Wednesday, March 17, 2010

Mega-Events in Developing Nations 

South Africa has spent at least $6 billion in preparations for this summer's World Cup. How can a poor but developing country like South Africa afford to host such an extravagant party? Simply put, it can't.

This line from an article in today's New York Times pretty well sums it up.
The people who live nearby [the new stadium in Nelspruit], proud as they are to host soccer’s greatest event, also wonder: How could there be money for a 46,000-seat stadium while many of them still fetch water from dirty puddles and live without electricity or toilets?
Of course, this is familiar territory for economists. Six years ago, I wrote an article that appeared in the South African Journal of Economics about mega-events in developing nations. In that article I wrote,
The Nigerian government recently spent $330 million on a new national soccer stadium, more than the annual national government expenditures on health or education. The intense criticism of this project is not directed at the cost of the stadium, but rather the cost of the stadium in the face of other pressing needs in a country like Nigeria.
Substitute the Nigerian national stadium for the new $137 milllion stadium in Nelspruit that will host a grand total of 6 hours of soccer this summer, and there is perfect foreshadowing of the type of misallocation of scarce resources that has come to fruition in South Africa.

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Wednesday, February 24, 2010

Decline of Portsmouth... and the English PL 

News reports in England imply that Portsmouth Football Club of the English Premier League, perhaps the richest league in world soccer, is within days of bankruptcy. Like an LA condo in 2008, Portsmouth is now operating under its fourth owner this season! This suggests to me that some soccer-owner-wannabes were a bit slow to catch on to the fact that the incredible decades-long growth in the value of sports franchises was destined to stall in the “Great Recession.”

Of course, this is not the first instance of financial trouble for a team in England’s top flight. Leeds United, a club that’s been champion of England three times, imploded both financially and on the pitch in the past decade. Leeds entered the equivalent of American bankruptcy in 2007 and has fallen into the third tier of English soccer. West Ham United, along with other London clubs that have had a periodic taste of the top, such as Crystal Palace and Queens Park Rangers, have faced financial jeopardy in the past year.

As is the case with homeowners, banks, and auto manufacturers, voices have recently been raised in England to “save the clubs from themselves,” if you will. Or alternatively, and inconsistently, to save the clubs from the foreigners, especially the Americans. There has been no American involvement in Leeds or Portsmouth as far as I know, although prominent American investments in top clubs like Arsenal, Liverpool, and Manchester United have brought forth various levels of vitriol from different varieties of English activists. The irony in this activism is that American ownership in English football increases the likelihood that player wages – the key expense which brings ambitious “climbing” clubs to their knees – will be restrained through league agreement. David Conn’s piece in today’s Guardian makes this latter point, and discusses a UEFA initiative to restrain player wage expenses.

A move to bring in some sort of a salary cap would likely find key allies, again ironically, in unusual quarters of the British polity. For example, a restraint on wages tied to club revenue has been advocated by Arsenal’s manager, Arsene Wenger, who fields a team in North London typically bereft of English players. His apotheosis in that regard, the English Football Association, would welcome the effects of a salary cap because it would limit the imports of foreign players and increase the number of Englishmen on the pitch.

In the case of Portsmouth, I suspect that their supporters would welcome just about any owner with the cash to return them to the EPL as soon as possible (they are surely doomed to relegation this year, regardless of who owns the club). As for Manchester United, there is more than one option which appeals to different segments of their supporters. First, a debt-free, free-spending billionaire to come upon the scene, who is willing to buy out the Glazers and spend oodles of money to combat the like of the Russian-financed Chelsea and the recent upstart, the Arab-financed Manchester City. In short, the sugar daddy that English fans pine for, from Wolverhampton to Notts County. Now, it must be said that while such a sugar daddy (a la G. Steinbrenner) might appeal to Man Utd fans, his appearance would surely appall almost everybody else. But regardless, when one takes the view of the league as a whole, this is fancy. How many people are there in the world who are willing to spend a billion plus pounds on a soccer club, in the interest of pure sport? Ultimately, Manchester United is a commercial enterprise, a fate that its sporting success and worldwide appeal has brought upon it.

Less controversial would be an English takeover which reduced the club’s debt/equity ratio. But again, this issue is poppycock. Basic economics implies that ownership will improve the club when it makes sense, regardless of how much debt the club has on its books. Man Utd’s debt had little or nothing to do with the transfer of Ronaldo, who was destined for Real Madrid regardless of who owned the club. Moreover, Wayne Rooney is still on board, and the purchase of Berbatov for 30 million pounds looks if anything, to be extravagant. Now, some people in finance may be exploiting the current imbroglio to lower the asking price for Manchester United, but I doubt that the Glazers are intimidated by this tactic (in the U.S. the Glazers might consider a lawsuit).

