Tuesday, March 31, 2009
Man Utd & AIG
Patrick Barclay writes:
So what are a club such as this doing with the disgraced name of AIG on their shirts? It is causing consternation in the United States, where United fans cannot wear their replica strips, at least in public, and some members of the House of Representatives have demanded that bailout money from the US taxpayer should not be used “to support an English soccer club” — and it is beginning to dawn here that this symbol of the financial system’s vindictive disintegration has no place in the people’s game.I had not given the demand side of this problem any thought before reading this column. But it strikes me that if AIG is the corporate poster-child of the financial crisis, and American fans are keeping their shirts in the closet, all of the shirts that have been produced to date should be re-directed to the "secondary market." Barclay is considering the problem as one of sunk cost in shirts for sale versus the dignity of the club. What would intrigue me is an analysis which quantifies a) the effect on shirts sales of AIG's demise, and b) the decline in value of the stock of Man Utd shirts owned by consumers. "Forgoing" the £18 million from AIG would indeed generate significant value on its own, and a chunk of that would be captured by the club.
The honourable course facing United is clear: they should forgo the £18 million or so still due on a contract expiring at the end of next season and put something admirable on their shirts free of charge, following the examples of Barcelona, who advertise Unicef, and Aston Villa (also American-owned), whose friendship is with Acorns, a children’s hospice.
For United, unfortunately, making such a decision would be like Uturning a liner, in that it would involve the scrapping of global mountains of Nike kit and other merchandise already prepared for the summer tour to China, and next season.
Labels: sponsorship
Thursday, March 26, 2009
Spring Training & Economic Impact
Here's a great piece by Charles Fountain, focused on the Grapefruit League. One highlight is the exchange of verbal blows between USF's Phil Porter and a local promoter. Porter wins on points, as the promoter trots out the seeing is believing fallacy, which always overstates the impact.
Here is where Porter nails it:
Here is where Porter nails it:
The only way to be certain of its real impact, Porter believes, is to look at what happens when spring training goes away. “Wait until somebody moves,” he says. “These are the things that provide natural tests for whether or not spring training provides the economic kick it is said to provide. If a team moves out of Winter Haven, say, what happens to Winter Haven? If next year it’s business as always with the same sort of sales and income and employment, then you gotta conclude that the presence of the team didn’t add anything to the community, because its absence didn’t take anything away.”
Labels: baseball, economic impact
The Economy and the Olympics
There's an article on the front page of today's Denver Post about the effect of the stumbling economy on the Olympics:
It's not necessarily the worst thing in the word if you believe that the Olympic Committee is mostly a rent-seeking organization. If you believe in substantial positive externalities generated by the Olympics, it's not so good. I count myself as mostly being in the first group, although I don't deny there is some degree of "publicness" associated with big-time sports. But if anything, the current economy is forcing people to remember that thing we economists talk about until we're blue in the face: we face trade-offs all the time.Although the Olympic flame was extinguished just a little more than seven months ago, already there are some who wonder whether the 2008 Summer Games in Beijing marked the end of the Olympics as we've come to know them.
"The economic climate has got to be taken into consideration; you just aren't going to have the huge spectacle that Beijing was," said Andrew Bacchus of United Kingdom Trade and Investment, one of the groups responsible for securing financing for the 2012 Games in London.
In these days of global financial uncertainty, it's hard to envision any sports extravaganza approaching last summer's — in its over-the-top theater or the estimated $45 billion that China shelled out.
Labels: Olympics, public funding
Tuesday, March 24, 2009
The More Things Change ...
CBS college basketball analyst and former coach (Manhattan, Villanova, UMAss), Steve Lappas made this (paraphrased) observation over the weekend:
I decided to do a little, preliminary data analysis, thinking to confirm my predictions. Of course, there are always limitations to data. Unlike hockey, basketball does not award for the pass leading to the pass leading to the score. As a result, assists might stay high (dribble and "kick-out" type assists) while passing leading up to the assist may diminish.
