The Bottom Line

The Bottom Line: Observations and Arguments on the Sports Business

ANDREW ZIMBALlST
Copyright Date: 2006
Published by: Temple University Press
Pages: 312
https://www.jstor.org/stable/j.ctt14bt0hf
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  • Book Info
    The Bottom Line
    Book Description:

    In The Bottom Line, one of the foremost sports economists writing today, Andrew Zimbalist (National Pastime), analyzes the "net value" of sports. He examines motives for why owners buy franchises, the worth of the players and the profitability of teams, and the importance of publicly funded stadiums. In the essays collected here-which appeared in publications like The New York Times, Sports Business Journal, and The Wall Street Journal from 1998-2006-Zimbalist considers the current state of organized sports, from football and baseball to basketball, hockey, and soccer. He also addresses antitrust and labor relations issues, gender equity concerns, collegiate athletics, and the regulation of steroid use, providing readers with a better understanding of the business of sports and the sports business-and what makes both tick.

    eISBN: 978-1-59213-514-1
    Subjects: Business, Sociology

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-viii)
  3. Introduction
    (pp. 1-6)

    The essays in this collection span a decade and a half of exciting action in the sports industry. They represent a selection of op-eds and journalistic pieces I have written for numerous newspapers and magazines.¹

    While the examples change, the environments mutate, and the dollars grow, the basic dilemmas and dynamics of the sports industry remain very much the same. Dollar growth is the easy part to document. Between 1990 and 2004, Major League Baseball’s gross revenues increased roughly from $1.3 billion to $4.3 billion (annual growth rate of 8.7 percent), the National Basketball Association’s revenues increased from $843 million...

  4. PART I. Team Management, Finances, and Value
    • So You Want to Own a Big-League Ball Team?
      (pp. 8-10)

      Richard Jacobs bought the Cleveland Indians with his now deceased brother David in 1986 for $35 million. Two weeks ago, the Indians issued a prospectus detailing plans to sell 4 million ownership shares in the team at a projected price of between $14 and $16 a share.

      With this deal, Jacobs is the first to take advantage of a new Major League Baseball (MLB) policy to allow direct, albeit partial, public ownership of its franchises. With increasing corporate ownership of baseball teams, it seemed only a matter of time before MLB would allow teams to sell stock to the public....

    • Capital Needs, Political Realities Fuel New Interest in Sports Offerings
      (pp. 11-13)

      The ownership landscape in professional team sports is undergoing a significant transformation. Including minority positions, there are now sixty-seven public companies that have investments in teams in the NHL, the NBA, or MLB. Most of these companies have come on board in the 1990s. The NFL has long proscribed such owners, but Commissioner Paul Tagliabue has indicated that the league’s policy may soon change.

      In the past two years, a new trend seems to be emerging that entails direct public stock offerings by sports teams. In November 1996, the NHL’s Florida Panthers sold 7.3 million shares at $10 apiece, with...

    • A Miami Fish Story
      (pp. 14-17)

      Far from losing $30 million in ’97, the Marlins made a hefty profit. So why did their owner destroy the team?

      How could a baseball team in a major media market win the World Series and lose $34 million? The owner of the Florida Marlins, Wayne Huizenga, claims that is just what his team did last year. He hoped that his proclamation of penury would shame Broward and Miami-Dade counties into building him a new, retractable-roof ballpark. When it didn’t, he went ballistic. Putatively to stop the team’s financial bleeding, he conducted the most radical fire sale of players in...

    • Take Stock in the Tribe
      (pp. 18-19)

      Back in June, before the Indians’ IPO, I advised Sports Business Journal readers to buy Cleveland Indians stock only if they were incurable baseball fans with a lifelong dream to own a share of a franchise—and even then, to buy only one share and hang it above their mantelpiece.

      The target price for a share prior to the IPO was $14–$16, yielding an implied franchise value in the neighborhood of $250 million. There was nothing wrong with that implied value. First, the Indians had gross revenues of $147 million in 1997. With a standard sales multiple of two,...

    • Has Milstein Lost His Mind? Not Hardly
      (pp. 20-21)

      First the Browns sell for $530 million; now the Redskins sell for $800 million. What’s next: the Cowboys for $1 billion?

      Funny thing. Owners have been complaining for years that escalating player salaries are out of control. The NFL’s 1995 expansion teams paid $140 million each for their franchises. Paul Allen in 1997 paid $200 million for the Seattle Seahawks. Then the Browns; now the Redskins. Let’s see: Franchise prices increased from $140 million in 1995 to $800 million in 1999. That’s almost a sixfold increase in four years, or an annual growth rate of 54.6 percent. Anybody remember the...

    • If the Redskins Are Worth $800 Million…
      (pp. 22-28)

      What’s it worth to own a ball club in Texas? As with all professional sports teams, it depends on the value of the expected stream of future economic benefits the club will generate. To an owner, these benefits include team profits; owner income from salary, consulting fees, and loan interest; enhanced profits in companies related to the sports team under the same owner; tax-sheltering opportunities; capital gains, perquisites; prestige; power; and plain old fun. Each of these items depends on how well the team is managed, the owner’s other businesses, and the owner’s personality, among other things. Thus, a sports...

    • The NFL’s New Math
      (pp. 29-30)

      Is a new NFL franchise in Houston worth $700 million, or has Robert McNair lost his mind? Recall that the two NFL expansion franchises in 1995 sold for the bargain-basement price of $140 million each. Last year, however, the bornagain Cleveland Browns sold for $530 million, and five months ago, the Washington Redskins sold for $805 million. 50 if the NFL is experiencing an asset bubble, McNair is not the only one to fall for it.

      When Daniel Snyder bought the Redskins for $805 million in May, the price included the assumption of $160 million of debt on the team’s...

    • Don’t Cry for Woody
      (pp. 31-32)

      Robert Wood (Woody) Johnson IV, heir to the Johnson and Johnson fortune, has purchased the New York Jets for $635 million. Some think Woody Johnson will need more than Band-Aids this time to stanch his bleeding checkbook.

      Although the Jets’ price is $170 million below last year’s sale price for the Washington Redskins and $65 million below the price of the new NFL Houston franchise, each of these franchises came with a new stadium. The Jets’ sale price is the highest for a U.S. sports team without a facility.

      Not only do the Jets not have a new facility, but...

    • Ticket Prices and Players’ Salaries: The Real Story
      (pp. 33-34)

      How many times have we heard owners say that they’ll be raising ticket prices because of escalating player salaries? These ownership pleadings are then dutifully regurgitated by much of the local media and assimilated by fans as an economic truism.

      Actually, this purported relationship is little more than folklore. To be sure, historically rising ticket prices tend to accompany increasing payrolls. But just because two things move up together, it doesn’t mean that one causes the other to go up.

      One of my favorite apocryphal stories from teaching introductory economics relates the tale of a man who lives next to...

    • Yes, It’s about Money
      (pp. 35-35)

      Alex Rodriguez, the twenty-five-year-old all-star shortstop, this week signed a contract with the Texas Rangers that will make him the highest-paid player in the history of sports. The contract—for $252 million over ten years—has drawn harsh criticism as an example of the runaway spending that is ruining the sport.

      Yes, the deal is extravagant. Two years ago, Tom Hicks, the Rangers’ owner, bought the team, along with the lease on the stadium near Dallas and options on about 200 acres of surrounding land, for $250 million. Is Rodriguez worth more than the team? Crazy as it seems, he...

    • The NFL’s Economic Success
      (pp. 36-37)

      America’s infatuation with the NFL’s product is about to be stoked again by a new season. The league’s successful economic model, which includes extensive revenue sharing, protracted labor peace, and effective marketing, is a major factor behind the sport’s popularity.

      During the off-season, the public learned more about the league’s auspicious economic fortunes. As a result of Al Davis’s failed suit against the NFL, documents summarizing the teams’ financial performance became public. The documents showed that in 1999 only one of the league’s thirty-one teams did not have an operating profit. Of the thirty teams that were profitable, twenty-one earned...

    • How Much Are the Red Sox Worth?
      (pp. 38-39)

      Last month, the first round of bids came in from would-be owners of the Boston Red Sox. According to Major League Baseball’s Blue Ribbon Economic Report, between 1995 and 1999 the Red Sox had operating losses totaling $5.43 million. The team indicates that 2000 and 2001 have been basically break-even years. So why are there at least six ownership groups willing to pay more than $300 million for 53 percent of this team?

      If 53 percent of the team finally sells, say, for $340 million, it would imply an equity value of $642 million for the whole franchise, including an...

    • MLB in the Aftermath of September 11
      (pp. 40-41)

      First things first. Baseball and football fans should be proud and appreciative of the exemplary behavior of executives, owners, and players in the NFL and MLB in response to the ugly and devastating acts of terrorism on September 11, 2001. The cancellation of games, the extensive relief efforts of the players and coaches, the large donations (including at least $5 million each from MLB, the NFL, the MLBPA, and the NFLPA, and a special contribution of one day’s salary from the entire New York Mets team valued at $450,000), the sensitive and compassionate statements, and the pre-game ceremonies honoring the...

