Friday, January 22, 2010

The "Tiger Effect" and Economic Impact 

The Buick Open this year will be without Tiger Woods who is out with his well-publicized, but self-inflicted, "injury." So what effect does this have on the Buick Open and specifically the local economy of San Diego?

According to an economic impact study published by the tournament, the 2007 and 2008 Buick Opens, each won by Tiger Woods, both attracted roughly 45-55,000 out-of-town visitors and generated economic impacts of around $30 million for the city. Out-of-towners represented 26% of the crowd in 2007 and 37% of spectators in 2008.

"Tigerless" tournaments generally attract 10-25% fewer spectators than those with the sport's premier player. Taking the economic impact numbers at face value, an admittedly unusual move here at The Sports Economist to be sure, if the reduction in attendance is evenly distributed between locals and non-locals, Tiger Woods' absence means a reduction in economic impact for the city of 10-25% or roughly $3 to $7 million.

But there is ample reason to believe his absence is not uniformly distributed. Even without Tiger, the Buick Open is a fun event for locals to attend right in their own backyard. However, the tournament may no longer be worth a long trip for the serious golf fan. Indeed, tournament officials have hinted that out-of-town visitors may comprise fewer than 10% of spectators this year. Since out-of-towers represent the only real source of potential economic impact, this represents a possible reduction in economic impact of 60-75% or a fall of $18-22 million from the previous $30 million figure.

Looks like Tiger might owe an explanation to all of the poor economic analysts in San Diego.

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Monday, September 08, 2008

Myrtle Beach Golf Conference 

Announcing the first Myrtle Beach Golf Conference. The following is from an email I received from Andrew Weinbach of the Department of Economics at Coastal Carolina:

This year the first annual Myrtle Beach Golf Conference will be held in Myrtle Beach , November 13-15. It will be an interdisciplinary group, including academics and industry folks. We so far have 3 sports economics papers on golf lined up, and would welcome a few more.

The website: http://www.myrtlebeachgolfconference.com/

Details:

The deadline for submissions is October 15, and a copy of the soft-cover 2008 proceedings will be produced by Spring.

Please let me know if you are interested, and pass this along to those who might be. I’d be happy to answer any of your questions.

Thank you for your time.

Andy

If you are interested in presenting, you can contact Andy:

Andrew Weinbach

Assistant Professor of Economics

E. Craig Wall Sr. College of Business Administration

Coastal Carolina University

(843) 349-6542

Fax: (843) 349-2455

aweinbac@coastal.edu

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Friday, September 05, 2008

Golf, the International Language? (update) 

The LPGA has backed down on its proposal to require tour members to be proficient in English in the face of criticism. My personal criticism of the now defunct rule was not that it was discriminatory, but that it would deprive the tour of many of its best players. I noted that the NBA would never consider banning Yao Ming for poor vocabulary.

One comment to the previous post by frequent reader Bartman suggests that while "the NBA might love Yao Ming, but they'd hate having 3 Chinese starters on every team."

That's a thought-provoking statement with which I think I ultimately disagree, and I believe the data back me up. While the economics literature is full of papers that show that consumer discrimination exists in sports, most of these papers adjust for player quality. Therefore, while a white fan may prefer Larry Bird or Mickey Mantle to roughly equally talented black players such as Magic Johnson or Hank Aaron, the same data also show that white fans nearly always prefer a black star to a white scrub. While Mantle's baseball cards sell for more than Aaron's, Aaron's still sell for more than Joe Shlabotnik's.

Remember, the NBA's fan base is largely white despite an overwhelming percentage of African American players, and Arsenal remains one of the mosts popular sides in the EPL despite fielding almost no English players. If China brings 3 starters to every team each with the skills of LeBron, Kobe, or KG, the NBA will quickly learn to love these players.

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Tuesday, August 26, 2008

Golf, the International Language? 

The LPGA announced today that starting in 2009 it would be requiring the players on its tour to be able to speak English. LPGA State Farm Tournament Director Kate Peters justifies this discrimination against non-English speakers by noting, "This is an American tour. It is important for sponsors to be able to interact with players and have a positive experience."

This decision bring up several interesting issues. First of all, the sports economics literature is full of papers testing for discrimination on the part of consumers. A classic 2001 paper by Kanazawa and Funk about the NBA found that black players were paid less than comparable white players but that teams with white players, even bench warmers, drew better Neilsen Ratings. As a back of the envelope calculation, the higher ratings could explain the higher salaries for white players. So, can one ethically justify employer discrimination that is done to accomodate customer discrimination? The U.S. Supreme Court generally says no, but what about this case? Obviously, the main difference is that English can be learned while skin color cannot, and the LPGA has stated that it intends to help those needing special tutoring to attain English proficiency.

Second, it is interesting that this is in issue in the LPGA but not other major sports leagues. Can you imagine the NBA banning Yao Ming until he passes an English proficiency test or Man. U. benching Cristiano Ronaldo until his fluency increased? (Of course, most Brits speak barely understandable English, but that's another story.) Apparently the NBA thinks its fans rather like Yao Ming's 22.0 points per game despite his somewhat limited English language abilities. Are LPGA fans less interested in watching the world's best female golfers (16 out of the top 20 of whom are non-native English speakers), and more interested in hearing their post-round press conferences?

