Monday, January 18, 2010

Gold Medals, Red Ink: NBC to Lose $200 Million on Games 

A number of media outlets are reporting that NBC will lose about $200 million dollars on the 2010 Vancouver Olympic Games broadcast. The network paid $2.2 billion of the US broadcast rights to the 2008 and 2010 games, and a reported $820 million of that was for the Winter Games. However, this loss is based on a comparison of the amount paid for the broadcast rights fees compared to the advertising revenues for the Games. The calculation does not take into account any spillover benefits that NBC gains from broadcasting the Games. For example, if more people watch non-Olympic related programming on NBC, and the network is able to charge higher ad fees for those programs, then broadcasting the Games produces additional revenues for months or years after the Games end.

Similar claims have been made in the past about networks losing money on broadcast rights for other sporting events, like the NCAA Men's Basketball Tournament and the National Football League. When interpreting claims of large losses by networks on sports broadcast rights deals, it is important to keep in mind that broadcasting sports events like the Olympic Games adds more than the revenues from advertising during the Games to the bottom line of networks.

Hat tip to Nick at the IJSF Blog.

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Friday, January 15, 2010

Capital-Labor Substitution in Production: Sports Writing Edition 

Newspapers are in deep trouble. That has been clear for some time. It looks like things just got worse for sports writers. The Intelligent Information Laboratory at Northwestern University has developed a program called Stats Monkey that takes the box score from a game and some play-by-play data as inputs and produces a newspaper story about the game, complete with headline. The program uses statistical modeling to figure out what the important events were in the game and to pick out key plays along with a "library of narrative arcs that describe the main dynamics of baseball games." Here's a link to a New York Times blog post with a sample of the output from the program based on a recent MLB playoff game.

This is a classic example of substituting capital for labor in production. Just last month, the Washington Times announced a 40% cut in staff, including the entire sports desk. I wonder if they are using Stats Monkey to generate sports page content? I interact with a lot of print reporters, primarily in interviews about my research on the economic impact of professional sports, and have found that the ones working the sports desk generally have the most trouble understanding my research (unlike business desk reporters who seem to quickly grasp the importance of substitution in local entertainment spending for explaining the results in the literature).

The Stats Monkey web site doesn't appear to list a price for the program, but it has to be a fraction of the cost of a staff of sports writers. I doubt that this sort of capital-labor substitution can save the print newspaper industry, since much of the industry's problems are on the revenue side of the business.

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Friday, September 04, 2009

As the Vertically Integrated World Turns Part II: Versus Network 

Two years ago, I posted on the ongoing battle between "Big Cable" and the NFL Network (NFL's Game of Chicken). In that case, the NFL's effort to move from a sports provider to a vertically integrated media outlet of its sports product setup the conflict with the next step in the supply chain -- the media packagers.

Now, two media packagers, DirectTV and Comcast, are deuling over the Comcast-owned Versus network -- home to NHL games, the Tour de France, and a variety of other sports. As of September 1, DirectTV dropped the network. In this case, Comcast is the vertically integrated firm not only serving as packager but also as upstream media source.

The "Puck Daddy" blog (via Yahoo Canada) provides a very thorough discussion of this dispute, drawing out the quite convoluted analytics -- negotiation strategies and posturing, intracompany marketing strategies, comparable or not-so-comparable deals with other packagers like Dish, and so on. One of the ironic features of this dispute vis-a-vis the NFL Network case is the role of the NHL. To date, it has stayed out, but as Puck Daddy notes
the NHL isn't stepping into this minefield until it needs to at the end of September. Even if we all know where their loyalties are; it's not exactly DirecTV who owns the Philadelphia Flyers ...
That last tidbit highlights another twist in the tale -- Comcast owns the Flyers. This makes me think that PD may have misconstrued the NHL's role. While their loyalties may rest with the Flyers, so does their leverage.

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Thursday, June 25, 2009

Bethpage, The Rest of the Story 

The mainstream media, much of it east-coast centered such as Connecticut-based ESPN, droned on and on about how great venue Bethpage is -- "muni," "bringing game to the masses," "spirited fans," ... In a Golf Channel segment, the ever preachy John Feinstein practically bowed down to USGA Executive Director, David Fey, for being "a liberal in a conservative world" and bringing the Open to Bethpage.