I collected data on assists, field goal attempts, free throw attempts, and points scored for second round NCAA tournament games in 1986 (the last year before the 3-point line) and for 2008. This comprises only 32 teams and 16 games for each year, so the results are hardly the final world. Here they are:
Assists 1986 = 13.8
Assists 2008 = 13.7
FGA 1986 = 58.9
FGA 2008 = 57.4
FTA 1986 = 21.8
FTA 2008 = 21.1
PTS 1986 = 70.9
PTS 2008 = 72.6
None of these differences come close to statistical significance and certainly don't set off alarm bells in terms of big, big changes. So, while dribbling may be substituting for passing some and maybe some three point shots are substituting for low post play some, the end result in terms of assists, shot-taking, free-throw taking, and point scoring is surprisingly similar to the pre-3 point eara.
The game has changed. We used to think that you had to pass the ball to get shots. Things have changed over time with the three point shot. With guys spotting up at the three point line, dribbling and driving has become more important. Getting the ball to the low post doesn't matter much anymore.Lappas' views fit my own (making them more appealing to me) -- the three point line has changed a lot of things. It makes an interesting econ story. Rule changes change incentives. The effects show up in obvious ways, more long distance shooting but also in not-so-obvious and maybe unintended ways -- less ball movement, less player movement, more dribbling, fewer assists, less low post play, and so on.
I decided to do a little, preliminary data analysis, thinking to confirm my predictions. Of course, there are always limitations to data. Unlike hockey, basketball does not award for the pass leading to the pass leading to the score. As a result, assists might stay high (dribble and "kick-out" type assists) while passing leading up to the assist may diminish.
I collected data on assists, field goal attempts, free throw attempts, and points scored for second round NCAA tournament games in 1986 (the last year before the 3-point line) and for 2008. This comprises only 32 teams and 16 games for each year, so the results are hardly the final world. Here they are:
Assists 1986 = 13.8
Assists 2008 = 13.7
FGA 1986 = 58.9
FGA 2008 = 57.4
FTA 1986 = 21.8
FTA 2008 = 21.1
PTS 1986 = 70.9
PTS 2008 = 72.6
None of these differences come close to statistical significance and certainly don't set off alarm bells in terms of big, big changes. So, while dribbling may be substituting for passing some and maybe some three point shots are substituting for low post play some, the end result in terms of assists, shot-taking, free-throw taking, and point scoring is surprisingly similar to the pre-3 point eara.
Labels: college basketball
Tuesday, March 17, 2009
More March Madness!
Remember the good old days when there were only two postseason men's college basketball tournaments? Things were simple then. If your bubble popped, you either landed in the postseason NIT, or you went home, licked your wounds and dreamed of next year.
Things got a bit messier last year, with the debut of the College Basketball Invitational (CBI), a 16 team tournament sponsored by a sports marketing company that tried to steal a few teams from the NIT. I had a post about the CBI last year. The CBI is back again this year, although the games will be televised on HDNet, which appears to be available only on DirecTV and Dish Network. I suppose that is better than YouTube or streaming web video. The CBI field includes St. John's (16-17), Richmond (18-15), Vermont (23-8), Green Bay (22-10), College of Charleston (26-8), Troy (19-12), Houston (21-11), Oregon St. (13-17), Buffalo (21-11) , Wichita St. (16-16), Northeastern (18-12), Wyoming (19-13), Boise St. (19-12), Stanford (18-13), UTEP (19-12), and Nevada (21-12). Yes, you read that correctly: 13 and 17 Oregon State is dancin' Bay-Bee!
This year we have yet another new entrant into the market, the CollegeInsider.com Postseason Tournament. This is another 16 team tournament; the games will be televised on Fox College Sports. The inaugural field includes Austin Peay (19-13), Belmont (19-12), Bradley (18-14), The Citadel (20-12), Drake (17-15), Evansville (17-13), Idaho (16-15), James Madison (19-14), Kent State (19-14), Liberty (22-11), Mount St. Mary’s (19-13), Oakland (22-12), Old Dominion (21-10), Pacific (19-12), Portland (19-12) and Rider (19-12).
