Will the NFL come to Los Angeles?

March 8, 2013

In previous posts over the last few years, there has been discussion on this blog about whether the NFL would finally place a franchise in Los Angeles.  Things seemed to be getting close in the last year, as Anschutz Entertainment Group (AEG) supposedly secure most of the backing and agreements needed to build Farmers Field in downtown L.A., next to the Staples Center (another AEG owned facility).  The picture grew a little more cloudy when AEG said that they were going to sell off their Los Angeles based organization, allowing another investor to take over.  Now there is downright chaos as it seems more conditions are on the plate for AEG, and there is also question of whether AEG has been following the proper timeline.

Amongst the discussion, is the NFL wanting a team to come to L.A. before Farmers Field is built.  That would mean a franchise would need to relocate first, and then attempt to build a new facility.  What this creates is the situation where a lot of cities may try to keep their teams by offering upgraded/new facilities where they are currently located.  In this way, the team would be guaranteed at least a new stadium.  The move to L.A. no longer seems to make a new stadium a certain thing.  St. Louis and Buffalo had been two franchises that had been considered on the hot seat in regards to having their franchises pulled away to the West Coast.  Now with this news, it may be that the Rams will try to leverage a potential move to get the $700 million in upgrades that St. Louis has supposedly been offering for their stadium.  In this, there is certainly the question of which franchise would move to L.A., or if the NFL wants to keep it open, to continue to pull public subsidies from other cities across the country with the simple threat of “if you don’t give us a stadium, we will move to L.A.”

The second part of the most recent drama is the council that had approved the project had set a timeline two years ago for the Farmers Field project to move ahead.  Currently, it would seem that the project is well off track and may not be allowed to happen at this point.  Part of this deal is that AEG must finish its work on the downtown convention center it is building in L.A. before it can move forward with Farmers Field.  This project is suppose to finish in the Fall of this year, but that is not certain to happen anymore.

Finally, as noted in this article from Yahoo, the NFL doesn’t believe the economics of the stadium will work for AEG.

“The numbers just don’t work, no matter how you look at the deal,” a league source said in February. “It’s either too hard for AEG to make money [and pay the debt on the stadium] or too hard for the team. I just can’t see a way for it to work.”

Officially, a league spokesman said Monday that the NFL is still tracking what AEG is trying to do.

“We continue to monitor the AEG situation and remain interested in multiple sites in the Los Angeles area,” NFL spokesman Brian McCarthy said in a statement.

Sounds to me like an NFL franchise is a long way from calling downtown Los Angeles home.

Hat-tip(H/T) to my students in my sports economics class who brought up this news during our discussion on stadium subsidies today.


Is the NCAA in danger?

January 30, 2013

The NCAA attempted to have a court case filed by former players thrown out in court.  The former players led by Ed O’Bannon want to recoup some of the broadcast right fee revenue that has only been shared by the NCAA and member institutions.  This initially focused on re-broadcasts of games, but now a new ruling from Judge Claudia Wilken is signaling that players (former and current) can go ahead with their antitrust lawsuit against the NCAA.  So what does this mean exactly?  If, and that is still a big if, but if the NCAA loses this lawsuit, it could mean that the face of collegiate sport as we know it could change forever.  It would also mean that the NCAA could be held liable for hundreds of millions (or even billions) of dollars in revenue to be paid back to former student-athletes.  That would be in addition to having to potentially split some of the broadcast revenues from here on out with student-athletes in those events.  If such events were to transpire, this could mean that many programs which need their current level of revenue from broadcast right revenue would find themselves short of money, and that they would probably find themselves in the red.  I would anticipate athletic departments either going into the red, or making cuts to many programs on campus in an attempt to stay financially stable.

What would all of this mean?  It would be a major sweeping change in athletics, and the financial and economic structure of how the NCAA and member athletic departments do business.  It would also make things more interesting as it would push forward the discussion of whether a student-athlete is an employee or not.  Many argue both sides of this, with discussion of whether the National Letter of Intent which all student-athletes sign is a contract or not.

This is still in its early stages, and is sure to be battled in court for quite some time.  With that said, I’m sure many in the NCAA and athletics are probably sweating a bit after today’s ruling.


If you are going to price gouge, do it to the other team’s fans!

January 11, 2013

The media has been abuzz this week with discussion over the price of tickets for the away section at the Arsenal vs Manchester City match in London this weekend.  Arsenal, decided to raise the price of the tickets in the away section to £62 (about $99 U.S.), which has made many supporters of Man City and the media very angry.  Manchester City actually returned 900 tickets to Arsenal of the several thousand that they were given for their fan section, as supporters of Man City have refused to pay so much to go travel to London to watch the game.