Amid the praise, this Newsday article (and related comments) speak to ugly problems with the Long Island choice. Here's one post from Newsday's Topix Forum:
The behavior of many attendees-can't call them golf fans due to their ignorant behavior-is a sad tribute to a once great sports city. NY is now the home of drunks, thugs, and crude idiots, trying to make a statement about their stupidity and crudeness. I hope the USGA has the sense to never return to this once great venue, that has been spoiled by the IDIOTS OF NEW YORK. YOUSE GUYS GOT THE METS AND THAT'S WHAT YOU DESERVE. MEDIOCRITY PERSONIFIED.
According to attendees, the level of crudeness dipped so low as large groups giving golfer Fred Funk a not-so-nice but closely-spelled pseudonym. Sure, the players "laugh off" the "rowdiness" or refer to the "excitement" and "electricity" of the place, but what else can they do. To speak candidly would invite becoming the mob's whipping boy.

The venue, from a viewing standpoint, also had its drawbacks, at least for those interested in golf more than the outdoor bar scene. One regular attendee of Opens rated it as a poor site because of very few decent views from ground-level rather than grandstands.

Beyond the boorish fan behavior or sightlines, the site selection is not quite as broadminded as John Feinstein's egalitarian sensibilities imply, at least if geography matters. The USGA has held 4 out of the last 10 and 9 out of the last 30 Opens in the shadow of NYC. Fifteen out of the last 30 have been played north and east of a line extending from Pittsburgh to Philadelphia to NYC (See Wiki's listing). Apparently, to the USGA and the likes of Feinstein, the Appalachains still form the frontier.

One econ angle is a point I have made before -- the media are not merely an informational pass-through. See Stadium Promises & Media Bias by Skip, Needed Perspective on Referee Scandal by Dave Berri, or China -- The New Japan by Skip for examples.

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Tuesday, June 23, 2009

The Sports Economist: Saving or Destroying Civilization? 

In a recent ESPN The Magazine article, Bill Simmons laments the loss of reporters as middlemen between players and the public.
Today's technology means athletes don't need a middleman anymore. You know how you won't hear a peep out of Jennifer Aniston for a year, then she'll have a movie to promote and you can't get away from her? She shows up when she wants to show up, always on her terms. It's no different from Tiger's making himself "available" every summer when his video game is released. Okay, he's a superstar; he can pull that crap. But what about the other guys? I see a day when the following sequence will be routine: Player demands trade on blog; team obliges and announces deal on Twitter; player thanks old fans, takes shots at old team and gushes about new team on Facebook. We will not need anyone to report this, just someone to recap it. Preferably with links.
Ironically, a post at Chef Diesel compains about the "Bill Simmons Syndrome" aspect of this disintermediation (or remediation) trend -- the rise of blogdom as a source of reporting and analysis. Although the author likes Simmons, he dislikes the amateurish imitators that have arisen alongside Simmons' clever and insightful writings.

I happened to have a conversation with sports-inclined journalism major in one of my classes this spring about this topic that stirred some musings of my own. Since this is a blog and not a book, I'll keep my observations to short bytes (I guess that's part of the "story" in itself):

1. Without putting guns to people's heads (and even then), information is not easily controlled. Skip makes this point in his post on dis- (or re-) intermediation in the context of league as media outlet -- league or player spin mattered little in the case of Michael Vick or Pacman Jones.

2. "Access" has benefits (David Halberstam's book as Simmons cites) but also costs. Being "on the inside" often comes with the price tag of loyalties and undisclosed information. At times, the most "inside" reporters operate as little more than PR people for the team.

3. Outlets like TSE serve as both subsitutes and complements to traditional media sources. The TSE in no way substitutes for daily analysis of yesterday's game. A lot of blogdom does try to do that -- for better or worse. It does substitute, to some extent, for more general "analysis" of the sports worlds, both in and outside the lines." Instead of relying on individuals with journalism degrees to analyze the data or consider broader questions, however, the TSE or other similar sites rely on individuals trained in the content and skills of a subject such as economics, statistics, finance, and so on.

4. The squeezing of the traditional middleman service helps explain why ESPN and other media outlets have shifted, in their SportCenter type shows, from voice-overs of exciting highlights to more reliance on more bombastic viewpoints. As Chef Diesel puts it
The once humble network has become a media giant that is more concerned with being hip and delivering witty punch lines than sharing scores, basic news stories and video highlights. Sportscenter, the flagship show of the station, has evolved into a horrible combination of a bad SNL audition and Access Hollywood.

5. We are still in a long run transition to some different media model. After my parents' generation is gone, who will buy newspapers? If they are in financial trouble now, what then? Clearly, newspapers are already making the transition to more of a internet/blogdom type setup, where this ends I'm not sure. In this world, the TSE functions a bit like the editorial pages of the WSJ or NYT -- a place where people with deep content knowledge express facts and opinions.

