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Two Weeks Out From the World Cup, a Familiar Picture Emerges

2014 May 28
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by Skip Sauer

The opening match between Brazil and Croatia will kick off two weeks from tomorrow. But there seems less anticipation leading up to the Cup on whether Brazil will reign supreme on its home soil, or on the fitness level of stars like Messi and Neymar. Rather, the attention in the business press is on Brazil’s investment in stadiums (12!) and transportation infrastructure. In years past, the sales pitch that such investment would spur economic development was repeated ad infinitum in the press. Events finally seem to have caught up with the fourth estate on this topic, as most stories now point to the follies and failures of mega-event motivated investment.

Today brings two informative (and ungated) stories from the Wall Street Journal, “Hope Fades … for an Economic Boost,” and “A Dozen Stadiums, a Million Problems.” Reading these, it seems clear that Brazil’s $11.5 billion investment in the World Cup was pitched to the public as being “transformative” (once again), with the follow-on economic boost from new facilities justifying the massive expenditures. This tune has been played many times and has been chronicled here at TSE since 2004. The evidence on the ground, then as now, is much the same: once the show leaves town, the super-sized facilities stand as symbols of political ambition, inflated expectations, waste, corruption, and ultimately as organizational failure at the highest level of international sport. Last week, HBO’s Real Sports with Bryant Gumbel had a piece on the “Olympic White Elephants” that dot the landscape of Athens, 10 years after the 2004 Games. It’s “must see tv” and quite sad. Greece would have been so much better off had these investments been made in sustainable enterprises.

In Minnesota, all the stadiums are above average

2014 May 20
by Victor Matheson

Minneapolis was awarded the 2018 Super Bowl today beating out competing bids from Indianapolis and New Orleans. The conventional wisdom seems to be that this is a surprising move on the part of the NFL and that Minneapolis was “the supposed underdog city with the frigid temperatures in the winter.” The New Orleans Times-Picayune called it “a stunning upset” likening it to Joe Namath’s Jets back in Super Bowl III.

At least one economist, however, nailed Minneapolis‘ selection. Choosing Minneapolis as the odds-on favorite really wasn’t that hard when one looks at the history of the game. First of all, despite New Orleans’ claim that Minneapolis is “a relative neophyte in the big-event hosting game,” the Twin Cities are hardly amateurs at hosting big events. Minneapolis hosted the Super Bowl back in 1992. In fact, I ate lunch right next John Madden at Minneapolis’ finest Chinese restaurant, the Village Wok, while in grad school in the city at the time. MLB is sending the All-Star Game to Target Field this July, and the city has hosted the World Series and the NCAA Final Four on multiple occasions. St. Paul hosted the 2004 Republican National Convention, a much bigger organizational and security undertaking than a simple football game. And let’s also just remember that experience isn’t everything. New Orleans, despite hosting more Super Bowls than any other city, couldn’t even manage to keep the lights on during their last attempt at hosting.

More importantly, however, is the fact that the NFL wants to reward cities that build new stadiums, especially those that shower their franchises with lots of taxpayer subsidies. The NFL constantly dangles the carrot of a Super Bowl in front of otherwise reluctant taxpayers in order to receive public handouts. Put  in $498 million, like the citizens of Minnesota did, and the NFL will send the Super Bowl and its supposed $498 million in economic impact  your way. It’s almost like getting a stadium for free. Of course, the bribe only works if the NFL is actually seen coming through with the big game.

Indeed the NFL has come through. Of the 16 Super Bowls hosted between 2001 and 2016, over half were held at newly constructed stadiums hosting Super Bowls for the first time including games in Tampa, Glendale, AZ, Detroit, Indy, New York/New Jersey, Jacksonville, Santa Clara, CA, Arlington, TX, and Houston. And now add Minneapolis to list.

Minneapolis will be a great host, but if you are planning on going to the game in 2018, I recommend you bring a really good coat and that you keep warm with some hot and sour soup at the Village Wok.

Team Valuations – Milwaukee/Alabama edition

2014 April 17
by Victor Matheson

While the Philadelphia 76ers got all of the press this year with their record-tying 26-game losing streak, the Milwaukee Bucks quietly ended up blowing out the competition for worst team in the NBA finishing 15-67, fully 4 games worse than the hapless 76ers.