There are now 129 postseason basketball tournament participants. A few notes on the field:
Hat Tip: Brian Soebbing
Things got a bit messier last year, with the debut of the College Basketball Invitational (CBI), a 16 team tournament sponsored by a sports marketing company that tried to steal a few teams from the NIT. I had a post about the CBI last year. The CBI is back again this year, although the games will be televised on HDNet, which appears to be available only on DirecTV and Dish Network. I suppose that is better than YouTube or streaming web video. The CBI field includes St. John's (16-17), Richmond (18-15), Vermont (23-8), Green Bay (22-10), College of Charleston (26-8), Troy (19-12), Houston (21-11), Oregon St. (13-17), Buffalo (21-11) , Wichita St. (16-16), Northeastern (18-12), Wyoming (19-13), Boise St. (19-12), Stanford (18-13), UTEP (19-12), and Nevada (21-12). Yes, you read that correctly: 13 and 17 Oregon State is dancin' Bay-Bee!
This year we have yet another new entrant into the market, the CollegeInsider.com Postseason Tournament. This is another 16 team tournament; the games will be televised on Fox College Sports. The inaugural field includes Austin Peay (19-13), Belmont (19-12), Bradley (18-14), The Citadel (20-12), Drake (17-15), Evansville (17-13), Idaho (16-15), James Madison (19-14), Kent State (19-14), Liberty (22-11), Mount St. Mary’s (19-13), Oakland (22-12), Old Dominion (21-10), Pacific (19-12), Portland (19-12) and Rider (19-12).
There are now 129 postseason basketball tournament participants. A few notes on the field:
- Higest ranked (by Sagarin) teams staying home: Cincinnati, NC State, Seton Hall, Vanderbilt, Iowa, Mississippi. Power conference teams snubbed by the NIT.
- Highest ranked (by Sagarin) CBI participants: Stanford, Wisconsin-Green Bay, Houston
- Highest ranked (by Sagarin) CollegeInsider.com team: Portland, Old Dominion
- Why are they playing: The Citadel (193 in Sagarin) in CollegeInsider.com field; Troy (171 in Sagarin) in the CBI field. Oregon State (12-17, ranked 114 in Sagarin) in CBI field.
Hat Tip: Brian Soebbing
Labels: college basketball, NCAA; college sports
Monday, March 16, 2009
Vivid Seats, for the NBA Playoffs
The 2009 NBA playoffs are fast approaching and anticipation is building? Will we see a repeat of last year’s classic Celtic-Lakers series? Or will LeBron and the Cavaliers dethrone the Celtics in the Eastern Conference Finals, perhaps? If you’re looking for 2009 NBA playoff tickets pay a visit to Vivid Seats, a leader among ticket brokers for nationwide sporting events.
The Sports Economist thanks VividSeats.com for their support.
Labels: vivid seats
Friday, March 13, 2009
Excess procreation
Here is the story of Travis Henry, running back, who is apparently a near perfect example of an infinite discount rate:
Travis Henry was rattling off his children’s ages, which range from 3 to 11. He paused and took a breath before finishing.Henry's coke habit is probably the reason that Denver released him from a $25 million contract. Lord help his soul.
This was no simple task. Henry, 30, a former N.F.L. running back who played for three teams from 2001 to 2007, has nine children — each by a different mother, some born as closely as a few months apart.
Reports of Henry’s prolific procreating, generated by child-support disputes, have highlighted how futile the N.F.L.’s attempts can be at educating its players about making wise choices. The disputes have even eclipsed the attention he received after he was indicted on charges of cocaine trafficking.
“They’ve got my blood; I’ve got to deal with it,” Henry said of fiscal responsibilities to his children. He spoke by telephone from his Denver residence, where he was under house arrest until recently for the drug matter.
Henry had just returned from Atlanta, where a judge showed little sympathy for his predicament during a hearing and declined to lower monthly payments from $3,000 for a 4-year-old son.
