Archive for the ‘Finance & Economics’ Category

America’s Pastime

Monday, April 28th, 2014

Major League Baseball has a rich tradition with fiery and passionate fans. At first ABC tried to negotiate with teams to sell television rights. At first only three teams agreed to these terms.  Major League Baseball wanted fans to come to the ball park and wanted to keep coverage of the games local and did not allow ABC’s Game of the Week to air  within 50 miles of the ball park. This made matters worse for ABC who was trying to do anything to stay afloat during this time. The MLB has grown incredibly since the 50’s and the money television networks puts up shows this. Starting off in 1984 the original contract between NBC and ABC was $126 million. ABC putting up $56 million and NBC $70 million. Those two networks started the trend more national coverage and others soon followed suit. Now the heavyweights for baseball coverage are FOX, Fox Sports 1, TBS, and ESPN. Each network shoveling at least $300 million a year towards coverage. The numbers have increased and along that the fans have increased. These huge television contracts fuel long-term salaries. According to CrainsDetroit.com the Detroit Tigers have a reported $568 million committed to long term contracts between Justin Verlander, Prince Fielder, and Miguel Cabrera. Local television contracts fuel this contracts by supplying money to the club. These facts lead me to believe that the contracts will only grow in order to keep up the ever-growing salaries for players. This has been foreseen ever since the early 1880’s by then Chicago White Stockings owner Albert Spalding.  “Professional baseball is on the wane. Salaries must come down or the interest of the public must be increased in some way.” – Chicago White Stockings owner Albert Spalding, 1881 (Forbes).

Fox Sports 1 Ad

 

Learning from ABL and the USFL to create a sustainable women’s soccer league

Monday, April 21st, 2014

To American society, it might seem it is easy for leagues to sustain themselves and flourish in a glamorous manner given the success of the big four professional leagues. However, to start off a professional league requires much luck, and financial planning and its common for leagues to fail. Two examples of failed professional sport leagues is the American Basketball League and the United States Football league which both folded after three seasons.

The USFL and the ABL were very different sport leagues, however they are similar in how they folded. The USFL had an issue of playing the quality of football that fans were used to watching the NFL. USFL couldn’t pull the top flight talent that the NFL did because most talented athletes from college went into the NFl. Also, even though the USFL played in the Spring, it had trouble generating interest. It was going to have to take away viewership from basketball, baseball, and hockey. The USFL finally folded because of no TV contract, a very ugly lawsuit(s) with the NFL, and a loss of $163 million between 1983 to 1985.

The ABL folded for many of the same reasons. The ABL was created right around the same time the WNBA was being formed. This meant the ABL was going to have to compete for top-level talent. They were also going to have to fight of TV time and media coverage in general. Interest for the league was going to have to be generated somehow and the ABL had to fight for little bit. In the end, the WNBA prevailed over the ABL because WNBA’s financial backing from the NBA compared to the owner’s limited budget of money. The league ultimately folded because of a $25 million dollar debt.

The National Women’s Soccer League can learn some things from these leagues in order to stay afloat. NWSL needs to generate interest for the league. Interest for soccer in the United States can be a struggle. It’s going to have to sign a TV deal so sponsorships start to flow in. Also, it’s going to have to market through promotions. The most important thing the NWSL can learn the USFL and the ABL is to have their finances in order. Players won’t play for free and sponsors won’t sponsor unless there is interest. One thing that they did learn from the past was letting their soccer players play for other leagues for more exposure and appeal. A key difference between the WNBA and ABA is that the WNBA let their players participate in other leagues. One benefit that has occurred from this action are national teams have pitching in for their players salaries to help relieve some of the financial burden on the teams itself. The teams also play in stadia appropriate for the size of their fan bases instead of playing in the nfl sized stadiums in order to pay less rental fees for games. With these adjustments from the past and smart budgeting, the National Women’s League has a real shot of developing into a economically sustainable league.