    • MLB by the Numbers, but Who’s Buying?
      (pp. 42-44)

      Two things always seem to be true about baseball: There is never enough pitching, and no one ever makes any money. Actually, owner-commissioner Bud Selig gave a slightly more nuanced version of the second maxim before the House Judiciary Committee on December 6: Twenty-five of MLB’s thirty teams lost money in 2001, and combined, all of the teams suffered a total loss in excess of $500 million.

      Are these numbers any more believable than Selig’s assertion (Milwaukee JournalSentinel, November 15, 200l)—amid claims that his Brewers team would benefit disproportionately from the contraction of the Twins—that St. Louis...

    • Baseball by the Numbers
      (pp. 45-46)

      Bud Selig claims that, combined, the thirty MLB teams lost more than $500 million in 200l. But this figure includes both interest expenses and depreciation charges. The appropriate measure of a business’s ongoing viability is operating income, which excludes these items. When this is done, the losses shrink from $519 million to $232 million.

      In 2001, baseball’s central-fund revenues (from national Tv, radio, the Internet, and property) averaged $24 million per team; distributions to each team averaged $17.9 million. The difference was kept by the central office of MLB, which had a budget of at least $180 million. The budget...

    • The Mets Are Worth More Than $391 Million
      (pp. 47-48)

      How much are the New York Mets worth? The team’s two owners could not seem to decide. For Fred Wilpon to buyout Nelson Doubleday’s 50 percent share, Robert Starkey, MLB’s financial adviser, was hired to do an appraisal. In his April 12, 2002, report, Starkey claimed that the team was worth $391 million.

      Doubleday thought that the Starkey estimate was far too low and refused to sell his 50 percent share based on that price. On July 10, Wilpon filed a complaint in U.S. District Court in an effort to compel Doubleday to sell his share. On August 5, Doubleday’s...

    • The Sports Franchise Market Is Stronger Than Many Think
      (pp. 49-50)

      The sports media is having a field day writing about the supposed glut of teams for sale on the market. Some writers—seemingly alarmed that the Dodgers and Angels didn’t sell within two months—are now claiming that the decades-long sports boom is over.

      A more cautious interpretation, however, would be more prudent. First, recall that the Red Sox took seventeen months to complete their recent sale for $720 million (including 80 percent of NESN). A typical team transaction is a complicated affair, passing through several stages: selecting an investment banker; writing a financial prospectus; identifying prospective buyers; conducting due...

    • Flawed Financial Analysis of NHL Skates on Thin Ice
      (pp. 51-53)

      In early April, Philip Propper, a Los Angeles Kings season-ticket holder and portfolio manager, released his report on the Kings’ finances to the media. Propper had observed that there was a serious discrepancy between the Kings’ claims of financial losses and an article in Forbes magazine estimating a club operating profit of $7 million in 2001-2002.

      Propper offered his services to the Kings, and the Kings apparently shared their financial statements with him. Propper’s report alleges that the Kings’ public statements oflosses are accurate. On the basis of his incomplete financial analysis of the Kings and smatterings of publicly available...

    • Baseball’s New Numbers: Doom and Gloom or Blip and Fit?
      (pp. 54-56)

      Remember last July? After declaring the All-Star Game a dead heat, Bud Selig warned that one franchise might go out of business within the week and another might not finish the season.

      As of mid-May, MLB’s average game attendance was down roughly 5 percent relative to 2002, and 2002 itself had been down 6 percent relative to 2001. Combine this with news reports that the Angels, just six months from their thrilling World Series triumph over the Giants, sold for only $182 million and one might believe that Selig was on to something.

      It’s the economy, stupid. Well, maybe, but...

    • Baseball’s New Management Culture Is a Work in Progress
      (pp. 57-59)

      What follows is a commentary, not a book review. So let me get the preliminaries out of the way.

      Michael Lewis’s new bookManeyball: The Art of Winning an Unfair Gameis a good read and an insightful look into the changing business of baseball.

      Read it.

      The book’s teachings, however, need to be tempered in several ways before we can assess their true meaning for the industry.

      Lewis presents a clear and compelling case that baseball’s traditional system of player evaluation has grown old and inefficient. For instance, fielding percentage and batting average are incomplete measures of defensive and...

    • $53 Million for Pedro? How Do You Figure?
      (pp. 60-62)

      This week, the New York Mets committed between $53 million and $56 million over four years to the thirty-three-year-old pitcher Pedro Martinez. More than a few commentators have warned that this could be the second coming of Mo Vaughn, an over-the-hill, overpriced, injury-prone, erstwhile superstar. Is the Mets’ new general manager, Omar Minaya, trying too hard to make an impression, or does the signing of Martinez make sense financially?

      Let’s be optimistic. Assume that Pedro stays healthy and pitches well. If he starts sixteen home games and the Mets’ average attendance for those games increases by 15,000 from 28,979 (last...

  5. PART II. League Structure, Design, and Performance
    • Fewer Families Own Sports Teams: It’s OK
      (pp. 64-65)

      Americans often form deep attachments to their sports teams. In return, they expect their teams minimally to try to win and to show some loyalty to the communities. When Walter O’Malley moved his Brooklyn Dodgers to Los Angeles in 1958, it marked the era of disloyal teams and changed the sports world forever. Despite O’Malley’s perfidy in the eyes of Brooklyn, for many, family ownership is associated with stability in sports.

      Now, Peter O’Malley, Walter’s son and the present Dodger owner, is about to sell this storied franchise to Rupert Murdoch, media magnate par excellence, for a reported $350 million-$400...

    • If Competitive Balance Spoils the Show, Congress Waits in the Wings
      (pp. 66-68)

      It is by now a cliche to note that the ownership of professional team sports is changing. By one estimate, in early 1998, sixty-six public corporations had direct or indirect ownership interests in sports teams. A large share of these public companies are in the media business. Media business-owned teams often have a different objective from stand-alone teams—namely, the team itself is not necessarily a profit center but, rather, is viewed as software or programming to promote the larger business empire. When Fox decided to pay the thirty-three-year-old Kevin Brown $105 million over seven years two months ago, part...

    • Selig, Players Both Err Early Regarding Competitive Balance
      (pp. 69-70)

      Still salivating from the hardening of the NBA salary cap, MLB Commissioner Bud Selig set up a “Blue Ribbon” panel last month to study baseball’s growing competitive imbalance. The committee includes an economist who did a good job controlling the growth of the money supply between 1979 and 1987, a former senator from Maine, several team owners, and a few others. To conclude that this committee is by, for, and of owners is a no-brainer.

      The problem is that any prospective resolution or amelioration of the competitive balance problem is 90 percent political and 10 percent technical, and at least...

    • Talent Decompression and Competitive Balance in Major League Baseball
      (pp. 71-72)

      Sixteen perfect games have been pitched in ninety-six years of modern baseball, but two of those were in the past fourteen months. Sixty home runs stands up for thirty-four years; sixty-one stands up for thirty-seven more, and then two players hit sixty-six and seventy in one year. If Mark McGwire’s record is due to a lively ball, lower mound, smaller strike zone, or the prohormone andro, how come pitchers are also setting records? Part of the answer lies in MLB’s expansion by four teams in the 1990s. The good news is that, thanks to talent decompression, records once again are...

    • Minor-League Basketball: There’s a Right Way and a Wrong Way
      (pp. 73-74)

      Isiah Thomas has a dream. He wants to corner all professional basketball below the NBA and launch an NBA minor league under his control. Two months ago, he bought the Continental Basketball Association (CBA) for $10 million, and it is reported that he is now negotiating to purchase another league, the International Basketball Association.

      To realize his dream, Thomas needs the blessing of both David Stern and Billy Hunter, the head of the players’ association. The NBA owners need to design a player-development system, including promotion and demotion procedures, and to take on a hefty financial responsibility to support a...

    • The Commissioner’s New Clothes
      (pp. 75-76)

      At their meetings last month, Major League Baseball’s owners gave Commissioner Bud Selig unprecedented formal power. Given the historical disagreements among the owners and the game’s absence of effective leadership, it is hard to quarrel with the effort to strengthen the commissioner’s office.

      One significant measure granted Selig the authority to do whatever is necessary to insure competitive balance in the game. A magnanimous gesture, and who could argue with its goal? The problem comes in implementation.

      If we take MLB’s press releases at their word, then George Steinbrenner, Rupert Murdoch, and Peter Angelos, among others, will sit idly by...

    • Baseball’s Competitive Balance and the Amateur Draft
      (pp. 77-79)

      The 2000 baseball season has begun. And what a beginning! First, 5 A.M. (EST) games from Japan; then Western Hemisphere opening night coinciding with the college men’s hoops championship game.