6. In the new media world, "journalists" as in journalism majors, probably will need one of two skills: either deep content knowledge to help organize and express knowledge and trends (e.g. Walter Mossberg at the WSJ) or a very entertaining/engaging schtik or writing style that carves out a place like a Bill Simmons.

Postscript: Through the Chef Diesel site, I discovered a couple of clever satires of sports journalism that TSE readers might enjoy if they haven't already: Kissing Suzy Kolber and Deadspin.

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Tuesday, November 25, 2008

ESPN vs. FOX Over BCS TV Rights 

What factors led cable giant ESPN to outbid FOX for the television rights to the post-season BCS games? In a word, they have different revenue streams; two-part pricing if you will. Richard Sandomir investigates:
ESPN cannot ignore the deep recession’s impact on advertising. But its subscriber revenue gives it an extraordinary cushion. ESPN charges cable and satellite operators an average of $3.65 a month per subscriber, the most in television, according to SNL Kagan, a research organization. Multiply that by 98 million subscribers, over 12 months a year, and ESPN’s financial armor adds up to $4.3 billion.

...Despite ESPN’s billions in subscriber fees, Skipper said that each deal must stand on its own. “It isn’t sitting in a pile in a drawer where I can reach in and use it,” he said.
Perhaps this is a sign of the "post-consumer economy." ;) If sports media is weaned off advertising revenue in the long run, would that not be a very good thing for those who enjoy the games?

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Monday, November 17, 2008

Active bidding for BCS TV rights 

The story is pitched as "first major sports event goes to cable," but for me the real information is in the size of the bids:
On Monday afternoon, current rights-holder Fox Sports notified the BCS Group that it wouldn't match an offer from ESPN for a rights package that will begin in 2011. Fox Sports is in the middle of a four-year deal for the BCS Championship as well as the Orange Bowl, Sugar Bowl and Fiesta Bowl.

ESPN had offered $500 million for four years, compared to Fox Sports' $400 million. Even Fox's offer is still up compared to the current rights deal, which pays $330 million.
That's a 51.5% increase folks. Perhaps it's a sign that we'll avoid economic armageddon after all.

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Wednesday, July 02, 2008

Sport vs. finance 

Scott Soshnick discusses made-for-TV schedules and how they result in a lower quality product on the field of play. I'm not a fan of the late night NBA Finals, but I gather that I am in the minority, otherwise advertisers would insist that tip-offs be earlier. But I had not thought about the sub-optimal distribution of rest days, and their impact on the quality of play.

I often worry that the scions of sport are cashing in now, at the expense of the future quality of the game. That's just a worry of mine, though. Soshnick calls it "a mistake of Ruthian proportion."

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Thursday, June 26, 2008

From Berlin: the fan zone 

Tonight I will experience a new phenomenon for me: watching a big game (Russia vs. Spain) in a "fan zone," one of the public viewing areas set up in Germany for the 2006 World Cup. They were wildly popular then, and Germany has rolled them out for the semi-finals and final of Euro 2008.

Now, hold on to your hat while you digest these statistics. European stadia are small by American standards, the semi-final tonight will see 53,000 in Vienna's Ernst-Happel Stadion. But last night, for the Germany-Turkey semi-final, an estimated half million fans turned up in Berlin:
Germany is home to about 2.7 million people of Turkish origin around 500,000 of whom are German citizens. In the run up the match, the first time the two countries have met in a major tournament since the 1950s, Turkish and German flags (more...) have been flying together from car windows and balconies in a nation gripped by football frenzy.

In downtown Berlin, an estimated 500,000 fans packed into the "fan mile" public viewing area next to the historic Brandenburg Gate, with access shut off a full hour before the game even kicked off after the organizers declared it full. The winning goal by the Germans saw the huge crowd erupt into a frenzy of football celebration.
Yowza! What does this mean for the future of spectator sport? We all know that broadcast media have changed the commercial landscape, but the ability of huge screens and large public areas to host masses of people could have new implications. I may know more after tonight.

Update: There are four enormous screens in a line at the "Coca Cola Fan Mile," and you can see the game quite well. The main screen at the Brandenburg Gate sports something akin to a mosh pit, which tonight was a sea of Russian and Spanish Flags. The screen is positioned higher there, to allow people to see the game above the waving flags. Only two screens were live tonight, but you can bet the fan zone will be extended for the full mile on Sunday when Germany plays tonight's victors, Spain. The fan zone appeared to me to be a gathering spot for relatively young fans who want to cheer their team in public or be with their countrymen, not aficionados. More women than you might expect, I would say. Far more Carlsberg was sold than Coca Cola, but Coke will know if the concept, which seems to be thriving in several places in Europe, will work in the U.S.