So what kind of reward does owner Herb Kohl get for guiding his team to NBA ignominy? Try $550 million, the price tag announced today as Kohl sold the team to New York investment firm executives Marc Lasry and Wesley Edens.

In other news, it was widely reported last week that in the latest government data on college athletic programs, the University of Alabama athletic department generated more revenue than every NHL team and 26 of 30 NBA teams.

So, here is an interesting thought experiment:  if the University of Alabama football team, which finished with only 4 fewer wins than the Bucks despite playing 68 fewer games, were a regular sports franchise, what would it sell for?

Of the $143 million in revenues generated by the athletic department, the football team is directly responsible for $88.7 million. The Bucks just sold for 5.05 times their annual revenue. Using this multiplier would put a value of roughly $450 million on the Crimson Tide football team. Revenue to market value numbers for other teams in the the NBA and NFL run between 3.2 and 5.2.

Of course, Alabama has another thing going for it as well. While Kohl had to pay his players about $54 million this season to generate those 15 wins and their corresponding $109 million in revenue, the Crimson Tide only incurred $2.2 million in player payroll expenses. In total, the school spent only $41.6 million on football, generating a profit of $47.1 million. On average, NBA and NFL teams at valued at 26.6 times their annual profits in the Forbes rankings. Using this multiplier, the Alabama football team would go for $1.253 billion, making it the 13th most valuable franchise in the US. By contrast, the endowment of the entire University of Alabama system in 2013 was $1.055 billion.

(Thanks to Josh Congdon-Hohman for the idea.)

The Economics of a Shot Clock

2014 March 17
by Phil Miller

A recent high school playoff basketball game has kindled a shot clock debate in Minnesota.  Shakopee and Hopkins, both part of the Minneapolis-St. Paul metropolitan area, were playing a semifinal game last week.  The game went to quadruple overtime and Hopkins won the game with a last-second prayer shot by Amir Coffey, a 60-foot heave that got nothing but net.  Here are the details.  Here is a decent video of the shot.

Here in Minnesota, high school basketball does not use a shot clock.  So part of the Hopkins strategy was to get the ball and stall to give it the final shot.  One of the reasons for having a shot clock is to keep teams from stalling and, thereby, to increase the fan interest in the sport.

One of the reasons why high schools up here don’t use the shot clock is because of the expense.  Here is some information from Reg Chapman at WCCO.

Newer baskets with shot clocks can cost upwards of $5,000, and that’s a lot for smaller boosters.

“There’s a cost of putting it in, there’s a cost of having an operator and there’s a lot of little rules that go along with that,” Merkle said. “The operator has to know what they’re doing. It brings in a whole other level of officials.”

It makes no sense to install a sh0t clock if the marginal revenue from doing so won’t cover the marginal cost.  Chapman notes that some of the bigger Minnesota high schools have installed shot clocks at their courts and have used them on an experimental basis.   But the smaller schools in lower divisions find the cost too prohibitive.  These , schools sometimes don’t even have enough players to fill the rosters(as Chapman notes) let alone buy expensive equipment.

Like it has done with so many other things, perhaps technology will improve enough to where the marginal cost of installing and operating  a shot clock will stop being cost prohibitive.  Until then in Minnesota at least, one can get a feeling for what basketball was like before the shot clock by going to a high school basketball game.

CFP NAASE Sessions at the Southern Economic Association Conference

2014 February 24
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by Phil Miller

Brad Humphreys sent along a call for papers for North America Association of Sports Economists sessions at this year’s SEA meetings in Atlanta Nov. 22-24.  Note that a session on the teaching of sports econ is of particular interest.  Here’s the CFP

The North American Association of Sports Economists (NAASE) is again organizing sports economics sessions at the Southern Economic Association (SEA) conference.  The conference will be held November 22-24, 2014 in Atlanta, Georgia.  The basic format of the NAASE sessions will be the same as in the past.  I hope to have several complete sessions to take to the SEA organizers to assure us of a good room and good session times.

*Deadline for submissions is April 1.*

We are trying to put together a session on teaching sports economics.  Anyone with a paper idea that would fit a session on teaching sports economics is especially encouraged to submit their paper.

If you have a sports economics paper you would like to present in Atlanta, please email Dennis Coates (see below for contact information) a title and full contact information including post and email addresses. Your submission must contain full contact information for all co-authors.