Which might have been a smart thing, as I believe it is now 35 years since Man City has beaten Arsenal at Highbury or the Emirates. (Yes, I’m an Arsenal supporter, and I keep track of these things…)

Notably, Arsenal and other teams in England have begun using multi-tiered pricing where different games are priced differently based on the opponents and other factors.  This practice means big games like Man City vs Arsenal will garner a high price, while QPR vs Norwich will be rather cheap.  It is also a practice which is not new to fans in North America, where many of the sport leagues use variable ticket pricing to try and capture greater consumer surplus.  Economists have begun to examine this practice of price dispersion, and research studies looking at similar practices in Theaters have found that it has boosted revenue for organizations.  Which means it seems only natural for sport organizations to copy this behavior.

But Arsenal fans are also unhappy, and have complained to the club this week because of the high prices.  They noted that in other countries across Europe, tickets often run between ten to twenty Euros.  I think with the growing nature of the business that is the Premier League, fans will only be disappointed in the future as ticket prices continue to soar, especially for matches with top tier opponents.

 


9-3 Louisiana Tech not going to a bowl game

December 4, 2012

A quick repost of a blog post I wrote up for my students today on the blog project they are working on.

Yesterday was bowl selection day for the NCAA College Football teams across the United States.  Teams who won half their games (or others who receive special exemptions despite losing records) are all eligible to play in bowl games.  While much of America was screaming at the Orange Bowl for having Northern Illinois University (NIU) playing in a Bowl Championship Series (BCS) game, a few individuals were very unhappy that Louisiana Tech was not going to a bowl game.  It was not a matter of record (the team went 9-3) or that they didn’t get an invite to a game (the Independence Bowl offered), but that the athletic department was indecisive when trying to figure out whether to accept the invite.

The bowl business is tricky stuff, and La Tech was thinking they were going to some specific bowl games coming into the weekend.  Then Northern Illinois finished 16th in the BCS rankings and won an automatic bid to the Rose Bowl, kicking Oklahoma out of the BCS.  This shift cause other bowls to shift who they were inviting, and soon La Tech found themselves with only an invite from the Independence Bowl.  It is not that the Independence Bowl is a bad game to play in, but that the payout the athletic department would receive would be around $1,100,000.  While that seems to be a good chunk of change, the bowls that La Tech thought they were in the running for had payouts around $100,000 to $200,000 higher.  While this seems like a small amount in the age of athletic departments spending tens of millions of dollars on football, I think La Tech had good reason to hesitate.

The bowl game system is one which invites teams from across the country to travel long distances and stay many days (teams travel, practice, have some fun events, play the game, then go home).  Most schools also bring donors, alumni, students, the marching band, athletic department staff, and university staff and administrators to the game.  Think about the bill for hundreds of people having to travel, stay in hotels, food, drinks, banquets, tailgates, events, and all of the sudden you are running a pretty high bill.  Couple this with the fact that some bowl games require schools to make a revenue guarantee in regards to the amount of revenue generated by fans purchasing tickets, and bowl games can quickly become a losing situation for many athletic departments.  In other words, bowl games are a “winners curse” for some.

So did La Tech do the right thing?  I think so.  It is better, in my opinion, for an athletic department to take their time and make the right decision, than make a poor one which would put them in the red.  La Tech’s most famous alumni Karl Malone, a former NBA superstar, was not happy.  Mr. Malone took to twitter and lambasted the school and its athletic department for not landing in a bowl game.  I can understand Malone’s anger as those who are punished by this are the student-athletes who earned the chance to a bowl game, but are now not going anywhere.  Malone suggested that not going to a bowl game is “exactly what is wrong with our university”.

I disagree Mr. Malone.  The athletic department was weighing their options carefully.  Is it a disappointment? Yes it is, but it does not hint at a bigger systematic issue with the university and the athletic department.


Is the NFL in trouble for Collusion?

September 11, 2012

Thursday in a Minneapolis court room, the trial will begin in the case of Reggie White et al., vs NFL which alleges that the NFL owners were colluding to keep salary caps at a certain level, including that the owners had a secret agreement to keep the cap at $123 million a year during 2010 when the league had no salary cap.  The lawsuit alleges that such behavior has existed since the early 1990’s, and argues that owners have been working together to keep salaries low in the league.  The lawsuit indicates that this collusion has cost the players billions of dollars in potential lost revenue over this frame.  People have been discussing that the bounty gate and concussion problems would be the things that really hurt the NFL, but this new lawsuit brings a major issue for the league from a financial standpoint.

MLB owners were found guilty of collusion during parts of the free agency era, and were thus forced to pay back players, so this is not the first time this has potentially happened in North American professional sport.

Sport site Deadspin notes:

The only way to challenge the salary cap punishments now, after they’ve gone through the collectively bargained appeals process, is to “re-interpret” the entire 1993 settlement that allowed for a salary cap in the NFL and punish the owners’ collusion to the tune of $4 billion in damages.

