01 June 2016

Stadiums: Should We Really Pay?

Guest Post by Leon Moore

“The Stadium that Manning built” is what some call Lucas Oil Stadium. But the evidence points to a different builder of this 63,000 seat behemoth: the taxpayers. The stadium cost 720 million dollars, of which the Indianapolis Colts paid only 100 million (1).

The stadium in downtown Indianapolis opened in 2008 and replaced the RCA dome, which was built in 1983. Lucas Oil Stadium is an extremely modern stadium equipped with 1,000 flat screen tvs, 137 luxury suites, state-of-the-art turf and seven locker rooms (4). Proponents of the stadium argued that the building of this stadium would insure many future super bowls in the city and many college basketball tournament games.

The Colts also threatened to leave the city in 2006 adding to the cries for the construction of a new stadium funded by public dollars (4). As Andrew Zimbalist points out, a small market team is much more susceptible to this kind of pressure than is a large market team (5). And Indianapolis is a relatively small-market city. In addition to this, an economic impact study stated that over the next 10 years the project would create 2.25 billion dollars in economic benefit. It also stated that 4,900 construction jobs would be created along with 4,200 permanent jobs (4).

With seeming benefits like this on the table, the stadium was approved. Often In situations like this many people set to make money jump on board quickly. People like construction companies, contractors, architectural design firms and construction unions support these types of projects (5). In addition to these groups, bankers, lawyers and other businesses support the projects (5). With groups this powerful in favor, stadium projects can be approved with greater ease.

In the case of Lucas Oil Stadium, bankers have made huge profits. Goldman Sachs, who the Indiana Finance Authority borrowed money from, are now being paid 71 million dollars to restructure debt (2). The public debt grew to 666.5 million dollars after the auction-rate bond market collapsed in 2008 (1). With the deal the debt will be 296 million dollars (3). So essentially Indiana made a bad deal and are now having to pay even more to get some relief. There was also 43 million dollars of unexpected financing costs that fell on the state (1). Local officials have raised hotel, restaurant and rental car taxes to pay for it and the other costs (1).

But the real question is whether or not building this stadium actually benefited the public. According to a report by Jordan Rappaport and Chad Wilkerson the economic benefits to publicly financed stadiums are much less than initially predicted. Often the economic benefits from a stadium are actually just subtracted from another economic sector in a city (6). With Lucas Oil Stadium however, many people are brought in from out-of-town to large sporting events such as the Super Bowl and college basketball tournament games. So the building of this stadium might have more economic benefits than other stadiums.

But still, the amount that the taxpayers have spent on this will be very hard to make up. Combine the large debt with the fact that Goldman Sachs has seemed to profit off of taxpayers as well, and it makes the building of the stadium seem like a hard pill to swallow.

Many of the people with a vested interest in stadium construction already have money, which makes their influence on local government out-sized. They have the resources to advertise and hire firms to do biased economic impact studies. But the people who end up paying are the regular taxpaying people of the state. As Rappaport and Wilkerson point out, voters should have the ultimate choice over whether a stadium is built or not. They should have accurate and unbiased estimates and it should come down to how much they value their sports teams.

1) http://www.bloomberg.com/news/articles/2012-02-02/super-bowl-lands-on-taxpayers-backs-as-stadium-deal-turns-sour
2) http://www.atlredline.com/goldman-sachs-rakes-in-millions-from-lucas-oil-stadium-1705385983
3) http://www.indystar.com/story/news/2015/05/23/state-pays-escape-risky-lucas-oil-stadium-debt/27802331/
4) http://www.bloomberg.com/view/articles/2012-02-03/as-super-bowl-shows-build-stadiums-for-love-and-not-money-view
5) Zimbalist, Andrew “May the Best Team Win”
6) https://www.kansascityfed.org/~/media/files/publicat/econrev/econrevarchive/2001/1q01rapp.pdf

Images: http://huntconstructiongroup.com/projects/stadiums/lucas-oil-stadium/

30 April 2016

Revenue Sharing in the Barclay's Premier League

Guest Post by Jack Decker

The distribution of revenue in the Premier League is a much better system than that found in the NFL, MLB, the NBA, and the NHL. This model revenue sharing system not only contributes to the growing profitability of the league, but may potentially be the cause of it.

The Barclays Premier League focuses on two main aspects for its revenue sharing plan: equality and merit-based reward. Although these seem contradictory at first glance, they both work together to create a system that is fair and encouraging for all teams. Percentage-wise, the more dominant category is even revenue distribution; 50% of total revenue from UK broadcasting is divided evenly amongst all teams.[1] While this itself is impressive, even more aspects of revenue besides local broadcasting are distributed equally. Central commercial and oversees TV revenue are split up equally between the clubs, and when these payouts are calculated for the 2013-2014 season, they are almost 1.5 times higher than the share from UK broadcasting![2] What this means for the Premier League is that the clubs are on a very even playing field. In fact, the ratio between the top and bottom earning club is only 1.57:1, much more equitable than for the four major sports in the US, all with a ratio greater than 2:1. [2][3][4][5][6]

The eternal problem of socialistic systems is that distributing the wealth so evenly leaves little motivation for individuals to try to earn any themselves. This exact qualm is had by many owners or commissioners, who are worried that generous revenue distribution would hurt the total income of the league. The NHL does a good job at combatting this, making revenue benefits only available to teams that are seeing an increase in their earnings, suggesting that they get rewarded only if they show that they are putting in the effort to succeed as a business. The Premier League has this covered as well; some revenue sharing is merit based. 25% percent of broadcast revenue is distributed based on performance, or how the club finished in the standings, and another 25% is dependent on facility fees, or how many times the club was featured in a UK broadcast. 2014 League champion Manchester City received $41.5 million in shared revenue for merit-based play, while the last place finisher Cardiff City received only $2 million. This aspect of revenue sharing certainly is not equitable, but it provides an important incentive to ensure that the best teams have motivation to succeed and will still be able to assist struggling teams financially.

Establishing a successful revenue sharing plan, as may other leagues have made clear, is a difficult feat. Nonetheless, the Premier League did so with ease, and now is reaping the benefits. League revenues have doubled in the past seven years, described by team owner Dan Jones as a “remarkable achievement”.[7] The reason for this is in due to the revenue sharing system, because it allows all teams to reap the benefits of broadcasting and also encourages more wage costs. The equal sharing aspect of the Premier League’s plan leads to all teams earning money from UK broadcasting, providing a sense of community for the league and making the TV deals less lucrative. Unlike for MLB, the broadcasting revenue exists for the Premier League to share, rather than for individual teams to turn immense profits from. The merit based sharing of the Premier League contributes to its widespread success as well, because it incentivizes all teams to spend a higher percentage of their revenue to improving their staff. In fact, wage costs rose to an average of 71%, a very high figure that resulted in debt for many teams, but led to an increase in the quality of soccer being played and thus made the league more profitable as a whole[3]. Both the sharing of broadcasting revenue and the reward for merit in the revenue system of the Premier League are responsible for league revenue increases.

If you find this topic of interest, please share your thoughts below. If there are any other details of revenue sharing in the Premier League that you find interesting, feel free to explain them in the comment section. Make sure to return to Tully’s Sports Blog for more exciting sports information!


The Revenue Rivalry in New York

Guest Post by Nick Constantilos

The Battle for New York’s Heart

Famous poet Samuel Butler once emphasized “Friendship is like money, easier made than kept”. What makes New York such a notorious and famous city is the endless opportunities and the reputation of endless fame that can come along with it. New York has a variety of reasons why the city has come to such great fame, from Ellis Island to Radio City Music Hall. But maybe the most important and historical is the contribution the city has made to America’s past time, baseball. New York has the pleasure of being the home to two major league baseball teams, the New York Yankees and New York Mets. Great pride comes with having two talented teams but along with that comes great rivalry. Ever since the New York Mets were established in 1962, the two major league teams have been battling for New York’s heart. Although these two teams were only separated by a subway ride, the real rivalry didn’t spark until their first meeting in 1997. This show down earned its nickname the “subway series” due to the short distance between them and fans going back and forth on the subway. Their rivalry would be truly defined after the epic game one in the 2000 world series between the two teams, which the Yankees eventually claimed the trophy.

