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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

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 <> 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

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:

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

Submission norms:
Authors will send an abstract (about 200 words) of the paper to

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
Késenne, Stefan. Professor of Economics at the University of Antwerp and Leuven, Belgium.
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.


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)


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)

Home Advantage Omen for Ashes Whitewash

2014 January 2
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by Liam Lenten

With cricket’s latest ‘Ashes‘ series having been decided more than a fortnight ago, much of the remaining interest in the final Test, just underway, centres purely on whether Australia can complete a 5-0 Ashes whitewash for only the third time in history (following 1920/21 and 2006/07). Most ‘key performance indicators’ for Sydney are pointing in that direction – the newly-rediscovered ferocity of the Australian pace attack, not to mention the unexpected feebleness of England’s batting top-order (and middle-order, for that matter). England have also selected three debutants.

Moreover, there is an additional factor that, given recent history, points fairly and squarely in Australia’s favour – merely that they are the home side. The calendar year of 2013 was a stellar one for home teams in Tests. Specifically, of the 44 Tests played last year, a remarkable 30 were won by the home team, 10 were drawn and only 3 won by the away team (Pakistan looks likely to make that 31 against Sri Lanka in the Test that started on New Year’s Eve).

The surprising element of this occurrence, according to some pundits, was that it came after a period, from 2010-2012, in which away teams performed quite admirably against the tide of home-ground advantage. At least on the basis of raw numbers – in these years, a combined 124 Tests resulted in 48 home wins, with the number away wins almost at parity (43). This apparent ‘trend’ towards away teams did not go unnoticed by sports journalists and other non-academic writers. For example, Gideon Haigh remarked to this effect (“The quiet revolution: home ground advantage begins to fade away”, The Australian, 20/12/2012).

However, as economists know all too well, looking at just the raw figures is too parsimonious an analysis for making claims that the nature of home-ground advantage – a phenomenon so well researched, understood and entrenched in sporting culture – has diminished so fundamentally and suddenly. What needs to be understood about the sample of Tests in those years were that they were correlated with factors that skew the chances of victory in favour of the home team to begin with, most obviously on the basis of relative strength of both teams.

For example, easily the best team of 2012, South Africa, played 10 Tests that year. All but one of them were played away from home, with an unbeaten record (4 wins, 5 draws) befitting a World number one. This is a nice example of what in economics (and some other scientific disciplines) is called a ‘selection bias’ – such biases have to be accounted for, since it is not difficult to imagine how the figures would have more-highly favoured home teams at an aggregate level if the Proteas had instead been scheduled to play 9 Tests at home. Another example (this time for 2011) is that minnows Bangladesh and Zimbabwe played a combined total of 8 Tests, 7 of which were on home soil, again skewing the overall record in favour of away teams. With such a small sample of teams and Tests, these selection biases are important and should not be ignored.

Likewise, the stunning reversal back towards home teams in 2013 has to be taken with caution – (the again rampant) South Africa played 7 of its 9 Tests at home, winning 6 and drawing the other. Second-ranked India also played the majority (6 of 8) of its Tests at home, completing a perfect record, not to mention third-ranked England’s impressive Northern summer record (5 wins, 2 draws), prior to their almost inexplicable slide in the current series.

Most Australian cricket supporters will  hope that the aberration of 2013 does not continue past this week – their next series is away to South Africa. Otherwise, that tour could prove to be a sobering experience following the current euphoria. Nevertheless, the influence of home-ground advantage in Test cricket does not appear to be under any immediate threat. To this end, if one was the betting type, I would not be shy in punting on a home victory at the SCG.

NHL TV deal is Canadian business story of the year

2013 December 31
by Duane Rockerbie

The Canadian Press has chosen the new television deal between Rogers Communications and the National Hockey League (NHL) as the 2013 business story of the year (Toronto mayor Rob Ford is not a business story). Few in the United States would care, but in Canada, hockey is a religion so the deal has received much press. Rogers is also an owner of MLB’s Toronto Blue Jays and its stadium, Rogers Centre, as well as a large network of local and satellite television stations, radio stations and print and on-line magazines and newspapers. Besides Canada’s obsession with the “national sport”, the deal itself is staggering. Rogers agreed to pay the NHL $5.2 billion for the exclusive television rights to the Canadian market for 12 years. To put this in perspective, NBC signed a 10-year TV rights deal with the NHL in 2011 for about $2 billion. Of course the new deal pales in comparison to the ESPN-NFL 10-year TV deal signed in 2011 for $15.2 billion, but the NHL and Gary Bettman are still very pleased.

The Canadian market was definitely undervalued by the NHL previous to the Rogers deal. It was served by a number of different networks (TSN, SportsNet, CBC) that each received a share of games that would not be sold to other networks. Only a handful of games were televised that appealed to Canadian markets, so many games between U.S. based teams cannot be viewed in Canada without purchasing the leagues Center Ice subscription package. That will all change with the new Rogers deal where virtually every NHL game will be made available at various tiers of subscription prices. The much loved Hockey Night in Canada broadcasts every Saturday night by the CBC (broadcast since 1952) will be made available to the CBC by Rogers gratis for a period of five years, however Rogers will retain all revenues from the broadcasts. It is unclear how and if Rogers plans to sell broadcasting rights to games to other networks. Rogers already digitally streams some games to its cell-phone subscribers and this could be expanded to computers and third-party streaming services.

Economists understand the strategy by Bettman and the NHL to sell all of the rights in an “all or nothing” type auction. An all or nothing package extracts some of the monopoly surplus from Rogers that the NHL could not with a larger number of smaller bidders. Rogers earns a larger surplus (including profit) than it would if it were not the sole provider of NHL games in Canada, so it still has plenty of surplus left. The NFL follows a different business model, selling its television rights to 3 major networks (ESPN, CBS, NBC) and broadcasting some games itself on its NFL Network. However the sheer size of the NFL television market insures very competitive bidding – not the case in the NHL with its much smaller U.S. market. One could say that the Canadian market is subsidizing the U.S. market in the case of hockey giving Rogers a major toehold in NHL business decisions.

The loser will be the Canadian hockey fan who will pay a hefty price to watch games on exclusive Rogers SportsNet channels. And Don Cherry.