Kalen Dear

Opie Wilson

Video clips about the ABL and the USFL

http://www.youtube.com/watch?v=veNFlCiQcRs

 

https://www.youtube.com/watch?v=Zb5VXQ67EDw

Sources:

https://sites.google.com/site/remembertheusfl/home

http://www.apbr.org/abl9699.html

 

 

http://www.nytimes.com/2014/04/18/sports/soccer/clinics-offer-national-womens-soccer-league-a-path-to-success.html

 

Pedersen, P., Parks, J., Quarterman, J., & Thirbault, L. (2011). Contemporary sport management (4th ed.). Champaign, IL: Human Kinetics. Chapter 12

 

 

ABL vs. USFL

Monday, April 21st, 2014

http://http://www.youtube.com/watch?feature=player_profilepage&v=8v2zT52MZ5w

The American Basketball league was founded in 1996 for women and that was during the time the NBA founded the WNBA. Basketball was booming in the 90’s where U.S Olympic teams both men’s and women’s teams winning gold medals and the NCAA bringing up new talents. The ABL is an independent professional league where women can play the game they love, but the beginning of the season some teams in the league could not maintain their budgets and got cut from the league. The ABL then had to find new basketball teams that could be apart of the league and play other professional teams. The league was struggling to keep teams and declared bankruptcy.

Another league that attempted to go pro was the United States Football League for men who wanted to go professional as well. The owner of the USFL attempted to work and compete with the NFL. Play teams that were in the NFL and find TV deals like the NFL. The owner tried to have a bigger fan base by having the season start when the NFL was off-season. The USFL got into to some legal issues with the NFL and attempted to sue them for anti-trust. The USFL won the case of anti-trust and anti-monopoly of the NFL, but only won $3.00 The USFL lost over $130 million dollars.

I think both of these leagues tried to go big too fast, they did not have enough money to support the teams that were in their league. The owners do not know how to run a business and take care of teams, fields, stadium seating, selling tickets and making a profit.

Now the National Women’s Soccer League is a club league that has gone professional. I think they will have good business by learning from these previous league’s mistakes. the NWSL has corporate sponsors like Nike and sponsor the men’s league. The league both have men’s and women’s teams for every club, so that would bring more business to the league and become a business that will grow.

 

 

D1 Coaching Contact: Academic Success

Monday, April 7th, 2014

Coaches all too often receive large bonuses when their team is winning, but why not for their team’s academic success?

Education Secretary Arne Duncan believes:

Universities need to tie bonus pay of their coaches and athletics directors more prominently to their college athletes’ academic performance

And so do we!

Key elements to a coach’s contact located in the academic incentive clause include:

  • Implement policies and demonstrate behavior that advances academic success
  • A flat bonus for meeting graduation rates or academic progress rate (APR) scores
  • A team cumulative GPA of 3.0 or higher

Meeting each element would earn the coach a bonus money signmoney signmoney sign

Penalties should also be in place to regulate a decrease in a team’s academic performance.

UCONN MEME

 

Let’s not forget UConn’s recent NCAA Tournament suspension for low Academic Progress Rate (APR) scores

 

 

 

Grambling was also hit hard with binding force for low APR scores.

Sanctions should also be in place for a decrease in APR score, which include:

  • Limited practice
  • Shortened season
  • Game forfeiture
  • Scholarship reduction

After a scholarship reduction sanction, the next step is to implement an Academic Enhancement Team to aid student-athletes.

The following link by the Journal of Issues in Intercollegiate Athletics sheds light on the athletic and academic discrepancies in a coach’s contract.

Do you ever wonder which school would win in an NCAA Academic Performance Tournament?

You’re not the first. In fact, Inside Higher Ed has an academic tournament giving the student-athletes and fans bragging rights in the classroom.

ncaa academic winnerThe 2014 winner is Kansas.

 

 

 

 

 

Now Thats A Lot Of Money: Atlanta Falcons Stadium

Friday, November 22nd, 2013

images

As the Atlanta Flacons build this 1 Billion dollar retractable roofed stadium, that should be upon completion in 2017 we ask how and where is the money coming from? Well there was a lot of work that went into this, it didn’t happen just over night. To be specific two years of negotiating was part of the process. “According to the Atlanta Journal-Constitution, the city’s economic development arm voted 8-1 to approve issuing more than $200 million in bonds” these bond are coming from hotel-motel taxes. The old Georgia dome when the new stadium is complete will be over 20 years old. This new stadium wont just be an upgrade, but according to the article from CBS sports it will be one of the top facilities in the league. Which I would hope so if it is going to be a 1billion dollar project.