The Revenue Conflict

The difference in distance between the New York Yankees and New York Mets is just a subway ride away, but the difference in revenue is much more drastic. The New York Yankees earnings in 2015 were 211.75 million dollars while the New York Mets was the MLB’s 10th lowest payroll of 94.76 million dollars. Although the Yankees hold the highest payroll in baseball, the value of the dollar to them is just as meaningful as any team in the MLB. The triumphant Yankees made their voice heard when the President of the Yankees, Randy Levine, commented on the MLB’s unfair revenue sharing system. Levine stated, "What is very burdensome to us -- and is unfair -- is the amount of money we have to pay in revenue sharing compared, for example, to teams in our market that pay 10 times less than us”. This issue caused another stirring of the Yankees vs. Mets pot but this time on the business end. It appears that the main reason Randy Levine was making these unfair claims towards the Mets is because the Mets could potentially be doing better financially then it appears on paper. One thing that is extremely confusing is the revenue sharing between these two teams. Any conflict regarding money such as expenses or revenue can be a complicated conflict to resolve. Revenue sharing is calculated through a formula which relates to net local revenue and many amounts of income and expenses are characterized and measured differently. An important aspect to keep in mind is most of this information doesn’t travel beyond the ownership level which makes it difficult for people outside the “circle” to understand the process. Baseball teams have no limit to the money they can bring in and spend so this makes it hard to justify what is truly fair when it comes to comparisons in revenue sharing. But whether is unfair or not the Yankees as usual made their voice heard.

If you are interested in learning more about the revenue rivalry between the Mets and Yankees check out this link: http://espn.go.com/mlb/story/_/id/15072082/randy-levine-says-unfair-new-york-yankees-pay-more-new-york-mets-revenue-sharing

Footnoted references:

11 April 2016

Let's Be Done With "One-and-Done"


Guest Post by Leon Moore

“He’s not ready, but he has to come out. He has no choice. There’s too much money there for him and he can’t go back to college and then face his friends back home. It’s not right, it’s not fair, it just is.” - John Thompson (4)

Freshman Jabari Parker and Duke had just been upset in their first round matchup by Mercer University. Jakob Gollon, a senior for Mercer, went 5-9 from the field, and 9-9 from the free throw line to score 20 points. Jabari Parker scored 14 points on 4-14 shooting. (6)

For many fans of college basketball including myself, this game was beautiful, partly because Duke lost, but partly because of what the result represented. The senior Gollon had no chance at making the NBA. It was clear he played basketball for the joy of playing, and he was rewarded.

Now consider his high-profile opponent in the game, Jabari Parker. Parker was a lock to be drafted in the top five that june, with most people considering him one of the top two prospects. In college, like Gollon, Parker was playing for the joy of playing. Yet to fans like myself, there was a cloud over his college career. We all knew that he would be “one-and-done,” and leave college after just one year. He would not develop in college and play for four years in all of the rich traditions that define college basketball and college athletics more generally. In that game, Parker represented the trend towards leaving college early to make money in the NBA.
You cannot blame Parker or any of the other “one-and-done” players for making the decision to leave early though. As John Thompson said, “He has no choice.” Now, we will look at the impact economics have had in creating the NBA’s rules regarding when players can enter the draft.

The NBA would like to change the rule to require athletes to forgo the draft for two years after high school as opposed to the current minimum of one year (3). The NBA believes doing this would allow teams to better analyze talent and therefore make better, more informed, draft choices (3). Adam Silver said, “We feel that these players are better off having more time developing as players before they enter into this league.” (1) He added, “I’m making a business decision for the NBA, which is to the betterment of the league and the roughly 430 jobs we have in this league.” (1) NBA owners also would not have to pay for the development of these players if they stayed in college, and importantly, would not have to hold a roster spot for them (5).

However, the NBA Players’ Association is not on board. Michele Roberts, the executive director, in 2011, argued against an age limit, saying “You have a limited life to make money as a basketball player. Anything that limits those opportunities is distressing to me. I view [the age minimum] as just another device that serves to limit a players' ability to make a living." (5)

Some view the NBPA’s opposition as merely a way to create a bargaining chip with the NBA (4). In 2017, there is the possibility that a collective bargaining contract will be reopened between the NBA and the NBPA. The players would like a higher salary cap while the owners and league do not want to compromise, yet also want to reform the one-and-done rule. David Stern, before retiring, said “They see it as a negotiating chip, we aren’t willing to give up what they want in return for making the change.” (4)

It seems nothing will happen unless there is compromise from both sides. The NBA is seeing revenue increase greatly, so the players should be entitled to more money. The salary cap should increase some, but the players association needs to do what is right and change the one-and-done rule. Players feel incredible pressure to turn pro, as they ponder huge salaries, often being forced to disregard what might be in their best interest developmentally (2). Any number of systems should be looked at, including but not limited to what the NBA has proposed and what the MLB currently does. The point is that the current system is broken, and compromise will be the only way to fix it.


10 April 2016

The One Thing Every Owner Needs: Sound Management


Guest Post by P.Lumbean

When my plan to win the Powerball on a weekly basis comes to fruition, one of the things I am going to do is to go about purchasing a team in either the NBA, MLB, NFL, or NHL (this is after I’ve addressed issues like world hunger, poverty, and colonizing space). When I purchase my team, I know exactly the first hire I am going to make and I know what my long term vision for that hire is going to be. I know this because I’ve seen my plan work in real life, and I’ve seen what happens when choosing another course of action doesn’t work so well.

Before I begin, can we all agree on the following? From an historical perspective, are the following teams successful from both a business and won\loss perspective: Cowboys (NFL), Stars (NHL), Spurs (NBA)? Can we also agree that the following teams have, for the most part, a futile history with in-the-arena success and\or on the balance sheet: Buccaneers (NFL), Canucks (NHL), Clippers (NBA)? If we’re in agreement up to this point, then please read on. If not, I may have no prayer of getting you to understand my perspective and consequently you are not a candidate to become a member of my organization so thank you for applying, but we’re going to go in another direction.
The Cliff Notes version of my plan: The first, and one of the only, significant actions I will take as owner of my new franchise will be to hire someone that I will from that point on refer to as “Team President.” This will be someone who is relatively young (ideally 35-45), extremely intelligent and personable, and someone that I could contentedly go out for a beer with. That’s it. Well, that’s not really it, I suppose I would have a job description for them, and the job description would look something like this paraphrased one for Rick Pych, the President of Business Operations for the San Antonio Spurs (NBA). Pych:

. . .leads the business operations for all four sports franchises owned and operated by Spurs Sports & Entertainment which includes the San Antonio Spurs (NBA), the San Antonio Rampage (AHL Hockey), the San Antonio Silver Stars (WNBA), and the Austin Toros (NBA Development League) as well as the operations of the AT&T Center … includes marketing, corporate partnerships and ticket sales, finance and administration, communications, corporate development, community relations, and facilities management as well as all corporate business and player planning and new initiatives on behalf of the organization and ownership.

Something tells me that Rick doesn’t spend a lot of time wandering around the office trying to keep himself busy. Here’s the deal with Pych. He’s been with the Spurs organization since 1993 and has steadily moved his way through the organization until reaching the point where he is right now sitting at the right hand of the throne of Spurs Sports and Entertainment owner Peter Holt. Pych has held his current role since 2008. He has been a consistent presence as the Spurs have gone about their business of being one of, if not, the most dominant franchises in the league. I agree with the website basketballinsiders.com that wrote prior to the start of the season,
Over the years, we’ve seen how a great front office can be critical to a team’s success. Oftentimes, a great front office can be overlooked since much of the attention goes to the franchise’s star players or head coach. But in reality, it’s the front office that puts together all of the pieces to make a team great.
One of the first teams that come to mind when discussing sustained success in the NBA is the San Antonio Spurs. They have a great organization from top to bottom. It’s no surprise then, that they have had very little change over the years.

They then though go on in the article to give credit to Spurs General Manager R.C. Buford. Buford, like most franchise executives with the title “General Manager,” is only responsible for player personnel decisions. That’s not fair because it sounds as though I am belittling Buford’s success. Obviously, the man knows full well what he is doing, as does Coach Popovich, Tim Duncan, and the rest of the folks directly related to the playing of the game on the court. But I would suggest that none of this is possible without guys like Rick Pych and more specifically the relationship between guys like Pych and owners like Holt.

Holt, who bought the Spurs the same year that Pych joined the organization, presumably had a direct hand in bringing Pych to San Antonio. Holt’s loyalty to Pych is apparent, and it would appear as though Pych is equally loyal to those below him on the corporate ladder as well (Buford has been with the organization since 1994).
Loyalty seems to be a thing with the Spurs.

