Economic impact of the Hall of Fame vote?

Across the country there are people who are holding their breath waiting to see what happens with this year’s Hall of Fame vote.  Many believe that this may be the first time that no players who currently eligible under normal standards will be elected (others could still be elected such as broadcasters, owners, older players who are no longer eligible).  If no players are elected, this could mean that there is not as much interest in the Hall of Fame this year, and could lead to decreased attendance at the induction ceremonies which occur in the summer.

Already many articles are pointing at the potential economic impact that this may have for Cooperstown, where the Hall of Fame is located.  The LA Times notes that some stores do about 15% of their annual sales during the induction weekend.  Professor McDonnell in this article of Forbes discusses the tie between Cooperstown and the Hall of Fame:

The village of Cooperstown is just as anxious to hear the Hall of Fame results as the candidates themselves. Cooperstown’s hospitality and tourism industries are inextricably tied to the Hall of Fame’s fortunes. They can ill afford to have a half empty dais on Hall of Fame weekend due in part to protest or lack of interest. Likewise, they need Main Street to be bustling with visitors who are spending their disposable income at the local restaurants, shops, motels and inns. A summer without a single living member of the Class of 2013 or a boycott of any kind by fans or current Hall of Famers could be detrimental to business owners that rely heavily on the allure of baseball’s history.

I understand that there is a good deal of business in hospitality and tourism that revolves around the Hall of Fame, but the Hall of Fame itself has been losing money over the last several years.  While it is a big deal for many local businesses, I begin to wonder how much we should be worried about the economic impact of the Hall of Fame vote.  Yes, some individuals and businesses will be affected, but at the same time, one has to question whether Cooperstown has literally put all of its eggs into one basket.  Furthermore, if we are talking about the vote mattering for the economy, then will not some writers feel more pressured to vote yes for individuals they think shouldn’t be in the HoF, all for the sake of propping up some businesses that have a great dependence on a event for a few days every year.

I hate to sound like I am not sympathetic, but at the same time I have to shake my head when I hear all this talk of the economic impact of the Hall of Fame vote.  It wasn’t like people knew this problem, I think better business planning and strategies needed to be created to try and offset some of these issues.

MLB Agreement to banish Pete Rose is for sale.

In our weird post of the month, it has been released on ESPN that the document signed by Pete Rose and Major League Baseball (MLB) officials 23 years ago to banish Mr. Rose from the game is up for sale.

Pete Rose was banished for baseball in 1989 after it was found that he was betting on baseball games, something that the league was clearly not happy about, as they forced him to sign this document that would effectively remove him from baseball.  To this point, it has pretty much served as a life ban, though there has been discussion over whether Pete Rose should be reinstated and allowed to be part of the MLB or at least one of its franchises.

Auction officials believe that this is one of the most important documents in history, and believe that the original will fetch more than the approximate $1 million that was paid in 2005 for the contract that was signed by Babe Ruth to play baseball all the way back in 1919.

And for those interested in history, you can read the PDF version of that document on sale right here.

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

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.

Mets inching closer to major financial issues?

It has been noted that the New York Mets are not in the best of financial situations, especially in regards to their cash flow.

Things got even worse when victims of the Bernie Madoff ponzi scheme filed a $303 million lawsuit against the owners of the Mets who had taken money from Madoff to help support the team.  The Mets lost an important ruling in federal court today, with the judge ruling that the Mets must show that they didn’t know about Madoff’s ponzi scheme.

The above linked story notes that the Mets lost over $70 million last year, were ordered to repay $83.3 million of profit from a fictitious Madoff company, and still face another $303 million if they can’t prove they had “willful blindness” to Madoff’s financial schemes.

I’m sure Bud Selig and the MLB front offices do not like what is going on.  After the Dodgers financial debacle, I’m sure the last thing they want is the Mets also having to go into bankruptcy as well.