Back to the issue of Portsmouth and bankruptcy. Bankruptcy will dock 9 10 points from Portsmouth and ensure their relegation beyond all doubt. Portsmouth could easily end up where Leeds United is, toiling about the bottom tiers of the Football League. But were they wrong to reach for the stars by buying the best players they thought they could afford? I’m willing to let the league table -- and their FA Cup trophy from 2008 -- pass judgment. As much as I want Arsenal to triumph over the new money of Chelsea and Manchester City, and as much as I’d like to see the likes of Portsmouth and Wolverhampton spared from the trap door of relegation, there is something ultimately appealing about the no-holds-barred competition of the English Premier League. Long may it reign.

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Monday, February 01, 2010

Football vs. Football 

While the United States is focused this week on the Super Bowl, a report released today by the consulting firm Initiative states that soccer's Champions' League Final attracted a higher global television audience than the Super Bowl last year. 109 million viewers watched the game in its entirety, eclipsing for the first time the 106 million fans who watched the Super Bowl . Given the worldwide popularity of the game of soccer, the report also noted that the Champions' League Final also had substantially more room to grow.

While America's premier event may have lost its perch atop the worldwide television ratings, the Super Bowl still dominates its competition when it comes to inflated economic impact statements. The NFL claims the 2007 Super Bowl generated $463 million in economic impact for the South Florida region while the 2008 Super Bowl produced over $500 million for Arizona. By contrast, this compares to a mere 35 million euro ($49 million) windfall for Moscow in 2008 and 45 million euro ($63 million) for Rome in 2009.

Of course, the Europeans aren't trying as hard to justify large subsidies for sports franchises. Either that or American economists consultants are just more talented at making stuff up than their European counterparts.

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Tuesday, January 19, 2010

Portugal's Hangover 

Portugal hosted Euro 2004, a fantastic tournament with a surprise winner in Greece. But as the financial crisis unfolds, some Portugese feel a tinge of regret over the expense involved. Not just the capital costs of building "seven modern stadiums from scratch" and renovating three others*, but also ongoing maintenance expenses:
Second-division Beira Mar can’t afford the upkeep of a 30,000-seat, $94 million municipal stadium in Aveiro, while first-tier Uniao de Leiria doesn’t have enough revenue to maintain the city’s $120 million arena. On the south coast, lower-league teams Farense and Louletano rely on taxpayers’ money to bankroll the $61 million stadium they share.
Some are calling for the stadiums to be demolished. The bloomberg story breaking this news notes that this may be relevant to Ukraine and Poland, cohosts of Euro 2012, who seem wary of overspending. A representative of the soccer players union claims that the complaints over stadium expenses are just political posturing, and indeed if most of the costs are sunk, to may be efficient to keep things as they are. But calling attention to $100 million investments that are now used in, let's say unusual ways, is perhaps a political statement worth making:

Municipalities are finding other uses for stadia. The Leiria stadium, whose annual electricity bill this year will be about 111,000 euros according to published accounts, hosts corporate events. Rooms at the Faro-Loule stadium are being used for temporary classes as a local school is renovated. In Coimbra, the municipal stadium will stage a concert by rock band U2 in October.

Still, the situation is unsustainable, according to Pereira, the Aveiro deputy. He said the town should consider demolishing its stadium.

“It was a mistake building it in the first place,” Pereira said. “Now we have to do something about it.”

Maybe Bono can figure something out.

* reported here

A tip of the hat to Allen!

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Saturday, July 18, 2009

Premier League "Domination" at Risk 

During the last two years, the EPL has produced three of the four semi-finalists in the Champions League, a fact that has lead UEFA chief Michel Platini to consider changing qualification rules in order to re-balance the competition. Well, it looks like economic policy may do the job for him. Britain is about to hike its top income tax rate to 50%, and the pound has lost ground to the Euro. In contrast, Spain taxes foreign players at 24%. Obviously, this gives teams in La Liga a big edge in the transfer market. Could it be that Real Madrid have been "bidding against themselves" as they collect their transfer trophies?

See this story in The Guardian -- Tax burden will end Premier League's domination -- for a discussion of the tax hike's implications.

