The Sports Economist

Bethpage, The Rest of the Story

2009-06-25T13:19:00.003-04:00

The mainstream media, much of it east-coast centered such as Connecticut-based ESPN, droned on and on about how great venue Bethpage is -- "muni," "bringing game to the masses," "spirited fans," ... In a Golf Channel segment, the ever preachy John Feinstein practically bowed down to USGA Executive Director, David Fey, for being "a liberal in a conservative world" and bringing the Open to Bethpage.

Amid the praise, this Newsday article (and related comments) speak to ugly problems with the Long Island choice. Here's one post from Newsday's Topix Forum:

The behavior of many attendees-can't call them golf fans due to their ignorant behavior-is a sad tribute to a once great sports city. NY is now the home of drunks, thugs, and crude idiots, trying to make a statement about their stupidity and crudeness. I hope the USGA has the sense to never return to this once great venue, that has been spoiled by the IDIOTS OF NEW YORK. YOUSE GUYS GOT THE METS AND THAT'S WHAT YOU DESERVE. MEDIOCRITY PERSONIFIED.

According to attendees, the level of crudeness dipped so low as large groups giving golfer Fred Funk a not-so-nice but closely-spelled pseudonym. Sure, the players "laugh off" the "rowdiness" or refer to the "excitement" and "electricity" of the place, but what else can they do. To speak candidly would invite becoming the mob's whipping boy.

The venue, from a viewing standpoint, also had its drawbacks, at least for those interested in golf more than the outdoor bar scene. One regular attendee of Opens rated it as a poor site because of very few decent views from ground-level rather than grandstands.

Beyond the boorish fan behavior or sightlines, the site selection is not quite as broadminded as John Feinstein's egalitarian sensibilities imply, at least if geography matters. The USGA has held 4 out of the last 10 and 9 out of the last 30 Opens in the shadow of NYC. Fifteen out of the last 30 have been played north and east of a line extending from Pittsburgh to Philadelphia to NYC (See Wiki's listing). Apparently, to the USGA and the likes of Feinstein, the Appalachains still form the frontier.

One econ angle is a point I have made before -- the media are not merely an informational pass-through. See Stadium Promises & Media Bias by Skip, Needed Perspective on Referee Scandal by Dave Berri, or China -- The New Japan by Skip for examples.

The Sports Economist: Saving or Destroying Civilization?

2009-06-23T15:11:00.004-04:00

In a recent ESPN The Magazine article, Bill Simmons laments the loss of reporters as middlemen between players and the public.

Today's technology means athletes don't need a middleman anymore. You know how you won't hear a peep out of Jennifer Aniston for a year, then she'll have a movie to promote and you can't get away from her? She shows up when she wants to show up, always on her terms. It's no different from Tiger's making himself "available" every summer when his video game is released. Okay, he's a superstar; he can pull that crap. But what about the other guys? I see a day when the following sequence will be routine: Player demands trade on blog; team obliges and announces deal on Twitter; player thanks old fans, takes shots at old team and gushes about new team on Facebook. We will not need anyone to report this, just someone to recap it. Preferably with links.

Ironically, a post at Chef Diesel compains about the "Bill Simmons Syndrome" aspect of this disintermediation (or remediation) trend -- the rise of blogdom as a source of reporting and analysis. Although the author likes Simmons, he dislikes the amateurish imitators that have arisen alongside Simmons' clever and insightful writings.

I happened to have a conversation with sports-inclined journalism major in one of my classes this spring about this topic that stirred some musings of my own. Since this is a blog and not a book, I'll keep my observations to short bytes (I guess that's part of the "story" in itself):

1. Without putting guns to people's heads (and even then), information is not easily controlled. Skip makes this point in his post on dis- (or re-) intermediation in the context of league as media outlet -- league or player spin mattered little in the case of Michael Vick or Pacman Jones.

2. "Access" has benefits (David Halberstam's book as Simmons cites) but also costs. Being "on the inside" often comes with the price tag of loyalties and undisclosed information. At times, the most "inside" reporters operate as little more than PR people for the team.

3. Outlets like TSE serve as both subsitutes and complements to traditional media sources. The TSE in no way substitutes for daily analysis of yesterday's game. A lot of blogdom does try to do that -- for better or worse. It does substitute, to some extent, for more general "analysis" of the sports worlds, both in and outside the lines." Instead of relying on individuals with journalism degrees to analyze the data or consider broader questions, however, the TSE or other similar sites rely on individuals trained in the content and skills of a subject such as economics, statistics, finance, and so on.