      But we should take what we can get. If the players don’t opt to extend the collective-bargaining contract for another year after this season, we might not get any baseball in 2001. If they do extend, we might not get baseball in 2002.

      Labor and management have a lot to talk about, and one would hope that they begin their collaborative process sooner rather than later. One of the central...

    • Baseball’s Blue Ribbon Panel: Good News and Bad News
      (pp. 80-82)

      Baseball’s hired geniusesGeorge Will, George Mitchell, Paul Volcker, and Richard Levin—should have done better after eighteen months of work. Their Blue Ribbon report is marred by superficial and wrongheaded analysis at points, but much of its message is sound, and some of its prescriptions are worth considering. The danger is that the report will be dismissed for its weaknesses, and its strengths will be overlooked.

      This is precisely what the Forbes magazine writers Michael Ozanian and Kurt Badenhausen did in theirWall Street Journal op-edon July 27. Ozanian and Badenhausen denounced the report as a “charade” because its...

    • NFL’s Revenue Sharing Saps Will to Win?
      (pp. 83-84)

      Ask baseball fans outside New York City and they are likely to tell you that they have had enough of $100 million payrolls and the Yankee dynasty. Baseball, they say, has become too imbalanced.

      Is it possible that football suffers from the opposite problem: too much balance? Consider the following. NFL teams share 40 percent of gate revenues, including club-seat premiums and sales of personal seat licenses (PSLs) (when not used for stadium construction); 100 percent of national and international television, radio, and Internet rights fees (more than $75 million per team per year [Note:In 2006, this sum will...

    • The Sports Industry during Recessions
      (pp. 85-86)

      Conventional wisdom has it that the sports industry is largely immune to economic downturns. While it is true that in previous recessions the sports industry fared better than manufacturing and most service sectors, it is prudent to recall that the U.S. economy has not experienced a recession since the first quarter of 1991 (and the recession before that was in 1982).

      The nature of the sports industry and the structure of its revenues have changed dramatically over this time span. These changes make the industry more sensitive to macroeconomic conditions and more vulnerable to recessions than in the past.

      Economics...

    • On Contraction, Selig Should Change His Mind Again
      (pp. 87-88)

      Last month MLB Commissioner Bud Selig told the media that he is no longer opposed to contraction—that is, a reduction in the number of teams. It is encouraging to see that the commissioner is willing to change his stance on an issue. Next time let’s hope he changes it in the right direction.

      Why did Selig have a sudden change of heart on contraction? Likely he would adduce two key factors. First, it will improve the absolute quality of play. He’s correct here. The only problem is that the difference (the number of major-league ballplayers will decline from 2.6...

    • Un-Fair Ball
      (pp. 89-90)

      Allen Barra’s April 13, 2001, piece in theWall Street Journalinvokes Disraeli’s famous remark: “There are three kinds of lies: lies, damn lies, and statistics.” By observing that no Major League Baseball team in 2000 had a win percentage above .600 or below .400, Barra purports to resolve the dispute about whether there is competitive imbalance in baseball. He doesn’t.

      One should begin by asking why Barra, seemingly like just about everyone else who has joined this debate, insists on hyperbole. Either baseball has never been better or it is on the edge of a precipice, with all fans...

    • Competitive Balance Is a Problem
      (pp. 91-92)

      With the Minnesota Twins and their $25 million payroll jumping out of the gate to take a one-game lead over the Cleveland Indians after fifty games, it seems that baseball’s journalistic Pollyannas are coming out of the closet. Allen Barra (Wall Street Journal, April 13, 2001) discovered that the spread of win percentages in Major League Baseball has been narrowing over the decades. Now Leonard Koppett (New York Times, May 20, 2001) reveals that the share of World Series participants coming from baseball’s largest markets has fallen over time. The conclusion of both authors is that there has always been...

    • How to Reform the NHL’s Economic System
      (pp. 93-95)

      In the October 1–7 issue ofSports Business Journal, Andy Bernstein wrote a provocative and thoughtful piece that suggested a new economic system for the NHL. Bernstein touted his plan this way: “Imagine an NHL in which every team has an equal chance to be competitive even without a salary cap or artificial restraint on player salaries.” He also promised “no revenue sharing” and “no luxury taxes.”

      The NHL’s collective-bargaining agreement expires after the 2003–2004 season. Judging by early pronouncements, the owners are looking for major concessions from the union. Claims that salaries have gone haywire and that...

    • MLS Remains Minor League, World Cup Notwithstanding
      (pp. 96-97)

      Major League Soccer Commissioner Don Garber could barely contain himself. The success of the U.S. team in the 2002 World Cup was going to legitimize soccer in this country and catapult MLS into the ranks of our most popular professional sports.

      Writing in the June 30 issue of theNew York Times, Garber gushed: “The success of America’s team has led to increased visibility and credibility for our sport, our leagues and our players…. [B]y any measure soccer has arrived. It has established its rightful place in the new America and will continue to spread its influence in the years...

    • Beantown’s New Brain Trust Touches All the Fans’ Bases
      (pp. 98-99)

      Now that baseball fans have the trauma of the 2002 near-strike behind us, it is time to reflect on and appreciate some of the good things that we have. One of the notable trends over the past decade in baseball is the improved quality of team-management staffs and ownership. The number of intelligent and experienced people running the front offices today is impressive. Whatever else the game’s problems, it is always helpful to have better executives managing the show.

      One significant upgrade has taken place in Boston. John Henry, Larry Lucchino, Tom Werner, and partners bought the Boston Red Sox...

    • The NFL’s Report Card
      (pp. 100-102)

      Commissioner Paul Tagliabue gave his state-of-the-game speech before last week’s Super Bowl. Here’s my assessment of what’s right and what’s wrong with the business of the NFL.

      The main story is a good one. The NFL is a well-managed league. Tagliabue is a sober, smart leader, and his union counterpart, Gene Upshaw, is the same. Together they have fashioned an owner–player partnership that is the envy of every U.S., and many a foreign, team-sports league.

      The NFLPA has come under attack by some critics who claim that the union has not done enough to guarantee players’ contracts and raise...

    • Trading Deadline Activity Raises Issue of Baseball’s Competitive Integrity
      (pp. 103-105)

      Baseball’s July 31 trading deadline came and went, but it left behind some questions about the sport’s competitive integrity. Consider what happened with the Cincinnati Reds and how it was handled by Commissioner Bud Selig.

      The Cincinnati Reds’ owner, Carl Lindner, said that his team needed a new stadium so it could be competitive again. Hamilton County obliged him, building a $330 million facility on the river. The Great American Ballpark opened this year. The Reds were ten games under .500 at the trading deadline.

      Baseball’s new revenue-sharing system also kicked in this year. The Reds stand to receive some...

    • The Gold in Baseball’s Diamond
      (pp. 106-107)

      As the 2003 season drew to a close, remarkably half of baseball’s teams had a chance to make the playoffs. Has Major League Baseball’s year-old collective-bargaining agreement, with its revenue-sharing plan and luxury tax, leveled the playing field? Not exactly.

      The tight races were chance occurrences, the result of a muddle of mediocrity at the top of the American League’s Central Division and in the battle for the National League’s wild-card slot. They had nothing to do with greater parity among the teams.

      If the changes in the collective-bargaining agreement were having their intended effect, the payrolls of the top...

    • What Went Wrong with WUSA?
      (pp. 108-109)

      Had he stuck around ESPN a bit longer, Rush Limbaugh might have opined: “The only reason anyone ever paid any attention to WUSA [the Women’s United Soccer Association] is because people want to see women succeed in sports.” Okay, maybe he wouldn’t have said it, but more than one sportswriter has questioned the financial viability of women’s professional sports in the last few weeks. Did they ever hear of Annika Sorenstam or Serena Williams? Have they observed the fan fervor and electricity of the Women’s World Cup competition?

      In fact, the suspension of WUSA has nothing to do with the...

    • Money Game: Baseball’s Short-Lived Rally
      (pp. 110-111)

      Judging by the healthy increases in television ratings for MLB’s 2003 postseason games, it might seem that baseball is reasserting itself as our national pastime. The felicitous combination of avoiding a work stoppage in 2002; more competitive divisional and wild-card races; the unusual appearance of the Cubs, Sox, and Marlins in the League Championship series; and the emergence of exciting young stars has allowed MLB to decisively reverse a longstanding downward trend in its post-season television viewership.

      This is good news for baseball fans like me, and some of it is due to better management of the game. One has...

    • No Reason to Break Up the Yankees
      (pp. 112-113)

      Ever since the Yankees landed A-Rod, the mercury on Yankee hatred seems to have busted through the thermometer. Peter Gammons had one of the better quips: “The Beatles just got Elvis.”