Thanks to Andrew Siegler for the link, who sees the positives in this for the English game: "I actually think this will be a good thing for English football, incentivizing English players to move abroad and learn how to play less like headless chickens." Yeow!

Question for students: The Guardian's story states the follwing: "According to agents, most marquee signings will simply demand that clubs make up the difference so that the players receive the same net wage. In other cases, where clubs refuse to make up the difference, players are increasingly likely to opt for Spain or elsewhere in order to relieve their tax burden." What sorts of players will be successful in "preserving" their net wage, and what sorts will move abroad?

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Friday, June 12, 2009

Is Real Madrid playing the "too big to fail" game? 

That's what co-blogger Stefan Szymanski implies in this article (towards the end): "Real’s really too big to disappear, whatever debt they can incur... No bank would ever be allowed to be the bank that sank Real Madrid." Interesting... I don't know what La Liga's rules may be with regard to points deduction for clubs going in to bankruptcy. But even if they did, their history would likely be sufficient to restore them to the top, regardless. Certainly, foreign creditors wouldn't hesitate to pull the plug on Real if that was in their (the creditors') interest.

Another thought-provoking quote in the article is the opinion of Simon Chadwick:
"Real Madrid is effectively injecting inflation into the transfer market," Simon Chadwick, a professor at England’s Coventry University, said in an interview. "What we’re going to see is transfer-fee inflation over the next few months up to the start of the season. That’s a serious issue, because it’s something that (soccer) really can’t afford when many clubs have major financial concerns."
While AC Milan and Manchester United have certainly benefited from Real's profligacy, I would be surprised if this is sufficient pump-priming to inflate transfer fees this summer. Manchester City's oil-fueled ambitions may be a factor though. Time will tell.

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Thursday, June 11, 2009

Real Madrid sets record transfer fee 

The BBC reports that Manchester United has accepted an offer of £80 m ($131m US) from Real Madrid for the services of Ronaldo. This is on the heels of Kaka moving to Madrid from AC Milan for a reported £56m earlier this week. The combined annual wage bill of Kaka and Ronaldo will top £25m as well. The record spending seems incongruous to me, with the Spanish economy in shambles (the unemployment rate is over 17%, twice the EU average) and one major Spanish club, Valencia on the verge of bankruptcy. Regardless, Next season's clashes with Barcelona in El Clasico should be interesting.

Update: CNN's headline to its report is "Real Madrid defy economic gloom to buy success." There is interesting discussion and speculation on whether they'll receive an immediate return on their investment.

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Tuesday, April 21, 2009

Soccer in Seattle 

A bit behind on this, but the new MLS team in Seattle (The Sounders) have sold more season tickets (per game) than the Mariners. Here the writeup in the Puget Sound Business Journal:

Seattle’s Major League Soccer expansion team has already landed more than 30 sponsors with only a few weeks to go before the season opener in March. That includes deals with Virginia Mason, QFC and a blockbuster deal with Microsoft worth a reported $20 million that will have the Sounders’ green jerseys emblazoned with the Xbox 360 logo.

The Sounders have sold about 20,000 season tickets, which eclipses the number sold by the 32-year-old Mariners team, which estimates it will sell about 14,000 by the start of the season.

Of course, the Mariners play more than four times as many games as the Sounders, and an M’s season ticket therefore costs much more. Plus, the recently announced return of future Hall of Famer Ken Griffey Jr. could give Mariners marketing a big bump.

So far the Sounders have drawn 28,000 to 32,000 for their games. By comparison, the LA Galaxy led reported MLS attendance last year (from Soccernet) at 26,000 per game with about half of the 14-team league drawing over 15,000 per game. As the excerpt mentions, the total expenditure for 81 regular season baseball games exceeds that for 18 soccer matches. The total is about a 3:1 difference according to the article.

I'm not so concerned with whether soccer has "passed" baseball in Seattle, but the fact that it has pulled up into the same neighborhood says something positive about soccer's growth but negative about baseball's long, slow decline from its former position as king of U.S. sports. Baseball has been both the beneficiary and victim of television. TV has raised salaries in baseball as in all sports but it has also boosted other sports, football in particular, relative to baseball and may have created incentive problems.

Has baseball hitched its wagon too closely to TV over the years? Certainly, baseball does not want to go into TV purgatory like the NHL. However, TV's contractual horizon and MLB's long term horizon do not necessarily dovetail. Boosting short-run TV ratings and revenues over the last 30 years with World Series games going into the early morning hours in the east may not boost long term interest in the game. One writer noted that the trend has been longstanding now -- even Carlton Fisk's famous homer in the 75 series came after midnight ET. Here's a Ron Fimrite piece from in the wake of last season's Phillies-Rays closer-to-dawn-than-sunset finish.