This could mean big problems. NFL owners are probably cringing as the Judge presiding over the trial will be David Doty, a judge who is known for having ruled in favor of the union several times in the past.

You can also read (and download) the lawsuit on another deadspin article here: http://deadspin.com/5912702/


Is the $60 million fine too step for Penn State?

August 29, 2012

Amongst the many penalties passed along to Penn State for their lack of institutional control of a series of unfortunate and disturbing incidents at their university, the NCAA hit the athletic department with a $60 million fine.  This comes not just because of the sexual abuse of minors by former assistant coach Jerry Sandusky, but in the subsequent lack of action and failure to report these issues by many in athletics and the university.  Today 29 prior faculty senate chair signed a document noting that the penalty was unfair to the the athletic department and the university, and that it was putting Penn St. in a bad financial situation.  While it is true that this penalty, plus all the potential civil suits which are on their way are potentially going to hit the university for a lot of money.  In the document the faculty group notes:

“The shock of the crimes that occurred here clearly underlines the need for greater vigilance and stronger policies. However, the sweeping and unsupported generalizations by the Freeh Group … and the NCAA do not provide a satisfactory basis for productive change,”

I can understand their unhappiness that Penn State’s reputation and finances are taking a hit on the academic side of things for issues that they view as being in the realm of athletics.  The problem is that the lack of institutional control meant that not only was athletics not doing anything about these incidents, but that those in the administration who should have been overseeing some of these issues also failed in their jobs.  If you look at the organizational structure of almost any athletic department, you will find that coaches are below the athletic director, and that the athletic director is usually below the chancellor/president and/or the Board of Trustees.  In this case, while the faculty can be unhappy and blast the NCAA for potentially harming academics, it is not the case that the administrative side of the university was entire without fault.

This seems to be another great argument in the favor of removing athletics from a university.  If athletics can have such power that they can cause such damage to a school because of the action of a few individuals in power, are universities taking a financial risk by giving so much power to sport organizations?  I am a big fan of college athletics, but it would seem that there is need to reconsider the powers given to athletic departments, and whether these departments should be able to influence others in the university community so easily.  The faculty group that signed this letter should give thought to more of  the reasons as to why Penn St. got into such dire straits in the first place.


Kansas City teams using taxpayer money to pay for pretty much everything…

August 1, 2012

It is not unusual for professional sport teams to use taxpayer money for upkeep and maintenance of their sport teams.  Well trouble may be brewing in the state I am based in (Missouri) as WHB 810 Sports Radio in Kansas City broke new yesterday that the Kansas City Royals, the cities Major League Baseball Team, is using only a small portion of the tax money they requested for maintenance and repairs.  This isn’t exactly illegal, but the Royals apparently are using only 9% of the $17 million in taxpayer money earmarked for maintenance and upkeep for stadium repairs.  What are they using the money for?  Well, in 2006 an amendment was added to the lease agreement to both the Kansas City Royals and Chiefs (the National Football League team for the city) which allowed them to use this fund to help pay for “game day operations”.  Well the Royals asked for money from the fund to pay salaries of employees ($4 million) and another $700,000 to pay for their taxes.  Both requests were approved, officially making it so that the Royals were paying their taxes with taxpayer money.  The best part?  The reporter from WHB 810 has actually provided with a list of what the Royals asked for and received from this special fund:

Security $287,377
Telephone $83,698
Supplies $657,838
Uniforms $86,301
Salary, Full-Time Associates $975,309
Payroll, Taxes and Benefits-Full Time $365,176
Salary, Full-Time Associates $321,355
Payroll, Taxes and Benefits-Full Time $133,617
Salary, Part-Time Employees $2,618,568
Payroll Taxes-Part Time Employees $200,320
Security    $236,113
Telephone $515,696
Stadium Services $691,322
Professional Services-First Aid $241,931
Utilities, Telephone, Cable TV $2,291,385
Day of Game Security   $247,528

And the Royals aren’t the only game in town, and it is now being noted from a source that the Kansas City Chiefs are doing similar things with the fund.  The Chiefs asked for $27 million, and used only a third of that amount on stadium repairs and upkeep.  It is noted that none of this tax money is allowed to pay for player salaries, but they are being used to cover other salaries of employees, and pretty much everything else.  The Jackson County Sport Complex Authority which approved these funds just sent re-nomination of their current head to Missouri governor Jay Nixon for approval.  Governor Nixon will need to think twice about this as citizens will clearly not be thrilled by this use of tax money.  This will also not improve Royals owner Dan Glass’ standing with the fans of his team.  They already are unhappy with the way the team is run and will not pay for players, now they find operations are being paid with their tax money, this can not go well.


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