The Business of Sports

The purpose of a book review is to let other people know either

a. hey, this is a great book and you should go buy and read it, or

b. hey, I hated this book and you should never even think about buying or reading it.

To send each message, you should first read the book.  Although I have seen book reviews where the reviewer skipped that first step, all of the reviews posted in this forum began with the book being read.

For the book – or actually books — I am reviewing in this post, though, I cannot say I have read every word. Nevertheless, I am recommending that everyone go out and read these books.

How can I make such a bold recommendation without finishing step one? The key is prior knowledge of the authors.  The book in question is called The Business of Sports.  This is actually a three volume collection of articles written by some of the top academics in the field of sports economics and sport management. 

The editors of this collection – Brad Humphreys (Chair in the Economics of Gaming at the University of Alberta) and Dennis Howard (Dean of the Charles H. Lundquist College of Business at the University of Oregon) – are two of the top names in sports economics and sport management respectively.  Humphreys is currently the President-elect of the North American Association of Sports Economists.  He is also editor of the International Journal of Sport Finance (and author of a host of academic articles).  Howard is the founding editor of the International Journal of Sport Finance (and also author of a host of academic articles).

Humphreys and Howard manage to get a host of people to contribute pieces on virtually every aspect of sports business.  Not only does this book draw upon some of the top academic talent in the fields, it’s also quite current.  In sum, these three books are a wonderful introduction to where the study of sports business stands today.

A few issues to note before I get to my review.

1. These books are primarily written for academic collections (like libraries). So they are a bit pricey.  You can order at Praeger (the publisher) and at Amazon (where you can also see some sellers offer it at a discount).

QUICK UPDATE: I noticed a comment on-line complaining about the price and even suggesting that the price of academic books is a method professors use to “line their pockets.”  It should be understood that the authors of the articles in this collection receive nothing more than a free copy of the collection.  Contributors to academic collections (and I have contributed to a few of these so I have some experience in the matter) do not get paid for their efforts.  The same story can be told about journal articles.

2. The first chapter of Volume Three Bridging Research and Practice is titled “A Simple Model of Worker Productivity in the National Basketball Association.”  Readers of The Wages of Wins (and this forum) might know that I am the author of this paper.  This paper does offer more details on Win Score and Wins Produced.  So for the few people (I imagine the population is less than five) who want more details (beyond what are provided in The Wages of Wins, at wagesofwins.com, and in this forum), you might find that chapter interesting.

3. I not only contributed to this collection, I know Humphreys and Howard, and also many of the authors.  This makes me a bit biased in my assessment of this work (but only a bit).

4. One last note… I am not actually going to write a review.  No, I am simply going to re-print the titles of each chapter as well as the description of the chapter reported in preface of each volume.  And that is going to make this a lengthy post.  Hopefully, though, this will give everyone a good introduction to what I think is an excellent academic collection.

Okay, enough from me. Below you will find the title – as well as a brief description – of each article in this collection. Again, I did not write these.  These were written by Brad Humphreys and Dennis Howard.

Overview of The Business of Sports

From one perspective, the sports industry is just another industry in a modern economy. The sports industry, like the beverage industry, is a collection of firms producing an array of products and services that meet the demands of modern consumers. Bottled water and diet soda are commodities, as are tennis rackets and tickets to baseball games. The process of obtaining the financing needed to build a new bottling plant has many similarities to the process of obtaining the financing needed to build a new hockey arena. Zoning laws apply equally to package stores and health clubs. But from another perspective, the sports industry differs in profound ways from other industries. What other industry has an entire section devoted to it in most local newspapers across the country? Or a separate segment on local news broadcasts? Has anyone ever asked to have her ashes spread on the local used car lot after passing on to life’s ultimate destination?

The sports industry contains some interesting features. Sport has the ability to elicit powerful emotions and inspire transcendent performances; yet every sporting contest by definition produces clear winners and losers, and the larger the stakes involved, the greater the potential gains and losses, the higher the highs and the lower the lows. The presence of a sports team is frequently linked to the status and prestige of cities, and the performance of national sports teams is closely tied to national pride and identity; but most sports are produced by profit-oriented, bottom-line-focused businesses.

The Business of Sports is a comprehensive examination of the sports industry.  From its inception, our goal was to bring together a group of international scholars and industry practitioners who were passionately involved in the sports business from a variety of perspectives and turn them loose on the biggest issues facing the sports industry in the twenty-first century. Because sport is a universal phenomenon, we solicited contributions from authors all over the globe. From the outset, it was clear that the modern sports industry was too complex and diverse to be contained in a single volume.

