Did revenue sharing create parity in MLB?

Sports economist Dave Berri says no.

 Commissioner Bud Selig tells us that the 2002 agreement has ushered in a “golden age.” If by “golden age” he means an era of pay equality and competitive balance, then the data doesn’t seem to agree. Team payrolls are even less equal today and the level of competitive balance appears to be about the same.

The reality is that competitive balance improved in baseball during the 2oth century as the population of available athletes expanded. And the improvements occurred well before the 2002 agreement. For the mechanism of how this works, please read chapter four of The Wages of Wins (shameless book plug, sorry about that). Or perhaps I will comment on this at our blog – The Wages of Wins Journal (another shameless plug, sorry again). In the last thirty years the standard deviation of winning percentage in both leagues has changed very little. Yes, payrolls have increased dramatically, but competitive balance remains basically the same.

So is this a “golden age” of baseball? If by “golden age” we mean the Yankees are not winning the World Series every year, then I guess that is true. But one should not be confused about how that trick was pulled off. The true trick happened when baseball expanded participation in the playoffs. Since 1995 the team with the best record in baseball has only won the World Series once. And that is because the best team now has to navigate three playoff rounds to win the title.

The revenue sharing plan, which put more gold in the pockets of small market teams, may have made the lives of some owners come closer to a “golden age.” But it is hard to see how this altered the level of parity we observe in the National Pastime.

Economic Impact Analysis Survey Article

I will be discussing this article in class on Thursday, October 19.
Caught Stealing: Debunking the Economic Case for D.C. Baseball

District of Columbia mayor Anthony Williams has convinced Major League Baseball to move the Montreal Expos to D.C. in exchange for the city’s building a new ballpark. Williams has claimed that the new stadium will create thousands of jobs and spur economic development in a depressed area of the city.

Williams also claims that this can be accomplished without tax dollars from D.C. residents. Yet the proposed plan to pay for the stadium relies on some kind of tax increase that will likely be felt by D.C. residents.

Our conclusion, and that of nearly all academic economists studying this issue, is that professional sports generally have little, if any, positive effect on a city’s economy. The net economic impact of professional sports in Washington, D.C., and the 36 other cities that hosted professional sports teams over nearly 30 years, was a reduction in real per capita income over the entire metropolitan area.

A baseball team in D.C. might produce intangible benefits. Rooting for the team might provide satisfaction to many local baseball fans. That is hardly a reason for the city government to subsidize the team. D.C. policymakers should not be mesmerized by faulty impact studies that claim that a baseball team and a new stadium can be an engine of economic growth.

What’s a losing season worth?

Tim Tucker summarizes the Braves attendance and ratings for 2006.

Fans reacted ambiguously to the Braves‘ worst season in 16 years.

Roughly as many people attended games at Turner Field as the year before, but dramatically fewer watched games on television. Entering this weekend’s final series of the season, attendance was up 1 percent and TV ratings down as much as 31 percent vs. last season.

On balance, though, “the team probably did better off the field than on the field” this year, said Braves president Terry McGuirk, who quickly added: “That’s not meant to be a pejorative remark about the team.”

The divergence in the response between attendance and TV viewers is interesting.

TBS’ rating for Braves games dropped 30 percent in the metro Atlanta TV market vs. last year, from 7.2 to 5.0, which translates to a loss of about 48,000 Atlanta households from the average audience. Outside Atlanta, TBS’ already-beaten-down national rating for Braves games dropped another 14 percent, from 0.7 to 0.6.

In the Atlanta market, the combined average ratings for Braves games on regional cable channels Turner South and FSN South dropped 31 percent, from 6.1 last year to 4.2.

I bet there’s a good test question in all of this information.

Rise in College Football Ticket Prices

Wall Street Journal (via ProQuest)

As teams look for new revenue streams, ticket prices are particularly attractive. Unlike income from things like TV rights and bowl games, teams don’t have to share ticket proceeds with their conferences.

For years, colleges have awarded the rights to buy the best season tickets based on a candidate’s tenure as a season-ticket holder: Fans with a longer tenure get first dibs on the best seats. But more colleges are now adopting a system similar to the pro teams, which offer so-called personal seat licenses, or one-time payments that give fans the right to buy season tickets.

Many teams say they have no choice but to raise prices. “If we didn’t do something, the only way to cut costs even further was to look at dropping some sports,” says Joe Parker, a senior associate athletic director at Michigan, which has a program that requires about 45% of season-ticket holders to pay a fee of $125 to $500 annually. He says efforts in recent years to cut costs helped put the athletic department in the black, but staying there was getting increasingly difficult.

Sometimes, watching the local pro team is now a better option financially than taking the family to the college game. For a season ticket in the premier club seating area at LP Field, home of the Tennessee Titans, fans have to pay $4,050 — a one-time fee of $1,500 on top of the $2,550 price tag for the eight-game package.

