Did the “Beckham Experiment” work for the MLS?

November 22, 2011

On Sunday, the Los Angeles Galaxy won 1-0 in the Major League Soccer (MLS) Cup final over the Houston Dynamo.  The Galaxy are lead by U.S. international Landon Donovan, as well as England’s David Beckham and Ireland’s Robbie Keane.  Notably, the game is the last before Beckham’s 5 year contract ends with the MLS.  Now the MLS is a curious league, as it is operated as a single-entity organization where the league holds all the player contracts.  This was done to originally keep costs in check so as to not repeat the failures of the North American Soccer League (NASL).  The strict salary cap rules were relaxed to allow players like David Beckham come to play in the league, with each team given the same number of exceptions in regards to players who do not count under the salary cap.  This has allowed players such as David Beckham, Theirry Henry, Robbie Keane, and many others to come play in the MLS near the end of their career.

I don’t think there is any doubt that David Beckham has had a significant impact on the MLS, but the question is whether Beckham was worth the large salary he was paid by the league.  This exact question was the focus of a research paper in the International Journal of Sport Finance by Robert A. Lawson, Kathleen Sheehan, and E. Frank Stephenson in 2008, entitled “Vend it Like Beckham: Beckham’s Effect on MLS Ticket Sales” (volume 3, p. 189-195).  In this paper, the authors conclude that Beckham increased attendance at stadiums by around 55%, and that he was probably worth the investment.  While it seems likely that MLS recouped the salary they paid Beckham, I wonder if the MLS has really just boosted the popularity of soccer in America, and not necessarily the league.

I point again to Sunday, a day when Liverpool played Chelsea and the MLS Cup final was held.  Not only were fans able to watch Liverpool vs Chelsea live early in the morning, but they could also watch the replay on Fox in the earlier afternoon, at the same time as the NFL was playing its early games.  The day was filled with sports, finishing with the MLS Cup occurring the same time as Sunday Night Football.  The numbers show that the MLS didn’t do very well in terms of ratings, even with David Beckham and other big names playing in the game.  USA Today noted that the Liverpool vs Chelsea replay had double the viewers as the MLS Cup Final.

Fox’s taped Chelsea-Liverpool soccer game Sunday afternoon drew an overnight TV rating that nearly doubled the rating for ESPN’s primetime MLS Cup Sunday.

Fox’s soccer got a 1.5 overnight, which translates to 1.5% of households in the 56 urban TV markets measured for overnights. ESPN’s Los Angeles-Houston MLS title game, which included stars David Beckham and Landon Donovan, drew just 0.8% of households.

This is not a good sign for the MLS, though their timing and placement of the finals was probably not the best.  Scheduling during the same time as a prime-time game between the Giants and Eagles.


Liverpools threat of breaking away from the Premier League Broadcasting deal.

October 12, 2011

A few days ago I talked about the landmark case in regards to Premier League broadcasts in Europe, and how there may be important changes coming in regards to how the rights are sold across Europe.

Now the threat is not from decoder cards and external forces, but internal ones.  Liverpool has started to make threats about breaking away from the Premier League’s current overseas broadcasting deal.  Liverpool’s challenge is that the TV rights for Premier League clubs should be sold overseas on a club-by-club basis.  In other words, Liverpool believes they and other clubs should have the right to sell their own broadcasts overseas.  Liverpool’s managing director even came out publicly and stated that this is:

“a debate that has to happen”

The Guardian notes that the current Premier League deal is set up as follows:

Since the Premier League’s foundation in 1992 its success has been largely based on the principle of collective selling, where each club no matter how lowly can expect a fixed share of TV deals with “merit” awards for finishing positions as an add‑on. Changing this model would risk revolt from the smaller clubs who stand to lose most, and thus threatens the league’s very structure.