Volume 1: Perspectives on the Sports Industry

Volume 1 of The Business of Sports explores the dimensions of the sports industry. The chapters in this volume explore the big issues in the sports industry, tackle the biggest problems, and highlight the global nature of the industry.

Chapter 1:   The Scope of the Sports Industry in the United States

by Brad R. Humphreys and Jane E. Ruseski

One of the biggest unexamined questions about the sports industry is a clear definition of its size and scope. While a few newspapers have hazarded guesses about the size of the sports industry, there have been very few attempts to quantify the economic scale of sports in any economy. Brad Humphreys and Jane Ruseski assess the economic size of the sports industry in the first chapter of this volume.

Chapter 2:   The Profitability of Sports Teams: International Perspectives

by Babatunde Buraimo and Rob Simmons

Are professional sports teams profitable businesses? The answer to this question has important implications in many areas in the twenty-first century economy.  Sports team owners frequently claim that their businesses regularly lose money, but the fantastic prices paid for sports franchises suggest that these businesses may be very profitable. Professional soccer teams in Europe operate in a very different environment than their counterparts in North America-promotion and relegation leagues-and frequently encounter financial problems. Robert Simmons and Babatunde Buraimo address this interesting and important issue and compare the profitability of teams in European and North American sports leagues.

Chapter 3:   Perspectives on the Sports Industry in China    

by Adam Antoniewicz

For Western readers, China represents both a great unknown and a tremendous opportunity in many commercial endeavors, and sport would rank near the top of any list of Chinese industries about which we know little. Adam Antoniewicz is a sports executive living and working in China. He has considerable experience working in the sports industry in China, and his chapter provides an interesting first-hand account of the development of the sport industry in China and contains deep insights into the nature of this largely unexamined industry with immense potential.

Chapter 4:   Mega-Events: The Effect of the World’s Biggest Sporting Events on Local, Regional, and National Economies

by Victor A. Matheson

Mega-sporting events are the world’s highest-profile contests. Cities, regions, and countries compete intensely for the rights to host these events, and the popular press contains many accounts of large economic benefits that these events generate. As part of the competition to host these events, governments spend large sums of money to upgrade their sports venues, tourist amenities, and infrastructure. Victor Matheson takes a critical look at the claims made by the proponents of sports mega-events and assesses the conclusions of academic evidence about the economic impact of these events.

Chapter 5:   The Financing and Economic Impact of the Olympic Games

by Brad R. Humphreys and Andrew Zimbalist

The Olympic Games are, arguably, the highest-profile sports events on the planet. From the high-stakes bidding process that pits world-class city against world-class city, to the notorious excesses lavished on the committee that decides where the next games will be played, to the massive broadcast rights fees paid to beam the Games to the world, the Olympic Games are the world’s most outsized athletic competition. Brad Humphreys and Andrew Zimbalist take an in-depth look at the financing and economic impact of the Olympic Games.

Chapter 6:   New Revenue Streams in Professional Sports

by Daniel S. Mason and Dennis R. Howard

Radical changes have taken place in North American professional sports leagues over the past fifty years. In years past, professional athletes held second jobs in the off season to make ends meet, people who owned sports teams also ran run-of-the-mill businesses like car dealerships, and broadcast media paid little attention to sports. Today, athletes are multimillionaires, team owners are billionaires, and dozens of television channels show nothing but sports 24/7. The single factor that has brought about these changes in professional sports is the huge increases in revenues earned by sports teams. In addition, since 1990, almost $30 billion has been spent on the construction of new ‘‘fully loaded” sports venues in the United States and Canada. Currently, three stadiums under construction in the United States will cost more than $1 billion a piece, each the equivalent of the total spent on new sport facility construction for the entire decade of the 1980s.  How is this unprecedented capital spending being sustained? Daniel Mason and Dennis Howard dissect the revenues earned by modern professional sports teams, document the ways in which the revenue streams of professional sports teams have changed in the twenty-first century, and speculate on the ways that revenue streams will continue to evolve in the future. Mason and Howard provide an in-depth examination of the latest revenue acquisition methods employed by professional sports organizations. While their analysis focuses on North American sports leagues, many of the innovative operational and capital financing techniques they discuss have relevance for teams and leagues around the globe.

Chapter 7:   The European Perspective on Team Ownership, Competitive Balance, and Event Impacts

by Arne Feddersen and Wolfgang Maennig

The sports industry in Europe is as large and significant as the sports industry in the North America.  The sports industry in Europe shares many common features with its North American counterpart: it consumes European sports fans just like in North America; the top players in European sports leagues are huge stars; the media exposure of sports in Europe is as large, if not larger than in North America. But the sports industry in Europe also has profound differences from the North American sports industry, in terms of league structure, player compensation, facility financing, and other important dimensions. Wolfgang Maennig and Arne Feddersen provide a thorough and engaging description of the sports industry in Europe, and highlight the similarities and differences.