      The analogy is apt in more ways than one. The Beatles had trouble getting along with each other. Add Elvis and his self-aggrandizing manager, Colonel Tom Parker, to the mix, and who knows what kind of noxious chemistry would have resulted.

      Never mind that the Yankees basically will pay A-Rod’s 2004 salary by unloading the salaries of Drew Henson, Aaron Boone, and Alfonso Soriano, and with subsidies from the...

    • More Financial Smoke and Mirrors from MLB
      (pp. 114-115)

      After years of gloomy proclamations about the state of baseball’s financial condition, the commissioner’s office is beginning to sound surprisingly upbeat. Average players’ salaries in 2004 are $2.49 million, down 2.7 percent from 2003. That might not seem like much, but it is a big turnaround from the 11.5 percent annual growth rate in salaries from 1995 through 2003.

      So there’s some cause for optimism at 245 Park Avenue, but MLB’s chief financial officer, Jonathan Mariner, made an eye-popping claim toSports Business Journal’sDan Kaplan last week: Only five MLB teams are in danger of not meeting the league’s...

    • Enough Already: Time to Award D.C. a Franchise
      (pp. 116-117)

      Some day soon, we are told once again, MLB will let us know whether the nation’s capital is deserving of a baseball team. Washington, D.C., ranks eighth nationally in the size of its media market (with 2.5 times the number of television households as Milwaukee) and fourth in the number of companies with more than 100 employees.

      Its median family income in 2000 was $84,800. This is well above the level in the other cities in contention: $65,800 in Portland, Oregon; $55,200 in Norfolk, Virginia; $54,700 in Las Vegas; and $50,500 in San Antonio, Texas. And it is well above...

    • Tweaking the NFL Juggernaut
      (pp. 118-119)

      So, what else is new? The 2004 NFL season is upon us, and the Patriots opened with a victory over the Colts, thanks in no small part to the steady foot of the placekicker Adam Vinatieri.

      Another thing that is not new this year is that NFL clubs will, once again, be massively profitable. According to the estimates of Michael Ozanian atForbesmagazine, in 2003 only one of the NFL’s thirty-two teams, the Arizona Cardinals, failed to make a profit. The NFL’s worst stadium deal, a lousy team, and a less than effective front office left the franchise with...

    • Single Entity, Though Alluring, Won’t Solve Hockey’s Problems
      (pp. 120-121)

      Two weeks ago. Bain Capital (BC) and Game Plan International (GPI) made a bold and tempting offer to the NHL: They would buy the entire league, all thirty teams, for $3.5 billion. The implied average franchise value is $116.7 million, but BC and GPI said they had a formula to pay high-revenue, large-market teams more than the average and low-revenue, small-market teams less than the average.

      BC is run by Steven Pagliuca, co-owner of the Boston Celtics, and GPI is run by the sports-financing veterans Bob Caporale and Randy Vataha. Following the old adage “Buy low, sell dear;” they saw...

    • British Soccer Fans, Kicked Again
      (pp. 122-125)

      Last week, globalization hit Manchester, England. Specifically, an American businessman who owns the Tampa Bay Buccaneers bought Manchester United, the world’s most famous and richest soccer club. Malcolm Glazer has no known interest in either the city or the sport (his son Joel is said to be a soccer fan but is not known ever to have attended a game). Tampa Bay is 4,300 miles from Manchester, and it seems unlikely that the new owners will be spending much time in the clubhouse.

      Most observers reckon that Glazer’s interest is purely financial. The franchise he bought was not “sweating its...

    • McClatchy Is Barking Up the Wrong Tree
      (pp. 126-128)

      Kevin McClatchy would like to turn baseball into a welfare state. This year, baseball’s top-revenue franchises will transfer nearly $300 million to its bottom-revenue teams. Of this, McClatchy’s Pirates are projected to receive more than $20 million.

      McClatchy’s also been getting some welfare from the state and county. Pennsylvania and Allegheny County put up $239 million toward the construction of PNC Park in 200l.

      The total development cost of the stadium was approximately $260 million, so the team put up less than 10 percent. The team keeps all baseball revenues generated at the stadium, including parking, and pays only $100,000...

  6. PART III. Stadiums:: Financing, Mega-Events, and Economic Development
    • Fan Freedom and Community Protection Act of 1996
      (pp. 130-132)

      The NFL, NBA, NHL, and MLB are monopolies. For public-relations purposes, these leagues will contend that they are not monopolies but, instead, just competitors in a large entertainment industry. They are part of the entertainment industry just as my socks, shirt, and jacket are part of the garment industry. They all keep me warm. The real question from an economic point of view is whether there is meaningful price competition among these various entertainment forms. If the San Francisco 49ers raise their average ticket prices from $40 to $42, will fewer people attend their games and more attend the games...

    • What’s BOB Really Worth to Phoenix?
      (pp. 133-134)

      The finance department of the city of Phoenix, Arizona, published a study last month on the local economy during the first six months of 1998. The numbers are impressive: Sales revenue in the downtown area where the new Bank One Ballpark (BOB) is located went up 34.1 percent compared with the same period during 1997, and sales revenue for the whole city was up 7 percent. The city did not waste a moment trumpeting these results to the media, and the media (Sports Business Journal included) dutifully regurgitated these numbers to the public. The message: The dismal economists are wrong....

    • Football Stadium Folly
      (pp. 135-136)

      Talk about an offer you can’t refuse. The one that Governor John Rowland of Connecticut made to the owner of the New England Patriots to lure the football team to Hartford was so generous and encompassing that it put the recent sports giveaways in Tampa, Baltimore, St. Louis, and Cleveland to shame.

      The deal, which the State Legislature will consider on December 15 after a hearing next Wednesday, includes, at Connecticut’s expense, a riverfront stadium for at least $280 million, $70 million to acquire and improve the site, $25 million–$100 million for environmental cleanup, land for a pavilion and...

    • When Teams Move, Protecting Both Fans and Owners Is Tricky
      (pp. 137-138)

      Suppose you’re a football fan and you are lucky enough to live in one of the twenty-nine metropolitan areas that hosts an NFL team. The team’s owner is a long-time resident in your city and publicly declares that he has nothing but scorn for owners who move their teams and that he would never do such a thing. The next year, you buy two season tickets with the understanding that you will have a right of first refusal to continue to buy those seats for each subsequent season unless you did not exercise this right in the prior year. That...

    • Now You See the Patriots, Now You Don’t: NFL Musical Chairs
      (pp. 139-140)

      Why did Robert Kraft, owner of the New England Patriots, walk away from the most lucrative stadium deal in NFL history? Oddly enough, the “new” deal in Massachusetts was essentially what Kraft had already been offered before his cat-and-mouse game in Connecticut—$70 million in state money for infrastructure, $250 million in private money for the stadium in Foxboro.

      Massachusetts House Speaker Thomas Finneran was excoriated in the Boston press for playing hardball with Kraft and seemingly losing the Patriots. Now the Pats are back on Finneran’s terms, and Kraft, doing his best imitation of the Oakland Raiders’ owner, AI...

    • Flawed Specter Bill Gets an A for Effort
      (pp. 141-143)

      On May 4, Senator Arlen Specter of Pennsylvania introduced the Stadium Financing and Franchise Relocation Act of 1999. The senator’s own state is committed to spending approximately $1 billion on four stadiums over the next several years. His bill would require the NFL and MLB to set aside 10 percent of their national-television–contract revenues each year to create a stadiumconstruction fund. This fund would then provide up to 50 percent of the construction costs of new facilities. If the leagues did not comply, they would be penalized by the removal of their broadcasting antitrust exemption, which allows them to...

    • A Tale of Facilities in Two Cities: Boston and Green Bay
      (pp. 144-145)

      Teams seeking public funds to help finance new facilities are fond of making three claims. First, the facility will generate thousands of jobs and promote local economic development. Second, the new facility will help team finances, enable the team to purchase higher-priced free agents, and make the team more competitive. Third, most teams claim that they are offering a fair deal in helping to finance construction.

      The first claim is false. All independent research on the subject has found that there is no boost to area employment and income from a new facility. And no new income means no new...

    • Share of Ballpark: $16 a Year
      (pp. 146-148)

      Should Florida use public funds to help build a new stadium for the Florida Marlins? There’s a proper way to focus on this question, and there’s a misleading way.

      Unfortunately, MLB Commissioner Bud Selig and Florida Senate President John McKay are making comments that distract from the real issue. Selig’s letter to Senator Alex Villalobos threatens either the elimination or the relocation of the Marlins. Don’t believe it. Selig has used the relocation threat on multiple occasions in the past. It hasn’t happened. Before the Marlins are allowed to relocate, MLB would have to consider several teams in more desperate...

    • Cards’ Offer Is in the Ballpark
      (pp. 149-150)

      Two-thirds of Major League Baseball teams are currently playing in a stadium built since 1989 or are awaiting the completion of a stadium under construction. Another five teams are in advanced stages of negotiation for a new facility.