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Wednesday, March 11, 2009

Two pieces worth noting 

Both are from the newly sports-minded WSJ.

First, in recent years, English teams have been getting the upper hand over their Italian counterparts, a reversal from prior decades. Why is this? My own answer is that "catenaccio," the Italian style of playing, is a form of implicit collusion. The pace is slow and defensive-minded. It is failing in an era in which skill and pace are increasingly prevalent on the pitch. Beckham is at AC Milan now because that is where he has a comparative advantage in the twilight of his career, as he has lost a step or two in the past decade. This WSJ story, "Why Can't Italy Beat England in Soccer?" touches on this briefly, and covers other interesting angles on the issue.

Second, here's a paper "Interracial Workplace Cooperation: Evidence from the NBA," discussed in the WSJ's Real Time Economics Blog. The claim: assists in the NBA are race-neutral. Surely work a look for some of our readers.

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Thursday, September 25, 2008

Welfare & the Italian national team 

Economists are used to the fact that government spending gets diverted towards strange special interests. But this example from the sports world is stunning:
European Union funds meant to help a poor region of Italy are set to be spent sponsoring the Italian national football team.

The regional government in Calabria, a southern province, wants the money to go on promotional branding during Italy's World Cup campaign.

It would cost them 1.8m euros (£1.4m) over three years.

Regional officials argue it can help raise the profile of their area, both within Italy and overseas.

The idea is that the promotion will attract more tourists to Calabria....

According to one website promoting Italian tourism, Calabria is currently "little-respected by other Italians and little-known to tourists".

It is also home to the N'Drangheta, one of Italy's most powerful and violent mafia organisations.
While I'm no expert, one possibly productive use of the money would be to fight corruption. </naivete'>

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Tuesday, July 22, 2008


Was the former Italy & Cosmos great (&ABC studio analyst) Giorgio Chinaglia involved in mafia corruption? This is sad, if true:
A notorious Italian organized crime gang tried to buy soccer club Lazio through third parties using funds gained from violence and intimidation, authorities said on Tuesday.

The plan by the Casalesi clan of the Camorra, the Naples version of the mafia, came to light as police in Rome served arrest warrants to 10 people including former Lazio player and president Giorgio Chinaglia.

In 2006, Lazio president Claudio Lotito was given police protection after receiving threats from "ultra" fans who were allegedly trying to intimidate him into selling to a consortium led by Chinaglia.

Chinaglia was charged with market-rigging linked to his bid and had since been a fugitive in the United States. Allegations that the mafia were behind his bid have only now been revealed.

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Friday, July 18, 2008

Marcotti: piedi in bocca 

Gabriele Marcotti at SI today:
Many years ago I was taught about the invisible hand and free markets and how, by definition, something was worth whatever someone was willing to pay for it. Of course, I've since learned that it's all a crock of bull. Some markets may work that way, but, in fact, most of them don't.
I infer from this screed that Marcotti's study of markets has led him to prefer the visible hand, centrally planned allocation, and a measure of worth spit out by a bureaucrat's computer.

This punking of economics (later extended to Billy Beane and Moneyball) is prompted by Marcotti's consideration of the transfer prices (and wages) of Ronaldhino, once heralded as the best soccer player in the world, and Ronaldo, who arguably is now. AC Milan just paid $40m for Ronaldhino, a price which is indeed quite puzzling, given his disappearing act last year with Barcelona. Marcotti sketches out some numbers to see if the transfer fee and wages add up to an estimate of incremental revenues, but throws up his hands in the end: "how do you quantify that?" Exactly, which is why Ronaldhino is worth what AC Milan is paying for him.

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Tuesday, June 17, 2008

Economic impact of Euro 2008 

Hosting Euro 2008 is holding down crowds at the venerable Vienna Opera, "the oldest theatrical institution with an unbroken record of performing in the German-speaking world."
At Monday's performance of Verdi's "La forza del destino" (The Force of Destiny), only 71 percent of seats were filled, a near-disastrous showing for a house that regularly sells up to 99 percent of its seats on most evenings.

Indeed, the opera house said it had even decided to cancel a ballet performance (La Bayadere) scheduled for June 29, the day of the Euro 2008 final in Vienna.

