the franchise is now worth about $300 million according to the most recent Forbes estimates) are not that great in the context of the stock market.
I want to add a couple of points to this debate:
I want to add a couple of points to this debate:
- They both mention operating losses claimed by pro sports teams. These must be taken with a grain of salt, if not treated as complete fabrications. It has been more than ten years since Paul Beeston's famous quote: "Anyone who quotes profits of a baseball club is missing the point. Under generally accepted accounting principles, I can turn a $4 million profit into a $2 million loss and I could get every national accounting firm to agree with me." Both of them should know better than to pay any attention to claims of operating losses, until hard evidence proves otherwise.
- They both argue about the Forbes franchise value estimates that come out every year. These estimates are consistently lower than the actual sales prices of franchises.
Labels: finance, franchise values
Ladies Hoops & Bucks
From Greg Auman in the St. Petersburg Times, where the Women's Final Four will take place next month:
Still, there is the sense that women's hoops has the potential to generate more revenue. Connecticut coach Geno Auriemma thinks his team needs to be taken down a peg for that to happen:
Much seems rosy in the women's game until you get to the bottom line for the 2005-06 season: a staggering $169-million in losses. That total is for the 333 schools in NCAA Division I as reported to the U.S. Department of Education. The figure is probably conservative because 80 schools reported their expenses matched their revenues, to the last dollar.The bottom line for women's hoops should not be on revenue. The fact is that just about all intercollegiate sports lose money. That men's football and basketball help pay the bills of the other programs at big time sports schools is nice, thanks very much.
Still, proponents say it's a worthwhile investment in giving women's basketball a chance to catch up to the older and more established men's game.
"The emphasis has been placed on putting more money, more energy, more manpower on women's basketball," said Candice Storey, senior women's administrator at Vanderbilt, which lost more money on women's basketball than any school in 2005-06. "It's just a slow process getting it to translate to real dollars."
At the sport's highest level, in the 11 largest conferences, the losses are more than $1-million per school, with 18 schools losing more than $2-million, according to the DOE. Men's basketball, by comparison, generated a $240-million profit in the same year, largely on two things the women still lack: a lucrative TV package and strong attendance. The women's game is still working to build the national audience and fanatical interest the men have enjoyed for decades.
Still, there is the sense that women's hoops has the potential to generate more revenue. Connecticut coach Geno Auriemma thinks his team needs to be taken down a peg for that to happen:
If powerhouses such as Connecticut are the rare economic model, the success story that all women's programs hope to be, they also may be part of the difficulty schools have in getting there.
Auriemma told the Times before this season that the parity coming to women's basketball may be something that helps the sport become profitable. As much as dynasties such as Tennessee and the Huskies have given exposure to their game, Auriemma said the sport needs the any-given-Sunday chaos of the NFL, where huge upsets can come on any field, even at the Super Bowl.
Labels: NCAA, womens basketball
Saturday, March 01, 2008
Penalty kicks and "action bias"
The literature on penalty kicks and decision-making continues to grow. The most recent (known) paper is from a group of Israeli scholars in the October 2007 issue of the Journal of Economic Psychology:
If goalkeepers behave according to the probability matching principle, they should choose to stay in the center in about 28.7% of the kicks (the percentage of kicks towards the center). The probability with which they choose to stay in the center, however (6.3%), is much lower, suggesting that probability matching is not the bias we see here. Indeed, it has been shown in the past that with experience, probability matching is gradually eroded (see for example Bereby-Meyer & Erev, 1998), and obviously elite goalkeepers are very experienced subjects in facing penalty kicks. This supports the conclusion that probability matching does not seem to be the reason for the surprisingly low frequency of goalkeepers choosing to stay in the center.The paper is discussed by Patricia Cohen in today's NY Times. The analogy to policy makers' impulse to "do something" when the economy hits the skids is made.
We propose that the reason for goalkeepers not staying in the center is action bias. Because the norm (as can be easily seen in the data) is that goalkeepers choose action (jumping to one of the sides) rather than inaction (staying in the center), norm theory (see Kahneman & Miller, 1986) predicts that a negative outcome would be amplified following inaction. That is, an identical negative outcome (a goal being scored) is perceived to be worse when it follows inaction rather than action. The intuition why is that if the goalkeeper jumps and a goal is scored, he might feel “I did my best to stop the ball, by jumping, as almost everyone does; I was simply unlucky that the ball headed to another direction (or could not be stopped for another reason)”. On the other hand, if the goalkeeper stays in the center and a goal is scored, it looks as if he did not do anything to stop the ball (remaining at his original location, the center) – while the norm is to do something – to jump. Because the negative feeling of the goalkeeper following a goal being scored (which happens in most penalty kicks) is amplified when staying in the center, the goalkeeper prefers to jump to one of the sides, even though this is not optimal, exhibiting an “action bias”.