      The Cardinals’ Busch Stadium was built in 1966. As cookie-cutter-era stadiums go, Busch is one of the best. It still leaves a lot to be desired in terms of modern amenities, sight lines, fan proximity to the action, and revenuegenerating features.

      As I have written before, independent economic research finds that, on average, a new stadium does not raise an area’s per...

    • New York City Can Do Better
      (pp. 151-151)

      The deals Rudy Giuliani struck with the Yankees and Mets on December 28 are the best argument in years for a new revision of the city charter. First consider the lease amendments. The city allows each team to deduct $5 million annually for five years from any rent due the city and to use the sum as the teams see fit to defray planning costs for the new stadiums. Total cost: $50 million. Bad deal. The right deal would spend less money, the costs would be shared 50—50, and the expenditures would be agreed on by both sides.

      Rudy’s...

    • The NFL and Los Angeles: Here We Go Again
      (pp. 152-153)

      Maybe the NFL and Los Angeles just weren’t meant for each other. Signs that something was strange about the NFL–LA relationship first appeared in July 1972 when Carroll Rosenbloom traded his ownership of the Baltimore Colts for Bob Irsay’s ownership of the Los Angeles Rams. Then came Al Davis’s suit against the NFL to enable him to move his Oakland Raiders to Los Angeles. The courts said that the NFL’s franchise relocation policy was too restrictive and that it was not acceptable to protect the Rams’ monopoly over the Los Angeles market.

      So Davis moved his team to Los...

    • Live from New York City: Inflation, Traffic—and the Olympics!
      (pp. 154-155)

      In the first round of the playoffs, New York City vanquished Houston and Washington, D.C. It went on to subdue San Francisco in the finals.

      With all the exultation over the outcome, you’d have thought New York had won a Super Bowl title. In fact, the city had been picked by the U.S. Olympic Committee to be the U.S. entry in the contest to host the 2012 Olympics.

      Up next is the three-year World Cup where New York, with its $13 million PR budget, will try to sway the International Olympic Committee judges enough to knock off Paris, Rome, Moscow,...

    • Renovating the Stadiums: The Real Economic Story
      (pp. 156-157)

      Residents of the greater Kansas City area are being asked to approve a bistate sales tax that is projected to raise $354 million to finance extensive renovation of the stadiums for the Chiefs and Royals and an additional $350 million for the metro-area arts programs. While there may be legitimate noneconomic reasons to support this bistate tax, voters should be aware that all of the independent, scholarly work on the subject has found that new sports facilities and teams do not contribute to an area’s economic development. Voters should not expect the region’s per capita income or employment level to...

    • Foxboro’s Gillette Stadium: A Model for Others to Ponder
      (pp. 158-159)

      Earlier this season, I made my first visit to Gillette Stadium in Foxboro, Massachusetts, home of the New England Patriots and the New England Revolution. From its stylistic touches to its seat backs with lumbar support, its two forty-two-foot video screens at each end of the stadium, and its spaciousness, this facility is a fan’s delight.

      Two characteristics in particular merit attention. First, 85 percent of the seats are on the sidelines, and all seats are angled toward the fifty-yard line. Second, the concourses are wide and open. All concessions and restrooms are against the back of the stadium, leaving...

    • Games People Play
      (pp. 160-161)

      Loathe as I am to question the authority of Joe Namath on the issue of stadiums and economic development, there are some issues I wish he would address in his next commercial.

      First, documents obtained through the Freedom of Information Act suggest that the true public cost of Jets Stadium is more than $600 million. Not included in this sum, for instance, is the projected $55 million cost for a platform over West Street to connect the stadium to the waterfront. The Jets’ plans call for extensive use of boat service across the Hudson River, and this platform is essential...

    • Straight Talk on Stadiums
      (pp. 162-163)

      Some issues just refuse to go away. The economic impact of sports facilities is one of them.

      On November 2, there were eleven ballot initiatives on sports facilities across the country. Of these, two concerned the NFL, and one concerned MLB. Public funding for a new stadium for the Cowboys passed in Arlington, Texas, while an initiative for stadium funding for the Kansas City Royals and Chiefs failed. As I write, the financing fates of a new baseball stadium in Washington, D.C., and a new football and Olympic stadium on the West Side of Manhattan are being decided.

      Each time...

    • More Benevolence in Stadium Games
      (pp. 164-165)

      Baseball’s stadium dramas have reappeared with a vengeance this year. First, there was thepas de troiswith Mayor Anthony Williams of Washington, D.C., City Council Chair Linda Cropp, and MLB Chief Operating Officer Bob DuPuy. The rich stadium deal was on the table, off the table, and then on the table again. The public will fund about 80 percent of the roughly $550 million expense of the new stadium and grant all stadium revenues to the team in exchange for $5.5 million in annual rent. Score a victory for MLB.

      Second, there was the drama in Minnesota, where after...

    • New York Facility Triad Is Good News
      (pp. 166-167)

      If bad news always happens in threes, then New York City is providing the exception to prove the rule. No sooner had Sheldon Silver, speaker of the New York State Assembly, vetoed the use of $300 million of state money to finance the Jets Stadium on Manhattan’s West Side than the Yankees and the Mets announced plans for privately funded new stadiums. The Yanks and Mets now join the Ratner arena plan for Brooklyn to provide the prospect of three new sports facilities’ opening in the five boroughs during 2008–2009.

      Over the past fifteen years, the public share in...

    • Economic Impact of the Olympics Doesn’t Match the Hype
      (pp. 168-170)

      The International Olympic Committee slapped the United States in the face twice two weeks ago: First, New York City lost out on its bid for the 2012 Olympics, and second, the IOC dropped baseball and softball as Olympic sports. It wouldn’t take a paranoid personality to think that maybe somebody out there doesn’t like us very much.

      Baseball and softball are certainly not as popular as soccer, but they are more popular than the vast majority of Olympic sports. It was only twenty years ago that the Olympics did not allow professionals, and now they drop baseball because they insist...

  7. Part IV. Antitrust and Labor Relations
    • Take Me Out to the Cleaners
      (pp. 172-173)

      The romantic view of Major League Baseball’s relationship with cities—such as San Diego, where the All—Star Game will be played tonight—is that it is a benevolent partner. After all, a new old-fashioned stadium has revived Baltimore’s fortunes. But the realistic view is that baseball squeezes revenues out of already impoverished urban areas.

      Baseball franchises are not publicly held corporations. There is no functional separation between ownership and management and, hence, there is no pressure to produce book profits to please individual or institutional stockholders. Through accounting legerdemain, bloated front offices, and extensive perquisites, even baseball’s most lucrative...

    • Batter Up, Already
      (pp. 174-175)

      With two days to go until spring training, and with the Republican leadership in Congress apparently unwilling to lift a finger to settle baseball’s paralyzing six-month labor dispute, fans must be in a state beyond despair. But the situation is not hopeless—at least, not yet.

      To get real baseball in 1995, Congress needs to get involved now. [Note: “Real baseballhere refers to major leaguers, as opposed to the replacement players that were used by the owners during spring training in 1995.] It won't do to wait until June, when some have said they plan to revisit the issue,...

    • Team Profitability and Labor Peace
      (pp. 176-177)

      The Florida Marlins lost more than $30 million last year. Right, and Dennis Rodman has no tattoos.

      The NBA claims that more than half its teams are losing money. The National Basketball Players Association (NBPA) says that only five teams lost money last year, and four of those are getting new arenas. The NBA owners say that they need a hard cap to stop the bleeding. The players say it ain’t so, and besides, if some teams on the bottom are really in the red year after year, then there are better ways to deal with it than creating still...

    • This Bud’s for a Salary Cap
      (pp. 178-179)

      The coronation of Bud Selig as baseball’s new commissioner brought yelps of acclamation from all corners. The owners even managed to turn their traditional trick of two votes: first the real vote, in which three owners dissented, and then the vote for public consumption, in which enthusiastic unanimity prevailed.

      To be sure, Bud’s promotion brings both good news and bad news. The good news is threefold. First, when referring to the office we will no longer have to take a deep breath and say “chairperson of the executive council:” Now, it will just be “commissioner:” Second, Selig is actually a...

    • Let the Market Rule the Basketball Court
      (pp. 180-182)

      It’s billionaire owners versus millionaire players, so who cares? A few years ago, people were reciting this mantra about baseball and hockey. Now it’s about the NBA, a league that until last week had never missed a game due to a work stoppage.

      With a lockout delaying the start of the season, owners and players are fighting over how to distribute the pie called “basketball-related income;” a sum that excludes licensing revenue of more than $250 million a year as well as 60 percent of revenue from such sources as luxury suites and advertising in NBA arenas. As of last...