Chapter 8: U.S. Sports Leagues through the Economic Crystal Ball

by Rodney Fort

The sports industry has undergone rapid and extreme changes in the past few decades. Despite these changes, sports fans are extremely resistant to change, and only grudgingly accept alterations to the beloved institutions they hold dear. If past performance is any indication of the future of the sports industry, sports fans are in for a wild ride in coming years. Rodney Fort, the dean of North American sports economists, polishes off his crystal ball and speculates on the future of professional and college sports in North America.

Chapter 9:   The Big Business of College Sports in America

by Daniel F. Mahony and Timothy D. DeSchriver

In many ways, college sports are the most interesting element of the sports industry. Unlike other sectors of the sports industry, college sports are produced by nonprofit educational institutions, and long after the Olympics abandoned the pretense of amateurism, college sports still clings to the amateur ideal. Yet college sports ranks among the biggest sports businesses and a large segment of sports fans in the United States fixate exclusively on college sports. Daniel Mahony and Timothy DeSchriver take a careful look at the state of college sports in the United States.

Chapter 10:            Sport in the Digital Domain

by Paul Swangard

Sporting events first appeared on television in the 1930s. By the 1980s revenues from television and radio broadcasts revolutionized the business of professional sport, turning players into millionaires and team owners into multimillionaires. Like television generations ago, digital media are revolutionizing the sports business; unlike the television era, it clearly will not take forty years for new digital media to have a significant effect. Paul Swangard surveys the digital frontier in sport. This up-to-the-second chapter contains a comprehensive view of the many recent developments in this rapidly changing area of the sports business.

Volume 2: Economic Perspectives on Sport

Volume 2 of The Business of Sports examines sport through the lens of economics. Economics is the study of how society deals with scarcity. Any society faces the problem of allocating scarce resources among competing activities. The sport industry faces the same problems. Teams and leagues face a limited amount of high-caliber talent and must decide how to allocate this talent. Any country has a limited number of markets that can support top-level sports teams and leagues must determine where to best place their franchises. Teams have limited resources to devote to paying players and must determine how to compensate their employees. Economics can bring powerful new insights into these issues, and many more important issues faced by the sports business.

Chapter 1:   The Allocation of Rewards in Athletic Contests

by Bernd Frick and Rob Simmons

One of the most important issues facing any professional sports organization is how to structure the competition in a way that produces the most exciting outcome on the field or court. Several years ago, economists noticed an interesting similarity in the way corporations structure their promotion and compensation schemes and the way the sports event organizers structure their competitions. Both face similar problems in terms of their ability to monitor effort and their desire to induce maximum effort on the part of all participants/employees. Economic models of this setting have come to be called ‘‘tournament theory.” Since this observation, economists have frequently used sports outcomes to test the predictions of tournament theory; the lessons from this research have broad applicability on the ballfield and in the boardroom. Bernd Frick and Robert Simmons survey the tournament theory literature, explore the link between corporate personnel management practice and sports events, and explain the interesting conclusions that emerge from this literature and what they mean for organizers of sporting events.

Chapter 2:   Single-Entity Ownership in Sports Leagues and Antitrust Law

by Bradley I. Ruskin and Jon H. Oram

In addition to the question of how to structure the competition, sports leagues also face the issue of how the ownership of teams should be structured. This issue is more complex in sports leagues than in other business settings because of the jointly produced nature of the product produced by sports leagues. Nike does not need Adidas to produce and sell running shoes. In fact, Nike would prefer to take as much of Adidas’ market share as possible, and if Adidas ceased to exist Nike would make more profits. But the same thing cannot be said of the New York Yankees and the Boston Red Sox. Although the Yankees would like to beat the Red Sox as often as possible on the field, they could not produce and sell a valuable product without the Red Sox. If the Red Sox ceased to exist, the Yankees would by far less profitable. This is the paradox of competition in sports leagues. A number of interesting business models have been developed to address the unique incentives present in sports leagues. One emerging approach is the ‘‘singleentity ownership” model that is used by Major League Soccer in North America. In a single-entity ownership league al teams are owned by one corporate entity. Although single-entity leagues are well equipped to address some of the incentive problems inherent in sports leagues, the legal status of single-entity sports leagues has often run afoul of antitrust laws in the United States, because these laws were not intended to apply to industries where the individual firms jointly produce output. Bradley Ruskin and Jon Oram discuss single entity sports leagues and recount the evolution of antitrust law as applied to these leagues.