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Wednesday, June 18, 2008

How much is Tiger's knee worth? 

Unless you are a competitor, Tiger Woods' impending season-ending knee surgery is a major blow to the sport of golf. Reader Shane Lorimer asks: "In your estimation, what is the economic impact that the PGA and all other invested parties will suffer in regards to Tiger Woods being out for the rest of the season?"

Here's my wild guess: Tiger represents a significant chunk of TV ratings, that is for sure. But most of those contracts are already set. Late sales of ads by networks carrying the Open Championship, PGA, the Tour Championship, & Ryder Cup will require price adjustment. Losses to advertisers that have "overpaid" must also be included.

Tiger earns an estimated $100m a year from endorsements. If what he generates for television itself is about equal to that, then missing 1/2 the season would result in a $50m loss to TV & "non-Tiger" advertisers who benefit from his presence on the course (and our eyes on the tube). The consumer surplus of fans who attend the tournaments will fall appreciably too. That value is also quite large & relevant. So $50m in economic impact might not be enough.

Tiger's knee could thus be worth a couple hundred million bucks in present value. Doc had better do a good job!

Update: CNBC's Darren Rovell asks a sports marketing pro the question. The answer focuses on the loss of exposure while out on the course. Nike loses "$65 to $75 million." Add a few million more from Buick & Gatorade. I wonder how those contracts read?

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Friday, June 13, 2008

Tiger, Jack, & "The Field" 

With the U.S. Open going on, I've got golf on my mind, so here's another golf-related post. A Google search quickly reveals how much buzz the question of who is better, Jack or Tiger, generates. One issue that emerges is the level of competition. An article in Slate.com, Tiger v. Nobody, echoes the views of Nicklaus himself as quoted in this LA Times story:
"The problem is it's hard to compare eras," Nicklaus said. "It's a different game today, and a lot of guys from before, like even Hogan and Player, would have had a hard time today because of the distance you need to drive it. That's just a fact of what the game is. "I don't know if we had as many good players, but the great players we had all were multiple major winners, so when I slipped up, there was somebody else on their 'A' game. "There are great players now, but they might not have won a lot of majors, except for Tiger. Phil [Mickelson] could be close. Ernie [Els] approached it, Vijay [Singh] approached it. But that's about it. And that's a fact of life today."
Jack seems right on both counts. The idea that fields are deeper with more good players is hard to criticize. Population growth along with rising incomes offer easy explanation. From Jack's entry into playing majors (1960 as an amateur) through his 1986 Masters title, a collection of legends-but-below-Jack won 35 majors between them (Ballestoros -4, Floyd-4, Palmer-5, Player-8, Trevino-6, Watson-8). Moreover, in Jack's 19 second place finishes in Majors, this group of players accounts for 11 "head-to-head" victories over Jack. (It's not just who you beat, but who beats you).

My interest in this is not centered on "who is the best" but why the drop off in legends below the level of Jack and Tiger? (See Tom Watson, Where Are You? ). Where are the Watsons and Trevinos -- guys who aren't as good as Jack or Tiger over the long haul but are good enough to beat them on multiple times even when they are "on their game." If overall field quality provides the answer, why doesn't this influence Tiger as well? I have offered rising income and reduced effort as an explanation. Here is an alternative explanation based on the increasing depth of the field coupled with a learning effect.
  • Suppose that winning a major not only signals your ability as a player but enhances your ability to do it again (or maybe it takes a couple of times). You learn to deal with the pressures, courses, ... The increasing depth of the field reduces the likelihood of breaking through to that second or third major victory, thereby reducing the "learning effect" and the likelihood of reaching the 6th or 7th major. Tiger's is good enough relative to "the field" for his performance record not to be affected.
U.S. Open Side Note: The Golf Channel's Frank Nobilo made a great statement last night, "there are no favorites in U.S. Opens." No doubt, Tiger and Phil bring in viewers and readers, but unlike the other majors, I would just as soon take the field versus not only Tiger but Tiger and Phil if wagering on the U.S. Open. They have 31 U.S. Open starts over 18 years (including as amateurs) between them with only 2 victories.

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Friday, February 29, 2008

More on Golf and the Economy 

Me speaking on Las Vegas NPR, with the AP's award winning writer, Tim Dahlberg, on the decline of golf (lengthy discussion). I blame it on the gals, in part, for reasons pooh poohed in Phil's post below. I think the sustained increase in women's labor force participation over the past several decades affects intra-household bargaining in a way that keeps the guys off the course. If golf could jettison its image of a male bastion of privilege (hello, Augusta!) and make the clubhouse and course more lady-friendly, that might help. Hot babes in the LPGA like Natalie et al. might, in an ironic way, help bring that about.