Labels: foolishness
Thursday, March 12, 2009
Sports Marketing
This article is about a talk given by CEO of Bank of America Ken Lewis, to a group at Boston College. Most of it is about bank solvency, the TARP, etc. From our perspective, the stunning thing in the article is the following claim:
Makes you wonder if one can trust anything a banker says these days...
The cynic in me wonders if that sort of profit calculation is what left Bank of America with a treasure chest full of toxic assets. The slightly less cynical view is that, if sponsorships are so darn profitable, a) why didn't the Mets get even more out of the naming rights to Citi Field, and b) why is there so much worry about the threat of businesses not renewing their sponsorship deals?Lewis also addressed bank marketing activities involving sports.
“I’ll admit that it’s easy to be skeptical about the business value of multimillion dollar marketing contracts with sports teams,” Lewis said. “And, obviously, there are lots of business executives who just really enjoy having access to teams and athletes.”
Lewis said he’d rather spend time in the mountains with his wife.
Nevertheless, he said for every dollar the bank spends in sports marketing, it gets $10 in revenue and $3 in profit.
Makes you wonder if one can trust anything a banker says these days...
Labels: sponsorship
Wednesday, March 11, 2009
A Report From the Cutting Edge
This just in: remember that image of baseball front office types as slow-witted dinosaurs who had to be dragged kicking and screaming into the twentieth century by Michael Lewis? Forget about that - MLB has jumped right onto this newfangled analysis bandwagon. According to a recent Bloomberg article, the Cleveland Indians have developed a brand-spanking new cutting edge ticket pricing system. Compared to other MLB clubs, who may be pricing tickets after consulting the Oracle at Delphi and examining pigeon entrails for all we know, the Tribe hired a consultant to statistically analyze their past three years of attendance data. Based on this cutting edge analysis, the Tribe "learned that fireworks after a game draw an additional 4,000 fans; every one-degree temperature drop below 70 Fahrenheit costs them 300; and when the New York Yankees come to town, attendance jumps 11,000." If this article is to be believed, the Indians are the only team in MLB doing this sort of analysis of attendance.
Among the other fascinating details uncovered by this cutting edge statistical analysis include that "...when children are on summer break, attendance increases 1,200; if rain is in the forecast, it falls 2,200; a bobblehead-doll giveaway brings in 4,700 people..." It's too bad that nobody in the Indian's front office thought to read "Does Bat Day Make Cents?: The Effect of Promotions on the Demand for Baseball" by Mark McDonald and Dan Rascher (which was published in the Journal of Sport Management almost ten years ago), because they could have saved the consulting fee. Most of that information is in Mark and Dan's paper.
Hat tip to Bryan Goodall.
Among the other fascinating details uncovered by this cutting edge statistical analysis include that "...when children are on summer break, attendance increases 1,200; if rain is in the forecast, it falls 2,200; a bobblehead-doll giveaway brings in 4,700 people..." It's too bad that nobody in the Indian's front office thought to read "Does Bat Day Make Cents?: The Effect of Promotions on the Demand for Baseball" by Mark McDonald and Dan Rascher (which was published in the Journal of Sport Management almost ten years ago), because they could have saved the consulting fee. Most of that information is in Mark and Dan's paper.
Hat tip to Bryan Goodall.
Labels: attendance, Major League Baseball, ticket pricing
Two pieces worth noting
Both are from the newly sports-minded WSJ.
First, in recent years, English teams have been getting the upper hand over their Italian counterparts, a reversal from prior decades. Why is this? My own answer is that "catenaccio," the Italian style of playing, is a form of implicit collusion. The pace is slow and defensive-minded. It is failing in an era in which skill and pace are increasingly prevalent on the pitch. Beckham is at AC Milan now because that is where he has a comparative advantage in the twilight of his career, as he has lost a step or two in the past decade. This WSJ story, "Why Can't Italy Beat England in Soccer?" touches on this briefly, and covers other interesting angles on the issue.