4. The squeezing of the traditional middleman service helps explain why ESPN and other media outlets have shifted, in their SportCenter type shows, from voice-overs of exciting highlights to more reliance on more bombastic viewpoints. As Chef Diesel puts it
The once humble network has become a media giant that is more concerned with being hip and delivering witty punch lines than sharing scores, basic news stories and video highlights. Sportscenter, the flagship show of the station, has evolved into a horrible combination of a bad SNL audition and Access Hollywood.

5. We are still in a long run transition to some different media model. After my parents' generation is gone, who will buy newspapers? If they are in financial trouble now, what then? Clearly, newspapers are already making the transition to more of a internet/blogdom type setup, where this ends I'm not sure. In this world, the TSE functions a bit like the editorial pages of the WSJ or NYT -- a place where people with deep content knowledge express facts and opinions.

6. In the new media world, "journalists" as in journalism majors, probably will need one of two skills: either deep content knowledge to help organize and express knowledge and trends (e.g. Walter Mossberg at the WSJ) or a very entertaining/engaging schtik or writing style that carves out a place like a Bill Simmons.

Postscript: Through the Chef Diesel site, I discovered a couple of clever satires of sports journalism that TSE readers might enjoy if they haven't already: Kissing Suzy Kolber and Deadspin.

Location, Location, Location

2009-06-23T14:01:00.003-04:00

The recent sale of the Montreal Canadiens just goes to prove that old adage that the three most important things in business are 1. Location, 2. Location, and 3. Location.

Based on recent offers for NHL teams, a team in Montreal is worth $550 million to the recent buyers, the Molson family. A team in Hamilton, Ontario is worth $212.5 million to spurned suitor Jim Balsillie. And a team in Phoenix is worth "a substantial sum below Balsillie's offer."

Obviously there are other factors besides home city in determining the price of a franchise, but the fact that hockey team with the clear rights to play in Montreal sells for, perhaps, 5 times what a very similar product sells for in Phoenix is telling.

The NFL and Gambling

2009-06-16T00:12:00.001-04:00

In the WSJ here. The article suggests that the NFL's stance in opposition to gambling is hypocritical and motivated by its appetite for public subsidy. John Vrooman of Vanderbilt states that $17b in public subsidy for NFL stadiums has been obtained in the past two decades. Makes sense to me.

Real Madrid and Sports Econ 101

2009-06-13T18:25:00.003-04:00

So what do professional sports teams sell? Rivalry of course, and to have rivalry you have to have a rival. Real Madrid have broken the bank (how did they manage to find one not already broken?) this week buying Kaka, Ronaldo and according to today's news story Villa , blowing a total of around €200 million, but who is all this talent going to play against? OK, two games against Barcelona will be spectacular, but the other 18 teams in the Spanish League are minnows. Champions League, you say? Six group stage games will probably only include one serious opponent, then they have six more games before the Final (God forbid they should get unlucky and lose, but at least one of these opponents will also be a minnow. So, all that money for at most nine games that count. This is why the most interesting outcome of this week's excitement is that President Perez is now talking about reviving plans for a proper European Superleague that would give them enough games to play. This idea, whose pedigree goes back to the 1980s, was dead in the water a year ago because of the dominance of the Premier League. But now that big stars are being lured away, the EPL clubs have a motive to come to the table.

I think there is an inexorable logic to this: the biggest stars in soccer play for Real, Barcelona, AC Milan, Juventus, Inter, Bayern Munich, Man Utd, Chelsea, Liverpool and Arsenal. This makes for 90 top flight games a season (home and away), but because they are spread across four leagues and only occasionally meet in the Champions League in a typical season they play less than 30 games among themselves. A proper Superleague would generate huge interest and unlock a great deal of value for owners. But hey, I could be wrong; after all, I've always thought the same thing about the Conference system in American college football...

Is Real Madrid playing the "too big to fail" game?

2009-06-12T10:06:00.003-04:00

That's what co-blogger Stefan Szymanski implies in this article (towards the end): "Real’s really too big to disappear, whatever debt they can incur... No bank would ever be allowed to be the bank that sank Real Madrid." Interesting... I don't know what La Liga's rules may be with regard to points deduction for clubs going in to bankruptcy. But even if they did, their history would likely be sufficient to restore them to the top, regardless. Certainly, foreign creditors wouldn't hesitate to pull the plug on Real if that was in their (the creditors') interest.

