Land Shark Stadium

From the past couple of weeks:
Dolphin Stadium in Miami hosted two prime time football games over the past couple of weeks: Miami vs. Georgia Tech and Colts vs. Dolphins. That is not unusual. However, what was unusual was that the stadium currently named Dolphins Stadium but Land Shark Stadium. Landshark stadium is an 8-month agreement (beginning in May) with Jimmy Buffet’s Margaritaville and Anheuser-Busch InBev. The name comes from Land Shark Lager, which AB co-markets with Buffet. The most interesting part of the agreement is the agreement is only for 8 months. At that conclusion of the agreement, the name will revert back to Dolphin Stadium which will be right in time to host the Super Bowl.   It will be interesting to see if other franchises (or companies) will move to these short term lease agreements in the future based upon the success (or failure) of the Land Shark agreement.

In other news, 2010 will bring television viewers another bowl game.  The new Yankee Stadium will be hosting a bowl next December between Christmas and New Years Day.  According to the article posted at ESPN.com, the game will be between the Big East #4 and the Big XII #7  with Notre Dame being eligible if the Big XII does not have a seventh bowl eligible team.  That will bring the grand total of bowl games to 35.  I wonder what ticket prices will be for that game.

UEFA Investigating Match Fixing

The BBC reported on Friday that UEFA is currently investigating 40 matches played over the past four years as part of the UEFA Cup/Europa League competition that appear to have been fixed.  Most of the matches took place during qualifying play and involved clubs from Eastern Europe.  Fifteen of the matches took place in the last two seasons.  The report indicates that both the halftime and full time scores appeared to be fixed.  That is a large number of matches, and even though they involved low profile teams from countries like Macedonia, the UEFA Cup/Europa League is a high profile pan-European tournament.  The article contains an interesting quote hinting at the financial incentives driving this behavior.  UEFA head of disciplinary services Peter Limacher said of the clubs accused of match fixing: “They know they are not going to be involved later in the tournament and they are going out, so decide, ‘Let’s make a profit’.”

Economic theory tells us that successful contests, either at the horse track or on the football pitch, consist of relatively evenly matched opponents, increasing uncertainty of outcome and fan interest.  Widespread match fixing reduces uncertainty of outcome and also erodes fans’ confidence in the legitimacy of the contest.  It appears that UEFA may need to rethink the design of this contest, given the negative incentives that are being created in the qualifying stage.  It also appears that some of the participating teams may be taking a relatively short-sighted approach to their financial decision making.  Match fixing involves a trade-off between a short run financial windfall (whatever the club earns from fixing the matches) and a potentially large, permanent cost if the club gets caught fixing the match.

Watching the Clock

Sunday saw the first Manchester Derby of the new season, since Manchester City spent millions and millions (see Brad’s last post about red ink in Madrid) in an attempt to topple Manchester United from their position at the top of English football.

Manchester United squeaked a win, 4-3, with the last kick of the match. Which wouldn’t have caused Mark Hughes, the Manchester City manager, too much discomfort, had it come in regulation time. Unlike in North America where the clock counts down to zero signalling the end of a game, in European soccer, the referee has sole control over when the game ends. Nowadays the referee must disclose at the end of 90 minutes how much “injury time” he will add, time lost for injuries and other disruptions during the 90 minutes.

At the end of 90 minutes, the referee signalled four minutes of injury time to be added, but Michael Owen hit Manchester United’s winner after six minutes of injury time had been played. Arguably, the game would have ended a draw had it been played with a countdown clock, and understandably Manchester City are furious.

But the referee still has discretion, and can add more time if there are stoppages in injury time (although this never usually happens and time wasting is very effective in injury time). I don’t know of any studies that have looked into injury time in England, before or after the length of time had to be stated at 90 minutes. There is a great study by Luis Garicano, Ignacio Palacios-Huerta and Canice Prendergast which finds for the Spanish La Liga, referees do systematically favour home teams to satisfy crowds by adding more minutes of injury time at the end of matches.

Manchester United’s stadium has over 70,000 supporters, which is a lot of fans to satisfy, and so it would not be surprising to think that a referee might be swayed by this. Fine, I think Mark Hughes might say, but to add six when you say four? It does seem a little unfair to me…

Red Ink in Madrid

The monopoly power in North American professional sports leagues, combined with their static composition, creates conditions ideal for profits, even if the teams perform poorly.  In European professional sports leagues, the promotion and relegation system, combined with the lucrative prospect of pan-European competitions like the Champions League, creates a different set of incentives, and vastly different financial outcomes.Top level European football clubs, even successful ones, often run large operating deficits and finance them with loans.