Second, here's a paper "Interracial Workplace Cooperation: Evidence from the NBA," discussed in the WSJ's Real Time Economics Blog. The claim: assists in the NBA are race-neutral. Surely work a look for some of our readers.
First, in recent years, English teams have been getting the upper hand over their Italian counterparts, a reversal from prior decades. Why is this? My own answer is that "catenaccio," the Italian style of playing, is a form of implicit collusion. The pace is slow and defensive-minded. It is failing in an era in which skill and pace are increasingly prevalent on the pitch. Beckham is at AC Milan now because that is where he has a comparative advantage in the twilight of his career, as he has lost a step or two in the past decade. This WSJ story, "Why Can't Italy Beat England in Soccer?" touches on this briefly, and covers other interesting angles on the issue.
Second, here's a paper "Interracial Workplace Cooperation: Evidence from the NBA," discussed in the WSJ's Real Time Economics Blog. The claim: assists in the NBA are race-neutral. Surely work a look for some of our readers.
Labels: discrimination, NBA, soccer
Monday, March 09, 2009
Winless Washington Seeks $150 Million
Husky stadium is old and renovation is in the cards. But $300 million is a load of money to spend, especially for a winless, directionless program. So the UW is asking for $150m in "tourist tax" funding from the state. Perhaps the basketball team's first outright Pac 10 Championship casts a warm glow over the proposal?
In the Huskies' favor -- at least from the perspective of getting legislation passed -- they are proposing an extension of a tax that is set to expire in 2014, and that most locals don't pay. The tax is on rental cars and hotel rooms, and is directed towards paying off the public debt incurred in building Seattle's pro baseball and football stadiums.
But the loss of the Sonics to Oklahoma over the issue of funding for a new Arena suggests that Washington voters have had their fill of financing sports palaces, at least for a while. With the state of Washington facing a $6 billion deficit, appetite for this tax-financed expenditure must surely be limited, especially among that chunk of the state that call themselves Cougars.
An economic impact analysis of Husky Sports is here. UW's pitch for the subsidy is here. The university notes that "Most of the public funding we are requesting would come from taxes paid by tourists visiting King County, so very little of the burden would fall on Washington state residents. Also, we believe some taxpayer investment in Husky Stadium is important for helping it continue to serve as an asset for the general public, not just the UW." But as the impact study notes, 74% of attendance at Husky sporting events is local. Hence, this is a simple cost-shifting move of the traditional pork-barrel variety. As a Husky myself, this is really kind of shameful.
In the Huskies' favor -- at least from the perspective of getting legislation passed -- they are proposing an extension of a tax that is set to expire in 2014, and that most locals don't pay. The tax is on rental cars and hotel rooms, and is directed towards paying off the public debt incurred in building Seattle's pro baseball and football stadiums.
But the loss of the Sonics to Oklahoma over the issue of funding for a new Arena suggests that Washington voters have had their fill of financing sports palaces, at least for a while. With the state of Washington facing a $6 billion deficit, appetite for this tax-financed expenditure must surely be limited, especially among that chunk of the state that call themselves Cougars.
An economic impact analysis of Husky Sports is here. UW's pitch for the subsidy is here. The university notes that "Most of the public funding we are requesting would come from taxes paid by tourists visiting King County, so very little of the burden would fall on Washington state residents. Also, we believe some taxpayer investment in Husky Stadium is important for helping it continue to serve as an asset for the general public, not just the UW." But as the impact study notes, 74% of attendance at Husky sporting events is local. Hence, this is a simple cost-shifting move of the traditional pork-barrel variety. As a Husky myself, this is really kind of shameful.
Labels: college football, public funding, stadium renovations
Sunday, March 08, 2009
College Basketball Referee Compensation
John Feinstein has an interesting column in today's Washington Post about David Hall, a college basketball referee. Sports officiating, even at the elite level, is a part-time job. The seasonal nature of sports contributes to this situation -- it was not that long ago that professional athletes in the NFL, NBA, MLB and NHL worked off-season jobs -- as well as the scheduling patterns in sports like football where games are played primarily on weekends.