...In the run-up to the Euro 2008 soccer championships being held in Switzerland and Austria, the State Opera had predicted that performances were unlikely to be affected, since opera-goers were not interested in football.
Lesson learned? Substitution of economic activity takes place on many margins.

To be sure, the city is teeming with soccer fans, so many that one hotel declared itself to be "Euro free," with signs in the lobby requesting that visitors not talk about the soccer championship.

Hat tip: Frank Stephenson at Division of Labor, who has commentary.

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Thursday, May 01, 2008

Emerging scandals? 

If the favorite, Big Brown, wins the Kentucky Derby, expect the tone of the news coverage to change. His trainer has a history of doping that the mainstream press is putting aside in the usual rose-colored pre-race stories. Journalist Paul Moran has the story though, at his blog. Oddly, the story comes via the New York Times top horse racing writer Joe Drape, whose blog "The Rail" gives outstanding coverage of the Triple Crown. This is my first stop for horseracing news these days.

As an aside, I think that doping and horses provides a good example of the social costs of doping in general. The Nash equilibrium is to dope, and it has been going on for decades. But doped, muscle-bound thoroughbreds are more likely to suffer a catastrophic injury than horses that run clean. (Granted, I think the links here are much stronger than with humans.) Drape has a good post on this issue as well, "The Last Winstrol Derby?", which discusses the possibility that American racing will ban & test for steroids in the near future. Winstrol has been used on horses long before it was injected - allegedly - into Roger Clemens' butt.

And now to the land of scandals, European soccer. This time we go off the beaten path, to Romania, and the run-in for the league championship. The story has everything: ethnic tension between the two protagonists, allegations of payments to referees, payments to opposing teams, and mafia-like sniping between the clubs.

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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.

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.
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.

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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.

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.
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.

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Tuesday, March 13, 2007

Does Soccer Have a Chance to Ever Become a Major Sport in North America? 

After spending some time in England last summer, and planning to return this summer, I have spent much more time than I ever imagined watching soccer, both live and on television, during the past year or so. I still do not find it all that gripping, which probably stems from my lack of knowledge and understanding about the game. In fact, the most fun I have had watching soccer so far has been in pubs that do not encourage drunken teenagers (see this) and at small stadia in lesser leagues. The hooting, yelling, singing, chanting, and atmosphere are lots of fun, but the downright deadly stupors of some of the younger crowd at some pubs during the World Cup last summer were very off-putting.

If I am remotely representative of the potential North American audience, does soccer have any chance of ever becoming a major sport in North America? Will it ever be as big, by some measure, as MLB or the NFL? [notice I omit the NHL because soccer probably does have a chance of surpassing hockey by some measures; in terms of participation, it already has.].
  1. One big plus for soccer is that its games typically last less than two hours, which is great for the television market. This scheduling (with a half hour studio show between each game) allows us (in Canada, anyway) to watch three UK Premiership soccer matches every Saturday in 7 hours, about the time it takes to see two NFL games. Instead of the NFL double-headers, we could easily have soccer/football triple-headers on weekends and double-headers on Tuesday and/or Wednesday evenings. Also, even if soccer/football games begin to take more time (see below) as has happened with both MLB and the NFL, they are unlikely to become much longer than 2 1/4 or 2 1/2 hours, which would still permit the weekend triple-headers with no difficulty [I know, I know: the NFL has Sunday triple-headers now, but they take for-friggin'-ever].
  2. At the same time, to make the product more attractive to potential sponsors, soccer will almost surely start guaranteeing that there will be 10-second or 15-second breaks when the ball goes out of bounds or especially when a team is granted a corner kick or free kick near the goal; mark my words, this will happen in FIFA even if soccer never takes off in North America. Purists will hate this, but purists also hated all the commercial time-outs that have become so prevalent in the NFL and that have added to the time baseball games last. Adding time-outs for commercials is, after all, a minor alteration in the game, and doing so would not unduly lengthen the games, so this is a change I can imagine would be comparatively easy.
  3. Lots and lots and zillions and tonnes of kids grow up playing soccer/football in North America these days. So there is some interest in the game at the young participatory level. But that interest does not necessarily translate into yuppie, high-income spectator interest [reductio ad absurdum?: kids like lots of things that do not translate into major adult markets].
  4. To capture the young adult, high-income, and corporate-account market segment, soccer/football will have to be more exciting for North American spectators. Some possibilities might include:
    • loud music during every break. MLB seems to think this is a good idea, but I hate it; as one MLB executive once told me, "Doc, your demographic isn't really the one we're targeting..."
    • Scantily clad cheerleaders?
    • More body contact; this change in the NBA over the past fifty years seems to have played a role in the growth of interest in the NBA. At the same time, though, it hasn't helped the NHL, which seems to be trying to reduce the amount of contact to some extent. Maybe the marginal revenue product of body contact in team sports is diminishing as the amount of contact increases, becoming negative at some point. [note: Brian Goff thinks there is already too much body contact in soccer.]
    • Scoring. I'm sure I'm revealing my ethnocentric loutish ignorance, but soccer/football is boring when there are so few goals scored. What a drag! We watch for a couple of hours and maybe there's a goal scored. And maybe it's the result of skill, but some/much of the time, it seems to be the result of randomness (in play, in officiating, in wind currents, in hair length [Peter Crouch's big goal last summer in the World Cup], etc.]. But nobody can agree on what to do to increase the scoring.
Brian Goff made some very interesting suggestions here (be sure to see the string of comments, too). Also, see this by Skip Sauer. And here is something Tyler Cowen wrote on the topic several years ago.