Liverpool thinks that the super powers of the Premier League, Manchester United, Chelsea, Liverpool, Arsenal (the clubs who are usually at the top of the table) should be getting a bigger share, as they are the ones who are bringing in the large audiences.  Again, these are deals which are worth billions of dollars to the Premier League, but if the money was not split evenly, and were sold on an individual club basis, it would mean an even greater imbalance in club revenues.  And of course, club revenues are a big part of buying talent, and hence being able to perform on the field.  Such a deal would be problematic in my mind, as it would destroy any sense of competitive balance in a league that already has balance issues, especially at the top.  Furthermore, it could mean that the mid-level and low-level clubs would be even poorer, and would not be able to field as attractive a product.

I point to La Liga, where two teams (Barcelona and Real Madrid) dominate the league in regards to revenue, and pretty much dominate on the field as well.  I think the Premier League, for the sake of having a better product, should continue to share revenue, and have the TV rights package deal sold in a single group.


Loyalty?

February 1, 2011

In the light of Andy Carroll jumping ship from Newcastle to Liverpool, the usual loyalty arguments are doing the rounds.

As my comment on the linked article shows, I’m not overly taken by these arguments, common as they are, because they don’t really make much sense. The argument is: Back in the day, before money came around, players were really loyal. Nowaways, they aren’t loyal, the one-club player is a thing of the past.

Of course, these are standard harking-back-to-a-mythical-golden-age type arguments. Back in these days, pre-1992, and maybe even pre-1960s, players really didn’t have much choice – their clubs held their registrations and a lot of power over them. Additionally, pre-Sky there was not a lot of money in the game. So: Players can’t move easily, and there isn’t much money about for them to want to either. Surprise, surprise, nobody moves anywhere. There’s this false sheen of loyalty, but of course it’s fake, it’s just agents responding to incentives.

Nowadays, players have much more power to move post-Bosman. There’s also much more money around, which is used by bigger clubs to tempt players. So: Players can move, and have incentive to (money) – surprise, surprise, they move!

It wasn’t loyalty that kept players in their clubs in the past, it was the system they had to operate within. It produced a fake sense of loyalty, and hence once that system came tumbling down, we got back to a more realistic idea of loyalty – the one-club players of this age (Ryan Giggs, Paul Scholes, Steven Gerrard, Jamie Carragher, Chris Taylor – the latter is my personal favourite) are the real loyal servants since they are tempted in many ways yet remain loyal.


Transfer Madness

February 1, 2011

Most media commentators are awash with superlatives after the transfer window shut last night after over £200m was spent by English Premiership teams alone; for them, clearly football has again gone crazy. After UK GDP fell by 0.5% in 2010Q4 and consumer confidence recorded its sharpest falls since 1992, clearly it is argued football is out of touch with reality.  That, of course, argues that at some point football has been in touch with reality, or that perhaps it should be…

Moreover, Liverpool have been at the centre of much of this transfer activity: star Fernando Torres has left for Chelsea for £50m, and has been replaced by Newcastle’s youngster Andy Carroll for £35m (that’s about £1m per goal he’s scored thus far in his career), and Uruguayan World Cup star Luis Suarez for around £23m.  Liverpool are rarely out of the news, and this is their first real transfer activity since being taken over by New England Sport Ventures (NESV). The strong advocacy by NESV of what is generally dubbed Sabernomics (the use of statistics to inform transfer and other activity within a football club) has led to increased scrutiny of their activities.  Brian Phillips picks up on this here, questioning this sudden splashing out of vast sums of money on unproven players (Carroll has barely got going, Suarez never played in England).  The article is laced with cutting remarks about the use of statistical methods (well, anything other than a scout’s intuition I imagine) to influence transfer activity.

But of course, it’s a typically superficial and short-term analysis of the situation.  The article looks at the sums paid, and the track record in simplistic terms (whether they have played in England, and how many goals they have scored). Yet Sabernomics is much deeper than that, and additionally market forces operate in the game forcing astronomical prices on players. I strongly suspect that the laptops at Liverpool will have analysed Carroll’s game at a much deeper level than just goals-per-game, looking at frequency and type of passes, of shots, of ability to link-up play, energy levels, general quality levels as revealed on the field. Carroll will be expected to score goals, but also to link up well with another striker and create a potent partnership, and to do his bit defensively also.