But conditions in this labor market appear to be changing. Hall, and some other college basketball referees, are now able to make a full time living as referees. According to the article, the BCS conferences now pay as much as $2,000 per game, plus first class airfare and other travel expenses. Hall works aboout 100 games per college basketball season. You can do the math to figure out an estimate of his before tax compensation. He left his day job at a broadcase software firm a few years ago.
The column contains a couple of interesting economic tidbits. First, as we would expect, the non-BCS conferences have had to increase their compensation for referees. Second, again as we would expect, this switch from part-time to full-time employment seems to have led to an increase in the quality of officiating, and an increase in the demand for the services of the full time officials. According to Feinstein:
But conditions in this labor market appear to be changing. Hall, and some other college basketball referees, are now able to make a full time living as referees. According to the article, the BCS conferences now pay as much as $2,000 per game, plus first class airfare and other travel expenses. Hall works aboout 100 games per college basketball season. You can do the math to figure out an estimate of his before tax compensation. He left his day job at a broadcase software firm a few years ago.
The column contains a couple of interesting economic tidbits. First, as we would expect, the non-BCS conferences have had to increase their compensation for referees. Second, again as we would expect, this switch from part-time to full-time employment seems to have led to an increase in the quality of officiating, and an increase in the demand for the services of the full time officials. According to Feinstein:
Guys such as Hall and East Coast officials Jim Burr, Tim Higgins and Mike Kitts (among others) are in so much demand these days that the second-tier leagues have taken to scheduling more games on Tuesdays and Thursdays in order to get them to work.There's a lot of interesting economics going on here. For example, the implication about the relative quality of officiating has interesting consequences. The people who organize basketball contests appear to face heterogeneity in referee labor inputs and a quality-price trade off in that labor market. The move to full-time referees -- specialization -- and the associated increase in compensation, is a market-based solution to this particular problem. I wonder how bad the information asymmetries are in the market for college basketball referees? (Feel free to insert your own Tim Donaghy comment here).
"It has gotten to the point where you schedule with referees in mind," said Doug Elgin, the commissioner of the Missouri Valley. "The good news is we can get those guys on their off nights from the BCS leagues. The bad news is we have to pay them BCS prices. Obviously we think it's worth it."
Labels: compensation, NCAA; college sports, referees
Thursday, March 05, 2009
Sports Franchises in Bankruptcy
A few weeks ago there was a discussion in the comments about the possibility that some professional sports teams might go bankrupt in the current economic turmoil. As a follow-up, here is a list of all the North American professional sports teams in the "Big 4" leagues (NBA, NFL, MLB, NHL) that have filed for bankruptcy protection in the past 30 years:
The dates of these filings are not strongly related to business cycle downturns. The June 1975 filing by the Penguins took place two months after the March 1975 trough (identified by the NBER Business Cycle Dating Committee) and the Del Baggio filing was during the current downturn. The rest took place during expansions. Only one of these franchises, the Cleveland Barons, did not emerge from bankruptcy. In two cases, it was minority owners that were bankrupt.
It's pretty clear that we have not yet reached the bottom of the current downturn. Based on past events, if a North American pro sports team is going to file for bankruptcy protection under Chapter XI in the near future, it will probably be a franchise in the NHL, and that franchise is unlikely to disappear. I have not been following the events on the other side of the Atlantic recently, but I would guess that things could be bad for football clubs in the top European leagues.
Hat tip to Professor Vic for doing the leg work for this post.
- The Pittsburgh Penguins Partners, who owned 100% of the Pens, filed for Chapter XI protection on June 13th, 1975.
- The Cleveland Barons, an NHL franchise that started out as the California Golden Seals in 1967 and moved to Cleveland in 1976, were merged with the Minnesota North Stars, who were also having financial problems, in 1978.