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Sunday, February 18, 2007

Real Salt Lake Subsidy 

The following account is from an editorial in the Daily Herald Newspaper, (from the Provo area south of Salt Lake City). It sketches the timeline of negotiations between the MLS soccer club and various government entities in Utah. The subsidy is rather small at $35m, but the sequence of events is fairly typical in the subsidy negotiation game:
Dave Checketts, owner of Real Salt Lake, threatened to move the professional soccer franchise to St. Louis if he didn't receive public funding to build a 20,000-seat stadium in Sandy.

Real Salt Lake is playing at the University of Utah until it can get a permanent venue, a dream that was momentarily placed in doubt when Salt Lake County Mayor Peter Corroon withdrew the county's promise of $30 million to help Real relocate to Sandy. Corroon had been warned by financial advisers that it was a risky investment.

An alternative proposal from Utah County was snubbed. Anderson Development offered to buy the team and base it at the former Geneva Steel site in Vineyard. Checketts insinuated that we're second-class citizens down here and rejected the deal.

In the eleventh hour, the Utah Legislature, goosed by Gov. Jon Huntsman Jr., came through, pledging $35 million in public money. The cash is supposed to come from taxes on hotel rooms and rental cars.

House Minority Whip Brad King, D-Price, called it a chance to promote Utah to the world. "This is worth millions and millions of dollars we will never commit from state coffers to promote us," King said.

Checketts is not the first sports team owner to get help from state government. Utah Jazz owner Larry H. Miller leases the land under the former Delta Center for $1 a year until 2040. Salt Lake City is also using taxes to pay off the center's $25 million bond.

There may be times when it's proper for government to help a business get started, but we are not convinced this is it. A soccer stadium hardly qualifies as an economic kick-start.

This is a subsidy for a special interest, in our view.

We console ourselves with the fact that $35 million is a small amount compared to other stadium deals. But that doesn't change the principle.

Salt Lake County's financial advisers said that revenue projections by Checketts were "too optimistic." Likewise, economists Roger Noll of Stanford University and Andrew Zimbalist of Smith College -- co-editors of the book "Sports, Jobs and Taxes" -- say that stadiums are more of a consumption expense than an economic booster.
Yes indeed. One might argue that the consumption expense is worth it to Utah's public. But equally valid is the claim that this expense is inflated by league restrictions on the number of franchises, and imperfections in the political process.

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Wednesday, February 07, 2007

The Third-Largest Industry in Italy 

What would you guess is the third-largest industry in Italy? Wine? Apparel? the Roman Catholic Church? Housing? Tourism? Automobiles?

According to Aldo Spinelli, quoted in The Economist [$], it is soccer/football.
The level of violence—some of it politically motivated—at Italy’s football grounds is said by the interior minister, Giuliano Amato, to be still rising. Despite this, club presidents have been pressing hard for a re-think on the government’s draconian measures. Ivan Ruggeri, the chairman of one team, Atalanta, said clubs should simply stop playing till the government changed its mind. “Italy’s third-biggest industry cannot be penalised in this way”, stormed Aldo Spinelli, who chairs Livorno, another Serie A side. [emphasis added]
If so, the Italian economy is in big trouble.

Wikipedia lists the following as the major industries in Italy:
tourism, machinery, iron and steel, chemicals, food processing, textiles, automobiles, clothing, footwear, ceramics
Sports, despite our immense interest in them, are small potatoes, economically speaking.

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