Another thought-provoking quote in the article is the opinion of Simon Chadwick:

"Real Madrid is effectively injecting inflation into the transfer market," Simon Chadwick, a professor at England’s Coventry University, said in an interview. "What we’re going to see is transfer-fee inflation over the next few months up to the start of the season. That’s a serious issue, because it’s something that (soccer) really can’t afford when many clubs have major financial concerns."

While AC Milan and Manchester United have certainly benefited from Real's profligacy, I would be surprised if this is sufficient pump-priming to inflate transfer fees this summer. Manchester City's oil-fueled ambitions may be a factor though. Time will tell.

Noll: Coyotes to Hamilton in 2010

2009-06-12T07:30:00.004-04:00

The focus of this story is on Roger Noll's view of the Phoenix Coyotes bankruptcy, and the likelihood that Jim Balsillie's offer to purchase the team and move it to Hamilton, CA will emerge as the final outcome. It's a discussion worth reading in its entirety. Here's a snip:

All parties in the Coyotes court challenge are waiting for a ruling from Judge Redfield T. Baum on a process for determining what additional amounts Balsillie may be expected to face on top of his $212.5-million purchase fee in relocation/indemnification costs. Noll believes the figure could be $60 million, but there has been some suggestions it could be as much as $400 million, which would include compensation for the Maple Leafs and Buffalo Sabres.

Baum has indicated he expects the relocation fee to be "reasonable and fair."

Noll believes that Balsillie's lucrative offer will be the only one on the table on June 22 when the bankruptcy court is set to determine who the bankrupt franchise should be sold to. The NHL has stated there are four other interested groups, including the Toronto Argonaut owners, who are considering making bids that would keep the team in Phoenix.

"If (Balsillie) really is the only bidder, he is going to get the team. And it's going to be in Hamilton," Noll said.

The notion of a $400m relocation fee -- in the NHL? in this economic environment? -- strikes me as patently ludicrous, but who knows, the NHL could have strong contractual language protecting quasi-exclusive territories. Does anyone know where the $400m figure comes from?

Cool video on point differences in the NBA

2009-06-11T11:04:00.004-04:00

At the end of regulation, tied scores are about twice as frequent as what you would expect from a strategy-free, i.i.d. scoring model. Using data from the last 13 years of NBA games, Cheap talk (a blog by two professors at Northwestern) presents a video which depicts how the spike emerges at 0 in the point difference distribution, over the last 40 seconds of the 4th quarter. A similar video shows that no such spike emerges at halftime -- a great visual demonstration that strategy matters.

Thanks to Patrick Warren for the link.

2009 ticket demand in Chicago

2009-06-11T09:14:00.003-04:00

From UC's Casey Mulligan:

Gloomy Economic Indicators in Chicago

Two real time crude sports-based indicators of economic activity in Chicago look bad:

(1) My ebay auction for 4 tickets to the (usually wildly popular) Sox @ Cubs game next week has zero bids, even though the price starts at face value.

(2) After my begging them for 10 years in vain to have my season ticket location improved, the Chicago Bulls asked me multiple times today if I would like some better seats next year. I am thrilled to be asked (I said "yes"), but these circumstance must indicate that ticket demand is seriously depressed.

That's the entire post, but do go to Casey's blog to see what he has to say about Keynes.

Real Madrid sets record transfer fee

2009-06-11T07:59:00.003-04:00

The BBC reports that Manchester United has accepted an offer of £80 m ($131m US) from Real Madrid for the services of Ronaldo. This is on the heels of Kaka moving to Madrid from AC Milan for a reported £56m earlier this week. The combined annual wage bill of Kaka and Ronaldo will top £25m as well. The record spending seems incongruous to me, with the Spanish economy in shambles (the unemployment rate is over 17%, twice the EU average) and one major Spanish club, Valencia on the verge of bankruptcy. Regardless, Next season's clashes with Barcelona in El Clasico should be interesting.

Update: CNN's headline to its report is "Real Madrid defy economic gloom to buy success." There is interesting discussion and speculation on whether they'll receive an immediate return on their investment.

The Short Porch has Gotten Shorter in the Bronx

2009-06-10T09:17:00.003-04:00

What has caused the home run derby at the new Yankee Stadium? Is it the new ballpark? Is it changes in the weather? Is it poor pitching? The folks at Accuweather.com have done a little analysis on the right field wall and have discovered something interesting to tell part of the story. Because of a scoreboard in the right field wall, the new Yankee Stadium's right field wall is not as curved as the old stadium's right field wall, resulting in a shorter short porch, even shorter than the famed right field wall in the house that Ruth built. On average, according to the good folks at Accuweather, the right field wall is between 4 and 5 feet shorter, and up to 9 feet shorter in right center. Not only that, but the wall itself is 2 feet shorter in height. Here's the write-up at Accuweather.com. HT to JC Bradbury.