Heading north from San Antonio up I-35, we find a different kind of loyalty in the person of Dallas Stars (NHL) President and CEO James R. Lites. Like San Antonio’s Pych, Lites has general oversight of the Stars. With the exception of four years working for the NFL’s Giants, Lites has been with the Stars steadily since 1992. In that time, he has worked for three different owners. What’s notable here is that it may be hard to find anyone who has been more consistently loyal to the Stars since they moved from Minneapolis to the Lone Star State. Given the significant role he has played in the development and maintenance of the team, he certainly deserves a lion’s share of the credit for their on ice success. Since Lites first joined the organization, they have had three different owners, five different general managers, and seven different coaches. In that same time, however, they have managed a .589 franchise point percentage total (that is to say that they have won 59% of the points available to them during the regular season). This ties them with all-time leader Montreal.

Probably the smartest move Stars owner Tom Gaglardi made when he bought the financially distressed team in 2011 was to bring Lites back to Texas after his stint in New York. Gaglardi gets a lot of credit for saving hockey in Dallas , but his hiring and keeping the clearly capable Czar of the Stars Jim Lites is a big part of that success.

Lites (L) Gaglardi (R)

Before leaving Dallas, I’d like to make our way west from downtown Dallas a little ways to say “Hello” to everyone’s friend Jerry Jones whose franchise presents, for the purposes of this piece, a tale of two franchises: The Dallas Cowboys of Tex Schramm and the Dallas Cowboys of Jerry Jones. The Schramm Cowboys ran from 1960 to 1989 and the Jones Cowboys from 1991 to the present day. For the purposes of this piece, Schramm’s Cowboys were the prototype of the kind of front office structure that I am advocating. Schramm was an old school “General Manager” who oversaw all aspects of the operation of the Cowboys. He answered to only two owners (Clint Murchison and H.L. “Bum” Bright) and had only one football coach (Tom Landry). They key here is that both Murchison and Bright left all operations of the team to Schramm and Schramm obviously did a marvelous job of oversight of the Cowboys, an expansion team when Schramm took the job. During his tenure, Schramm took a fledgling franchise and turned it into “America’s Team.” Three paragraphs in The New York Times obituary for Schramm sum up my perspective of his being a jack-of-all trades kind of general manager:

"The Cowboys were losers their first five seasons, then managed to reach the .500 mark in 1965. Finally, Schramm's insistence on building through the draft paid off handsomely. Players like defensive tackle Bob Lilly, defensive back Mel Renfro and wide receiver Bob Hayes formed the nucleus of a team that got to the championship game in 1966, losing to the Packers. Eventually, the Schramm-Landry Cowboys played in five Super Bowls, winning two."

Schramm did not coin the term America's Team, but he loved it. It had a dashing connotation with the Lone Star on the helmet, and it became the title of the Cowboys' 1968 highlight film, which helped brand it on the public consciousness.

In 1972, he introduced the Dallas Cowboys Cheerleaders to pro football. They formed a touring troupe that took them around the world.

Talk about a leader who had an enormous influence in all areas of the team’s operations! Now, to be fair, Schramm was an extraordinary man who had a huge influence not just in Dallas and on the Cowboys but on the league as a whole. He was perhaps destined for greatness in whatever he did and wherever he did it, but the point for me is that owners Murchison and Bright had the foresight to do all they could to keep Schramm in his position and that consistency of leadership, as much as anything else, kept the Cowboys on top of the league both financially and on the field for so long.

Then along came Jones. Or should I say “Along came Joneses.”

Current Cowboys owner Jerry Jones bought the franchise in 1989, promptly fired long-time coach Tom Landry, and Schramm resigned two months later. Jones philosophy on his role as owner was quite different from Murchison and Bright’s. He and, subsequently, his family were to be in charge and a visit to the Cowboys website makes it all too clear that the Cowboys are a Jones Family endeavor. Jerry is Owner, President, and General Manager and his three children hold the top three front office positions in the organization. On the one hand, this guarantees a certain kind of consistency in the front office and to this point, I have been advocating consistency. However, I have only been advocating consistency when and if the positions are held by capable individuals. Pych in San Antonio, Lites in Dallas, and Schramm of the earlier Cowboys clearly demonstrated an ability to handle the job of overseer. The jury seems to be out with regard to Jerry Jones. His success financially is undeniable. As Patrick Rishe points out in Forbes, “with a currently estimated team value at $4 billion for a team he purchased for $150 million in 1989, and a beautiful sporting facility in AT&T Stadium which has generated millions in revenue for his team’s brand and the region at large by attracting non-Cowboys events to North Texas, his business acumen is undeniably shrewd and forward-thinking.”
He has, however, committed certain public relations blunders (read Greg Hardy) in recent years and his teams have not excelled on the field the way many fans might have hoped.
In short, the leadership of the Cowboys has been consistent if not necessarily particularly competent.

The Tampa Bay Buccaneers also have four folks from the same family ostensibly overseeing the franchise. The differences, however, between the Bucs and the Cowboys are rather pronounced as any casual fan of the NFL will attest. The Buccaneers do in fact have one Super Bowl title to their credit, but their franchise history is dominated by a lot more losing than winning. Since 1995, the Glazer family has owned the team. Currently, three Glazers (Bryan, Edward, and Joel) serve as co-chairs of the organization, and their job descriptions are remarkably similar on the team’s website. It’s a bit difficult to discern who, if anyone, is ultimately in charge of day to day operations of the team. Where Jerry Jones has clear oversight in Dallas and his children have clearly defined (but subservient) roles to his, the Glazers seem to be intertwined. Below them are the usual suspects in charge of on the field efforts (player personnel types) and business operations (marketing, community involvement, etc). My point here is that there is not one clearly defined role for one specific individual responsible for franchise oversight. I contend that this has been part of the problem for the Buccaneers as an organization.
Looking back over the history of the Buccaneer organization, one finds that they have gone as long as seven years without a Chief Operating Officer (presumably leaving those duties to one of the Glazers?). They’ve also had seven different general managers and six different owners. This does not paint a picture of consistency and stability.
Taking a diagonal trip across the continent from Tampa Bay, we land in Vancouver to take a quick look at the Canucks who, for all intents and purposes have a pretty rough history behind them: since the organization’s inception in 1970, they have appeared in the Stanley Cup Finals three times (losing all three). In 3572 games played, they have amassed only 49% of the points available to them, ranking them with the likes of the Lightning, Blue Jackets, and Panthers. If the pattern holds, we should see that consistency of leadership at the top has been in short supply. The pattern holds:

• Prior to 1987, the team went through six general managers (responsible for the hockey aspect of the franchise). They then had a ten year period of stability with one GM (Pat Quinn), but since 1997, they have had five different GMs\Presidents of Hockey Operations.
• On the business side of things, they have in fact had the same Chief Operating Officer (Victor de Bonis) since 2007 but in the ten years leading up to that point, they had three separate Presidents\Chief Operating Officers.

One wonders how the franchise might have fared over all these years had they had the consistent leadership like that of James Lites in Dallas.

Finally, I likely don’t need to say much here about the Clippers and their inconsistency in terms of leadership and owner\management relationships. The words “Donald” and “Sterling” when put together likely tell the reader all he or she needs to know about the Clips and their futility and inept ownership over the years. At the heart of their troubles, however, beyond the obviously incompetent owner, was a leadership structure that never allowed for consistently defined roles. In 2000, Sports Illustrated wrote a lengthy piece about Donald Sterling and among many other indictments, wrote:

• Few Sterling hirelings utter a word--much less a discouraging one--about their boss.
• When it comes to pinching pennies, Sterling is an embarrassment of riches. Old NBA hands still talk about how he reportedly tried to cut costs during his first season by asking coach Paul
Silas if the players really needed a trainer and if Silas would mind taping them before games.
• "To have a decent team you need to keep a core of players together and let them grow," says Los Angeles Lakers guard Ron Harper, a survivor of five Clippers campaigns. "Sterling doesn't
do that. He's not a builder, he's a meddler."
• The most frustrating part of being G.M. was the lost opportunities. Sterling didn't trust his own basketball judgment and wasn't prepared to accept mine. I'd call him about a trade I wanted to pursue, and he'd say, 'Let me get back to you.' He'd never get back to me. So nothing would happen." – Former Clipper GM Carl Scheer
• "I don't know how important winning is to Donald," says Scheer. "He seems more concerned that his books are balanced, that he runs one of the few NBA franchises with no debt, that he can bring his friends to games."

