Tuesday, April 29, 2008
Sports Econ Musings
A Real-Time Economic Indicator from Sports World: One of my colleagues returned from Talladega, reporting that crowds for the Sprint Cup and Nationwide Series races were way off from last year. He described the Nationwide attendance as sparse.
Free-Agency & MLBPA: Buck Martinez (TBS Analyst for NYY-Cleveland Game)went to some lengths describing the pressure put on C.C. Sabbathia, potentially the marquee free agent pitcher for next off-season, by the MLBPA to follow through and become a free agent rather than resign -- which is what Sabbathia says he prefers. Martinez' imputed rationale for the MLBPA is that getting the top guy on the market sets higher prices for everyone. That's a testable proposition for the sports economists out there with the free agent data sets -- does a higher quality player in the pool raise average offers?
My Ongoing NBA Playoff Beef: (See "Where Hardly Any Game Matters") Sixers beat the Pistons in Detroit, win in Philly, but must win two more to advance and one more to put the Pistons at the very brink of elimination. In spite of the Sixers play, there's been about as much drama as a Seton Hall-Providence matchup. A Celtic-Lakers matchup may be entertaining, but getting there will seem a lot like the WWF.
Free-Agency & MLBPA: Buck Martinez (TBS Analyst for NYY-Cleveland Game)went to some lengths describing the pressure put on C.C. Sabbathia, potentially the marquee free agent pitcher for next off-season, by the MLBPA to follow through and become a free agent rather than resign -- which is what Sabbathia says he prefers. Martinez' imputed rationale for the MLBPA is that getting the top guy on the market sets higher prices for everyone. That's a testable proposition for the sports economists out there with the free agent data sets -- does a higher quality player in the pool raise average offers?
My Ongoing NBA Playoff Beef: (See "Where Hardly Any Game Matters") Sixers beat the Pistons in Detroit, win in Philly, but must win two more to advance and one more to put the Pistons at the very brink of elimination. In spite of the Sixers play, there's been about as much drama as a Seton Hall-Providence matchup. A Celtic-Lakers matchup may be entertaining, but getting there will seem a lot like the WWF.
Labels: labor markets, MLB, NASCAR, NBA
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
Monday, September 24, 2007
The Optimal Penalty of Height Infractions in NASCAR
From NASCAR.com
Carl Edwards' race-winning No. 99 Ford failed post-race inspection following Sunday's Dodge Dealers 400 at Dover International Raceway, which could lead to penalties assessed against the Roush Fenway Racing operation later this week.
...Edwards hopes some post-race bumping from teammate Greg Biffle is the cause for the infraction."The worse case would be 25 points, the right-rear being low -- any engineer or crew chief in the garage will tell you that's the last thing you want," Edwards said. "You want the right-rear to be high.
That seems sensible since that's the side of the car lowest to the ground going into turns (assuming an otherwise level car).
"The only thing I can think of is at the end of the race, Greg came up and gave me a couple of love taps to say 'good job, good race' and hopefully they find that that bent the tail of the car down a little bit. There are some braces bent under the decklid so hopefully that's what it is."A similar infraction occurred at New Hampshire in July, when the cars of Johnny Sauter and Kyle Busch failed to meet minimum height requirements. NASCAR took away 25 points apiece and fined each crew chief $25,000.
If a similar penalty is assessed, Edwards would drop from fourth to sixth in the Nextel Cup standings.
If so, NASCAR is justified in docking some points from Edwards. If NASCAR does nothing, this sends a signal to racing teams that they can do some minimum damage to lower a car without worrying about getting docked points. If NASCAR goes too far, they give an incentive for racers in future races to strategically bump leaders to gain an advantage that is outside the realm of competition.
What's the optimal penalty? I can't answer that with much precision, but since there is statistical error inherent in determining the cause of the infraction, if the evidence points to a benign reason, then the benefit of the doubt should go to Edwards (and I'm not saying that because Edwards is a former student of mine :-)).
Labels: NASCAR, optimal penalty
Sunday, September 23, 2007
Book Review: 200 MPH Billboard
The last time I paid attention to stock car racing, Cale Yarborough and Richard Petty were names and I'd never heard of the acronym NASCAR. New England wasn't a place you watched that kind of racing (there were drag races nearby, but no ovals.)
Now, of course, NASCAR has taken off to become the fourth sport of America -- taking out hockey as well as golf and tennis for attention in America. Unlike most sports industry models, as Ross and Szymanski point out, NASCAR is organized more like McDonalds: the participants or the owners of the vehicles or tracks do not control NASCAR; NASCAR is its own separate entity.
In The 200-MPH Billboard: The Inside Story of how Big Money Changed NASCAR, Mark Yost has written a description both of that transformation of NASCAR into a unique business model, and its ability to sell the sport to other businesses. The early chapters tell the story of the Bill France family and its building of the sport's economic model. While it seemed natural that these teams would be sponsored by the makers of automobiles or the parts inside them, it took the vision of France and a few others to see the possibility of using the cars themselves as a means to market other products.