    • The NBA Lockout: Who’s Dropping the Ball?
      (pp. 183-186)

      On November 12, theNew York Timesran a profile of the Washington Wizards’ owner Abe Pollino Pollin was quoted as saying that the NBA’s present economic system does not work and that the owners deserve a fair rate of return on their investments. The same day, NBA Commissioner David Stern was quoted inUSA Todaystating that the fundamental issue was a fair share for the owners.

      Interestingly, neither Pollin nor Stern alluded to a problem of competitive balance among the teams—the argument most often made on behalf of a salary-cap system. Rather, both seem to be concerned...

    • The NBA Lockout: A Postmortem
      (pp. 187-190)

      Some sportswriters and players’ agents, and even the guru of sports-union leaders, Marvin Miller, have questioned the efficacy of union leadership during the recent NBA lockout. While the final collective-bargaining agreement makes some unfortunate concessions from the players’ perspective, the deal also contains some important gains for the union. Moreover, both the structure of the deal and the union’s accrued experience from the struggle augur well for the next confrontation six or seven years down the road. The critics are right when they argue that Billy Hunter and Patrick Ewing may have made some mistakes. They are wrong if they...

    • “Jordan Effect” Won’t Rescue the NBA
      (pp. 191-192)

      Michael Jordan announced his return to the NBA last week—not as a player but as part-owner and general manager of the Washington Wizards (formerly the Bullets). He also vows to participate in team practices so he can look closely into the players’ eyes and see what they are made of. And if Gar Heard, the Wizards’ coach, doesn’t like it? “I’m his boss and so I can do it:” Jordan pronounced at a press conference.

      Understandably, the second coming of basketball’s greatest player generated a lot of excitement. The news was the lead story in both theWashington Post...

    • NBA Players Are Doing Fine, Thank You
      (pp. 193-194)

      If all goes according to plan, after the January 28 Super Bowl, U.S. sports fans will focus renewed attention on the NBA. It will come none too soon for most NBA arenas, where empty seats have been more visible than usual this season. NBA television ratings on Turner are averaging only a 1.2 Neilson rating, down 14 percent from last year.

      Yet there are also signs of success. The NBA is approaching the midpoint in its present collective-bargaining agreement whose negotiation delayed by three months the start of the 1998–99 season. When the accord was reached in early January...

    • Contraction and Baseball’s Antitrust Exemption?
      (pp. 195-196)

      Should MLB scorn common sense and its fans by proceeding with contraction plans, it will find a variety of challenges to its special antitrust-exempt status. These challenges will come from attorneys-general of states seeking to retain existing clubs or to attract relocating clubs and from the MLB Players Association, among other possible sources.

      Several weeks ago, I was having lunch with a group that included a few owners of Major League Baseball teams. One of the owners inquired whether MLB’s antitrust exemption still mattered. It is a reasonable question-after all, each of the major team-sports leagues is a monopoly, but...

    • Baseball’s Addition through Subtraction Just Doesn’t Add Up
      (pp. 197-199)

      The lords of baseball gave us one full day to relish the most electrifying World Series in recent memory. Then, out of nowhere, came the “C” word.

      Baseball is a monopoly, and like all monopolies it is fond oflimiting output to raise the price of its product. In this case, baseball is reducing the number of franchises and, it hopes, raising franchise values.

      Meanwhile, the consumers in Minnesota, Montreal, and greater Washington, D.C., get shafted. It is as if GM had bought up Ford, Chrysler, and Toyota and announced it would cease to sell cars in Oregon.

      Some say baseball...

    • Baseball’s Game of Smoke and Mirrors
      (pp. 200-201)

      Ever since the last days of Peter Ueberroth’s commissionership, it has been hard to suspect the barons of baseball of conspiring to do anything. Conspiracy implies foresight, organization, and cohesion—qualities that have eluded the owners as a group.

      The owners’ present leader, team owner-commissioner Bud Selig, is sufficiently confused that, after being accused of a conflict of interest in trying to eliminate the Twins, he assured the national media that Minneapolis was closer to St. Louis (621 miles) than it was to Milwaukee (337 miles). Then the good commissioner proclaimed that Carl Pohlad had offered to pay 80 percent...

    • Baseball and D.C. for All the Wrong Reasons
      (pp. 202-205)

      Congratulations Washington, D.C., you have been anointed. Last week, MLB Commissioner Selig indicated that Washington, D.c., after a thirty-year hiatus, once again might be a worthy host for Major League Baseball.

      One might wonder by what logic the nation’s capital and eighth-largest media market merits a team after MLB’s planned contraction to twenty-eight teams but did not before, when there were thirty franchises. Of course, contraction is not a reality; it is only an ownership gambit, and one that has no place in a sane economic world. MLB, as the only producer of top-level, professional baseball in the country, is...

    • All Right All You Lawyers, Play Ball!
      (pp. 206-207)

      This season, the owners have pledged that they will not lock out players or unilaterally try to impose an agreement. The players, rather than striking as in 1994, are likely to take a decidedly different tack, too: decertify their union and sue the owners on antitrust grounds. They can do that because in 1998, Congress lifted MLB’s antitrust exemption as it applies to collective bargaining.

      How does the owners’ behavior violate antimonopoly rules? First, to increase revenue sharing, and purportedly to promote competitive balance, the owners want to impose a nominal 50 percent tax on the net local revenue of...

    • Baseball: A Deal Can Get Done
      (pp. 208-210)

      In July 2000, Commissioner Selig’s hand-picked Blue Ribbon Panel, after fifteen months of study, issued its report on baseball’s economic problems and what to do about them. The panel’s principal recommendations were threefold: increase revenue sharing, reintroduce a luxury tax on high payrolls, and modify the draft system by internationalizing the amateur draft and establishing a competitive balance draft off the major-league rosters.

      With minor tweaking, Selig has put these recommendations on the bargaining table. Press reports suggest that he has put four other significant economic issues on the table, as well: a rule stipulating that no more than 40...

    • Labor Relations Heating Up in the NBA
      (pp. 211-213)

      Three weeks ago, the NBPA filed an appeal of the September 25 ruling of the system arbitrator Charles Renfrew. Renfrew denied the NBPA’s claim that the NBA had circumvented the 1999 collective-bargaining agreement.

      The NBPA discovered at the beginning of 2002 that the owners were intending to use a distribution system that, in essence, would increase the luxury-tax rate substantially above the already high 100 percent stipulated in the collective-bargaining agreement. (By way of comparison, the luxury-tax rate in the new baseball collective-bargaining agreement starts at 17 percent and can go as high as 40 percent in the third year...

    • The New Baseball Labor Agreement Is Already at Work
      (pp. 214-215)

      The smells of spring are buried under two to three feet of snow on much of the East Coast, but the crack of the bat and pop of the glove are being heard in Florida and Arizona. The new baseball season is about to begin, and it is a reasonable time to ask whether baseball in 2003 will be different from baseball in 2002.

      It is clear that MLB’s new collective-bargaining agreement is already having an impact on the game. The question is whether it is the desired impact.

      The owners had two professed goals for the new collective-bargaining agreement:...

    • NHL: Time to Stop Blowing Smoke and Start Real Bargaining
      (pp. 216-219)

      The NHL's collective-bargaining agreement runs out after this year. Contrary to the tough rhetoric out of the commissioner’s office, the league can ill afford a work stoppage, let alone a protracted one. With the very real prospect of a smaller national TV contract, lower sponsorship agreements, and growing competition from the broader entertainment industry, a lockout could have devastating effects. The good news is that, despite the present escalating war of words between Gary Bettman and Bill Daly on the owners’ side and Bob Goodenow and Ted Saskin from the players’ association, a lockout is eminentlyavoidable.

      Lets begin by de...

    • A-Rod Capture Makes Dollars and Sense
      (pp. 220-221)

      John Henry, owner of the Red Sox, reacted to the Yankees’ acquisition of Alex Rodriguez by stating that he was now convinced that baseball needed a salary cap. Henry said that the Yankees’ resources so far outstripped those of all other teams that a cap was the only way to level the playing field.

      The irony, however, is that the Yankees’ financial clout had next to nothing to do with landing A-Rod. Over the past month, the Yanks have rid themselves of nearly $10 million in salary obligations to two of the organization’s former third basemen: Aaron Boone and Drew...

    • What to Do about the Hockey Mess
      (pp. 222-223)

      In the past few months I have been asked by players’ agents, law professors, sports talk-show hosts, and others whether I would consider becoming involved in resolving the NHL’s labor dispute. Guess what? The owners aren’t interested in mediation, much less arbitration.

      The owners, under Gary Bettman’s leadership, made a bad compromise in 1995 and now seem to be determined to resist any compromise. Bettman has made clear what the owners want: something he calls “cost certainty:” as if such a thing exists in a capitalist economy. Even the salary-cap systems in the NFL and NBA do not have cost...