It may happen that £35m seems a lot, and it may have happened just after Torres left for £50m and hence smack of panic, but it’s fairly well known that English players attract a premium, and there must be sound reasons for that. There is a less of a risk that English players won’t settle in the country, there is less of a risk they won’t fit into the English game. If Carroll’s partnership with Suarez provides the kind of goals that it could well do (Alan Shearer has gone on record saying that the combo looks a lot like the Sutton-Shearer partnership at Blackburn back in early 1990s when Blackburn scored goals for fun and became the only team other than Man Utd, Arsenal and Chelsea to win the Premiership), then it will propel Liverpool back into the Champions League places, and more than repay NESV for this rather huge looking initial outlay in cash.

And do we really think Liverpool’s owners were that unaware that Torres might leave? Do we credit them with that little intelligence…?


International Friendlies and Injuries

November 19, 2010

Ignoring the FIFA World Cup fiasco for the moment, there’s been another furore keeping the press busy in England.  On Wednesday evening an experimental England side was comprehensively beaten at home by France in an international friendly.  Cue naturally laments of how depressing the future of English football is looking (on the back of 90 minutes), but the funny undertone of the entire thing was how seemingly pointless such friendlies are.  This has been an attitude growing over the years as club teams play more and more important fixtures in Europe and domestically, and so some of the less events (the League Cup and international friendlies) have lost their importance.  It’s funny then that there was so much soul searching for a defeat in a pointless game – where most of the usual England team didn’t play.  But I guess it gets readers on to your website…

Moreover though, as hinted by the BBC blog linked earlier, an additional controversial aspect of the friendly was that Steven Gerrard of Liverpool was played for a devastating 85 of the 90 minutes, instead of the reportedly agreed 60 minutes.  The Liverpool staff apparently weren’t too impressed.  So there have been mootings from others, including Tony Pulis, manager of unfashionable Stoke, that the FA should be liable for the injuries to players when playing in international friendlies.

Now that’s all well and good; it may be an effective and sensible system: After all, the players are contracted to their clubs and their clubs pay their wages.  But of course it’s all part of a power struggle in English football between the clubs and the Premiership and the national team, one that seems to be increasingly won by the Premiership, usually at the expense of the national team.  Perhaps we must just accept this; we love the way the Premiership is, apparently, and wouldn’t miss it for the world.  But perhaps that Premiership doesn’t allow for a successful national team because that national team is pushed to the margins.

The implication of making the FA liable in friendlies is basically that friendlies will stop happening: Why would the FA even bother to play these games if an injury means that it will be liable for hundreds of thousands of pounds, maybe millions?  And of course, if we pander to the brigade who tell us that all international friendlies are now pointless, then we end up that the only games the national team plays are meaningful and hence there is no time for the international-level players to gel into playing together via some less high-pressure games – the standard way in which any team prepares for a new season.  It strikes me those proposing to abandon all international friendlies haven’t really thought this through, and the implications of it.


Liverpool + Moneyball = Unhappy Fans & Media?

October 29, 2010

The Liverpool sale has been widely discussed here by both Brad Humphreys and James Reade.  Just recently, Paul Hayward of The Guardian wrote up an editorial piece about how it would be bad news for Liverpool if their new owners took a Moneyball approach to managing the club.  The author perpetuates fear of statistics and analytical thinking and analysis of players in sport, especially in football (soccer).  Mr. Hayward especially notes that Arsenal, one club in Europe who is run with such an approach by their manager Arsene Wenger (who has a degree in economics).  He claims that the dictatorship that Wenger runs at Arsenal has been bad for the club, and lead to many bad decisions, yet if one looks at the standings over the last few years, it is quite clear that Arsenal seems to have fared better from one year to the next.