Sterling bought the team when they were the San Diego Clippers in 1981 and initially, he was directly involved in oversight of all operations a la Jerry Jones in Dallas. In soon became apparent though that he was in no position to have any success in this regard. In fact, when he commented that he publicly acknowledged that he would prefer it if his Clippers finished in last place so that they could draft the highly coveted Ralph Sampson, the league promptly fined him $10,000. His attempt a few months later to strong arm the league into allowing him to move the team to Los Angeles prompted an investigation by his fellow owners that almost lost him his franchise. In perhaps one of his only wise moves as an owner, Sterling relinquished some of his duties to someone with a bit more expertise in this regard (Alan Rothenberg), and he and the Clippers were back in the league’s good graces. More or less. Still not content in San Diego, Sterling moved the team to Los Angeles and incurred a $6 million fine from the league.
Rothenberg sat in the president’s office during the move from San Diego and until 1989. His was not a particularly pretty era on the balance sheet, and it was particularly gruesome on the court.

As bad as the Clippers teams were during Rothenberg’s reign as President of the Clippers, keeping him might have been the wiser move for Sterling. Instead, he went back to having general oversight of the franchise and thus continued its unprecedented futility. Some examples:

• In 1990, players went to Sterling in an effort at getting coach Don Casey fired. Sterling referred them to general manager Elgin Baylor who ostensibly was only responsible for player personnel decisions
• The 1991-1992 team had three different coaches
• Between 1983 and 2010, they only had two winning seasons
• They have two 17-game losing streaks, one 19-game losing streak, and one 20 game losing streak to their “credit.”

By 2010, things had finally begun to turn in a positive direction for the Clippers. Not surprisingly, Sterling had turned over the business reigns to a competent businessman and had also improved management of their player personnel department (Elgin Baylor, an amazing player on the court, but a disaster as a GM was gone), and wise draft picks were being made. And most importantly, from the perspective of this piece, a President had been brought in who was fully responsible for the business side and shared player personnel decisions. Andy Roeser had been with the Clips in a front office capacity since 1984 and had been promoted to team President in 2007. It wasn’t until 2012 that he began to have significant input in player personnel decisions, but clearly, there was an effort being made by someone (Sterling?) to consolidate front office power. Not surprisingly, the Clippers fortunes on the court and at the box office began to soar.

Then Donald Sterling did and said what Donald Sterling did and said, and poor Roeser went down with him.
Now the Clippers have a new owner who has decided to split team management duties between a business oriented executive and a player oriented general manager. Time will tell if this return to a decentralized system of power will work for the Clippers, but I wouldn’t be very optimistic for the long term strength of the organization if I were a Clipper fan.

The Spurs, Stars, and pre-Jones Cowboys have a history of success. They also have a history of front office executives who were loyal to their owners and who had general oversight for all aspects of the organization.

The Jones Era Cowboys are difficult to assess in this regard as their owner is the hands on executive and I’m not really sure what to make of him. He’s making lots of money for the team, but can his team, during his tenure, be considered a success?
The Canucks, Bucs, and Clippers have long and ignominious histories of futility and I contend that this is because they have had inconsistent administrative leadership, with unclear job descriptions, and a diffusion of power that leads to disorganization and a failure to progress.

Next month when the Powerball comes up with my numbers, my first calls will be to Texas: “Hello, is your team President looking for a job?”



09 April 2016

Are Yankees Seeking to Torpedo the Revenue Sharing Formula This Year?

Guest Post by Connor Maloney

Under the current collective bargaining agreement (CBA), set to expire on December 1st of 2016, all Major League Baseball teams are subject to a 34% contribution of their net local revenue. The sum of those 30 contributions is then distributed equally amongst the teams. The CBA states that teams must use those revenue sharing receipts in an effort to improve their performance on the field. It also openly states that teams are prohibited to use the receipts for anything other than baseball operations such as repayment of debts, distribution to ownership, etc.

Recently, the President of the New York Yankees, Randy Levine, spoke some his thoughts about the money they are paying in regards to the current revenue sharing plan. Levine spoke in an interview with FOX Sports, “What is very burdensome to us -- and is unfair -- is the amount of money we have to pay in revenue sharing compared, for example, to teams in our market that pay 10 times less than us” [Rosenthal]. He later went on to say that this was something that he hoped would be addressed in the new CBA at the end 2016.

I’m assuming that the current revenue sharing arrangement is something that might be opposed by the top 10 teams in terms due to loss of revenue (which includes the Yankees), but is something that would supported by bottom 10 teams for the same reason. This is a system that was put in place to try and level the playing field between teams in top markets that perennially drive revenue and teams that might not be in big media markets and struggle to gain revenue. There is some cause for concern that this could pit owners against each other in the next discussions for the collective bargaining agreement.

My opinion and my hope is that in the next collective bargaining agreement a system like this remains in place. I would be content if the proportion of the contributions that teams made were adjusted but I just think that this is a system that tries to keep competition throughout the league. The teams that may oppose this feel that it is unfair because they are giving more than other teams. However, a point that is raised by opponents of this system may say that it acts as a disincentive for teams to increase revenue and just depend on subsidy-like proceeds from the revenue sharing.

We’ll just have to see whether the revenue sharing will create tension between owners once the season is over and they begin the effort to design a new collective bargaining agreement.


Rosenthal, Ken. "Yankees Snipe at Mets in Revenue-sharing Gripe." FOX Sports. N.p., 25 Mar. 2016. Web. 06 Apr. 2016.

07 April 2016

Owner-Management Issues in the NBA

Guest Post by Kyle Artus

As NBA teams become more and more profitable, owners are wanting to have more and more control over the players they are putting out on the court. I can’t necessarily blame them, it is their money that is paying the players after all. However, more and more owners are stepping in player personnel decision that should probably be left up to the GM and the rest of the front office. Owners try to make their own decisions on who to draft, sign, or trade, hire a coach and then completely disagree with him on every major issue, and try to stop General Managers from doing their job.

James Dolan, the owner of the New York Knicks, has historically been an owner who wants to get involved in every facet of the team. Two summers ago, he hired Phil Jackson to be the President of Basketball Operations. Phil Jackson has won 11 championships as a coach in the NBA and is widely considered as one of the greatest basketball minds of all time. When Jackson was hired, he was given responsibility over staff hirings/firings, free agent signings, trading players, and drafting players. One month after he was hired, Dolan had already tried to stop him from doing his job. According to the NY Daily News, Jackson had wanted to make some changes to the staff and was planning on firing some of the current members. Dolan came in and put a stop to that.[1] Dolan has a history of doing things like this. He did the same thing to the former GM Donnie Walsh when he was trying to trade for Carmelo Anthony. Walsh had every intention of pursuing a trade for Anthony, but Dolan came in, took over the negotiations, and traded for Anthony right away instead of waiting for a better deal as Walsh had suggested.[2] It is difficult for anyone in management, who are supposed to be the ones skilled in dealing with basketball transactions, to do their job the right way with an owner like that constantly interfering.

A similar story is transpiring in Sacramento with their new owner Vivek Ranadivé. Ranadivé’s came in as owner after an ownership family named the Maloofs sold the team. The Maloofs were generally disinterested in basketball and making the Kings a successful team. So all Ranadivé really had to do was try and he would look better. And he has. But perhaps too much. So far, he has hired Vlade Divac to perform the basketball operations of the team. Together, they hired George Karl to be the head coach. Since then, everything that has come out of Karl’s mouth seems to be the opposite of what comes from Divac’s and Ranadivé’s. Karl has been very verbal about the need to trade star player Demarcus Cousins. He has many times said that they have been looking to trade Cousins. Ranadivé has many times stepped in and said a complete different thing.[4] Reports surfaced that Ranadivé wanted to fire Karl merely four months after hiring him because they thought to have agreed that Karl would not be involved in personnel decisions.[3] Frankly, the personnel decisions should be left up to Vlade Divac since it is job, and both Ranadivé and Karl should stay out of it. However, overactive owners and coaches will always think that they know what is best for the team.

It is no coincidence that both the Knicks and the Kings are two of the teams with the bleakest outlook in the NBA. The Knicks have one aging superstar in Carmelo Anthony and a promising rookie with Kristaps Porzingis, but they also don’t have a draft pick this year and have no other real promising players. The Kings have a superstar in the midst of his prime in Demarcus Cousins, but have consistently failed to build around him. They tried this year by bringing pass-happy Rajon Rondo and sharpshooter Marco Belinelli, but they are still on the outside looking in when it comes to the postseason.

Owners need to recognize that just because they are the ones with the money to pay the players and the staff, they are not the ones who know how to best run a basketball team. They need to let the people in charge of making personnel decisions actually make the personnel decisions. By having a little bit of trust in the people they hired to run the team, these teams could actually turn it around. The best owners are the ones who are willing to pay what is necessary and who stay out of the GM and the coaches’ way.

