Tuesday, November 10, 2009

Astounding Breakthrough in Tournament Design 

Not sure if you noticed it, but college basketball started last night. The schedule still needs fixing. The NCAA men's championship game takes place before the start of baseball season, but the World Series ended last week. If MLB adds a few more rest days to the postseason schedule, or the NCAA pushes the start of the season back a few days, we will reach Nirvana (located just outside Bristol, CT), where college hoops and MLB fully overlap, providing round-the-calendar sports action.

Anyway, college basketball starts off this year with the 2K Sports Classic, which is billed as a basketball "tournament." I have some old fashioned ideas about how tournaments work. A dated, 20th century notion that in knockout tournaments two teams play a game or a series and the winner advances to the next round while the loser is either eliminated, or perhaps moves to the losers' bracket in some cases (I am open to the idea of a losers' bracket - it works in the College World Series, for example). The problem with my quaint idea of how a tournament should work is that sometimes unexpected events take place - we called them "upsets" back in the day - and a team like Gardner Webb would beat Kentucky at home, advancing to the widely televised later rounds, thus taking up valuable tee-vee exposure and drawing miniscule viewing audiences.

Thanks to the astounding developments made by the Gazelle Group, organizers of the 2K Sports Classic, those pesky "upsets" have been eliminated from their "tournament." Here's how it works. The tournament participants are divided into "hosts" (the Big Boys: Syracuse, North Carolina, Ohio State and Cal), and the "others" (Albany, FIU, Alcorn State, Murray State, Robert Morris, NC Central, Detroit and James Madison). In the "Regional Round," the Big Boys play two games each and the others play one game. Regardless of the outcome of these games, the Big Boys "advance" to Madison Square Garden in NYC to play in the Championship Rounds on the Deuce; the other teams move to the "Subregional Rounds" to play additional games in an "undisclosed location" presided over by former vice president Dick Cheney.

As far as I can tell, the "Championship Round" games will be decided by points scored. In the future, the outcome of these games should be decided by the size of the revenues generated, with the teams drawing the most "supporters," as measured by $0.99 text messages sent to the Gazelle Group, advancing to the championship game.

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Friday, October 09, 2009

Baseball and the Economy: What Happened to TV Ratings? 

Attendance at MLB games this past season was 6.9% lower than it had been the previous year. That is a HUGE drop. An intriguing question is, what happened?

  1. One possibility is that the rather sudden drop in housing prices and employment led people (individuals AND corporations) to cut back on their spending on entertainment, including baseball. If so, and if people's tastes for baseball haven't changed much, we should expect that the television ratings wouldn't have changed much from 2008 to 2009. In fact, tv viewership might even have increased as more people stay home to watch the game on tv instead going to the ballpark in person. Of course the change in television programming (notably the change at TBS) from one season to the next will have confounded this effect.

    Unfortunately, I haven't been able to locate the full season ratings for 2009. One source I did come across said that as of late May, the tv ratings were about the same as they had been the previous season, but that was early in the season.

  2. Another possible explanation is that there was only one close play-off race, the AL Central. Most of the other play-off teams were well-decided a week or two or more before the season ended. If increasing numbers of the races were, in this sense, "less interesting", that, too might have had an impact on attendance at the ballpark. If this hypothesis is correct, then tv ratings should have been lower in 2009 as well, especially near the end of the season.
In other words, the data on television ratings might help us discern the relative strengths of the two hypotheses. Given these competing hypotheses (both of which could be right, of course in varying strengths), can anyone shed any light on what happened with tv ratings this past season?

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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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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?

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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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