When it comes to tickets to LSU football, freshmen students get the scraps. Upperclassmen and the public get the first crack, forcing freshmen to sometimes resort to scalping tickets to get entry to Tiger Stadium. A Louisiana state representative is not a fan of the current system, calling it a “crime” that freshmen students pay as much as $300 for scalped tickets.
Story here. To the extent that the Invariance Hypothesis Coase Theorem holds, this proposed change in property rights wouldn't put more freshman fannies in the seats at Tiger Stadium. But it would put more cash in their pockets when they turn around and resell their tickets.
And with jock taxes, cities and states can generate revenue without taxing their electorate. The Pittsburgh usage fee does not apply to any full-time city resident.
I think this is right. Because player salaries are fixed with respect to attendance, sports economists argue that ticket prices don't depend on the salaries paid to athletes. This is especially true of visiting player salaries. If so, then these taxes won't get passed on to fans via ticket prices.
The historical record on the economic impact of mega events never, ever (and I mean ever) lives up up to the before-the-fact claims of consultants and the events' cheerleading squads. Why wouldn't, say, a Super Bowl have a massive effect on, say, San Francisco? Because San Francisco is already a vacation and convention destination. Having a Super Bowl in San Francisco will attract visitors, but it will also drive others to vacation elsewhere. The economic impact, however you want to measure it, is the net impact, not the gross impact.
But how can legions of football fans descend upon a region and not make a dent, economically? One reason is that measuring the number of people who head to a Super Bowl city for the game is a straightforward endeavor. Measuring the number of people who stay away from an overpriced, tourist-infested zoo is not. Especially in a year-round tourist destination like the Bay Area, Super Bowl visitors aren't flocking to hotels that would otherwise be empty; they're displacing would-be visitors. What's more, hotels in many Super Bowl cities triple their rates and insist on multiday packages. This drives away non-Super Bowl visitors and also leads to fans booking rooms for more days than they'll actually use — meaning those rooms aren't being occupied by actual people who could be spending actual money.
To claim an economic windfall based on visitor numbers without factoring in those who avoid the area or are pushed out "is like going to the hen-house, counting all the foxes, and saying 'Look at the economic impact of all these foxes here eating!'" Porter says. "You're not counting all the hens who are gone."
The economic impact of sports is usually framed in terms of how many jobs it generates and how much spending it generates. But this misses the point. Here's commenter bobby over at my most recent post (on jobs and income creation with sports!) at The Sports Economist:
i find it mildly distressing that almost all of the discussion about economic impacts of sporting events is about rectangles with rarely if ever a discussion of triangles. i was always trained that welfare was measured by consumer and producer surplus, not expenditures, but then what do i know?
and, to make matters worse, i was always taught that if bundle B was chosen when bundle A was available that it could be concluded that A was better than B. i guess i’ll have to go back and study some more, someday.
i guess the idea that people are happier with a baseball game than a movie doesn’t mean much anymore, and its downright silly to suggest that a baseball game makes a place better off because people could have gone to a movie instead.
i think i’ll go drink a beer, eat a hot dog, and polish it off with some apple pie, now that i realize how silly i was to believe in revealed preference, consumer surplus, and consumer choice. oh well.
He's exactly right. Any discussion of the ultimate economic impact of sports, government policy, whatever should not be about how many jobs are created, how much people spend, etc. It should be on the overall well-being that activity generates in terms of producer and consumer surplus. That is the ultimate economic impact. Jobs and spending numbers do little more than obscure that fact.
The only thing I can see keeping the Big XII in tact is Texas giving up a lot of its political power in the conference and agreeing to more equitable revenue sharing, which may include revenue generated from the Longhorn Network.
Leagues are cooperatives and when a cooperative works well, according to game theory, the members act to improve their joint welfare (the ol' Nash Solution). But cooperatives are inherently unstable because of the incentive to cheat on the cooperative, and there needs to be some kind of enforcement mechanism to keep the cheating from happening. If there is no mechanism, the situation falls into a prisoners' dilemma type of game. That seems to be where we are at now, and all signs point to Texas being the one that cheated.
Maybe, just maybe, everything that's going on in the Big XII right now will encourage Texas to work together with the other schools to bring stability back to the Big 12, and maybe encourage Texas A&M to stay. Texas will not have the power in a conference like the SEC, Big 10, or Pac 12 that it has in the Big 12. It may have to share pooled media revenues equally with all other conference members and have equal say in political matters. It may not be able to have its Longhorn Network, the cancer that threatens the entire conference, or it may be forced to strip down the content that can be shown on the LHN. Or, horrors, it might be forced to share revenue generated by the LHN.
And maybe conference middleweights like Texas Tech, Oklahoma State, Missouri, and Kansas have been diligently working behind the scenes to improve their options so they will have something to fall back on if the Texas and Oklahoma bolt. Tech and OSU probably have the best options since most observers are predicting them to join OU, and maybe Texas, to the Pac 12. Better options give strength in negotiations.
It's a long shot, I know. But I'm trying to be positive here.
Gabe DeArmond of Powermizzou.com tweets some interesting quotes from Mizzou football coach Gary Pinkel. Pinkel was being interviewed by Tim Brando this morning. Unfortunately I don't have a link to the interview itself. Here's what Gabe (@GabeDeArmond) tweeted in three separate tweets:
#Mizzou coach Gary Pinkel with Tim Brando this morning: "Obviously we've got some issues in our league...You don't hear anything...
"About any other league in the country having these problems. And we all know where it starts."
Pinkel: "It's really a shame because the potential of the league is just so tremendous. I have no control over it."