    • Hockey Owners Give Their Sport a Slap Shot
      (pp. 224-225)

      Looking for a new economic system, the NHL owners have been locking out the players since September.

      Just in case you forgot, metropolitan New York hosts three National Hockey League teams. Does anyone in the five boroughs and its environs believe that New York City’s cultural life has been diminished by the absence of hockey? Has anyone noticed a drop in the area’s economic activity without Rangers, Devils, or Islanders games being played?

      And as you ponder these not-so-complex questions, think about the NHL’s expansion teams in Charlotte, Nashville, Atlanta, Tampa Bay, Broward County (Florida), Dallas, Anaheim, Phoenix, Los Angeles,...

    • Monopoly’s Money
      (pp. 226-228)

      Never mind the drivers—NASCAR’s rulers seem to be spinning out of control. A few weeks ago, NASCAR’s chairman and chief executive, Brian France, proposed a plan to limit the number of cars that team owners may control to three. This could reduce the stable of cars owned by Roush Racing, which has five, and Hendrick Motorsports, which has four.

      France says he is concerned about equity and competitive balance. As the argument goes, when one owner controls several cars, the drivers can share information about track conditions and car technology, giving them an advantage over other drivers. And as...

  8. Part V. College Sports and Gender Equity
    • College Sports: Surplus or Deficit?
      (pp. 230-232)

      The NCAA publishes financial surveys of its 930-odd member schools every two years. The 600-plus schools in Divisions II and III run substantial deficits in their athletic departments. The 200-odd schools in Divisions IAA and IAAA also run large athletic deficits. But approximately three-quarters of the 110 “big-time” schools in Division IA report an athletic surplus, and the NCAA is not loathe to trumpet this apparent success. The front-page headline of the November 18, 1996, issue of theNCAA Newsread: “Study: Typical IA Program Is $1.2 Million in the Black.”

      If the association wanted to leave a different impression,...

    • Make Freshmen Ineligible: Only Good Can Come of It
      (pp. 233-234)

      A few weeks ago inSports Business Journal, Bryan Burwell ridiculed the NCAA for considering the reintroduction of freshman ineligibility for intercollegiate basketball. He argued that if freshman basketball players are made ineligible, it will lead to an earlier flight to the NBA, as well as to restraint-of-trade and race-related lawsuits. Burwell said the way to insure academic integrity is to make the athletes take real classes.

      The struggle over freshman eligibility in college sports goes back at least to 1869. In that year, with the help of ten freshmen, three of whom were failing algebra, Rutgers beat Princeton in...

    • Real Reform, Not Tinkering, Is Needed in College Sports
      (pp. 235-237)

      Another season of big-time college football has kicked off. Once again, the first games were played a week or two before classes began. Who ever said that universities don’t have their priorities straight?

      Carrying its $303 million budget, the NCAA has moved its offices into plush new quarters in Indianapolis. The sports-marketing agency ISL has offered $380 million annually for rights to a sixteen-team post-season college football tournament (2.7 times the amount paid out for bowl games in 1999), and the networks are reportedly offering several billion dollars for a longterm contract to broadcast March Madness.

      Yet television ratings for...

    • The NCAA Has Lost Its Way
      (pp. 238-240)

      On page one of the 1997-98NCAA Manual, the basic purpose of the National Collegiate Athletic Association is written: “to maintain intercollegiate athletics as an integral part of the educational program and the athlete as an integral part of the student body and, by doing so, retain a clear line of demarcation between intercollegiate athletics and professional sports.” Some may wonder whom they think they are kidding.

      In December 1996, Notre Dame was playing its final regular-season football game against the University of Southern California. The Notre Dame place-kicker missed an extra point at the end of the fourth quarter,...

    • Unsportsmanlike Conduct
      (pp. 241-242)

      Claude Rains’s Inspector Louie Renault in Casablanca was “shocked, shocked” to learn that gambling was going on at Rick’s Café. Now it is time for administrators at the NCAA, the University of Tennessee, and scores of sports writers to be shocked that academic fraud was going on among the players on the Volunteers national champion football team during 1998–99.

      According to ESPN, it appears that four or more tutors were writing papers and doing other schoolwork for at least five football players last year. A few months ago, we learned that one tutor at the University of Minnesota completed...

    • CBS’s Big NCAA Deal Is No Cure for What’s Ailing College Sports
      (pp. 243-244)

      The sports world is in the midst of a media-rights explosion. Falling ratings to the contrary, the new NFL, NBA, NHL, and MLB/ESPN television contacts have all more than doubled their previous levels.

      Last month, CBS offered the NCAA $6 billion commencing in 2003 for eleven years of broadcast, Internet, sponsorship, and licensing rights to the annual men’s basketball tournament in March, plus several smaller events. The annual average revenue from this deal is $545 million—two and a half times the existing 1995–2002 contract of $216 million.

      These riches were bestowed on the NCAA despite (1) the fact...

    • Win One for the Gipper
      (pp. 245-246)

      Last month, the NCAA hit Notre Dame with the first major infraction penalty in the school’s history. Long viewed as the collegiate sports model to emulate because of their ability to maintain a strong commitment to academics at the same time that they excelled athletically, the mighty Fighting Irish seem to have fallen from grace. If Notre Dame has succumbed to the pressures of commercialization, many wonder, is there any Division IA school left that has resisted corruption?

      Notre Dame’s recent transgressions were threefold. First and foremost, a booster showered extravagant gifts (airline tickets, accommodations, events in Las Vegas, meals,...

    • Backlash against Title IX: An End Run around Female Athletes
      (pp. 247-250)

      After an initial burst of progress following its passage in 1972, Title IX did little to promote gender equity in intercollegiate athletics during the 1980s. The Civil Rights Restoration Act of 1987 and subsequent court cases, however, reinvigorated the advance during the 1990s. The share of women among all intercollegiate athletes increased from 33.4 percent in 1990–91 to 39.9 percent in 1997–98.

      While this growth marks substantial improvement, it is clear that women still have a long road to travel before gender equity is attained. In Division I during 1997–98, women accounted for 41 percent of all...

    • Has March Madness Gone Mad?
      (pp. 251-252)

      The NCAA March basketball tournament is the culmination of the college basketball season. The association recently sold the television, radio, and Internet rights for this sixty-four-team tournament to CBS for $6 billion over eleven years, commencing in 2003. This year, the NCAA will earn approximately $225 million from the tournament’s television rights and another $19 million from arena revenues, generating just over 80 percent of the NCAA’s annual budget.

      Maybe these riches embarrass the association. Rather than basking in year-end celebration, the NCAA has chosen to enforce one of the thousands of regulations in its 1,281-page manual. Seven players have...

    • Pay for Play in College Sports: Think Twice
      (pp. 253-254)

      There’s a new and growing movement among students, coaches, and analysts in favor of paying college athletes. Everyone knows that the only thing amateur about intercollegiate sports is that the athletes don’t get paid. The coaches on the top men’s basketball and football teams make a million dollars a year and more. The colleges in the BCS games take home $13 million-$15 million per appearance. The new CBS contract to broadcast the NCAA basketball tournament is worth $6 billion over eleven years. Surely, there’s enough here to pay the workers.

      Economic studies estimate that the star players on the leading...

    • College Athletic Success and Donations: Evidence Is Not Encouraging
      (pp. 255-256)

      Out of the 300-plus schools that play in the NCAA’s Division I, in any given year there are probably no more than a dozen whose athletic departments turn a surplus when all their operating costs are taken into account. Acknowledging this, many supporters of big-time college sports argue that successful athletic programs pay for themselves indirectly by inducing alumnae and others to increase their giving to the university’s general fund

      The logic is reasonable enough. A school goes to the Rose Bowl or to the Final Four. Alumni and boosters feel proud and open up their pocketbooks. Indeed, this is...

    • The NCAA’s New Financial Status Report: Good News or Bad?
      (pp. 257-258)

      Last week, the NCAA came out with the latest edition of its biannual report on the financial performance of its Division IA schools. As always, if the report is read uncritically, it seems that most big-time sports universities are having no economic difficulties in running their athletic programs. Consider the following apparently sanguine news.

      Of the 104 Division IA schools responding, average revenue of the athletics program grew from $17.7 million in 1997 to $21.9 million in 1999, an impressive 24 percent growth over the two years. The reported profit of the average program increased almost fivefold, from $400,000 in...

    • College Is Not for Everyone
      (pp. 259-260)

      In a rather intemperate and poorly informed piece (Sports Business Journal, January 8–14, 2001), Len Elmore accused the Knight Commission of promoting a wrongheaded and possibly racist policy regarding young, minority basketball players. Elmore objected to the suggestion by a few members of the commission that the NBA should reconsider its intention to have a minimum age of twenty for players in the new National Basketball Developmental League (NBDL), scheduled to begin next fall.

      In fact, the Knight Commission is in the process of holding hearings on the problems in college sports. It has yet to issue any

      That...