Yu Darvish and the Posting System

Last week, the Texas Rangers finished their deal signing Japanese pitching superstar Yu Darvish to a 6 year deal worth $60 million.  While the $10 million a year may not seem to be that much when comparing Yu Darvish’s salary to that of other star pitchers in Major League Baseball, the total price for Darvish is another thing.  Because Darvish was under contract to a Japanese professional baseball team, the Hokkaido Nippon Fighting Ham (the best or worst name for a team in sport history), MLB teams were forced to bid on the rights to try and negotiate a contract with him.  This system works like a blind auction where teams interested in negotiations with a player submit bids.  The highest bidder ends up getting the chance to talk to the player.  This is the same system which brought Daisuke Matsuzaka to the Red Sox a few years ago.  Yu Darvish set a new posting record, with the Rangers bidding $51.7 million for exclusive rights to negotiate with him.  That $51.7 goes to the club in Japan, who can use the cash for whatever they wish.  This system has it’s ups and downs.  While it allows players who want to come to the U.S. to leave their clubs in Japan, and still have the clubs get compensated, there is also a private bidding war going on when star players become available.

In the end, the Rangers end up paying a total of $111 million for the player, and $51.7 of it goes to Darvish’s club in this case.  Some question whether someone is worth this much money and risk, but it is important to note that bidding high and winning means that no rival team has a chance at getting him under contract for at least another year.

As for the Japanese clubs, the money that the Seibu Lions brought in from Daisuke Matsuzaka was quite helpful in stadium renovations that they wanted to make.  In essence the posting system transformed the stadium into the house that Daisuke built.  The question is, what will the Nippon Fighting Ham do with the $51.7 million?

Miami Marlins and the SEC

Things in South Florida just got more interesting both on and off the field. Known for a small payroll, the Florida (now named Miami) Marlins have signed two of the top free agents for next season. This is prior to opening a brand new stadium beginning next season.

Last week, a story by Jeff Passan of Yahoo Sports reported that the Securities and Exchange Commission (SEC)  issued subpoenas to the Marlins organization to understand the agreement reached by the city and the team on a new stadium. Among items that the SEC wanted to see was the Marlins financial records, communications with the MLB commissioner, other meeting minutes, and campaign contribution.

Passan outlines the Marlins story up to the SEC subpoenas. The Marlins wanted a new stadium because they were supposedly losing money. The Marlins threatened to relocate the franchise if the city did not provide the team with a new, baseball only, stadium. The local government requested financial records from the Marlins but were denied. However, the government still voted to build the new stadium which also gives the Marlins all stadium related revenue.  The stadium is expected to cost the city 2.4 billion dollars. When Deadspin posted team financial statements last year, the financial statement of the Marlins showed that the Marlins made tens of million of dollars. Now the SEC has stepped in to investigate. As Passan writes:

While the subpoenas issued by the SEC do not explicitly detail the purpose of the investigation, the feds’ motives are evident: They want to understand how, exactly, a group of county commissioners agreed to fund 80 percent of the Marlins new stadium, which cost more than $600 million, without ever seeing the team’s financial records – and whether bribes had anything to do with it.

It remains to be seen what the SEC investigation will conclude.  This situation has the potential to be very ugly for the Marlins, the city, and Major League Baseball.

MLB Changes and Houston Astros Sale

Last week, MLB approved the sale of the Houston Astros as well as some other policy changes. According to an article by the Associated Press, the Astros were sold for 750 million dollars. MLB executives, however, wanted the Astros to move from the NL Central to the AL West. By moving the Astros into the AL, both the NL and AL will have an equal number of teams (15). With 15 teams in each league, that means that interleague play will take place throughout the entire season and not during specific times in the season. Also, MLB is also expanding the playoffs by two additional teams (1 in each league).

What makes the Astros sale interesting is that MLB would not approve the sale unless the new owner agreed to move the team to the AL West Division. As a result, the new owner negotiated a 70 million dollar discount on the franchise sale price according to reports. Half of the 70 million dollars is being paid by MLB and the other half by the old team owner.

What makes a change to the AL worth 70 million dollars to the owner? Certainly, there may be some additional traveling involved as Houston will have to travel to Seattle. It is approximately 1900 miles to Seattle by air compared to 1150 to Pittsburgh, the furthest team from Houston in the NL Central.  Houston will also have to travel to Oakland and Anaheim compared to Chicago, Milwaukee, Cincinnati, and St. Louis. By moving to the AL West, Houston will play the Texas Rangers, their geographic rival and new division rival, more times than just one series per year under interleague play.  Playing the Rangers should provide the Astros with increase revenue for these games to help offset some travel cost.  The question remains as to why changing leagues “costs” 70 million dollars.