First came Junior Johnson and RJ Reynolds. Still reeling from the decision in the late 1960s that cigarettes could no longer be advertised on television, RJR had an advertising budget with no place to spend it. At the same time, NASCAR was struggling to replace support from the automakers. Yost describes the decision as "the most momentous business decision in the history of NASCAR." Not only did the Winston Cup come into existence in 1971 and RJR funded a $150,000 purse for the Talladega 500 that same year, but RJR was able to convince other corporate entities to join in advertising. Each looked up into the grandstands, says one historian in Yost's book, and saw their customers. And the advertisers saw it in their own interest to help NASCAR create a more uniform feel for their racing venues and their cars. In short, the days of lugging your vehicle to the track and hoping you won enough money to afford gasoline for the drive home were over.
Yost details the expansion of the sponsorship base through the middle of the book. Much like baseball's expansion of advertising from beer and tobacco to credit cards and shaving products, NASCAR's success required them to grow from tobacco, beer and automotive products. By the mid-1980s such brands as Folgers, Tide and Crisco were being advertised by NASCAR vehicles and drivers. Such sponsorships reinforced the need for a uniform, well-regulated competition in NASCAR, which the industry's corporate structure permitted.
The latter half of the book focuses then focuses on case studies of this business model. I found the story of Texas Instruments' use of NASCAR to push its DLP technology for wide-screen television the most interesting of these. Not only did TI create demand from fans and viewers of NASCAR events on television -- the people most likely to buy HDTV -- but they also created events with Circuit City that could help get the latter to push their version of HD in a very crowded market. There are several such B2B stories in the book, which is an aspect of NASCAR sponsorship that has few parallels in the major team sports.
Yost concludes by looking at the challenges NASCAR faces and whether the sport has peaked in popularity and profitability. It's a fair question, though Yost speculates greatly in the last few pages in ways that lead one to think he sees growth still. As NASCAR has 70 Fortune 500 companies as sponsors, it would be hard to bet against it.
Cross-posted at SCSU Scholars.
Now, of course, NASCAR has taken off to become the fourth sport of America -- taking out hockey as well as golf and tennis for attention in America. Unlike most sports industry models, as Ross and Szymanski point out, NASCAR is organized more like McDonalds: the participants or the owners of the vehicles or tracks do not control NASCAR; NASCAR is its own separate entity.
In The 200-MPH Billboard: The Inside Story of how Big Money Changed NASCAR, Mark Yost has written a description both of that transformation of NASCAR into a unique business model, and its ability to sell the sport to other businesses. The early chapters tell the story of the Bill France family and its building of the sport's economic model. While it seemed natural that these teams would be sponsored by the makers of automobiles or the parts inside them, it took the vision of France and a few others to see the possibility of using the cars themselves as a means to market other products.
First came Junior Johnson and RJ Reynolds. Still reeling from the decision in the late 1960s that cigarettes could no longer be advertised on television, RJR had an advertising budget with no place to spend it. At the same time, NASCAR was struggling to replace support from the automakers. Yost describes the decision as "the most momentous business decision in the history of NASCAR." Not only did the Winston Cup come into existence in 1971 and RJR funded a $150,000 purse for the Talladega 500 that same year, but RJR was able to convince other corporate entities to join in advertising. Each looked up into the grandstands, says one historian in Yost's book, and saw their customers. And the advertisers saw it in their own interest to help NASCAR create a more uniform feel for their racing venues and their cars. In short, the days of lugging your vehicle to the track and hoping you won enough money to afford gasoline for the drive home were over.
Yost details the expansion of the sponsorship base through the middle of the book. Much like baseball's expansion of advertising from beer and tobacco to credit cards and shaving products, NASCAR's success required them to grow from tobacco, beer and automotive products. By the mid-1980s such brands as Folgers, Tide and Crisco were being advertised by NASCAR vehicles and drivers. Such sponsorships reinforced the need for a uniform, well-regulated competition in NASCAR, which the industry's corporate structure permitted.
The latter half of the book focuses then focuses on case studies of this business model. I found the story of Texas Instruments' use of NASCAR to push its DLP technology for wide-screen television the most interesting of these. Not only did TI create demand from fans and viewers of NASCAR events on television -- the people most likely to buy HDTV -- but they also created events with Circuit City that could help get the latter to push their version of HD in a very crowded market. There are several such B2B stories in the book, which is an aspect of NASCAR sponsorship that has few parallels in the major team sports.
Yost concludes by looking at the challenges NASCAR faces and whether the sport has peaked in popularity and profitability. It's a fair question, though Yost speculates greatly in the last few pages in ways that lead one to think he sees growth still. As NASCAR has 70 Fortune 500 companies as sponsors, it would be hard to bet against it.
Cross-posted at SCSU Scholars.
Labels: NASCAR