Here is the contact information for the session organizer:

Dennis Coates
410-455-3243
coates@umbc.edu

Southern Finance Association CFP

2014 February 21
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by Phil Miller

Jason Berkowitz, Assistant Professor of Finance at St. John’s, is putting together a proposal for a session or two at this year’s Southern Finance Association Meeting in Key West, Fl (a location that, to this northerner enduring another honest to goodness blizzard, sounds really, really appealing).  Here’s the skinny on what Jason is looking for.

Hello everyone, I am reaching out to you all as I would like to organize a sports betting session (possible two) at the Southern Finance Association Annual Meeting in Key West, Florida from November 19-22.  If you have a paper you would like to present please e-mail me your abstract or completed paper by February 25th <berkowij@stjohns.edu> so I can have a few days to put the strongest possible proposal together.

Call for Sports Econ Papers – 2014 Southern Economic Association Annual Conference

2014 February 4
by Phil Miller

Dennis Coates of the University of Maryland – Baltimore County is organizing sports economics sessions for the North American Association of Sports Economists (NAASE) to be held at this years Southern Economics Association (SEA) conference in Atlanta.  Here is the CFP:

Call for Papers – NAASE Sports Economics Sessions
84th Annual SEA Conference
Atlanta, Georgia

The North American Association of Sports Economists (NAASE) is again
organizing sports economics sessions at the Southern Economic
Association (SEA) conference.  The conference will be held November
22-24, 2014 in Atlanta, Georgia.  The basic format of the NAASE
sessions will be the same as in the past.  I hope to have several
complete sessions to take to the SEA organizers to assure us of a good
room and good session times.

If you have a sports economics paper you would like to present in
Atlanta, please email Dennis Coates (see below for contact
information) a title and full contact information including post and
email addresses. Your submission must contain full contact information
for all co-authors.

Here is the contact information for the session organizer:

Dennis Coates
410-455-3243
coates@umbc.edu

Here is the NAASE website for anyone interested in joining this association of sports economists.  Here is information about the SEA’s 2014 conference.

Call For Papers – IX Gijon Conference of Sports Economics “Neale Golden Anniversary”

2014 February 4
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by Phil Miller

Note: the deadline for abstract submission is Feb. 15, less than two weeks away.  Here is the CFP:

CALL FOR PAPERS
IX GIJON CONFERENCE ON SPORTS ECONOMICS
“NEALE GOLDEN ANNIVERSARY”
MAY 9TH- 10TH 2014

The annual conference of the Sports Economics Observatory Foundation
(FOED, University of Oviedo) will be held in Gijon (Spain) at the Paraninfo of
Laboral, Faculty of Commerce, Tourism and Social Sciences Jovellanos, May
9-10, 2014 (Friday and Saturday).

Individuals are invited to submit unpublished communications related to any
topic and issue related to Walter Neale’s article “The Peculiar Economics of
Professional Sports: A Contribution to the Theory of the Firm in Sporting
Competition and in Market Competition” published in the Quarterly Journal of
Economics in 1964. There will be a special session on the ‘single entity’ idea of
a sport league.

All of the submissions will be assessed by a scientific committee.

Accommodation and meals during the conference are the responsibility of the
organization.

Submission norms:
Authors will send an abstract (about 200 words) of the paper to
foedplacido@gmail.com
placido@uniovi.es

Abstracts submission: until February 15.
Papers selected: March, 2.
Final paper: May, 30.

Several papers will be selected to be published in a special issue of the Journal
of Sport Economics. The rest of the papers will be published in a book edited by
the organizers.