1 http://m.nydailynews.com/sports/basketball/knicks/source-dolan-stop-jackson-knick-staff-firings-article-1.1765645
2 http://bleacherreport.com/articles/2025630-report-james-dolan-stopped-steve-mills-from-firing-mike-woodson
3 https://mobile.twitter.com/SportsCenter/status/614167723929673728
4 http://www.usatoday.com/story/sports/nba/kings/2015/06/22/sacramento-kings-owner-vivek-ranadive-demarcus-cousins-trade/29143601/

31 March 2016

The Passion of a Boston Baseball Fan

Guest Post by Glenn Sullivan

Baseball fans come together for a grueling 162 game season with two months of pre-season and possibly playoffs. These fans spend nine months together and develop a sense of comradery, but it doesn’t stop there. Teams sell the idea of a family or community coming together for the same cause. Whether that cause be supporting a player or supporting another fan, just because the seasons over doesn’t mean the family goes away. According to David Ortiz fans are what get him going “I just love the feeling from the fans and when I'm walking on deck I can hear people screaming and wishing you the best. That puts you into the game more than anything.” But that doesn’t go without pressure from them as well “Sometimes you just don't feel the same everyday, it doesn't matter what you do, but when you have people looking forward to seeing you perform for them, that puts you in the mood, and that's natural in Boston. That's why it's such a special place to play.” Ortiz knows every time he steps to the plate he has 50,000 fans behind him motivating him to succeed. Fans develop a sense of ownership to their team as well, so much so that they are willing to go to war with the fan of another team. Fans triumph together, fight together and the loose together, but ultimately keep moving forward together.


When times are good there isn’t much for fans to complain about. During the off season your team came up with a plan and so far everything has gone accordingly. Those issues that have seemed to plague your team in the past disappear and it is nothing but blue skies. The dreams of a playoff run seem more real every day and you can feel the energy surging from the crowd at the game or bar. Fans are talking about the previous night’s game to their co-workers and making predictions for upcoming ones. Fans get so caught up in the moment they would do anything for their team. Take the 2013 Boston Red Sox, during their championship run the majority of the team stopped shaving and grew their beards out. Fans were quick to follow, growing their own playoff beards. Red Sox nation rallied around the slogan “beard strong.”

After winning the 2004 World Series for the first time in 86 years the Red Sox owner said "This is like an alternate reality. All of our fans waited their entire lives for this...We won't even need the airplane to fly home." --John Henry. The energy in the stadium after the win was surreal, fans waited hours after the game to spend time celebrating with fellow fans and players.


Some say Boston has the toughest crowed to play in front of. That’s because these fans will stop at nothing to support their team, even if it means taking things out side. During a 2005 game between the Red Sox and Yankees a fan threw a beer at Gary Sheffield as he was fielding a ball. This fan was ejected from the game, but had no remorse and felt he had done his team a great service in getting one over on the yanks. The hatred of a rival team runs deep and continues through the generations.


If your team is down and there seems like there’s no hope that is when the toughest fans shine through. Sometimes it seems like no matter what your team does it won’t make a difference you’re still going to lose that season. For years Red Sox fans have known true despair after going 86 years without a title. During those losing seasons the Red Sox would come so close to the promise land but never get in. They lost in the World Series to the Cardinals in 1946 and 1967, the Cincinnati Reds in 1975, and in 1986 to the Mets. It took true loyalty to be able to call themselves Red Sox fans while watching their team lose time and time again.

In the 9th

The Red Sox have an effect on their fans, a feeling of being overwhelmed with the atmosphere. It’s hard to describe the feeling but here is Simon Schama’s a Columbia University professor attempt at it “I'm helplessly and permanently a Red Sox fan. It was like first love...You never forget. It's special. It's the first time I saw a ballpark. I'd thought nothing would ever replace cricket. Wow! Fenway Park at 7 o'clock in the evening. Oh, just, magic beyond magic: never got over that”

Boston may be known for its tough crowd, but it’s also known for its diehard fans. We have known true glory during the banner years with the Celtics, and we have known true disappointment during the 86 year drought with the Sox’s. Boston fans know the meaning of loyalty and how to be there for their family through thick and thin. Regardless of the team’s record, we will always find lines at the gates and hear fans singing Sweet Caroline.


Baseball-Reference Playoff and World Series Index". Baseball-Reference. Sports Reference. Retrieved November 5, 2009.
Shaughnessy, Dan. "YES!!!" Boston Red Sox. Boston Globe, 28 Oct. 2004. Web. 30 Mar. 2016. .
Wilkins, Ryan. "Baseball Prospectus | The Week in Quotes: World Series Edition." Baseball Prospectus. N.p., 1 Nov. 2004. Web. 30 Mar. 2016. .
"David Ortiz Quotes." Baseball Almanac. N.p., 10 Oct. 2003. Web. 30 Mar. 2016. .

30 March 2016

A "Suite Deal" For Who?

Guest post by Leon Moore

During the industrial revolution, working people began to attend sporting events. The increase in real wages created a middle class and people with disposable income. This extra money could be spent on a ticket to a ball game and maybe a hot dog. Sports belonged to the everyday person. (6)

With this in mind, I looked on the Boston Celtics website at ticket prices. Single person tickets ranged anywhere from $25 to $300.(3) This to me seemed like a natural range, one in which the common person could find an affordable ticket. Then I saw the cost of renting a luxury suite for one game. It ranged from about $3000 to $5000.(2) The consumer of this did not fit with my image of the middle class sports fan.

What a person gets when they rent a luxury suite at the TD Garden includes 18 tickets, theatre-style seating, catering options, several televisions, and a private restroom. (2) The average fan would never buy this, so who is?

According to Chad Estes, the president of a premium ticket sales company that does business with the New York Yankees and the Dallas Cowboys, the consumers are “corporations and high net-worth individuals.”(1) He says that people buy suites with an aim towards building relationships with clients and sometimes as a way to create family time.

Suites are a great deal for owners as they provide steady cash flow throughout the season, and can be counted as Stadium Income, which in many cases is not subject to league revenue sharing operations. (1) In some cases, a suite can cost up to $900,000 for a year. (1)

With premium seating being great for owners, it surprised me to find that they only became mainstream in stadiums in the last 20 years. According to Emily Sparvero, assistant professor at the Sports Industry Research Center at Temple University, "Luxury suites have been growing in importance since the 1990s and are an essential part of any new stadium being built." (1) The two owners credited with starting the premium seating trend are Jerry Jones, of the Dallas Cowboys, and Joe Robbie of the Miami Dolphins. (4) Joe Robbie Stadium opened in 1987, and the debt incurred building the stadium was paid off in 10 years from luxury seat revenue at $16 million a year. (4) This success and other successes lead to the creation of many new stadiums, all built with premium seating included.

Yet the question of why these luxury seats began to be built in the 1990’s still remains. Almost certainly it involved a change in the consumer market. As previously mentioned, the consumers of premium seating are mostly corporations and high net-worth individuals. So in the 1990’s was there a change in this group’s resources?

From 1950 until 1980, corporate profits after tax increased from about $20 billion to to about $200 billion. From 1980 to 2000, the number increased $300 billion to $500 billion total. And in the second quarter of 2015, the profit was up all the way to $1,844 billion. (5) I cannot claim to fully understand what these numbers mean, but I do think I can say that they mean corporations today have more money to spend on things like luxury boxes. This could possibly explain why in the 1990’s many stadiums were built to include premium seating.

Another factor that could be creating a consumer market for premium seating is the increase in the wealth at the top of society. Political campaign’s today, like that of Bernie Sanders, are gaining traction because of the populus’ anger at the wealth inequality. This wealth inequality could be creating a market for premium seats. Stadiums at most only have a couple hundred luxury boxes that they need to sell for a season. When wealth is concentrated, the people with it can afford to buy an expensive entertainment item, like a luxury box. And because the owners only need to sell a relatively few amount of these boxes, it is not a problem that the wealthy people are so few in number.

But how will this change sports? I do not think luxury seats by themselves will change sports. A regular fan can still have a regular sports experience with a hotdog and beer even if someone is drinking fine wine eating smoked gouda in a luxury box above them. I believe what could change sports however is increased corporate profits and wealth inequality. This could and is helping to shrink the middle class, which could then decrease the number of fans in regular seats. This would harm the atmosphere of being in a raucous and wild arena or stadium.

To preserve the middle class fan base and therefore the sports experience, fans should do their research and support political campaigns that help foster a strong middle class. It is a shame that a fun thing, sports, should be tied to something which has such a negative connotation, like politics. But maybe we will lose our fun thing if we cannot do the unpleasant thing.