Two reconnaissance stops were the clue. At Fulham, where Roy Hodgson, coincidentally, was manager, success sprang from the restoration of stalled careers – Danny Murphy, Bobby Zamora, Zoltan Gera – and the digging out of hidden treasure (Brede Hangeland). At Arsenal, NESV was touring the Bloomingdales of worldwide scouting: a club where analytical models were so ingrained that Arsène Wenger shipped out Gilberto Silva for taking a fraction of a second longer to redistribute the ball than he had a season earlier.

The authors main argument: statistics may work for baseball in North America, but they will not work for football in England.  He even states:

The urge in matters of scouting is to defend not a computer model but the human eye, intuition, knowledge, the moment of revelation. There was no Moneyball when Liverpool spotted Kevin Keegan or Alan Hansen or when Manchester United, to quote Sir Alex Ferguson, first saw on a parks pitch a young, spindly Ryan Giggs – “a dog chasing a piece of silver paper in the wind”.

Already, this piece has seemed to pick up some ridicule from popular sport sites in the U.S. , though I will be curious how it is received in the U.K.  I understand many fans are suspicious of people using numbers and stats to understand their favorite sport, but if the results produce wins, should they really complain so much?  Looking at the Arsenal model again, they seem to have done quite well both on the field and financially in the last few seasons.


More on the Liverpool Sale

October 16, 2010

The Guardian has an interesting article on the soap opera that is the sale of the Liverpool Football Club.  It seems that former Liverpool owner Tom Hicks has become fixated on the Forbes Magazine estimate of the value of the team.  Forbes produces annual estimates of the value of various sports franchises as part of their Sports Money section.  The estimates are interesting conversation fodder, and probably generate a fair share of arguments over pints at the local, but I find it curious that someone like Tom Hicks would focus on this estimate.  I suppose his interest stems from the fact that the Forbes estimate (£513m)  substantially exceeds the value that the club was sold for (£300m).

I find Hicks’ “obsession” with the Forbes estimate of the value of the club curious because a lot of research shows that the Forbes estimates differ significantly from franchise sale prices, at least in North America.  Rod Fort noted this in an article in IJSF volume 1, Issue 1.  Mike Mondello and I documented this in a 2008 article in the IJSF, and Phil Miller also pointed this fact out in a 2009 IJSF article.

The Forbes estimates are based on all the financial information available (which is not that much, given that North American franchises do not release audited financial data), and a systematic analysis of these data, but they clearly differ from actual franchise sale prices.  Hicks, as former owner of the club, should have access to much better financial data than Forbes magazine.  He might be fixated on the Forbes estimate of the club value because it is close to his estimate, but sports franchises often sell for prices different than the net discounted value of future profits implied by the financial “fundamentals.”   For example, prospective owners who care more about wins than profits often bid up the price of sports franchises, and teams embroiled in controversy (like, umm, Liverpool right now), might sell at a discount.


Is it Making the News Over There?

October 14, 2010

I contribute to this blog from the UK and while the internet is a global thing, it’s not clear whether particular stories are making the headlines elsewhere.

The saga of Liverpool FC rumbles on, and has taken a new twist.  Yesterday the High Court in London ruled against Liverpool’s current American owners, George Gillett and Tom Hicks, seemingly paving the way for the owners of the Boston Red Sox, New England Sports Ventures, to take over the club and end a sorry sorry spell for the club under the chaotic stewardship of Hicks and Gillett.  However, the recalcitrant owners it would appear have little shame and on hearing the court’s verdict in London headed down to some district court in Texas and had an injunction granted against the sale of Liverpool!

Now of course, the Texan district court has no jurisdiction over Liverpool or the UK, yet NESV and RBC (who loaned Liverpool a load of cash that they want back) do business in the US and so it seems will have to fight out this injunction.