 

Some issues that come up with public funding for these sports stadiums are that not everybody likes the sports team. For example you could have someone who has never even seen the Atlanta Falcons play a game, and they are helping pay these 200 million dollar bonds. What do they get out of it, since they don’t care about the team. Well that is one problem when coming to this situation, another problem that people look at with a situation like this is, could this money be going to a better cost? Like new medical research, education, or there are plenty of other examples people can make cases that this money can go toward. So ask yourself is this new stadium going to be for the greater good?

 

 

“Falcons’ $1B Retractable-roof Stadium Gets Public Funds.” CBSSports.com. N.p., n.d. Web. 22 Nov. 2013.”

 

why pay so much for new stadiums

Friday, November 22nd, 2013

Economic impacts of sporting events and facilities bring to light the idea of growth of sport industries. Not all impacts are good. According to the text by Paul M Pederson, Janet B Parks, Jerome Quarterman and Lucie Thibault, experts disagree about the potential of sporting events and facilities to generate such economic growth and activity.

Economists have long known stadiums to be poor public investments. Most of the jobs created by stadium-building projects are either temporary, low-paying, or out-of-state contracting jobs, none of which contribute greatly to the local economy. Today the locals spend less money at sporting events simply because costs are too high. Economic impacts done to the local economy drastically reduces the real gain that is said to do in the first place. Not all facilities bring economic gain. According to the article by Aaron Gordon, “America Has a Stadium Problem” Despite every number suggesting they shouldn’t, American cities keep building sports stadiums funded with public money. Topics discussed by economists of Americas cities have also been, according to Gordan, drastically underestimating the true cost of these so called “projects”. They fail to consider public subsidies for land and infrastructure, the ongoing costs of operations, capital improvements, even upgrades such as new score boards.

the basis behind subsidies for sports stadiums is as follows: owner wants new stadium to make more money and increase the value of the franchise. Owner threatens to move team. Politicians save face by pretending they won’t offer millions of dollars in subsidies. Politicians eventually offer millions of dollars in subsidies and keep the team in the city. If there’s a justification for all this, it comes from the concept of a public good.

http://www.psmag.com/business-economics/america-has-a-stadium-problem-62665/

 

These acts for building new stadiums on taxpayers budgets are outrageous. The discussion in the text describes how certain key findings we can take away from theses outrageous spending done on behalf of the economy. A financial manager can take into consideration how much money the organization needs to meet the long term obligations of use of the organizations funds. To be thinking broader than selling tickets and merchandises to increase revenue, and rather thinking about other ways to increase revenue for the organization. This is all easier said then done, who knows what the future brings for these “brilliant”  organization financial managers.

 

New stadium, another million dollars from the public

Thursday, November 21st, 2013

When professional sports industries plan to build new stadiums, where do they expect to get their funding from? From their own salaries or the public money? Well, of course from public financing, the people, the fans.

The Atlanta Braves, for example, plan to build a new stadium in Cobb County in which they will put into use in the 2017 season. This new stadium has reserved about 60 acres of land in order to build the new stadium, which will also include parking, land and infrastructure. This project is expected to cost about $672 million dollars; but where will this funding come from? As stated in the article “Braves plan to build new stadium in Cobb”, Derek Schiller says that the Braves will be a “significant investor” but not giving to how much money they will put in and that Cobb County will also be responsible to giving large amount of money as well, but the Braves will pay any cost over the set amount. This new stadium is expected to “enhance fan experience”; for this reason the new stadium will reach supposedly reach new heights.