9th grader offered scholarship...

2009-06-10T08:29:00.004-04:00

to study, errr..., play football at the University of South Carolina. If coach Spurrier is there in four years time (he's currently 64 years old) I'll be surprised. The recruiting game is unravelling, folks! Al Roth would be amused. Ironically former SC PhD student (and former basketball player) Scott Kelly studied recruiting in NCAA basketball from a Rothian perspective, and has had discussions with the coaches' association on adopting market design principles to reduce the inefficiencies spawned by the recruiting process. Everyone one would be much better off, I think, if college coaches spent more time with players on the practice field, instead of hitting the road to recruit 9th and 10th graders.

Judge Sotomayor & Sports Labor Relations

2009-06-04T16:59:00.004-04:00

Joel Maxcy, Coordinator of the University of Georgia's Sport Management Programs, has started a blog, Sports Labor Relations. In this post, Joel examines Judge Sotomayor's decision in the Clarett case in light of the precedents set in the well known Mackey vs. NFL case. His careful analysis strengthens my belief that Sotomayor's decision steamrolled useful and efficient legal precedent in favor of a union-friendly finding.

Economics of Sportsmanship

2009-06-03T11:05:00.000-04:00

Yahoo! Sports' Adrian Wojnarowski blasted LeBron James for his behavior after the Magic series and his "explanation" of it the next day:

I’m a winner, King James proclaimed. So, there you go. That’s his reason for rushing out of the conference finals without so much as a nod to Dwight Howard (notes) and the Orlando Magic. That’s his reason for marching to the bus and letting the Cleveland Cavaliers’ spare parts take care of his responsibilities in the interview room.
Funny, but James stayed on the court to make sure the Detroit Pistons and Atlanta Hawks paid respect to him. As it turns out, there’s one thing allowed to happen at the end of a playoff series: Everyone bows down and kisses the King’s ring. Only, LeBron doesn’t have a ring. He’s never won a game in the NBA Finals. So, yes, maybe they just have to kiss his feet.

It’s not being a poor sport or anything like that,” James said. No, nothing like that. Yes, James cares so much that it isn’t possible to be gracious and humbled. You know me, he told the reporters in Cleveland on Sunday. I’m a competitor. “If somebody beats you up, you’re not going to congratulate them,” James said. “It doesn’t make sense for me to go over and shake somebody’s hand.” Here’s the question: Who has the guts to tell him that he sounds like an immature, self-absorbed brat? Here’s the problem for the Cavaliers and James: No one.

As a fan, I mainly agree with Wojnarowski and find James' rationalization even more of a turn-off than his initial actions.

As an economist I'm intrigued by the widespread nature of sportsmanship standards. The exact threshold for good and bad sportsmanship differs across individuals and tends to be influenced by a variety of variables including the specific sport along with fan age, urban/rural, income, nationality, or ethnicity. Despite nuances across individuals, sportsmanship seems to be part of wider moral/ethical standards. Leagues codify some standards, assessing penalties for "unsportsmanlike" behavior such as fighting, excessive griping to the referee, or taunting of opponents. Many of the sportsmanship standards, however, exist outside of league rules. For example, trotting around the basis at a decent clip after a home run or shaking hands after games or series (in league rules in many youth leagues but not in pro leagues).

What useful purposes might such sportsmanship standards encourage? Sports competition at the most basic level requires cooperation between competitors ("Co-Opetition" to use the term coined in the Brandenburger-Nalebuff book) or "I'll take my ball and go home." Leagues sportsmanship rules and practices may help promote build some degree of goodwill and limit some destructive conflicts.

Why do fans care? It is harder to come up with a narrow, utilitarian explanation for fans. Here, it seems that a desire for "fair play" and "good sportsmanship" is connected to deep-seated moral/ethical outlooks -- the promotion of broad "civic virtues" such as as fairness, self-restraint, humility, awareness of others ...

Whatever the basis, a lot of fans are turned off by the chest-thumping, big celebrations of minor accomplishments, and petulance. Sports leagues indulge bad behavior at their own risk. I'm personally acquainted with many sports fans who no longer watch a particular pro league because of "unsportsmanlike" displays. Why do league reps (like David Stern in James' case) or some in the media defend bad displays of sportsmanship and even seem to encourage some of it as adding flavor to the games? The simplest explanations is that they view their wagon as closely hitched to the player or want to continue to have "access."