It was a peaceful night as far as I saw, with a large security operation coming into, leaving, and throughout the fan zone. I avoided the odd pack of scowling blokes in England shirts. I watched the second half at a big screen in a hotel bar. Smaller numbers, but with most seats taken, and that's where the money was tonight.

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Sunday, April 20, 2008

Taking It On the Chin Again 

Longtime readers of the Sports Economist may recall that I have taken my fair share of abuse from the print media in the past. I have been a critic of subsidies for professional sports facility construction for years, and this doesn't always sit well with people -- cough cough sports reporters cough cough -- who have a vested interest in subsidizing sports stadiums and arenas -- cough cough team owners cough cough. A couple of years ago, a Washington DC sports columnist called me a "clown" in his column after I pointed out that subsidies for the new stadium for the Nationals were a bad idea.

I have moved up here to Edmonton, in the Great White North, where the powers that be have decided it's time for a new arena for the beloved Oilers. Last Friday, I gave a lunchtime speech to the Economics Society of Northern Alberta with my usual spiel about the lack of tangible economic benefits from a new arena. Today, I was skewered in the Edmonton Sun by sports columnist John Short who seems to have taken offense at the idea that a shiny new arena for the Oilers on the public dime isn't the best thing since sliced bread. Among the gems in his column

He's an outsider and can't possibly know how much our pride and ego is worth.

Worse, he's an American. He can't know anything about hockey. Background knowledge in this case can't possibly count for anything.

Thanks for the warm welcome to town, John. I don't really feel at home somewhere until I have been pilloried in the local press by a sports columnist. It lets me know I'm still doing my job.

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Friday, September 07, 2007

Today's NFL: a brave new media world? 

As we mentioned previously, the media are buzzing over the new approach of the NFL to media. The rule limiting online video at non-NFL sites is particularly nettlesome and controversial. Michael McCarthy's story at USAToday, "NFL calls own number in new media game plan" describes the move:
On the Internet, the NFL took hands-on control of NFL.com from CBS SportsLine last fall and has relaunched the site with more video content, according to the league. NFL.com, and the 32 individual team websites, offer one thing other sports and news websites can't match: highlights from games that can be tailored to focus on each fan's favorite players and teams.

The league also is trying to boost the relevance of its four-year-old NFL Network by running more exclusive programming, including eight prime-time games on Thursdays and Saturdays late in the regular season, three college bowl games and the NFL's college scouting combine in the spring.
MLB.com has turned into a significant revenue-generator for baseball, so it only makes sense for the NFL to pursue a similar strategy. But the issue has become intertwined with "controlling the message" that is put forth by the media. As McCarthy puts it:
The nation's richest and most powerful sports league has launched a behind-the-scenes effort to seize greater control over what fans see, read and hear — and chart an even more lucrative course for itself in the process. It's taking a series of steps to drive more fans and advertisers toward its own NFL Network cable channel and NFL.com website. And at a time when the NFL is trying to clean up its image by cracking down on athletes who run afoul of the law, the league also is imposing new — critics say onerous — restrictions on how the independent media cover its players, coaches and teams.

Together, the moves represent an unprecedented attempt by the NFL to manage how it's portrayed to the public. They also could offer a glimpse of where sports programming is headed: Former White House spokesman Ari Fleischer, now an image consultant and adviser to Major League Baseball Commissioner Bud Selig, predicts sports fans soon will confront an increasingly cluttered media landscape in which more sports leagues, and college conferences, offer their own TV channels and websites.
On the fundamentals, this is right on the money. We are in a period where a dominant trend is disintermediation, literally speaking, in broadcast coverage of sports. More and more coverage is being produced by the "upstream" firm, i.e. a team (as in the Yankees and YES, or in a more limited way, by Notre Dame and NBC) or a league. The Big Ten Network is leading the way in college (and with App State beating Michigan, what a debut! Sorry, Rod).

But I think the issue of image control is overrated. The Michael Vick and Pacman Jones episodes show that when negative issues arise, media spin is difficult or impossible for the NFL to control. You can't keep the cameras away from the perp walk.

The NFL is pushing existing media aside to make way for its own production. It can do this because today's broadcast and broadband technology enable it to bypass an intermediary and former ally. It's not about image. It's simply about the money.

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