1 http://usatoday30.usatoday.com/money/economy/story/2012-02-04/cnbc-super-bowl-suites/52948968/1

2 http://www.nba.com/celtics/tickets/premium/bb-luxury-suite-rental-pricing-schedule.html

3 http://www.nba.com/celtics/tickets/individual-game-tickets?cfc=TICKETS_INDEX

4 http://www.vanderbilt.edu/econ/faculty/Vrooman/VROOMAN-NFL.pdf

5 https://research.stlouisfed.org/fred2/series/CP

6 http://www.bostonfed.org/peanuts/sptspage/inning2a.htm

21 March 2016

Related-Party Transactions in the NHL

Guest Post by Jonathan "Jack" Decker

Related-party transactions shelter a staggering $100 million per year from MLB revenue. [1] This statistic alone shows how drastically this new relationship between sports teams and media companies has affected the baseball industry. Over the past twenty years, this “relationship” between teams and media operations, known as related-party transactions, has emerged as a trend amongst team owners and is employed by almost all teams, from the Yankees to the Pirates to the Dodgers. A tactic adopted as soon as MLB levied a 20 percent tax on teams’ net local revenues in 1996, the reason for it is simple: reporting profits under another company means teams evade paying taxes to the league. [1] Having read May the Best Team Win, the prevalence of related-party transactions seems to be clearly abundant in baseball, but it also plays a role in the sport of hockey. Here are examples of transfer pricing in the three largest NHL teams:

Toronto Maple Leafs

The Toronto Maple Leafs, professional hockey’s most valuable team, are the cornerstone of Maple Leaf Sports & Entertainment. Maple Leaf Sports & Entertainment, or MLSE for short, also owns the Toronto Raptors of the NBA, Toronto FC of Major League Soccer, Leafs TV, Raptors NBA TV, and a few minor league teams. [2] The Leafs and Raptors share the Air Canada Center, a stadium built in 1999 and owned by MLSE. MSLE’s decision to merge the Maple Leafs and Raptors franchises served two main purposes. The first of these is being granted two channel licenses by the Canadian Radio-television and Telecommunications Commission, Leafs TV and Raptors NBA TV, used to broadcast live games involving their teams in order to increase competition for their rights and drive up fees paid by other broadcasters. [3] The second purpose of the merge was a calculated 30% increase in ticket revenue under the new, shared stadium.

New York Rangers

The Rangers are run by Madison Square Garden, a division of Cablevision Systems that includes the NBA’s Knicks, WNBA’s Liberty, programming networks (such as MSG, MSG Plus, and Fuse), MSG Arena, the WaMu theatre, Radio City Music Hall, Beacon Theatre, and the Chicago Theatre. [4]

Montreal Canadiens

The Montreal Canadians were bought by George Gillett Jr. in 2001 for $181 million. Gillett Jr. also purchased the Bell Centre, the home of the Canadians, which opened in 1996. [5] Furthermore, Gillett owns a controlling interest of the NASCAR team Evernham Motorsports, under the name Gillet Evernham Motorsports, and is the founder of Gillet Entertainment Group.

Although through these examples it is clear that transfer pricing plays a role in the NHL, perhaps not to the same extent as in the MLB but still a significant role nonetheless, the question remains as to why this is the case. The NHL “taxes” teams not through a levied tax on revenues, like the MLB does, but rather through a hard salary cap. [6] This means that revenue does not decide how much money hockey teams must pay to the league, but payroll does. This may seem like there is little incentive for owners to shuffle around their money like in MLB, but they still do. The reason for this is similar to the reason the owner of the Chicago Cubs used; the owners can use this hidden revenue to convince the players that the team has less money to pay for their salaries. Besides more technical cases, like the use of the Leafs-Raptors merger to boost ticket revenue, most NHL teams use related-party transactions mainly to lower player salaries. Hockey teams do not have to pay the levied tax that MLB teams must pay, but still can benefit, in other ways, from the same tactics that baseball teams use to avoid them.

If you find this topic of interest, please share your thoughts below. If there are any other examples of transfer pricing in the NHL that you find interesting, feel free to explain them in the comment section. After all, this post only examines the ownership of the three largest teams. Make sure to return to Tully’s Sports Blog for more exciting sports information!

1. May the Best Team Win by Andrew Zimbalist
2. http://www.forbes.com/lists/2008/31/nhl08_Toronto-Maple-Leafs_312012.html
3. http://web.archive.org/web/20030321125842/http://www.crtc.gc.ca/ownership/cht177.pdf
4. http://www.forbes.com/lists/2008/31/nhl08_New-York-Rangers_315381.html
5. http://www.forbes.com/lists/2008/31/nhl08_Montreal-Canadiens_314528.html
6. http://www.nj.com/devils/index.ssf/2010/06/nhl_sets_salary_cap_for_2010-1.html

18 March 2016

The Sports Industry and Television Rights

Guest Post by Kyle Artus
The average American will spend 9 years of their life watching television. [1] Months, or perhaps years, will be spent watching sports. Sports are becoming a bigger and bigger part of everyday life in America. Parents bring their kids to practice or games, athletes play, train, or practice, and fans will watch games and support their team every day. Due to the huge businesses that both sports and television have become, they now have a huge overlap. Sports teams and leagues make billions of dollars just by selling the right to play their games on television. Television stations engage in bidding wars to get these rights. More and more every year, the biggest product coming out of the sports industry is their television rights.

Television networks spend a tremendous amount of money every year to put major league sports on their network. For example, Fox, CBS, and NBC combined pay upwards of 2 billion dollars a year to broadcast NFL games. [2] ESPN and TNT pay about $2.66 billion every year for NBA games. [3] Fox and Turner Sports pay about $800 million annually for MLB games. [4] This is a huge source of revenue for teams and sports leagues. As this revenue source increases, it becomes more and more of a focus for the team owners. Teams and leagues are going to want to make their sports more TV friendly in order to maximize their potential for TV money. This is becoming evident in many professional sports leagues in America. The NFL has more stoppage of plays and commercial breaks than ever before, with an average of 20 commercial breaks and over 100 total advertisements. [5] The NFL game is prime for television, and this is one of the reasons that their TV rights cost so much. Millions of people watch every game and there is plenty of time for the television stations to make money by selling commercial slots.

In the NBA, the league is considering placing advertisements on their jerseys. [6] Now this is not directly related to their TV rights, but it could affect them in the future. With advertisements on the jerseys, and millions of people watching the games on television, the price for a company to place an ad on jersey could be astronomical. It is being reported that these ads would bring in approximately $100 million. [6] This could impact future deals with the NBA’s TV rights. If they get a new deal that expands their TV presence, more games on more nights on a more nationwide basis, these ads could become even more valuable. More people will see them and therefore, the NBA could charge more for them. In the not-so-distant future, I believe seeing jerseys like the one in the picture below will be unavoidable.

Major League Baseball has started experimenting with ways to speed up their games and make it more TV friendly. They have implemented rules such as strictly timed commercial breaks, requiring batters to keep at least one foot in the batter’s box between pitches, and making the managers stay in the dugout during replay reviews. Additionally, they implemented a pitch clock in the minor leagues to ensure that a pitch is throw in a reasonable amount of time. [8] This comes as perhaps a way to make the game more exciting and quick to appeal to a new generation of fans. This will make it easier for people to sit down and watch a game on television as a large complaint against baseball was the pace and how long games can be. This can only increase their appeal to television stations and could increase the value of the MLB’s television rights.

As teams and leagues make more money off of television, the games change to reflect this. It is smart business to try and make your product more appealing. As TV rights become a larger part of the revenue stream, the product that the sports industry is selling becomes more about the appeal the sport has for television. This could be great for sports fans as they could have a more accessible game to watch on TV. But it could also cause problems for traditionalists and sports purists. As the game is changed to becoming more appealing for television, some of the culture and what made the game so popular to begin with could be lost. It will be important for professional sports leagues to try and balance the changes that they do or do not make. They will need to consider how much they can change before the game becomes unrecognizable. They need to find a balance between making small changes that may help the game, and selling out to advertisers and wherever the money is coming from.