Cowboys Stadium, reviewed

2009-06-03T07:28:00.003-04:00

The new football palace in Arlington is reviewed by an architecture writer from Massachusetts, in the Dallas Morning News. Very interesting. Refers to "the new sports economics" when "new economics of stadium design" would be more appropriate, but that's ok.

The opening act is a George Strait concert this weekend, which seems appropriate. The place will be swingin' with big hats.

Yankees stadium deal a target

2009-06-02T12:16:00.003-04:00

Richard Sandomir reports on a case where a NY Assemblyman has a subpoena to obtain what seems like a gazillion documents from the Yankees, in order to ferret out the facts behind the recent stadium deal. At least the Yankees are making it seem like a gazillion documents, as they claim it would cost the state over $5 million - about a buck a page - to produce them. Heh - are these gold-plated documents, akin to the $2500 seats the Yankees were trying to sell earlier this year?

Post-season college baseball & economic impact

2009-06-02T10:10:00.004-04:00

This story from Tallahassee reports on the economic impact of hosting a regional and super-regional series in the NCAA baseball tournament. Like most media coverage on economic impact, the story is written as if the local dollars that are generated by the sporting event are significant. No doubt they are, for the businesses impacted. If I were selling Florida State t-shirts and ball caps I'd be delighted: sales at the Garnet and Gold Stores were up a reported $10,000 to $15,000 last weekend. Restaurant sales at a place named Po' Boys -- no doubt a favorite hangout for local sports fans -- were 20% ahead of normal.

As usual, however, the dismal scientist doesn't see that there is much to crow about in these figures. Some fans who bought a t-shirt at the regional are likely to wear it to next fall's football game. The purchases in an otherwise dull sporting period for FSU substitute from the much larger mass of purchases that stem from the crowds at home football games. Once again, the unseen is more difficult to detect than "the seen." The same goes for most of the po' boy sandwiches sold last weekend. Some of those dollars were not spent in Tallahassee grocery stores, Tallahassee restaurants more distant from the stadium, and locations in Florida from where some FSU fans traveled. Unseen, and hard to measure, but doubtless a significant offset.

The largest figure mentioned in the article is the $102,000 that FSU bid to get next weekend's super-regional (the bid for the last weekend's regional was $92,000). As stated by FSU's sports information director, any sales by the University over and above the bid are kept by FSU, and the NCAA collects the bid amount, if accepted. Now, if you are Florida State and interested in gaining national television exposure by competing, and winning in the NCAA championship, you will have to take into account the value of this exposure, and the fact that Arkansas, their competitor for the super-regional, is interested in the same thing. Competitive bidding should push bid prices to a point where the expected profit (inclusive of the value of exposure) in increasing the bid falls to zero. How much does that leave FSU?

The stadium at Florida States "seats" about 6500 (at some venues, staff, the grounds crew, and even the ballplayers are counted as those in attendance, so a hard count of actual paying customers is not easy to come by). Tickets are sold as both singles and as a block for the entire tournament. At Clemson's regional last weekend, the tournament block cost $70 for the seven scheduled games. (Note: Clemson also "seats" about 6500, and reported attendance of 6217 for Monday's championship contest, after two competitors, Alabama and Tennesee Tech had been eliminated. No doubt Alabama's fans were long gone by then.) Assuming a sell-out and comparable prices, gross ticket sales would be about $455,000. Subtract the NCAA's fee, the marginal costs of cleanup, staffing, groundskeeping, and umpiring, and a rough guesstimate is that FSU might have cleared between $200,000 and $300,000 on ticket sales. Add some additional profit from concessions, perhaps a bucks or two per attendee (as opposed to tickets sold, as FSU only played three games en route to their championship), and perhaps the larger figure is the closer to the truth.

The bottom line is that the NCAA collects a nice chunk of change for lending its brand to the sixteen regional and eight super-regional contests during this two week period: something on the order of $2.4 million. (TV revenue should be tacked on to this). The hosting schools, depending on ticket sales, might bring in enough net revenue to cover the costs of the baseball season, which in the past has not been a revenue-generating sport. The food and t-shirt sales are nice for a few local vendors, but small potatoes in the larger scheme of things.