Scientific Committee
Chairman:
Késenne, Stefan. Professor of Economics at the University of Antwerp and Leuven, Belgium.
Members:
Andeff, Wladimir. Professor of Economics at Paris 1 Pantheón Sorbona, France.
Baade, Robert. Professor of Economics at Lake Forest College, Chicago, United States.
Frick, Bernd. Professor of Economics at the University of Paderborn, Germany.
Fort, Rodney. Professor of Sport Management at the Universidad of Michigan, United States.
García, Jaume. Professor of Applied Economics at the Universitat Pompeu Fabra in Barcelona.
Otero-Moreno, José María. Professor of Applied Economics at the University of Malaga,  Spain.
Noll, Roger. Professor Emeritus of Economics at Stanford University, United States.
Szymanski, Stefan. Professor of Economics at the Cass Business School. City University.  London, UK.
Vrooman, John. Professor of Economics at the Vanderbilt University, United States.
Organizing Committee
Plácido Rodríguez
Stefan Késenne
Jaume García

NFL Coaching Lottery 2014 Edition

2014 February 2
by Brian Goff

The firing and replacement of NFL head coaches has ended with seven slots filled.  Three of them (Jim Caldwell, Lovie Smith, Ken Whisenhunt) led teams in the past and four (Jay Gruden, Mike Pettine, Bill O’Brien, Mike Zimmer) move up from assistant coaching-coordinator positions with O’Brien adding the last two seasons as head coach at the collegiate level for Penn State.

While most fans, no doubt, have feelings about whether their team’s hiring shines or stinks, the truth is, it isn’t much different from draws from a lottery hopper or beauty contest. Data analytics have invaded most every aspect of sports, but this is one area where the numbers don’t reveal much other than noise.  In the world data miners, I don’t doubt that a persistent digger out there may discover some systematic signals of success, but they are very subtle.

Sure, if a college team could hire Alabama’s Nick Saban, their chances of success are not random.  At the pro ranks, teams seldom get a shot at someone with a long, proven track record.   Kansas City’s hiring of Andy Reed in 2013 is one of the few examples.  The choice between a coach with a modest prior winning percentage and a coordinator with no head coaching experience differs little from a coin flip.  The same holds when pulling a successful coach up from the college ranks.  For nearly every Jim Harbaugh there is a Steve Spurrier or Greg Schiano.

Prior NFL head coaching experience would seem to be useful indicator.  As a friend of mine suggested, a head coach must wear many hats, pointing toward the existence of a learning curve.  I suspect that it true, but no such pattern jumps out of the data.  If it’s in there, it’s subject to important caveats and swamped by other influences.

Coaching connections seem to be a common indicator used by general managers.  If someone coached under Bill Walsh in the 1980s or Bill Belichick in the 2000s, they were more likely to land jobs.  In all sports, general managers and owners lean on coaching pedigree..  In the NFL data, at least, they don’t help predict success very obviously.   Great coaches spawn about as many dregs as stars.

About the most that can be said is that teams might avoid extremely bad choices by selecting someone like Lovie Smith, who had a solid record at Chicago, but high-end success is not guaranteed.  Coaches such as Jimmy Johnson slid backwards in their second stint. On  the other side, some coaches with modest to decent records in their first attempts, such as Belichick or Pete Carroll, performed much better in their second chance.  Maybe that’s learning or maybe it’s the luck of a hall-of-fame quaterback like Tom Brady emerging out of a late round, shot-in-the-dark draft pick.  The bottom line for fans is that whether they are happy or upset by your team’s coaching choice, only time will tell.

NFL Scheduling and Competitive Balance

2014 January 2
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by Liam Lenten

In this paper (now forthcoming, JSE: doi: 10.1177/1527002512471538), it was shown that for every single year after the expansion to 32 teams in 2002 (until 2011), the NFL was even more competitively balanced when the strength of schedule was accounted for, without exception, using four common CB measures. Previous The Sports Economist posts on this are here and here.

Since the 2013 regular season has just been completed, we crunched the numbers on the two most recent seasons. The streak remains unbroken, once again demonstrating the importance of adjusting CB measures for unbalanced schedules.

2012:

Standard Deviation Ratio: 1.5245 (unadjusted); 1.4645 (adjusted)

Herfindahl Index of CB:  1.1453 (unadjusted); 1.1340 (adjusted)

Concentration (12) Ratio:  1.4010 (unadjusted); 1.3889 (adjusted)

Gini Coefficient:  0.2776 (unadjusted); 0.2647 (adjusted)

2013:

Standard Deviation Ratio: 1.5271 (unadjusted); 1.4396 (adjusted)

Herfindahl Index of CB:  1.1458 (unadjusted); 1.1295 (adjusted)

Concentration (12) Ratio:  1.4063 (unadjusted); 1.3904 (adjusted)

Gini Coefficient:  0.2776 (unadjusted); 0.2590 (adjusted)