[1] http://www.statisticbrain.com/television-watching-statistics/
[2] http://espn.go.com/nfl/story/_/id/7353238/nfl-re-ups-tv-pacts-expand-thursday-schedule
[3] http://espn.go.com/nba/story/_/id/11652297/nba-extends-television-deals-espn-tnt
[4] http://espn.go.com/mlb/story/_/id/8453054/major-league-baseball-completes-eight-year-deal-fox-turner-sports
[5] http://qz.com/150577/an-average-nfl-game-more-than-100-commercials-and-just-11-minutes-of-play/
[6] http://www.forbes.com/sites/mattpowell/2014/06/20/sneakernomics-coming-soon-ads-on-nba-jerseys/#76998712263e
[7] http://phillysportslive.com/wp-content/uploads/2012/07/nba-jerseys.jpg (PHOTO CREDIT)
[8] http://espn.go.com/mlb/story/_/id/12351883/major-league-baseball-announce-pace-play-rules

16 March 2016

Baseball: A Model of Successful Business Adaptation

Guest Post by Steven Koonz

Baseball is as American as apple pie. It has been the American pastime since the late nineteenth century. Major League Baseball has been played since 1876. Over the years, baseball has changed and evolved into a billion dollar industry. The game today would be barely recognizable to a baseball fan in the 1870s, both in the way it is played and in the way the business of baseball is conducted. So how did we get to where we are now from when that first National League game was played in 1876?

As with any game, the rules of baseball have changed over time. The game played today is very different from the game played in 1876, or even before that. Changes have been made to make the game safer, more fair, and more exciting to watch. A century ago, players did not wear batting helmets. Spitballs were legal. Usually only one ball per game was used. The ball was made of materials that did not jump off the bat like the balls that are used today. These are only a few of the ways that the game was different.
Perhaps some of the biggest changes to the game of baseball were those that led to the end of the dead-ball era around 1920. The ball was switched out for one that was more lively, spitballs and any other form of doctoring the ball were made illegal, and umpires were required to replace the balls when they became dirty, thus making it easier for the batter to see them. These changes led to an unprecedented increase in offense, and paved the way for players like Babe Ruth to become stars. Whether it was the intended consequence of the changes or just a byproduct, these new rules made the game more exciting to watch. Another major change that was designed to increase offense was the implementation of the DH in the American League in 1973.

Rules have been adopted for purposes of safety as well. Helmets have become mandatory for all batters. MLB is experimenting with protective headgear for pitchers as well, although it seems unlikely that it will be made mandatory in the near future. However, with all of the recent concerns about concussions, the league is doing its part to prevent head injuries. Before the 2014 season, MLB tightened restrictions on collisions between catchers blocking the plate and baserunners, with the hopes of preventing injuries like the one suffered by catcher Buster Posey in 2011.

In addition to changes made on the field, the business behind baseball has changed too. Willie Mays, one of the greatest and most dynamic players of all time, made $165,000 in 1973. At the time, it was one of the top salaries in the league. When adjusted for inflation, that equates to around $900,000 in today’s money. The Red Sox just recently signed David Price to a long term contract with an average annual value of $31 million. Advertising deals, broadcast rights, and growing market size have all increased the earning potential of teams. Better technology, and cable TV becoming more accessible have led to huge broadcasting deals, like the LA Dodgers $8 billion, 25 year deal for TV rights. Free agency gave the players more leverage to negotiate their contracts with their teams and other teams, thus further increasing player salaries.

The reason MLB has been so successful over the years is that it has been able to change with the times. Men like Bill Veeck, Branch Rickey, and several others brought changes to baseball that make the game what it is today. It is this ability to adapt that has been responsible for baseballs resilience as our national pastime, despite labor strikes, cheating, and steroid use. When MLB was first founded, its founders probably had no idea that there would be games played in Tampa in air conditioning, or at night under the lights in Los Angeles, or that there would be ‘sausage races’ in Milwaukee. One can make a comparison between Fenway Park and the game of baseball. Fenway park is an old facility, one that has seen more than a century of baseball played on its field. Babe Ruth pitched from that mound. Ted Williams stood in the left handed batter’s box there for 248 of his 521 home runs. Despite its great age and history, Fenway is still a perfectly functional ballpark, with additions and renovations over the years to modernize the facility. Major League Baseball is similar, being an old game that has been modernized over the years.

13 March 2016

The Socio-Cultural Triumph of Mike

Guest Post by Nicholas Constantilos

If I were to ask you “Who is the most popular basketball star ever?” who do you think of? Soaring slam from the free throw line, which person comes to mind? It’s hard to come across someone who does not instantly think of the legendary Michael Jordan. The late basketball star Elgin Baylor once stated… “If you look up the definition of greatness in the dictionary, it will say Michael Jordan.” What this iconic man did for not only the game of basketball but for society is untouchable. He developed one of the most popular brands in the world, left a lasting imprint on popular culture, and forever remains a living role model. I am going to explain why Michael Jordan is a cultural and social legend.

Jordan Brand Significance

I can confidently say that if someone hasn’t owned one pair of Air Jordan’s in their life time, they have at least heard of the shoe brand. In fact, Michael Jordan was the first athlete to ever have his own shoe brand and from this he helped put the Nike brand on the map for sports shoes and apparel. Nike was initially a brand made for runners until Jordan’s fame started following him off the court and gave Nike a claim on basketball. What makes basketball and shoes so intertwined is how much people reflect their game on the type of shoes they wear. Basketball is the only sport where the shoe get most of the credit for one’s success; at least that’s what we all like to think is the reason. ESPN sports writer, Scoop Jackson, stated “Basketball shoes helped define who our hero’s were”. So when Michael Jordan took to the “Air”, he became defined. A large reason why the Jordan brand is so popular is due to Michael’s outstanding performance on the basketball court and with that he created an essentially flawless basketball career. When someone wears Jordan’s shoes they are wearing Michael’s spirit and carrying on his legacy. The shoe give people a sense of comfort because wearing Jordan’s means “success”. Speaking of success, when comparing the Jordan brand to the modern world wide brand “Apple”, a quote that stood out to me was “Apple is still 21 years and 18 iphone models away from being where Jordan is with its signature sneaker.” Now put that into perspective…

Popular Culture

Just when you thought Michael could only impact people on the court and with his shoes, he didn’t stop there. He changed culture itself by his starring in the movie Space Jam. Space Jam was so appealing because it tied together the culture of sports to other areas of pop culture such as the Looney Toons, popular Comedians, and popular musicians. No movie before Space Jam combined real life people and animation the way this movie did. During 1996 some of the most popular rappers at the time such as LL Cool J, Busta Rhymes, and Coolio were featured in the movie, Space Jam got them all on one song, which was never done before. Famous R&B singer R. Kelly also made a song for the movie called “I Believe I Can Fly”. What other movie can you say did that before Space Jam? This all was made possible due to the fact that Michael Jordan was the pumping heart of the movie making all these stars want to be a part of it, giving the movie a true purpose.

A Cultural and Social Hero

What came after Michael Jordan’s outstanding accomplishments and almost unbelievable transcript was the inspiration he gave everyone with his success making them want to be “Just like Mike”. If you ever see someone with bald head and hoop earrings…Michael is responsible for setting that trend. For the youths watching his finals moments, there is no better belief that anything is possible when watching Michael Jordan’s moments. Hall of fame writer, Sam Smith, emphasized “As kids it seemed like the ultimate hero story. No matter how much he’s down or what the odds were, he would find a way to win.” This amazing talent was echoed so loudly to the public that most people did not see “black or white” but a basketball player they enjoy watching, who gave them endless pleasure. By becoming this person it helped cross racial barriers which was and still is extremely impactful. The unique value this man brought to society as a whole will forever live on in history, inspiring people of all ages and ethnicities, including myself.
If you want to experience Jordan’s claim to fame and feel his legacy, check out his brand of apparel and shoes at http://www.nike.com/us/en_us/c/jordan

References: http://www.japantimes.co.jp/sports/2014/11/25/basketball/nba/jordans-global-impact-transcended-racial-economic-boundaries/

07 March 2016

A Plan to Bring Baseball Off of Life Support

Guest Post by P. Lumbean

Celebrating Diversity on the Roster: Marketing Accordingly

If you’re of the opinion that it’s a good idea to erect a giant wall along the US Border with Mexico, this piece is probably not for you. If you’re of the opinion that baseball is best when played by white American-born males, this piece is probably not for you either. Finally, if you’d just as soon watch a game surrounded by middle to upper income American born fans, you’re not going to like what I have to say either. Because I believe that folks from Spanish speaking countries in the Americas and those living in America who were born in Latin American countries (or are descended from such individuals) have the best chance at both saving Major League Baseball from itself and may even return it to its former glory.

Demographic Shifts in the United States

Despite what some of the political stage this year would have us believe, the demography of the United States is changing and it’s going to take a lot more than a really tall wall on our southern border to halt that change. The US Census Bureau projects that between now and 2060, the percentage of citizens of Asian heritage will be the second fastest growing group and those of Hispanic heritage will be the third fastest growing group. The fastest growing group will be those citizens who are of “mixed” or two or more races. By 2060, the Census Bureau projects that of the 416.8 million residents, 29% will be of Hispanic heritage. This represents a 115% increase from that same population in 2014. Meanwhile, the Asian-American population will increase by 128% from 2014 to 2060. By 2060, almost 40% of American citizens will identify as either Asian-American or Hispanic-American. This compares to the 23% in 2014.