I presume Pinkel means Texas. I've had thoughts here and here at The Sports Economist over what's going on within the Big XII.
Economically speaking, when it comes to "producing competition" as we sports economist like to say, the "firm" as understood in economic theory is the league itself. A league, like any firm at its heart, is a cooperative. A little bit of pure self-interest is supposed to be expected, but once the cooperative is formed, we expect, well, cooperation between the members to make it work.
That's not what we've seen with the Big XII. Whether it's the Longhorn Network or the concentration of conference political power, Texas holds the best hand and is not afraid to play that hand even if it means destabilizing the whole conference. That's why Nebraska left despite the fact that the conference's revenue-sharing system favored it. That's why Texas A&M left.
It's sad because the Big XII as it existed from the time it was a 12-team conference was an excellent sports conference. Not just an excellent football conference, but an excellent sports conference. But its existence seems to be falling apart daily.
Here in the States, the major sports leagues (MLB, the NBA, NFL, and NHL) are all closed leagues. League membership is determined by league membership. If a league is to expand, it has to be voted on by the incumbent members. It has been argued that because of this closed format, leagues limit the number of cities that have teams and limit the number of teams in cities.
The theory of monopoly leagues says leagues will limit output (i.e. the number of cities with teams and teams within cities) in order to maximize the local market power held by each team. This allows the teams to charge higher ticket prices/fees*, obtain higher local media rights fees, and to extract higher subsidies from willing pols. Those pols, playing with other people's money, are afraid of their appearances to voters if a team leaves or if they fail to obtain a team. Teams, knowing this full well, milk it for all it's worth. They then engage in a prisoners' dilemma game to try to try to get/keep from losing teams. From NPR:
It's a story that could have been told in almost any American city over the past two decades. Owners of teams in the "big four" sports leagues — the NFL, MLB, NBA and NHL — have reaped nearly $20 billion in taxpayer subsidies for new homes since 1990. And for just as long, fans, urban planners and economists have argued that building facilities for private sports teams is a massive waste of public money. As University of Chicago economist Allen Sanderson memorably put it, "If you want to inject money into the local economy, it would be better to drop it from a helicopter than invest it in a new ballpark."
Studies demonstrating pro sports stadiums' slight economic impact go back to 1984, the year Lake Forest College economist Robert Baade examined thirty cities that had recently constructed new facilities. His finding: in twenty-seven of them, there had been no measurable economic impact; in the other three, economic activity appeared to have decreased. Dozens of economists have replicated Baade's findings, and revealed similar results for what the sports industry calls "mega-events": Olympics, Super Bowls, NCAA tournaments and the like. (In one study of six Super Bowls, University of South Florida economist Phil Porter found "no measurable impact on spending," which he attributed to the "crowding out" effect of nonfootball tourists steering clear of town during game week.)
Meanwhile, numerous cities are littered with "downtown catalysts" that have failed to catalyze, from the St. Louis "Ballpark Village," which was left a muddy vacant lot for years after the neighboring ballpark opened, to the Newark hockey arena sited in the midst of a wasteland of half-shuttered stores.
And why do teams ask for subsidies? Because they can.
Jim Nagourney, who spent three decades negotiating stadium deals on behalf of government agencies and team owners, describes how he helped snooker city officials as a consultant to the Los Angeles Rams, who were then negotiating a move to a new stadium in St. Louis. "We had a whiteboard, and we're putting stuff down" to demand in a stadium lease, he recalls. "I said, 'Guys, some of this is crazy.' And John Shaw, who was president of the Rams at the time — brilliant, brilliant guy — said, 'They can always say no. Let's ask for it.'" The result, which Nagourney calls "probably the most scandalous deal in the country," included a clause requiring the new stadium to remain "state-of-the-art," or else the team could break its lease and leave. "The city was poorly represented — the city is always poorly represented.... We put in all of these ridiculous things, and the city didn't have the sense to say no to any of them."
There is no mention of job creation or wage improvement in the article. Instead the article sums up the decision to subsidize construction of the Edward Jones Dome ($280 million from 1993-1995) in St. Louis thusly: 1. Professional sports brings prestige to a community; 2. The people in the community felt like losers when other professional sports teams left the area; 3. It's government's job to do things to make life a complete and fulfilling experience; 4. We were jealous some other community was going to get a team and their officials were going to gloat.
Economists are still studying the value-of-civic-pride-angle regarding sports teams, and there's still some economic analysis being done on the jobs/income angle. But even though there is still some research being done on the economic development angle, there's a strong consensus amongst sports economists that throwing money at sports teams is a terrible economic growth policy. As Allen Sanderson of the University of Chicago once said (paraphrased) "The biggest wastes of land are graveyards and sports stadiums." At least the St. Louis pols noted in that post didn't mention the jobs and income angle as a motivator for public funding.
*Earlier this summer, my wife and I took our kids to a Milwaukee Brewers game (and, later, to Chicago) for a trip to celebrate Eldest's birthday. After splurging on nice tickets, I was given an option to print my tickets at home and another to pick them up at will call. I don't remember the exact amount, but the Brewers charged me around $2 - $2.50 for the print-at-home option and $4 or so to use the will call window. I can understand why will call would cost more than print-at-home, but why would print-at-home cost more than X→$0?
The highest paid player on Jack McKeon's '73 team (Lou Piniella) made an inflation adjusted $254K (via @swood40)
<sarcasm>Ah, the good old days when players stayed with their teams and kids could always follow their favorite players on their favorite teams. </sarcasm> There was a reason players stayed with their teams back in the day. It was the reserve clause.