On the economy in general, I spoke with Sportz Undercover's Jared Zwerling also this week (interview here). I argue that the economic slowdown will have a minor and perhaps negligible impact on the sports industry. This reflects my assumption that the downturn is temporary and the long term trend, which is a strong positive for the sports markets, will be maintained.

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Thursday, February 28, 2008

The "New" Economics of the LPGA 

GolfWorld's Ron Sirak has an interesting article on the LPGA. Endorsement money has begun to flow in to the top players:

When Meg Mallon won the 2004 U.S. Women's Open she wore a hat purchased in The Orchards golf shop and her caddie carried a bag uncluttered by corporate logos. The following week, after she took the Canadian Women's Open, Mallon received one congratulatory call from an equipment rep -- and no endorsement offers. What made the situation more depressing was that Mallon had 17 LPGA victories, including four majors, and possessed one of the most marketable personalities in her sport.

"It's very frustrating when you watch the men's qualifying school and the winners say [golf manufacturers] are throwing money at them right and left, and our tour can't even get a bonus pool," she said at the time. She was not alone in her frustration: Beth Daniel, Juli Inkster and Rosie Jones were unrepresented or under-represented in endorsement deals.

Fast forward to today and LPGA players are hot commodities -- at least the stars. All four major winners from a year ago had endorsement deals well in excess of seven figures annually, many from multinational companies outside golf. Three have lucrative equipment deals. As the tour embarks on its 59th season at next week's SBS Open at Turtle Bay in Hawaii, Mallon said she was "ecstatic that [equipment companies] have finally found the value in the women's game. I hope the trend continues."

Via Golf Blogger (HT to John LaPlante). John noted that the improvement in deals is partly driven by the change in womens' labor market presence and by Title IX requirements. But those factors have been more gradual and don't go well in explaining the spike in the right tail of the star spectrum. A better explanation of the spike, as Sirak argues, is that several of the LPGA's rising stars, such as Paula Creamer and Natalie Gulbis are new to the LPGA and provide, well, sight-utility. And they are good golfers. As John noted in an email to me:

Three youngsters--Paula Creamer, Natalie Gulbis, Morgan Pressel--have both good looks AND game. Nothing succeeds like success.

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Friday, February 22, 2008

The Decline of Golf 

I have my own reasons for giving up the habit. This story hazards a few guesses at why the game has gone to bogey-land, in general. The idea that golf takes a lot of time and commitment, in a world where alternative amusements are increasingly available makes the most sense to me.

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Monday, January 28, 2008

The Superstar Effect 

A given tournament player is often thought to put forth more effort when he/she faces better competition. But what if there is a superstar in the tournament (HT to Don Coffin)? Do the non-superstars continue to put forth as much effort?

Managers use internal competition to motivate worker effort, yet I present a simple economic model suggesting that the benefits of competition depend critically on
workers'’ relative abilities,— large differences in skill may reduce competitors'’ efforts.
This paper uses panel data from professional golfers and finds that the presence of a
superstar in a rank-order tournament is associated with lower competitor performance.
On average, higher-skill PGA golfers' ’tournament scores are 0.8 strokes higher when
Tiger Woods participates, relative to when Woods is absent. Lower-skill players' ’scores
appear unaffected by the superstar'’s presence. The adverse superstar effect increases
during Woods's streaks and disappears during Woods'’s slumps. There is no evidence
that reduced performance is due to “riskier ”play.

That is from Jennifer Brown's job market paper entitled "Quitters Never Win: The (Adverse)
Incentive Effects of Competing with Superstars." Here is a Slate write up on Brown's paper. Here's the conclusion in the Slate piece (by Joel Waldfogel):

What does this mean for the nongolfing world? It's generally agreed that people work harder when they are paid for performance. Anyone who has ever languished in a Paris cafe, €”where service compris translates roughly as "the Republic of France mandates a minimum 15 percent tip regardless of service quality" €”can appreciate the power of incentives. But the effects of incentives appear to be muted when the incentives are based on relative performance and the competition is tough. We're taught that quitters never win, but if the evidence from golf is any indication, it might be more accurate, if less pithy, to say that expected losers are more likely to quit, or at least not perform as well. If you're running a business, and you have the opportunity to hire the Tiger Woods of office work, you're not going to pass up the chance. But Brown's study suggests you might want to consider its effect on your other workers' performance. Steak knives might not cut it as second prize.

Here is a link to Sherwin Rosen's 1983 American Economist article on the economics of superstars. Economists have known for a long time that the amount of effort put forth depends on its benefits and the costs. Brown's paper, according to the abstract, shows us empirical evidence that the lower the probability of succeeding, the less effort non-superstars put forth (all else equal).

I have three quick thoughts: how often are there superstars in tournaments? If superstars rarely come around, then it might make no sense to alter the structure of tournament play.

What if there are two superstars in the tournament? Then the battle among the non-superstars becomes for third place and, all else equal, this should lead to even less effort being put forth.

What about the situation where the superstar is very young and looks to dominate the sport for years to come? It seems reasonable that some with potential talent but who have not invested in that sport may decide to look elsewhere to compete.

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