    • Should College Athletes Be Paid?
      (pp. 261-261)

      Star college athletes on top Division I basketball and football teams produce revenues of $1 million a year or higher. What do they get in return?

      Ignoring illicit payments and benefits, the star athlete gets a free-ride scholarship that includes tuition, room and board, book money, and emergency funds. This value can run upward of $35,000 annually. The star athlete often stays in special housing, eats well, travels first class, benefits from extensive tutoring in his classes, and may receive Pell Grant money of more than $3,000 a year.

      To qualify for these benefits, the star athlete is generally expected...

    • Making the (Up)Grade: Tougher Than It Looks
      (pp. 262-263)

      Since 1990, approximately a dozen schools have attempted to upgrade from Division IAA to Division IA in college football. The lure is the expectation of greater media exposure and the hope of an elusive financial payoff.

      Typically, however, costs rise much faster than revenues for the metamorphosed schools. To be in Division lA, universities must sponsor at least fourteen varsity sports, play at least 60 percent of their games against other Division IA teams, have a football stadium with a minimum capacity of 30,000, and experience an average attendance of more than 17,000 at least once in the previous four...

    • Another Bowl Game Is Not What the NCAA Needs
      (pp. 264-265)

      The NCAA has approved another college football bowl game, the ConAgra Bowl, to be held on Christmas Day in Hawaii for the 2002–2003 season. This makes twenty-eight certified post-season bowl games.

      Thus, fifty-six schools will go to bowl games next year. With only 115 Division IA schools playing football, this means that 48.7 percent of the teams will make the post-season. More precisely, with two or three schools typically sanctioned against playing in bowl games each year for NCAA violations, more than half of the eligible schools play in bowl games.

      Some might say that this is a good...

    • Numbers, Facts Don’t Back Title IX Critics
      (pp. 266-268)

      In January 2002, the National Wrestling Coaches Association (NWCA) sued the U.S. Department of Education for the way in which its Office of Civil Rights has implemented Title IX regulations and enforcement. The NWCA, along with other anti–Title IX groups, has vigorously lobbied the Bush administration and Speaker of the House Dennis Hastert (a former wrestling coach) to weaken existing procedures that support gender equity in college athletics. This commission appears to be the product of these pressures.

      Like other critics, the NWCA charges that Title IX regulations function as an illegal quota system. To meet the Title IX...

    • The BCS Is Ripe for Reform
      (pp. 269-271)

      In July, the fifty-three Division IA schools that do not belong to the six elite athletic conferences formed the Coalition for Athletics Reform. Their goal is to open up the present BCS so that all Division IA institutions have an equal chance to compete for the national football championship.

      Two weeks ago, the House Judiciary Committee held hearings on the BCS, asking whether the existing system is fair and whether it violates antitrust law. Last week in Chicago, Myles Brand, the new executive director of the NCAA, called together administrators from BCS and non-BCS schools to discuss whether the present...

    • Clarett Has a Compelling Case for NFL Eligibility
      (pp. 272-274)

      U.S. District Court Judge Shira Scheindlin is supposed to decide before February 1 on the request for summary judgment inMaurice Clarett v. NFL. Clarett, who will turn twenty-one in October, six weeks after the 2004 season begins, wishes to be eligible to participate in the upcoming NFL draft.

      The NFL claims that its bylaws prohibit this and, moreover, that its bylaws are legal. Clarett’s attorneys challenge the meaning and legality of the league’s bylaws.

      The NFL’s collective-bargaining agreement with the NFLPA contains a provision that the union will not sue the NFL over any of the provisions in its...

    • Let Jeremy Bloom Ski and Play Wide Receiver
      (pp. 275-277)

      The California State Senate got tired of waiting around for the NCAA to enact some significant reform around its treatment of student athletes. Last spring, the Senate voted 26–l0 to pass Bill 193, which would require state universities to provide several additional benefits to student athletes.

      These benefits include providing a stipend to cover the full cost of attending college (around $2,400 extra for necessary travel, out-of-season medical expenses, clothing, and leisure activities); allowing athletes to keep income from work not associated with their sport; allowing athletes to sign with agents while in school; and allowing athletes to transfer...

    • Curb Coaches’ Salaries and Preserve Title IX Gains
      (pp. 278-280)

      Another exciting and contentious season of college sports has drawn to a close. One of the more remarkable events almost eluded media coverage altogether. Last month the Office of Civil Rights (OCR) of the Department of Education issued a new implementation guideline for Title IX.

      The OCR overrode its own historical practice and judicial interpretations to change the meaning of prong three of Title IX compliance, which addresses the institution’s obligation to provide participation opportunities that meet the interests and abilities of the underrepresented sex. If anyone of three prongs is satisfied, then the school is judged to meet the...

    • Final Word: Million-Dollar Contracts for College Coaches Make Little Sense
      (pp. 281-282)

      The new year always brings many rituals. One of them for me is getting a dozen or so media calls about the growing commercialism of college football.

      One question I always get is: Why are the top Division IA football coaches paid $1 million–$2 million (and sometimes more) when the top-paid college presidents are paid $400,000–$800,000?

      The standard rationale in the trade is supply and demand. That answer begs the question.

      Think of it this way. How much do you think MLB managers would be paid if every major-league team was exempt from taxes; it was supported by...

  9. Part VI. Media and the Regulation of Steroids
    • Extreme Is Mediocre and XFL Is the Name
      (pp. 284-285)

      Last fall, Vince McMahon's World Wrestling Federation (WWF) knockedMonday Night Footballfrom its pedestal atop the television ratings on Monday evenings among the twelve- to twenty-four-year-old male demographic. This is a key demographic not only because its members do a lot of consuming and they are relatively easy to target, but because it is an age group when lifetime habits are formed.

      If McMahon knows the way into the hearts and minds of twelve- to twentyfour- year-old males, then maybe his new XFL, to begin play in four months, will become a permanent fixture in the U.S. professional-sports landscape....

    • The Increasingly Complex Sports Media Landscape
      (pp. 286-287)

      It has been a tumultuous first quarter of 2002 in the sports-broadcasting business. News Corporation announced that it is taking a $909 million writeoff on its long-term contracts with the NFL, MLB, and NASCAR. Morgan Stanley issued a report projecting that the networks will lose an estimated $1.17 billion on their sports programs during 2001–2002, in contrast to a profit of $294 million in 1997–98. NBC dropped the NBA. And the sports media pundit Neal Pilson averred that all this was “a clear signal that the networks are tapped out for any significant rights-fee increases in future years:”...

    • No Easy Answers for MLB’s Steroid Scandal
      (pp. 288-290)

      Two weeks ago, I was working out in the Smith College gym when I overheard a conversation among three boys, probably in their early twenties. They were talking openly and in graphic details about using steroids and their workout regimens and boasting about their new muscle mass.

      When Senator John McCain says that he’s not worried about what Barry Bonds and Jason Giambi do to their bodies, he’s worried about how drug use by professional athletes infuses a harmful culture of body building among future athletes, he’s got a point. Of course, the culpability goes well beyond today’s sports heroes....

    • Reflections on the Super Bowl
      (pp. 291-292)

      When it comes to national cultural rituals, the Super Bowl is it. It is New Year’s Eve and then some.

      Consider this: Some 21.5 million households were expected to host Super Bowl parties this year that would be attended by 54.6 million people. Another 9.9 million trekked to bars or restaurants to watch the game.

      Since 1972, television ratings for the Super Bowl have exceeded 40 every year except one. The exception was 1990, when the then dominant 49ers blew out the Broncos 55–10, and even then the ratings reached 39.

      There’s nothing else like it. Ratings for neither...

    • In Steroids Hearings, Congress Has Its Eye on the Wrong Ball
      (pp. 293-294)

      Don’t these guys ever get embarrassed? Their constituents apparently find discussion of Social Security reform too confusing and have tuned out. To tune them back in, members of the House Government Reform Committee decided to haul baseball stars and bereaved parents into its hallowed halls to stage a CSPAN gala event.

      The members asserted that the purpose of the hearings was twofold: first, to call attention to drug abuse and begin to set young Americans straight on the dangers of steroids; and second, to investigate the extent and roots of steroid use in baseball.

      The first motive is laudable. But...

    • Anti-Doping: Settle In for the Long Haul
      (pp. 295-296)

      The drug issue in professional sports, it seems, just won’t go away. Congress has tried to point the finger at Bud Selig, Don Fehr, and individual players. The Boston Herald journalist Howard Bryant focused his finger pointing on Commissioner Selig.

      But there are no villains. There is just a very complicated problem.

      To be sure, Selig and the other commissioners may have acted with greater foresight and force, while Fehr and the other players’ association directors may have been less legalistic and recalcitrant.

      Players, until recently, did no more than respond to market incentives and attempt to improve their performance...

  10. Index
    (pp. 297-304)