Turning pro early, in Europe

2009-05-29T08:28:00.004-04:00

After two years at Clemson, Terrence Ogelsby will play basketball next year in Europe. A Florida player with NBA level talent, Nick Calathes is also leaving school after two years to play in Greece. These are the only two college players mentioned in this discussion (Frederick has completed his eligibility at South Carolina), but I expect this will become more common in the years ahead. Ogelsby's dad played in Europe, and Calathes is a native of Greece, so they are well enough informed to blaze the trail to Europe for underclassmen. As basketball institutions improve across the pond and information spreads, playing for a scholarship won't seem such a good deal alongside the opportunity to earn a few hundred grand, or more.

Institutions change slowly, but the improvement in world basketball is a long term trend that is plain as day. College basketball has imported top foreign talent for some time, but economic forces imply that the flow will reverse. I doubt college basketball will soon mirror college soccer (where the best talent flows to the money centers fairly early, and skips college), but that is the direction it is headed.

From the Archives: Judge Sotomayor's Decision in the Clarett Case

2009-05-27T11:49:00.006-04:00

In addition to her injunction which brought an end to the baseball strike of 1994 (on this, see Richard Sandomir's piece in the NYT today), Supreme Court nominee Sotomayor played a significant role in the recent Maurice Clarett case. Clarett, of course, was a college football star who was running out of chances in the NCAA, and sued the NFL to overturn the eligibility rules which precluded a sophomore from entering the draft.

Here's my commentary on Sotomayor's ruling at the time, along with a renewed link to the decision itself. TSE's old posts have lost their formatting over the years (nice one, blogger!) so I've copied the content in it's entirety below.

----------------------------------------------------------
Tuesday, May 25, 2004
3-0 to the NFL

The NFL won its appeal in the Clarett case. Greg Skidmore at the Sports Law Blog finds the decision satisfactory. I find it both illuminating and evasive.

Judge Sotomayor's decision references a number of cases upholding the exemption of restrictions in collective bargaining agreements from antitrust, both in sports and elsewhere. The discussion is authoritative and informative. It notes that the exemption does not apply when the restriction imposes harm on business competitors who are not party to the contract. This is not the case here: the harm is imposed on an prospective employee who is not party to the contract.

The court points out that CBAs encompass numerous issues, and that selecting one clause for antitrust scrutiny may upset the balance of compromises among employers and employees. It is not obvious to me that this concern should protect an anticompetitive restriction - simply address the issues without violating the law! Nevertheless the sanctity and primacy of collective bargaining to this court is readily apparent in the decision, making it clear that an antitrust challenge faces heavy going. The decision clearly implies - and the 2nd circuit has said this before in reference to the NBA draft - that if the NFL wants to cap salaries, the union can offset the negative effect on their wages by limiting the wages paid to future players in subsequent drafts. Prospective players are clearly harmed by this, but the restriction passes muster under the 2nd court's interpretation of the law.

The decision is evasive on two major counts. First, apart from mentioning the NFL's claim that the rule protects young players from physical harm, the decision wastes nary a sentence on the issue. The reason is clear - since labor law trumps antitrust, there is no need to judge the reasonableness of the restraint. Second, in announcing this in unabashed terms, the court tiptoes around the real issue here:

In the context of this collective bargaining relationship, the NFL and its players union can agree that an employee will not be hired or considered for employment for nearly any reason whatsoever [emphasis added] so long as they do not violate federal laws such as those prohibiting unfair labor practices ... or discrimination.

That the restriction is discriminatory is obvious. But youth is apparently not a protected class, unlike minorities or the elderly. I find this odd.

Not all courts allow collective bargaining as much latitude as the 2nd circuit. In the Mackey case, the "Rozelle rule" on free agent compensation was struck down by the eighth circuit. Following Supreme Court precedent, one of the tests applied was whether the restriction "primarily affects only the parties to the collective bargaining relationship." This test clearly conflicts with the approach of the 2nd circuit to labor problems. The decision simply notes that the approaches disagree, and not surprisingly, the decision in Clarett sticks to the precedent adhered to in prior cases in their circuit. An appeal to the Supreme Court might establish which approach they prefer, and thus clarify matters.

I'm not as enamored with labor law as Judge Sotomayor, and I'm not as pleased with the decision as Skidmore. By resting so completely on its "labor law trumps antitrust" basis, the appeals court ducked the most interesting questions in the case. Nevertheless, the decision is clearly exposited and informative, so it will go on the reading list for my sports economics class.
----------------------------------------------------------

Sonia Sotomayor's Connection to Sports

2009-05-26T09:49:00.005-04:00

President Obama is apparently going to nominate Sonia Sotomayor to the Supreme Court. But, you rightly say, what is the Sports Economics angle in this story? Judge Sotomayor was the judge who issued an injunction that said MLB teams could not impose a collective bargaining agreement nor use replacement players to start the 1995 season, effectively ending the 1994-95 MLB strike.