The Dodgers are up for sale!

The McCourt family who pretty much have run the Dodgers into the ground with their financial and organizational mismanagement of the Dodgers have finally decided to sell the team.  Really, Frank McCourt, the owner, had no other choice with the number of looming payments he needs to make as part of a divorce settlement with his ex-wife (rumored to be upward of $150 million).  In the time that the McCourt’s were running the Dodgers, they had the team in such financial danger that talks of bankruptcy came up last summer, right before Bud Selig was forced to step in and have MLB take over the franchise.  Dodger fans were so thrilled with the McCourt’s time as owners, that a group of 50 fans showed up with signs and held a rally celebrating the McCourt’s deciding to sell the team.

So the question then arises as to who may be the new owner.  Dallas Mavericks’ (NBA defending champions) owner Mark Cuban came forward and said that he was interested and even offered to buy the Dodgers during their times of financial trouble.  While he is still interested in the Dodgers, the current $1 billion price tag seems to be a bit too high for Cuban.  Cuban says he is interested in the Dodgers, as long as the price is right.  The question is, what is the right price?

Another interested party is former general manager and vice-president of the team, Frank Claire.  Mr. Claire has started a group which is looking for a major financial backer, but also includes others with management expertise, including Andy Dolich who has been an executive for a number of professional sport franchises in California.

Former owner Peter O’Malley is also said to be interested in purchasing the team.

A final group is that made up of former Dodger greats including Steve Garvey and Orel Hershiser.  This last group has said to be in the works for over two years, and seems to be quite serious about the bidding process.

Major League Baseball (MLB) needs to pre-approve all the groups that are going to bid on the team.  They are currently in the process of rushing through this step so that they can get move to the auction stage and actually get the team sold to a new owner.  It’ll be curious to see who is approved (Mark Cuban might not be popular with the MLB owners), and to see who actually wins, and how much they end up paying (though we might not find out the actual number).

A few betting stories

As much as it hurts me to talk about the Cardinals improbable (not impossible) trip and winning of the MLB World Series (Yes, I am a Cubs fan), there have been a few interesting stories that have come up in regards to betting.  At one point during the season, the Cardinals were so far out of the playoff race they had 500/1 odds of winning the NL Championship, and 999/1 odds of winning the World Series.  These bets were made on September 12th, and as you can see from the image on the right, the $250 bet made on each one had a big payoff.  When the Cardinals won the NL Championship,l the man received a $125,000 payout for his big win, and stood to win $250,000 more if the Cardinals won the World Series.  The man (who is still unidentified) actually hedged his bet by betting $100,000 on the Rangers (from his $125,000 winnings) to win the World Series, meaning that while he wasn’t going to maximize his profits, he was going to come out of the World Series a good deal richer than before.  In the end, the Cardinals won, the man walked away with a $275,000 profit from an initial $500 bet.

It seems there have been some other bettors out there who have been a bit more irrational, including the group of Cardinals fans who went to a casino with a load of cash and bet it all on red in the roulette wheel (the Cards wear Red, are also known as the Redbirds).  They spun and lost, and still ended up forking a ton of cash over for tickets in addition to the loses.

Our final story of the day comes from Bloomberg, who noted earlier last month that the Detroit Lions had beat the spread 13 of the last 14 times, with the other time being a push.  Bloomberg did the math and found that a $100 bet at the beginning of this streak being placed and ridden for the whole 14 game period could end with a reward of $450,000.  Of course no one actually made such a bet, yet it shows that there are often improbable moments in sport.  Of course, as we discussed in a class this morning, betting is often done irrationally by fans.  Many people who bet on the spread actually thing they are picking winners and losers, not the difference in the score.  Because of this imperfect knowledge by fans and bettors, the books can make quite a fortune.  The stories above show a few cases where individuals could have made a great deal of money by a small bet, however, they don’t talk about the large group of people who probably lost even more money betting on the opposite side of things.