- Bruce McNall, who owned 28% of the Los Angeles Kings, filed for Chapter XI protection on May 12th, 1995
- The Pittsburgh Penguins, then owned by a group headed by Roger Marino, filed for Chapter XI protection on October 13th, 1998
- In early January 2003, the Ottawa Senators, who listed debts of $166.2 million, including $50.7 million to Covanta Energy Corp., $40 million to the Canadian Imperial Bank of Commerce, $20 million to FleetBoston Financial Corp., and $14.2 million to the NHL, filed for bankruptcy protection
- A few days later, on January 13th 2003, the Buffalo Sabres filed for Chapter XI protection, listing $206 million in debt to its 40 largest creditors.
- On June 6th, 2008, William "Boots" Del Biaggio, who owned 20% of the Nashville Predators, filed for bankruptcy.
The dates of these filings are not strongly related to business cycle downturns. The June 1975 filing by the Penguins took place two months after the March 1975 trough (identified by the NBER Business Cycle Dating Committee) and the Del Baggio filing was during the current downturn. The rest took place during expansions. Only one of these franchises, the Cleveland Barons, did not emerge from bankruptcy. In two cases, it was minority owners that were bankrupt.
It's pretty clear that we have not yet reached the bottom of the current downturn. Based on past events, if a North American pro sports team is going to file for bankruptcy protection under Chapter XI in the near future, it will probably be a franchise in the NHL, and that franchise is unlikely to disappear. I have not been following the events on the other side of the Atlantic recently, but I would guess that things could be bad for football clubs in the top European leagues.
Hat tip to Professor Vic for doing the leg work for this post.
Tuesday, March 03, 2009
The Sports Page Comes to the WSJ
The WSJ unveiled its sports page today. The lead article is an interesting one on incentives, or the lack of incentives in today's NBA:
More seriously, I take issue with the perspective of the article. College football is interesting and attracts fans year after year, despite that fact that 90% of the teams that participate have a minuscule chance at winning the BCS Championship. No doubt, the article is correct in that the financial incentive to improve has diminished. But the first order impact is that the financial cost of competing will decline. The sporting aspect of training, strategizing, and improving is no less diminished by the financial crisis. To be sure, general managers must be wary of the conditions in the aggregate economy -- the article is correct on that point. But the compelling aspect of sport lies not in player contracts, but in competition on the court. That should not change, and teams that recognize this better than others will increase their chances of improving, and perhaps competing for the title, this season and next.
As for the WSJ's addition of a sports page, I'm intrigued. But sports sections have been a staple of local newspapers for decades, and they haven't saved newspapers from financial failure. My hunch is that new media competition in sports has been as strong as in any dimension of the news business. Indeed, the loss of newspaper circulation may be disproportionately due to ESPN.com, MLB.com, Tigernet, etc. Having said that, the Journal has a different take on things, and the new sports section is certainly welcome in this corner of fandom!
Beyond the Los Angeles Lakers, Boston Celtics, Cleveland Cavaliers and Orlando Magic -- all of whom have won at least 70% of their games -- only the San Antonio Spurs have better than a 10% chance to win the NBA title, according to lines offered by Las Vegas oddsmakers. Four teams are on track to lose at least 75% of their games, which hasn't happened in 11 years.Wake me up when the Finals reach game 5....For the first time in NBA history, team owners, executives, and fans in numerous markets say they have resigned themselves to the idea that their teams are not going to be competitive this season and that, given the state of the economy, they could not make the sorts of expensive moves that would help them improve. "We all want to win, but we have to be aware of the uncertainty of our future revenue," said Dallas Mavericks owner Mark Cuban.
Beyond the obvious disappointment for fans, what's most troubling about this situation is that for the first time in the long history of North American professional sports, the majority of the teams in one league have no financial incentive to improve. Most will be better off financially if they do nothing, and in many cases, will fare even better if they make personnel moves that are certain to make them worse.
Adding to the trouble is the fact that next year, an unprecedented number of the league's best and most desirable players will become free agents -- a group that includes young superstars LeBron James, Dwyane Wade, Chris Bosh and Amar'e Stoudamire.