According to a recent BBC report, La Liga powerhouse Real Madrid currently has 327 million Euros of outstanding debt.  Real Madrid spent lavishly in the off season, acquiring Cristiano Ronaldo, Kaka, Karim Benzema and Raul Albiol for transfer fees totaling 219 million Euros.  Real Madrid appears to be engaged in a spending “arms race” with La Liga rival Barcelona, who also have a large operating budget.

This problem is not confined to Madrid and Barcelona.  I saw a paper presented at a conference in Paderborn, Germany last April with evidence that almost every club in the top two football leagues in Spain were losing money (unfortunately, no public version of this paper exists).

UEFA claims that it will soon be putting rules in place to curb excessive spending by European football clubs.  I doubt that UEFA can solve this problem on its own.   European football clubs operate under different financial regulations and in different economic environments.  A single UEFA policy seems unlikely to cure all the financial problems in European football.   Worse, the UEFA sponsored Champions League contributes to the problem, by providing football clubs near the top of every domestic league with an incentive to acquire better players through transfer fees.

What a Difference a Coach Makes!

As an Englishman and a soccer fan, Wednesday night left me with a fairly permanent grin on my face that was hard to move. England comprehensively beat Croatia, a team consistently ranked in FIFA’s top 10, 5-1 at Wembley Stadium to seal qualification to the World Cup Finals in South Africa in 2010. This followed up beating the same top-ten ranked team in their own back yard 4-1 earlier in the qualification campaign.

If one wanted a great example of the effect a good coach can have, one needs to look back as far as England’s previous qualification campaign, that for the 2008 European Championships. In that campaign, they also faced Croatia, but lost limply 2-0 in Croatia, and farcically 3-2 at home, to fail to qualify for the Euros for the first time in English soccer history.

Of course, that limp failure was under the stewardship of Steve McClaren, or Mike Bassett, as he should probably be known. McClaren took over an England side fresh from reaching its second consecutive World Cup Quarter Final, and took them to depths not previously pummelled. Rightly, after the failure to qualify, he was sacked.

In came Fabio Cappello, and the transformation has been remarkable. The players are essentially the same (since of course national coaches can’t sign players), but the results could hardly have been more different. For once, I’m looking forward to a World Cup where England actually has a genuine chance of doing something.

U.S. Government bans Canadian NHL charter flights.

Things got interesting today in the courtroom as Judge Baum said he might reject both the bid from the NHL and Jim Balsillie for the Phoenix Coyotes.  Read here for more.

In an unrelated, but just as interesting move, the U.S. Government removed the exemption which had been included for Canadian sport teams and musicians traveling within the U.S.  Previously, NHL and other sport franchise from Canada were able to charter flights and go from one location to another within the United States, allowing them the ability to move about with ease during road trips.  However the new ruling has removed this exemption, meaning that all charter flights from Canada headed into the U.S. will only be allowed to stop at a single U.S. destination before having to head back to Canada.  NHL Deputy Commissioner Bill Daly notes that such a move will “wreck havoc” with the business operations of the Canadian NHL clubs traveling in the U.S.

Consider the schedule for the Edmonton Oilers, who have an interesting road trip in February.  They have a stretch of away games that would take them to: Minnesota, Colorado, Arizona, and California in that order.  Rather than moving from one destination to another, as would be allowed under the old rules, the new regulations would require the team to fly back to Canada between each stop, or to use a U.S. charter.  The problem with this, however, is that NHL teams often charter with a single company through out a season by way of an agreement, so Canadian teams who chartered with a U.S. airlines, would have no way of moving around within Canada other than using public airlines.  In either case, the Oilers (and other Canadian franchises) would be forced to take alternatives which be more costly or time consuming (or possibly both).

The cause?  It seems some Pilots from the U.S. Air Line Pilots Association had complained about the passenger lists and stops they were forced to make.  It turns out many injured players, trainers, and other individuals were using these charter flights to go to cities around the U.S. which were not part of their NHL franchises official schedule.

Things are already getting messy.  There are threats of investigations and possibly even banning U.S. charters in Canada from going to more than one destination.  Already, several NHL teams have withdrawn from working with Air Canada, including the Boston Bruins and the Anaheim Mighty Ducks.  My big question, is if things are stuck in their current state, what would be the costs of transportation for these teams?  Will the NHL schedule even be able to be worked out logistically?  Financially, this will have to hurt for every team which travels back and forth from the U.S. to Canada, and will probably hurt Canadian teams more (though the Bruins and Sabers could have trouble with three Canadian franchises in their division).  In a time where financial stability of sport franchises is in the limelight, it seems the U.S. government is creating a potentially disastrous situation for the NHL and NBA who have already been hard hit by the recession.