NFL First Rounders: Paid Too Much or Too Little?

2009-05-20T10:18:00.004-04:00

After the NFL draft, Joel Rose, a reporter from Marketplace asked me about the high salaries of first rounders and whether a rookie pay scale made sense. Here's the caption to the piece:

Backlash rising over NFL rookie inflation
Detroit Lions quarterback Matthew Stafford is slated to earn more than anyone in the NFL, a fact the commissioner says is "ridiculous." Joel Rose explores why the NFL pays more for its rookies compared to other sports leagues.

Rose echoes the widespread sentiment of reporters and bloggers (SI's Jim Trotter is an exception) with frequent comparisons of a few rookies to a some recognizable veterans who earn less. As always, there is some necessary accounting to do to really compare apples to apples, but that's not my objective here.

In my comments to him, I noted that top half first round salaries are very high. In many cases, these upper tier first rounders make 5 to 20 times more than second or third rounders. Other than very successful QBs, it is hard to imagine such large differences in their incremental contributions to winning in a sport where 11 guys are on the field at a time and 30 or so make significant contributions in a game. Gene Upshaw thought that these higher salaries only helped pull up salaries over time. However, one might contest that if the total player salary pool is a constant proportion of revenue.

However, because of widely varied roles and lack of measurables on performance for many positions, it is hard to get a handle on whether these big differences in salaries reflect top end rookie value or reflect a premium that they are somehow extracting at the cost of veteran players (particularly non-elite veterans with limited bargaining power). I decided to take a look at performance based on Hall of Fame and All-Pro slots held by different draft positions.

All-Pro Selections by Draft Round
	I	II	III	IV	Other
1970-90	33%	13%	11%	6%	37%
1991-05	36%	16%	10%	6%	32%

Hall of Fame Selections by Draft Round
	I	II	III	IV	IV
1970-90	51%	20%	7%	9%	13%

These figures, on their own, cannot prove or disprove a point of view on rookie salaries. They do show that, in spite of the uncertainties, first rounders possess a lot of playing value relative to others and do tend to have extraordinary careers with substantial frequency. (The data also suggest that below the second round, there is a huge amount of uncertainty: here's a related post.)

CBO Study on Tax Preferences for College Sports

2009-05-20T08:18:00.003-04:00

The Congressional Budget Office has released a study on the Tax Preferences for College Sports. The main findings:

Athletic departments in NCAA Division I schools derive a considerably larger share of their revenue from commercial activities than do other parts of the universities.

In the case of Division IA schools (a subset of schools in Division I that meet NCAA requirements for football programs), 60 percent to 80 percent of athletic departments’ revenue comes from activities that can be described as commercial. That proportion is seven to eight times that for the rest of the schools’ activities and programs, suggesting that their sports programs may have crossed the line from educational to commercial endeavors. Revenue from commercial activities accounts for a much smaller share of athletic department revenue (20 percent to 30 percent) for schools in the rest of Division I.

Nonetheless, removing the major tax preferences currently available to university athletic departments would be unlikely to significantly alter the nature of those programs or garner much tax revenue even if the sports programs were classified, for tax purposes, as engaging in unrelated commercial activity. As long as athletic departments remained a part of the larger nonprofit or public university, schools would have considerable opportunity to shift revenue, costs, or both between their taxed and untaxed sectors, rendering efforts to tax that unrelated income largely ineffective.

Congress has been looking in to the commercialization of intercollegiate athletics recently, which prompted the study. Sen. Charles Grassley is quoted in this story, whining about the problem and the study, presumably since it throws cold water on Congress' ambition to alter the nature of college sports by threatening to change their tax treatment. I think the CBO study (get it here) is a useful source of facts and analysis on the issue, with informative tables on revenue sources and estimated profitability of sports programs at the 164 D1 institutions. Recommended.

Tracking Changes in MLB Baseball Attendance

2009-05-16T11:21:00.000-04:00

Baseball-Reference.com has a handy page (HT to JC Bradbury) where they are tracking changes in MLB team attendance. It calculates overall attendance, per-game attendance, and comparisons between this year and last year. It also allows you to sort the data and it allows you to display the data in csv format for copying and pasting into your favorite spreadsheet.