 

Comparing Win Efficiency in North American Professional Sports

NBC Sports’ ProBasketballTalk (PBT) must be quite bored, as they only have news about the lockout and the National Basketball Association (NBA) season potentially being cancelled to really talk about.  That said, they did post an interesting article today about the concept of win efficiency in professional sports.  The question they were asking, was whether NBA franchises had the best win efficiency, as determined by the number of wins generated by a teams payroll.  The calculation which they pull from a Bloomberg Business Week article is calculated by:

After calculating that “cost per win” number for each team across all four major sports over the last five years, Boudway found the standard deviation for each team within their respective sports. Using that standard deviation — dubbed “Efficiency Index” for the purposes of that particular post — Boudway was able to compare across leagues, and determine the spenders who are getting the greatest payoff per dollar spent relative to their competition.

You can click on this link to see the numbers.  One thing I had a question about was the differences in the number of games played.  Win efficiency is an interesting thing, as I have noted in previous posts about the Tampa Bay Rays, Oakland A’s, and the book Moneyball, there are some teams which are able to win games with lower payrolls.  I decided to play around with the Bloomberg numbers, and normalize them for the differing number of games played by each team.  This produced quite different values than the Bloomberg report.  In fact, it went from having a mix of teams from different leagues at the top, to having mainly NFL teams.  In this, when I corrected for the differences in number of games played, it displays that the NFL is clearer the most efficient at the top.  The problem is of course one of sample size.  The NFL has such a small number of games in a season compared to the other leagues, that it is hard to be able to truly compare a single season of NFL teams (who play 16 games) against MLB teams (who play 162).  Additionally, we have to take into account that the leagues have different structures in regards to salary cap rules (MLB has no salary cap, the rest do).  This thus creates the case where some teams are probably forced to be efficient because they don’t spend much, and because of low number of games for NFL teams, means they are able to seem to be very efficient.  I’m not going to say that the teams at the top of this list are better at money management, or have much more effective management, because those kinds of generalizations are hard to make when we are talking about leagues with different structures.

My numbers (sorry for the length).  First column is their rank, second is their rank in the Bloomberg rankings.

