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College Football and the Threat Point

Doc, who's spending the next few months teaching students econ in a castle in England has a great post on the difference between English football and American sports leagues. I want to focus on his stadium comments:

English football teams play in much older stadiums.

A minority of EPL teams but a majority of MLB teams play in stadiums built since 1990. This difference is almost surely because the threat of moving is so much more credible in the U.S. than in England.

To understand the monopoly power of league owners and the effectiveness of the cartel, it's important to outline a few issues. Professional sports leagues are really little more than collections of current franchise owners, so when we talk about league officials, we are really mostly talking about the onwers of the league's franchises. These owners have a stake in each other's economic fortunes that goes beyond competition on the field. Revenue sharing between teams increases the attention that fellow owners give to other teams' revenue streams. As a team's stadium ages, all else equal,the revenues generated by teams falls. Building a new stadium for a team increases that team's revenue streams which, through revenue sharing, flows to the rest of the franchise owners.

There are also barriers (such as exclusive territorial rights granted by league officials, votes of existing franchise owners that must occur before expansion or movement is allowed, expansion fees and relocation fees) that keep existing teams from moving to and new teams from setting up in viable cities. In an open entry NFL, Los Angeles would not be without a football team for 10 years? All of these things are used by league officials to keep the number of teams less than the number that fans could support.

College football programs have no such threat point. Many programs represent state schools and are already explicitly or implicitly subsidized by the state and the politics of threatening to move home games from campus would likely be very nasty politically for these schools. Nebraska AD Steve Pederson can't credibly threaten to move his program to, say Wahoo or Wayne State, if the state doesn't pony up for a new stadium. Think of the politics that would create! But even in the case of private institutions, there is no credible threat that a program will move. Kevin Weiberg, commissioner of the Big 12, can't threaten, say, the city of Waco with the move of Baylor to Santa Fe, NM, if Waco doesn't pony up for a new Bear stadium.

As of 2006, the average age of Big 12 football stadiums is just over 70 years.

Big12stadiums

Granted, some programs have moved the location of their home games. For example, the University of Arkansas will play 2 of its games in Little Rock. But decisions like that of Arkansas' officials is mostly due to bringing games closer to the fan base. In addition, these Big 12 stadiums are not trash dumps. Mizzou officials have invested several 10's of millions of dollars in the past 10 years or so renovating Faurot Field and other Big 12 program officials have done likewise. The Big 12 stadiums that I have visited in the past few years may not be palaces, but they certainly aren't anything close to being dumps either.

In any case, when a pro sports team threatens to move to another city, the problem isn't with voters or representatives not wanting to subsidize professional sports stadiums. The real problem lies with the monopoly power of leagues and the credible threat points league officials and team officials have by keeping viable cities open.

(Cross-posted at Market Power)