It’s seems quite apparent that Asian-Americans and Hispanic-Americans combined will represent by far the largest ethnic category in the United States in 2060. Their economic clout at that time, should be significantly enhanced from what it is now. Businesses that want in on this economic gravy train would do well to start catering to these two groups sooner rather than later.

Fan and Player Demographics in Major League Baseball

If one Googles the term “fan demographics MLB,” one of the first items that appears on the results page is an article with the headline: “MLB Business Dead in 20 Years With Current Fan Demographic.” Yikes (or at least, “Yikes” for those of us who love baseball). Is this really possible? Let’s take a look by first extracting this quote from the aforementioned article:

“You know what the average baseball fan is?” Passan asked. “It’s a 55-year-old white guy. Fifty-five might be light. I’m serious. Baseball’s demographic these days is the worst demographic you can possibly find for future growth. For present business, it’s not bad – because 55-year-old white men buy things. But for future growth, if that is your average consumer, your business is dead in 20 years.”

This comes from columnist Jeff Passan who covers Major League Baseball for Yahoo Sports, and closer inspection of the data shows that he has a point. Nielsen, the self-described, global information and measurement company, releases an annual “Year in Sports Media Report.” There are some fascinating insights in these reports. Specifically, when breaking down the fan demographics, Nielsen found that among fans of Major League Baseball,

70% were male.
50% were 55 years of age or older
83% were white
36% earned $ 75,000 or higher

It does indeed appear as though the MLB fan base is (or at least was in 2013) comprised primarily of older white men in higher income brackets. This case can especially be made when comparing the demographics of fan bases in the competing leagues in the United States:

NFL: 37% are 55 and older
NBA: 40% are white
NHL: 29% are 55 and older
MLS: 27% are 55 and older

These statistics are not particularly effective unless one puts them in the context of overall popularity of sport. Logically, the more popular a sport is, the more financially healthy it is likely to be. Sports that are on the incline need to keep doing what they’re doing. Sports on the decline likely need to make some changes. Business Insider has been asking fans to identify their favorite sports since the mid 1980’s. Some of what they’ve found:

MLB and the NFL each got between 20 and 25% of the vote in the mid 80’s. Since then, MLB has seen a steady decline, reaching an all-time low of 13% in 2003. In the meantime, the NFL has seen steady growth reaching an all-time high 36% in 2011.

The NHL has remained fairly steady in the 5% range since the 1980’s.

The NBA, not surprisingly, saw a surge of interest in the 80’s and early 90’s (Magic-Bird era) and then again in the mid to late 90’s (Michael Jordan era). Since then, the league has settled back in to a predictable pattern of 6 to 7%.

Finally, pro soccer has been by far the least likely sport to be identified as a fan “favorite.” That is until recently, when since 2013 it has gone up rather dramatically and now competes with both the NBA and the NHL.

To be sure, asking fans to identify their favorite sport does not directly correlate to economic health or to sheer volume of income for any given league. After all, someone who identifies the NFL as their favorite league may in fact spend no money, directly or indirectly, on any other league “product.” On the other hand, someone identifying soccer as their favorite sport may spend their money on two or three other sports that they are fond of.

What the Business Insider poll does do for us is to create one barometer. It’s one somewhat useful indicator as to the health of a league, particularly when a league either seems to be ascending or descending markedly in popularity. It’s therefore quite instructive to note that Major League Baseball, whose fan base is dominated by older, whiter, wealthier, male sports fans has been declining n popularity while Major League Soccer has seen a recent, significant uptick.

The Hispanic Sports Fan

A closer look at the MLS (soccer) fan demographics gives an indication as to who it is that may be driving the surge in the league’s popularity in the United States. Returning once again to Nielsen’s 2013 “Year In Sports Media” report, we find that an astonishing 34% of Major League Soccer’s media consumers are Hispanic. This is a particularly notable figure when seen in the context of the figures from the other leagues. The percentage of Hispanic consumers elsewhere are as follows:

NFL: 8%
NBA: 12%
MLB: 9%
NHL: 2%

The report also notes the following:

Over the past year, a young, mobile, and tech savvy audience has embraced MLS in the U.S. Consider this: 52 percent of MLS fans who have expressed strong interest in attending live events and viewing games on TV are ages 18-34, the highest percentage of any pro league. Additionally, MLS fans are far more likely to be smartphone owners, with 76 percent of MLS fans owning a smartphone (Android & iOS) compared to 66 percent of the general U.S. population. And 42 percent of MLS fans have viewed mobile video in the past 30 days, compared to 21 percent nationally

The MLS therefore seems to most definitely be a league on the rise. It then occurs to me that a league whose future might not appear to be so rosy might do well to emulate some of the tactics employed by MLS. To wit: appealing to fans who may already be naturally predisposed to a sport.

Soccer is a huge sport worldwide. It then stands to reason that a high percentage of sports fans immigrating to our country are going to arrive with a predisposition to soccer. They will likely be drawn to the sport just because of a fondness for it, but they may especially be drawn to those teams who have players on their roster(s) from their home countries or regions.

The Hispanic Baseball Player

If you’re still with me, and following my train of logic, you see where this is headed. The 2015 opening day rosters in Major League Baseball had a total of 868 players (this includes players on the active roster, disabled list, and restricted list). 230 were born outside the United States. Of those 230, 201 were from Spanish speaking countries with the Dominican Republic (83) and Venezuela (65) representing the clear majority of Spanish speaking countries. So when more than 25% of the players come from foreign countries and when 23% come specifically from Latin American countries, how is it that such a small percentage of the sports fans are Hispanics? I am suggesting here that Major League Baseball has not capitalized on this most obvious of trends and until or unless it makes a concerted effort to do so, it is a league that will continue to founder until it runs itself into the ground.

What the Smart Franchises Are Doing or Should Be Doing

To be fair, Major League Baseball is at least saying that it recognizes the importance of catering to the current or prospective Latino\a baseball fan. Last Spring, MLB signed an agreement with what they called a “multicultural partner.” Latinworks refers to itself as a “cultural branding agency” and has been tasked with working with MLB to more effectively reach out to Latino sports fans. They have done so through television advertising campaigns and an expansion and improvement of various Apps directed specifically at Spanish speakers.

At the time that the agreement was announced, Jacqueline Parkes, MLB’s Chief Marketing Officer was quoted as saying: “This is us saying to Latino consumers, 'You are here, you are part of the game, and we want you to be here more frequently.' The campaign celebrates the nuances of the game and the powerful influence that Latino players have on the game.”

Individual franchises are also taking steps to increase their marketing to their Latino communities. According to the Los Angeles Dodgers, 43% of their fan base in 2013 was Latino. So it makes a whole lot of sense for them to have trademarked the term “Los Doyers” which references the team’s ties to the Latino community. This trademarking has led to the sale of everything with the “Los Doyers” moniker on it to the “Doyer Dog” hot dog at Dodgers Stadium. Similarly, Arizona’s Diamondbacks have “Los D-backs” t-shirts, an Hispanic Heritage Night, and postgame concerts featuring Latin music.

And I Haven’t Even Touched On. . .

As someone who has spent far too much time listening to candidates and self-described “experts” during this election cycle, I am now somewhat taken aback when I hear someone say something that is actually refreshing or in some way different. Yesterday when struggling to decide how I would conclude this essay, I heard the following from Jose Antonio-Vargas, a Pulitzer Prize-winning journalist, founder and editor of #EmergingUS, and founder of Define American. In talking about this particular presidential election, he said:
Well, what is missing is a more truthful conversation about where this country is going. Look, the country is only going to get gayer—there’s only going to be more gay people coming out—more Asian, more Latino, more black. Right? And women will break every possible barrier there is, and should be broken. You know, what’s at stake in this country, in many ways—right?—is kind of the soul of a lot of heterosexual white men, right?

This piece has focused on the rise, or at least the potential rise of the Latin-American sports fan. The wisest politicians, business owners, and professional sports leagues will recognize that our country is going through a major population evolution, will embrace that evolution, and will ultimately cater to it.
I’ve focused on only one aspect of this demographic change here. I’ve left out those Americans (or new Americans) of Asian descent, the LGBTQ community, and young people growing up in the hyper-digital age to name only three of the additional groups that are positively changing our country. Leagues that want to die on the vine will continue to cater primarily to one category of citizen. Those that want to thrive will recognize the exciting changes taking place and will market accordingly.

Other Sources