Some 160 miles east in Knoxville, the University of Tennessee is now offering high-rolling fans seats in the new East Club, which has 422 outdoor, theater-style seats under a cover. The cost: $4,000 a year for the seats, plus a $25,000 donation payable in equal installments over five years, bringing the total annual price tag to $9,000 for each of the first five years. The section has an adjoining hospitality club room with private restrooms, pre-game and halftime buffets. (Food isn’t included in the Titans plan.)

Wither the Georgia Dome?

Arthur Blank wants a new stadium.

“People might say, ‘Why is it an issue now when you’re talking about 2015, 2016?’ The answer — and the reason it’s in the front of my mind — is that it now takes about eight years to build an NFL stadium when you include thinking it through, finding the right location, visiting stadiums around the world, understanding what the fans want.”

Blank cited two reasons for a new stadium: Atlanta’s football team is near the bottom of the NFL as a revenue producer, and the Georgia Dome, where the Falcons have played since 1992, will have some serious age on it in another decade.

Blank said the Falcons’ financial arrangement with the state-owned Dome is not competitive with other NFL teams. But he added that even if the team had a better deal a decade from now, “I think a new stadium would be needed. Domes tend to age more quickly than other buildings do. It will be 23- 24- 25 years old [by 2015-2017]. The facility itself will need to be replaced.”

Why does he want a new stadium?

Forbes Valuation

Forbes Ranking

Ballparks.com Info (look at club seats)

Although NFL teams share most national revenue equally — including the league’s mammoth television contracts — a wide disparity has developed among teams in recent years because of a growing gap in locally generated revenue that is not shared.

The key variable in determining how much local revenue a team can generate is its stadium arrangement.

While many teams have stadium deals that allow them most or all profits from concessions, parking and suite rentals, the Falcons’ deal with the Georgia Dome falls far short of that.

The deal — negotiated between state officials and late Falcons owner Rankin Smith — guarantees the team $4 million per year in revenue from the Dome in lieu of a percentage of concessions, parking and suite rentals.

In addition to the guaranteed amount, the deal gives the Falcons a share of the Dome’s annual profit after operating expenses and debt payments are covered. The Falcons get 70 percent of the first $2.85 million in profit and 50 percent of any additional profit.

Also, the Falcons have a separate arrangement with the Dome to market and sell club seats, suites and advertising, for which the club is paid a commission.

According to state records, the Falcons received about $10.7 million from the Dome in fiscal 2006 — the $4 million guarantee, $2,673,604 in profit sharing and $4,043,959 in commissions.

Check out the Redskins Valuation. See their ballpark.com profile.

Dan Snyder added a ton of club seats to a total of 15,000.

Sacramento Scam

Skip Sauer notes a trick that Sacramento politicians are using to get public approval to raise taxes for building  a new arena for the Kings.

Reader Mike Marshall notes that the new deal is now buried inside a general tax referendum, which requires only 50% + 1 vote to pass, rather than the 2/3 super-majority required for a specific tax hike. …

If I understand the sequence and strategy right, city leaders came to believe that the original plan to finance and spend about $600 million on an arena was unlikely to pass muster with voters, so in response, they are going to spend another $600 million on “unspecified projects” and make everyone pay. This in order to cross the threshold at the voting booth. This one might be worth watching.

Laws and sausages.

Minor league gimmicks

Minor league games are a lot of fun to attend. In fact, if you ever want to introduce someone to baseball, the minor leagues are the place to go. However, because the major league games are so easy to find on TV, the minors normally have to do some other things to get fans out to the park.
Brian Borawski links to a list of minor league gimmicks in his Business of Baseball Report. Here is my favorite.

Brevard County Manatees (Florida State League)
Plunger Giveaway
Saturday, August 26 vs. Palm Beach Cardinals
Sometimes it’s best to do away with witty remarks and historical anecdotes and simply report the facts: on Saturday, the Brevard County Manatees will be giving away plungers. Unfortunately, that is currently all that is known about this unprecedented promo. Will it be a sink plunger? A toilet plunger? Will it be embossed with the Manatees logo? The world wants to know, but details are maddeningly vague at this point. You’ll simply have to attend Saturday’s game to find out.

Reminder: Blogs due on Monday

You must have your blog up and running by Monday morning. I’ll be looking at them at about 8 am. Remember when you set your blog up to make sure that the subject matter of the blog is clear. You might want to add an introductory post stating what you plan to blog about over the semester.

The Maryland Stadium Authority

Economist Dennis Coates, a leading expert on stadium finance, points to an interesting critique of the Maryland Stadium Authority.

It loses money, violates the law, and works to protect the monopoly status of a private business.

Maryland has received all those good works from an agency created in 1986 with the “mission of returning a professional National Football League (NFL) team to Baltimore and ensuring that our Major League Baseball team, the Orioles, remained in Maryland.” Now that’s good government!

It’s comical how far the MSA has overstepped the bounds of it’s original mission. And from the sound of things, it doesn’t appear that the organization is any could at what it does, except maintaining its own existence.

Test Post

This is a test post. Blogging is fun. Dr. Bradbury’s blog is Sabernomics.