This kind of thing makes me personally quite angry and I’m not a Liverpool supporter (although my own team, Oldham, was almost destroyed by a similarly callous owner back in the early part of the last decade).  What is it about sports team owners willingly driving clubs to the verge of bankruptcy in some kind of game to eke out an extra few dollars?  I’m not about to join either the brigade against overseas ownership of football teams in the UK nor the brigade that things “good character” tests of potential new owners will ever be useful things (not least because brown envelopes stuffed with cash exist), nor am I about to suggest that any kind of local/state government intervention is neccessary here.  But it does start to raise questions.  Sports clubs are distinctly unique entities with remarkable levels of brand loyalty and through their links with local communities are very difficult to analyse.  There clearly are positive externalities to their existence (just as hooliganism is an example of a negative externality surrounding them).

But do they justify further intervention, as there will undoubtedly be after a saga such as the current one?  Will more stringent “good character” tests really weed out recalcitrant owners like these ones?  One hopes that the best possible outcome of this whole sorry saga might be that the clubs themselves consider ever more strongly the character of potential future owners.


The Ongoing Saga of Liverpool FC

October 6, 2010

News has broken this morning that Liverpool FC, the iconic football (soccer) team, may well be sold by their current American owners (Tom Hicks and George Gillett) to New England Sports Ventures, the owners of the Boston Red Sox.

The rapid decline of Liverpool has been quite shocking: Just a couple of years ago they demolished Real Madrid 4-0 at their stadium, Anfield, yet last Sunday they were humbled 2-1 at the same stadium by Blackpool to lie in the relegation zone of the Premiership.  Furthermore, one of their debtors, the Royal Bank of Scotland, is getting a little tetchy and wants its loan repayed by 15th October otherwise the club will be placed into administration (bankruptcy protection) – something that would trigger a 9-point penalty and make the spectre of relegation, once unthinkable for the “Big Four” club, all too real.

This highlights the financial state of European football Brad mentioned in a recent post, something which perennially worries many commentators on football.  Yet the likely outcome of this whole saga will once again reinforce the long-standing cycle of deteriorating finances.  There will be some “bail out”, almost certainly not government-led, and the debts wiped off by some knight in shining armour.  While football clubs, especially those like Liverpool, remain as untouchable institutions (too big to fail!), the cycle will get worse and worse since owners can make the same kinds of bets made in financial markets in their heady days: Heads we win, tails the taxpayer loses.

The question probably is, then, will there ever be a Lehman Brothers of European football to kick off some kind of dramatic revolution in football?


What value management?

January 14, 2010

Aspiring economists are taught in microeconomic theory lectures that it is unwise to judge an agent on a noisy metric, or one not fully under their control. Of course, in soccer management, the only metric a coach is judged by is results, something over which he has only marginal influence.

If we travel back in time to last March and April, Rafael Benitez was coach of a team that hammered the mighty Manchester United 4-1 in their own back yard, Real Madrid 4-0 at home, and Aston Villa 5-0 at home. Liverpool came mightily close to honours both home and abroad, and their near miss seemed to set the club up for another assault this year on the major prizes in English and European soccer.

Defeats to Lyon and Fiorentina dumped Liverpool out of the Champions League prematurely, and last night new depths were sunk to when they limply lost 2-1 at home to Reading in the FA Cup (the only domestic honour still available to them), who themselves are in deep relegation trouble at the bottom of the Championship, the division below the Premiership.

How fine are the margins though? All the goals that humbled Liverpool in the Champions League came in the dying seconds of matches, and Liverpool were 1-0 against Reading into injury time last night. Furthermore, to what extent can a manager be held responsible for the folly of his players? Yossi Benayoun foolishly clattered into a Reading player to give away a penalty kick that Reading scored to level matters and take the game into extra time, and multiple Liverpool players conspired to miss easy opportunities to put Liverpool back in control in the match.

Nonetheless, the feeling today is that Benitez in living on borrowed time. Only so many freak events can happen under the stewardship of a coaches it seems. The implication is, of course, to what extent is a good coach a lucky one?


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