More seriously, I take issue with the perspective of the article. College football is interesting and attracts fans year after year, despite that fact that 90% of the teams that participate have a minuscule chance at winning the BCS Championship. No doubt, the article is correct in that the financial incentive to improve has diminished. But the first order impact is that the financial cost of competing will decline. The sporting aspect of training, strategizing, and improving is no less diminished by the financial crisis. To be sure, general managers must be wary of the conditions in the aggregate economy -- the article is correct on that point. But the compelling aspect of sport lies not in player contracts, but in competition on the court. That should not change, and teams that recognize this better than others will increase their chances of improving, and perhaps competing for the title, this season and next.
As for the WSJ's addition of a sports page, I'm intrigued. But sports sections have been a staple of local newspapers for decades, and they haven't saved newspapers from financial failure. My hunch is that new media competition in sports has been as strong as in any dimension of the news business. Indeed, the loss of newspaper circulation may be disproportionately due to ESPN.com, MLB.com, Tigernet, etc. Having said that, the Journal has a different take on things, and the new sports section is certainly welcome in this corner of fandom!
Labels: NBA, sports and the economy
Monday, March 02, 2009
If It's Broke, Why Not Fix It?
While spending the fall semester on the West Coast, I attended the MPSF Water Polo championships. (MPSF stands for Mountain Pacific Sports Federation -- a "cross-conference" conference of schools that play most sports in another association such as the PAC10, West Coast, or Big West.) I had seen water polo during the Olympics but never in person. Although the competition was very impressive in regard to the the athleticism and endurance of the players, it suffered from a terrible incentive problem leading to a foul, literally, every 5-10 seconds. Fouls near the goal are so costly that they are rarely whistled and extremely physical play from the defenders is allowed, while fouls away from the goal are not costly enough leading to huge numbers of stoppages. Call it "Soccer++" (See Modest & Not So Modest Proposals).
Why has something so glaring not been addressed? The selection of on-the-field rules is a relatively unplowed field in sports econ. We usually just assert that rules are chosen to maximize profits (or revenues). That assertion is easy enough to make but is it accurate? Are there a bunch of existing customers loyal to a given set of rules making changes likely to be unprofitable or is it something else such as league "political economy"? The NHL finally ditched the Red Line in is application of the "2-line pass" only after such an idea had long been floated. It's hard to believe that a lot of fans were tied at the hip to the Red-line, 2-line pass rule. Where rules changes require a supermajority, relatively risk averse owners are the deciding votes and may be the choke point for new ideas. Maybe it is TV contracts with relatively short lengths that make the networks unwilling to gamble on payoffs that might build over the longer term. A bunch of related questions crop up. Do leagues experiment at about the same rate or different rates, and if different, why? My guess is that sports leagues, like industries differ considerably in their willingness to experiment with altered play formats.
The biggest head scratchers for me are sports, such as water polo or soccer, where the incentive problems are glaring or sports lacking in popularity. Why not experiment? As I have written before, why doesn't the NBA try different, shorter playoff format?
Why has something so glaring not been addressed? The selection of on-the-field rules is a relatively unplowed field in sports econ. We usually just assert that rules are chosen to maximize profits (or revenues). That assertion is easy enough to make but is it accurate? Are there a bunch of existing customers loyal to a given set of rules making changes likely to be unprofitable or is it something else such as league "political economy"? The NHL finally ditched the Red Line in is application of the "2-line pass" only after such an idea had long been floated. It's hard to believe that a lot of fans were tied at the hip to the Red-line, 2-line pass rule. Where rules changes require a supermajority, relatively risk averse owners are the deciding votes and may be the choke point for new ideas. Maybe it is TV contracts with relatively short lengths that make the networks unwilling to gamble on payoffs that might build over the longer term. A bunch of related questions crop up. Do leagues experiment at about the same rate or different rates, and if different, why? My guess is that sports leagues, like industries differ considerably in their willingness to experiment with altered play formats.
The biggest head scratchers for me are sports, such as water polo or soccer, where the incentive problems are glaring or sports lacking in popularity. Why not experiment? As I have written before, why doesn't the NBA try different, shorter playoff format?