1. 4    New England Patriots    -0.3375
2. 7    Indianapolis Colts    -0.3
3. 12    San Diego Chargers    -0.27
4. 20    Baltimore Ravens    -0.215
5. 27    Pittsburgh Steelers    -0.1925
6. 28    Green Bay Packers    -0.19
7. 30    Atlanta Falcons    -0.185
8. 1    Nashville Predators    -0.184420649
9. 33    Philadelphia Eagles    -0.175
10. 37    New York Giants    -0.1575
11. 41    Chicago Bears    -0.1425
12. 42    Tennessee Titans    -0.1425
13. 5    San Antonio Spurs    -0.136935092
14. 6    San Jose Sharks    -0.135830777
15. 44    New Orleans Saints    -0.135
16. 10    New York Islanders    -0.126996255
17. 2    Florida Marlins     -0.126493546
18. 11    Atlanta Thrashers    -0.120370363
19. 3    Tampa Bay Rays    -0.115494108
20. 13    Phoenix Coyotes    -0.111535841
21. 14    Utah Jazz    -0.110431526
22. 15    Los Angeles Lakers    -0.108222896
23. 16    Pittsburgh Penguins    -0.10711858
24. 49    Tampa Bay Buccaneers    -0.105
25. 17    Orlando Magic    -0.100492689
26. 19    St. Louis Blues    -0.099388373
27. 21    Denver Nuggets    -0.093866797
28. 8    Pittsburgh Pirates     -0.09349523
29. 9    San Diego Padres     -0.092709556
30. 52    Dallas Cowboys    -0.0925
31. 53    New York Jets    -0.0925
32. 22    Chicago Bulls    -0.091658167
33. 23    New Orleans Hornets    -0.091658167
34. 54    Jacksonville Jaguars    -0.0875
35. 24    Detroit Red Wings    -0.08613659
36. 26    Boston Celtics    -0.085032275
37. 32    Phoenix Suns    -0.080615014
38. 18    Arizona Diamondbacks    -0.071496352
39. 35    Dallas Mavericks    -0.070676177
40. 36    Portland Trail Blazers    -0.070676177
41. 38    Carolina Hurricanes    -0.069571861
42. 39    Atlanta Hawks    -0.069571861
43. 43    Houston Rockets    -0.061841655
44. 25    Oakland Athletics     -0.061282588
45. 29    Washington Nationals     -0.058925565
46. 31    Texas Rangers    -0.057354217
47. 46    Anaheim Ducks    -0.053007133
48. 34    Cleveland Indians    -0.051854497
49. 47    Buffalo Sabres    -0.050798502
50. 63    Denver Broncos     -0.0475
51. 40    Kansas City Royals     -0.046354778
52. 45    Colorado Rockies    -0.040855058
53. 55    Minnesota Wild    -0.036442404
54. 48    Cincinnati Reds    -0.035355339
55. 50    Milwaukee Brewers    -0.032998316
56. 51    Toronto Blue Jays     -0.032212642
57. 68    Minnesota Vikings    -0.03
58. 57    Dallas Stars    -0.028712197
59. 58    Washington Capitals    -0.027607882
60. 59    New Jersey Devils    -0.027607882
61. 60    Vancouver Canucks    -0.02319062
62. 61    Cleveland Cavaliers    -0.022086305
63. 56    Minnesota Twins    -0.021998878
64. 62    Detroit Pistons    -0.02098199
65. 64    Oklahoma City Thunder    -0.017669044
66. 65    Chicago Blackhawks    -0.016564729
67. 66    Charlotte Bobcats    -0.015460414
68. 67    Miami Heat    -0.014356098
69. 69    Philadelphia 76ers    -0.011043153
70. 70    Florida Panthers     -0.011043153
71. 71    Arizona Cardinals    -0.01
72. 72    Carolina Panthers    -0.01
73. 73    Atlanta Braves    0
74. 74    St. Louis Cardinals    0.005499719
75. 79    San Francisco Giants    0.012570787
76. 77    Los Angeles Kings    0.014356098
77. 81    Baltimore Orioles     0.020427529
78. 75    Houston Texans     0.0275
79. 76    Kansas City Chiefs    0.0275
80. 86    Houston Astros     0.029069945
81. 91    Los Angeles Dodgers    0.036141013
82. 78    Seattle Seahawks    0.0375
83. 82    Boston Bruins    0.037546719
84. 83    Golden State Warriors    0.037546719
85. 84    Los Angeles Clippers     0.038651034
86. 85    Colorado Avalanche    0.040859665
87. 87    Indiana Pacers    0.043068295
88. 88    Toronto Raptors    0.043068295
89. 89    Montreal Canadiens    0.043068295
90. 95    Los Angeles Angels    0.043997755
91. 98    Philadelphia Phillies    0.0487118
92. 80    Cincinnati Bengals    0.0525
93. 93    Columbus Blue Jackets    0.053007133
94. 94    Tampa Bay Lightning    0.058528709
95. 99    Detroit Tigers    0.061282588
96. 96    Milwaukee Bucks    0.06294597
97. 100    Seattle Mariners     0.06363961
98. 101    Chicago White Sox    0.064425285
99. 102    Washington Wizards    0.091658167
100. 103    Memphis Grizzlies    0.097179743
101. 109    Chicago Cubs    0.097423601
102. 104    Sacramento Kings     0.103805635
103. 111    Boston Red Sox    0.104494669
104. 90    San Francisco 49ers     0.11
105. 105    Ottawa Senators    0.110431526
106. 92    Buffalo Bills     0.115
107. 113    New York Mets     0.120993827
108. 108    New Jersey Nets    0.129204886
109. 110    Calgary Flames    0.143560984
110. 97    Miami Dolphins    0.1475
111. 112    Toronto Maple Leafs    0.152395506
112. 114    New York Rangers    0.200985377
113. 116    Philadelphia Flyers    0.228593259
114. 121    New York Yankees    0.228631193
115. 117    Edmonton Oilers     0.234114835
116. 106    Cleveland Browns     0.255
117. 107    Washington Redskins    0.2675
118. 119    Minnesota Timberwolves     0.312521219
119. 120    New York Knicks    0.314729849
120. 115    Oakland Raiders     0.4825
121. 118    St. Louis Rams     0.585
122. 122    Detroit Lions    0.805

You will notice that in both rankings the Detroit Lions are dead last.  When you lose most of your games, you just can’t be considered to be very efficient unless you are paying your players close to nothing.  While adjusting for the number of games changes things a bit, there is still a 0.95 correlation between Bloomberg’s rankings and my adjusted ones.