As of yesterday (May 15th, 2009), teams as a whole have seen per-game attendance drop by about 5%. While the Yankees, as usual, are garnering most of the headlines (especially with their $2,500 dollar a game seats), the Mets, Nationals, and Tigers all have seen steeper declines in average attendance.

Nine teams have realized attendance increases with the Tampa Bay Rays leading the way. That's not at all surprising given their success on the field last year. Studies routinely show that when teams perform well one year, their attendance tends to be higher the following year because the good performance changes fan expectations, ceteris paribus.

The recession is surely hurting teams. Both the Mets and the Yankees have moved into new palaces, which should ceteris paribus translate into attendance increases, but both rank in the top 4 in per-game attendance decreases with the Mets seeing the sharpest decline so far.

As I metioned above, a lot of attention has been given to the pricing policies of the Yankees. It certainly is possible that they erred when setting ticket prices, but without digging deeper into the numbers, it's hard to say how much of the decline is due to factors such as weather, the recession, poor pricing policies, team quality, changes in capacity, etc. The Yankees' new ballpark has a capacity of 51,800 while the old Yankee stadium had a capacity of 57,545. The Mets' new ballpark has a capacity of 45,000 while its old ballpark had a capacity of 55,601. Surely this is one of the factors that explains why fewer fans are attending Yanks and Mets games this year.

Cross-posted at Market Power.

Rochester Rhinos could get $420,000 city subsidy

2009-05-14T08:38:00.002-04:00

I couldn't resist a blog about the Rochester Rhinos.

The story is in the Rochester, NY, Democrat and Chronicle. Here is how it opens.

When Mayor Robert Duffy presents his proposed budget on Friday, it will include a new $420,000 subsidy for Rhinos Stadium — a move necessary despite tough financial times, officials said, after the new team owners lost $2 million in their first season.

This story is interesting in part because the situation may be one in which nearly every problem with stadiums as development tool is evident. For example, the story tells us that the stadium is in a section of town that many citizens are afraid to visit. We learn that there are several other stadium and event facilities in the city competing for opportunities to host events. And, it's a soccer only venue, at least so far.

We are also told that

"We aren't giving them tax money," said city Corporation Counsel Thomas Richards. "What we are doing is taking over our building and maintaining it. ... We won't be in there changing light bulbs, that sort of thing. But in terms of anything significant for the property, we will be responsible for it."

Here are some of the items included in the $420k, that isn't money given to the team:

Clark said the team asked for assistance with expenses such as utilities. The city, for example, can combine its electricity billings with other city properties and get a better rate. The budgeted $421,300 also include estimated insurance costs, water, shared maintenance and management and past taxes

.

I fail to see the difference between giving someone money and paying their bills for them, but I was trained as an economist rather than a lawyer.

Also, from the Mayor, "Clearly we are not in the business of bailouts, but we do everything we can to try and maintain assets in the community," Duffy said. "And the Rhinos are an asset."

Not a terribly valuable asset, of course, as the first owners defaulted on loans paid to them between 2004 and 2007, which forced the sale of the club to the current owner. Surprisingly, this owner is also struggling to make a profit with the club. Who would have thought it?

Don't worry, the economic development office for the city is involved as well.

The actual estimated cash outlay is $387,000, said Carlos Carballada, the city's economic development commissioner.

"Our determination was, do we just shut it down, or do we try and protect the asset and the only tenant?" he said.

In the real world, sunk costs are rarely sunk and the urge to throw good money after bad seems impossible to resist.

The Economics of the New Yankee Stadium

2009-05-12T13:47:00.002-04:00

From the NY Post:

Reader Gary Cicio, NYC podiatrist, did the research, and asks us to choose one of the two options to see a Mariners-Yankees game this season, and from the very best seats:

Option 1: Two tickets to Tuesday night, June 30, Mariners at Yanks, cost for just the tickets, $5,000.

Option 2: Two round-trip airline tickets to Seattle, Friday, Aug. 14, return Sunday the 16th, rental car for three days, two-night double occupancy stay in four-star hotel, two top tickets to both the Saturday and Sunday Yanks-Mariners games, two best-restaurant-in-town dinners for two. Total cost, $2,800. Plus-frequent flyer miles.

Via Kottke via Marginal Revolution. Tyler Cowen at MR responds:

Was it not Mises who said that the purchasing power of money is the same everywhere? Some of the price differential will come from the greater value of the business connection in New York. And maybe those seats are really good.

What about the opportunity cost of time from flying from NY to Seattle? What about the experience of watching balls fly out of the new Yankee stadium - with the emphasis on new - like planes out of LaGuardia? Surely all that matters too.