The new stadium well get to a better fan experience for their fans than the Turner Field, but at what cost. If the reason to build the new stadium is to build and enhance the experience of their fans, why not upgrade the Turner Field? This will cost a little more than half of the new stadium. Instead of building the new stadium, where the reserved area can be used for other buildings needed in the county and may build new employments, the management of the Braves should find ways to upgrade the current field in a more economic way and keep the stadium to where many memories have been made. This way the public can use their finances in their own leisure or needed buildings for the area. Why give and fund more public money than a team that makes millions of dollars. The public should have a say into if they would want a new stadium, not just the home team.

http://www.ajc.com/news/sports/baseball/braves-plan-to-build-new-stadium-in-cobb/nbpNQ/

High Salaries of Players – the Good, the Bad and the Ugly

Thursday, November 21st, 2013

Sport became a fundamental part in people’s life and created an enormous profitable business environment. A study of the sport industry indicated that the industry revenue generation exceeds $213B. Furthermore corporate sponsorship of sports properties in 2005 estimated to be in excess of $7.7B. The NFL franchise was worth of $755M which showed a 17% increase over 2003) (http://www.slideserve.com/osmond/sport-the-economy). All these indicators suggest that the sport industry is on the raise and in fact through this lucrative business job opportunities are developed.

In this blog I discuss mainly the high salaries of professional athletes and the positive and negative outcomes of these salaries to the sport teams. There are lots of different businesses and companies involved in the sport industry; therefore in order to be specific, I will concentrate on the sport teams which are an essential part of the sport performance segment.

 “The industry also contributes 456,000 jobs with an average salary of $39,000 per job.”

http://www.economicmodeling.com/2013/07/09/not-just-a-game-the-impact-of-sports-on-u-s-economy/

Two major winners of this profitable business are the athletes and the owners. Through the action of the rise in NFL salaries, player salaries continuing to rise, and therefore sport managers are “facing the challenges of generating sufficient revenue to match those increased costs” (Pedersen et al, 2011). Certain NFL teams, which are a part of the sport performance industry, are concerned with the high salaries of athletes in order to maintain their goal of being a profitable organization.

     “I’ve got partners out there right now whose teams are making less money than their linebackers,” Bisciotti said. ” I think we’ve got an acute problem here with the general profitability of the teams. We always knew this was not a big cash-flow business, but when you’ve got guys like Jacksonville tarping up 10,000 seats to stop blackouts, when you’ve got teams that are voluntarily staying at the minimum of what they have to spend on the salary cap in order to not go upside down financially, then we already have a structural problem.”

http://www.nfl.com/news/story/09000d5d8162e7da/article/bisciotti-many-nfl-teams-struggling-financially-lockout-possible

These words of Ravens owner Scott Bisciotti in 2010 indicate that NFL teams are facing the lack of having no significant cash flow. Thus teams have problems of generating a profit and long-term problems are created in order to have a healthy and stable business. Tremendously high salaries of professional athletes are not helping to create a cash-flow business. Furthermore the heightened power of the players unions in the professional sport leagues plays a significant role in increasing the salaries and raising the salary caps. Furthermore the players unions contributed to an increase in labor stoppages, which also effects negatively the financial situation of the teams.

Screen shot 2011-04-24 at 8_31_42 PM

 

Nevertheless there are also positive economic results for teams regarding giving professional athletes a high salary. For example the Los Angeles Lakers has a 5-year average profit of $38M (http://www.forbes.com/pictures/emdm45hle/2-los-angeles-lakers/). Kobe Bryant probably has a major influence as a player and a brand in the profit of the Lakers. He is by far on the top of the Lakers’ salary list with $30.45M in 2013-2014; the second one is Pau Gasol with $19M (http://www.hoopsworld.com/los-angeles-lakers-team-salary). In my opinion one cause of the high salaries of professional athletes is that clubs and their owners are dependent on these athletes. The thought of “we need you more than you need us” is a reason why owners pay their players so much money. As mentioned in the YouTube video below, which discusses reasons of the inequality of salaries between people. It is discussed that capital used to keep talent in place, because capital was scarce. Now a day’s talent keeps capital/money, the reason for that is that talent is what scarce, and thereby athletes demand a higher salary from their employers’ because they realize their unique and in demand talent.

http://www.youtube.com/watch?v=EZ83YOptIZ8

All in all high salaries of professional athletes definitely help to keep talented and high skilled players, who generate profits for their teams because of their unique performances. Never the less high salaries can be a burden for club owners in order to generate profit and to create cash flow. The players unions are a major issue of clubs because of their constant demand of higher salaries. Fact is that not every single team has a Kobe Bryant who generates a ton of money. Smaller clubs are facing major problems in order to keep up with the payment of high salaries.

