The Sports Economist

This week’s WSJ Magazine has an entertaining story by Jason Gay on “Neymar da Silva Santos Júnior, the 22-year-old prince of Brazilian soccer.” He’ll be bigger than Beckham if Brazil win the forthcoming World Cup (current odds: 3-1).

Gay’s story is full of good lines. My favorite is on the scale of the stage for Neymar and company: “The last World Cup final, in 2010 between Spain and the Netherlands, was watched by an estimated 700 million people, which makes the Super Bowl seem like open-mike night at a coffee shop.” On Neymar’s fame, Gay relays Roger Bennett’s observation that Neymar’s jaw-dropping skill set made him into “‘a footballer for the YouTube age’ … Bennett believes that his worldwide reputation grew principally through short video clips, perfect for dissemination on social media.” That’s an interesting point. Here’s a startling fact: Nike signed Neymar at the age of 15 (he’s now 22). They were on to him early.

One thing you won’t find much of in Gay’s story is a discussion of Neymar’s stats, but these are easily found at ESPNFC. This year he’s been scoring at a rate of one goal every two games, with two assists every five, all while undergoing the transition into an established Barcelona team. His strike rate for Brazil has been a degree or two higher. Gay’s story paints a picture of an athlete who won’t shrink from the spotlight of the World Cup. He’s clearly capable of the spectacular, so I expect we’ll see a “Nike moment” or two in the next month of games.

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.

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.)

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.

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

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.

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