Phoenix Coyotes Update, part X

Jim Balsillie raised his bid for the Coyotes by $30 million yesterday, to $242.5 million, and offered Glandale, the Phoenix suburb that is home to the team, $50 million to mitigate the negative impact of losing the team. No response from the NHL Board of Governors yet, but I did come across an interesting article in the Globe and Mail from last March.  According to this article, an unnamed former NHL governor estimated thatthe Coyotes had lost “more than $200 million” since 2001, and were expected to lose $25 million to $30 million last year.

The article also contained this hilarious statement:

NHL deputy commissioner Bill Daly said in an e-mail message that the Coyotes’ financial problems are not considered overwhelming and sought to quash rumours that the club came close to missing a payroll.

“I’m not in a position to comment on Mr. Moyes’ personal financial situation or the financial condition of Swift,” Daly said. “I can confirm that we are not concerned about the Coyotes missing payroll, nor have they ever come close to missing payroll.

“I can also confirm that I do not expect the team to file for bankruptcy protection.” A banking source said the Coyotes are talking to Citibank about a loan. Citibank, which is having its own financial difficulties, declined comment through a spokesman.

Yeah right.  And people bust economists for their terrible predictions.  This offer makes the NHL’s bid, and the bid from rival Ice Edge Holdings look even worse.

Jim Balsillie is willing to pay $242.5 million for a financial asset that some people would have us believe is awash in red ink.  Balsillie is, by all accounts, a good businessman.  The success of Research in Motion suggests as much.  Either Balsillie is really a nitwit who is willing to throw good money after bad, the Coyotes will be much, much more profitable in Hamilton than in Phoenix, or somebody is fibbing about the size of the losses incurred by the Coyotes.  What do I think?  Here’s one of my all time favorite quotes from sports business

Anyone who quotes profits of a baseball club is missing the point. Under generally accepted accounting principles, I can turn a $4 million profit into a $2 million loss and I could get every national accounting firm to agree with me.” — Paul Beeston, then a Toronto Blue Jays vice president, now baseball’s chief operating officer, 1979

Chelsea fined

FIFA, the world governing body of soccer, has delivered judgement on Chelsea’s wheelings and dealings in the transfer market this week, banning them from buying any players for two transfer windows, hence until January 2011. They induced a player, Gael Kakuta, to break his contract with Lens.

One suspects there will be an appeal and reduction in the ban, but it looks like Chelsea, always among the big spenders in the English Premier League (EPL), will be hampered substantially in developing their squad once the ban takes effect. Of course, as Phil McNulty points out, Chelsea are hardly the only club guilty on this front, and it looks like Man United are next on FIFA’s list.

This would be an excellent way to level the EPL playing field: Ban the top clubs from making transfers for a while. Probably not as sustainable as limiting the rosters for these clubs, but much more effective than limiting the number of foreign players.

New Arenas For Everyone!!!!!!!

Welcome to Alberta, the land of milk and honey.  We have heard rumors of difficult economic times elsewhere, but not here in the land of plenty.  We scoff at you pikers with your TARP funds and bailouts.  Here in the capital, the new arena for the Oilers is already “underway” as of yesterday, according to the team.  All they need is a few hundred million in taxpayer dollars and a Zamboni.  And now, word from the south is that the Calgary Flames are getting new digs as well.  The Saddledome was built in the early 1980s – the last millennium – and is now, gasp, the sixth oldest arena in the NHL.   The Flames do not have their hand out … yet.  According to Flames president Ken King: “We have had informal discussions, and I want to stress, informal discussions at all government levels, that’s the provincial government, the federal government and the city.”

The latest skirmish in the “Battle of Alberta“: Dueling hockey arena projects.  Just great.  I  predict that the only losers will be the taxpayers.

Phoenix Coyotes Update

Two big events in the ongoing ownership saga in Phoenix:

1. SOF Investments LP (owned by computer magnate Michael Dell) and potential ownership group Ice  Edge Holdings appear to have worked out a deal to do something about the $80 million that the Coyotes owe to SOF.  Ice Edge is still claiming they will offer $150 million for the team.  The Ice Edge Holdings bid has some additional strings attached, including a new lease on the arena in Glendale and a handful of regular season games to be played in Saskatoon.  That “new lease” bit sounds like a potential deal breaker to me, considering that  Glendale, the owner of the arena, has already made a lot of noise about losses on the facility.
2. Judge Elihu Smails, er, Redfield T. Baum announced that he will not toss out the bid by BlackBerry King Jim Balsillie prior to the auction of the team.  Surely this will cause apoplexy on the NHL Board of Governors, who have done everything short of accusing Balsillie of being the anti-Christ in their effort to maintain the NHL territorial monopoly status-quo.

The NHL still intends to bid on the team.   In addition, Hizzhonor said that the rulings on the NHL bid may not be made by September 10th, the current date for the auction/cage match.  It looks like this will drag on a bit.