Who likes stinky, old bathrooms??? NO ONE!!

Thursday, November 21st, 2013

http://http://www.kare11.com/video/1138008258001/1/To-vote-or-not-to-vote-on-public-funding-for-a-Vikings-stadium

The Minnesota Vikings are currently working on building a new stadium for their team. From this video you can tell that there are a lot of mixed feelings on if this is really a great idea. One half of the tax payers think it is a stupid idea for them to have to pay for it out of their own pocket, while the other half most of the Viking’s fans, believe it is a good idea. It would be the third top highest funding project in the state of Minnesota.

There will be one day of taxing cigarettes on shelfs and warehouses and another tax on out of state profits in the state of Minnesota. Many of the tax payers completely hate the idea of this. But in all reality the tax payers taking the biggest hit are smokers, which to be honest don’t buy cigarettes that day then.

With a new stadium it can bring in more profit. Many people spend a lot of time and money on sport tourism. Traveling across the country or even world spectating games or even just touring some of the biggest stadium or arenas. I know for a fact that if I was completely loaded with money I would want to travel across country to watch games and visit the biggest stadiums. This plan overall can be very beneficial and boosts local business revenue overall. 

Another video is posted bringing more information about the actual financial part of the funding.

Video 2

New Vikings Stadium

New Vikings Stadium

Old Minnesota Vikings Stadium

Old Minnesota Vikings Stadium

How much are sports worth?

Thursday, November 21st, 2013

How much are sports worth? There was one particular high school that chose to put too much effort, time, and money into sports rather than the school’s education program.

To cut costs, the district had already laid off eight employees and closed the middle-school campus, moving its classes to the high-school building; the elementary school hadn’t employed an art or a music teacher in years; and the high school had sealed off the science labs, which were infested with mold. Yet the high school still turned out football, basketball, volleyball, track, tennis, cheerleading, and baseball teams each year.

How much do sports really cost?

Football at Premont cost about $1,300 a player. Math, by contrast, cost just $618 a student. For the price of one football season, the district could have hired a full-time elementary-school music teacher for an entire year. But, despite the fact that Premont’s football team had won just one game the previous season and hadn’t been to the playoffs in roughly a decade, this option never occurred to anyone.

There is such a huge emphasis on sports even in high school that the school district begins to place sports higher in priority over education. For this particular school, they almost gave up sports for school and one of the upperclassman students said this:

Would you rather have sports or school?

One fascinating point about this article was that it was showing how other countries compared to America treat their sports and school so very differently. Americans have the mindset of sports being a right not a privilege. Most 0f this emphasis on sports is that the coaches get paid a lot for their salary and think that they are bigger and better than others around them.

Football is, far and away, the most expensive high-school sport. Many football teams have half a dozen or more coaches, all of whom typically receive a stipend. Some schools hire professional coaches at full salaries, or designate a teacher as the full-time athletic director. New bleachers can cost half a million dollars, about the same as artificial turf. Even maintaining a grass field can cost more than $20,000 a year. Reconditioning helmets, a ritual that many teams pay for every year, can cost more than $1,500 for a large team. Some communities collect private donations or levy a special tax to fund new school-sports facilities.

 

The impact of coaching salaries on sport industry is becoming more and more involved, and is affecting areas around the industry. For example, with this high school situation, coaching salaries are getting a higher priority than teacher’s salaries.

The sport industry is becoming out of control. Will this stop or get worse? Only time will tell. However, there is a huge impact of the players and coaching salaries on sport industry.

http://www.theatlantic.com/magazine/archive/2013/10/the-case-against-high-school-sports/309447/