Chapter 3:   Competitive Balance and Attendance in the Sports Industry

by Brian P. Soebbing

One of the most important allocation problems facing sports leagues is how to distribute the limited number of wins that are available in any season. The allocation of wins, commonly called ‘‘competitive balance” by sports fans, is fundamentally an economic problem. If leagues do not allocate wins in an appropriate way, fans will lose interest in the league’s product and the league will cease to be a viable business venture. Economists have paid a great deal of attention to this allocation problem over the past twenty years and Brian Soebbing summarizes what economists have to say about competitive balance.

Chapter 4:   Franchise Relocations, Expansions, and Mergers in Professional Sports Leagues

by Daniel A. Rascher

Although sports leagues grow in size over time through expansion, every sports league is a monopoly, and economics teaches us that monopolies make profits by restricting the amount of output produced. In practical terms, this means that there will be fewer teams in any sports league than society would like to have at any given time. There will always be more viable markets for sports teams than there are teams. Franchise moves are a fact of life in North American professional sports leagues. Daniel Rascher applies the economist’s toolbox of analytical techniques to the topic of franchise moves in professional sports leagues. Rascher assesses the past history of franchise moves in the United States and Canada, and provides interesting insights into why your favorite local team may be playing in another city half way across the continent in a few years.

Chapter 5:   The Financial Valuation of Sports Franchises

by Mitchell Ziets and David Haber

Because they are businesses, the competition among professional sports teams extends beyond the ballfield and into the boardroom. The sports pages, and business pages, are filled with stories about how much various sports teams are worth, in dollar terms. And because sports teams are valuable assets, they are frequently bought and sold in the open market just like any other commodity. Mitchell Ziets and David Haber address the interesting question of how much professional sports teams are worth. Unlike many other corporations that have shares traded on stock exchanges, professional sports teams in North America are privately held businesses with no publicly traded shares. This leads to some difficulties when determining the financial value of sports teams, the focus of the chapter by Ziets and Haber.

Chapter 6:   Professional Sports Facilities, Teams, Government Subsidies, and Economic Impact

by Xia Feng

Sports teams and leagues are not the only organizations that face the fundamental economic problem of the allocation of scarce resources to infinite wants and needs. Federal, state, and local governments face the same problem: government has a limited ability to raise tax revenues and an unlimited set of taxpayer demands to satisfy. Interestingly, professional sports teams and leagues are recipients of government handouts. Much of the money spent on new and renovated professional sports facilities over the past few decades in the United States and Canada has come from state and local government subsidies. It is not uncommon for a new professional sports facility in the United States to be built entirely with government funds. Because our government does not have access to unlimited funds, subsidies for professional sports facility construction demands careful attention. Xia Feng provides a thorough and critical analysis of the economic justification for government subsidization of sports facility construction. Feng points out that the most common justification for these subsidies, the economic impact of sports on urban economies, has surprisingly little support in terms of credible empirical evidence.

Chapter 7:   Pay and Performance of Players in Sports Leagues: International Comparisons

by Bernd Frick and Rob Simmons

Professional athletes earn salaries far greater than the average worker. While some observers decry these salaries as examples of where modern societies have gone wrong, a number of the chapters in these volumes point out that the modern professional sports franchise is an extremely profitable commercial enterprise. Economists have been studying the issue of pay and performance in the workplace for decades. Bernd Frick and Robert Simmons summarize the economics of pay and performance in professional sports. This lively and insightful discussion of how salaries are determined provides an interesting perspective on the huge salaries earned by twenty-first-century athletes.

Chapter 8: Salary Caps and Luxury Taxes in Professional Sports Leagues

by Michael Leeds

The rising salaries of professional athletes have not escaped the attention of the owners of sports teams and the officials in sports leagues. Surely no reader will be surprised by this observation. But readers unfamiliar with the economic history of professional sports leagues in North America may be surprised to learn that ‘‘out of control” salaries were a major concern of the owners of professional baseball teams almost from the moment that the National League was formed almost one hundred and thirty years ago. From the perspective of professional sports team owners, athletes have always been overpaid. Michael Leeds examines the ways in which professional sports leagues have tried to rein in the growth of athletes’ salaries, the reasons why salary caps never seem to be effective, and the consequences of these events.

Chapter 9:   The Valuation of Nonmarket Benefits in Sport

by Bruce K. Johnson

The sports business has a number of interesting features that distinguish it from other industries. One of these features is the important nonmarket benefits generated by sports businesses. When a Wall Street brokerage house pulls off a successful IPO, or a merger and acquisitions lawyer seals a multibillion-dollar merger deal, the average Jane in the street has little reason to celebrate, despite the large economic impact of these events. But when the local professional sports team wins a key playoff game, the entire city, even casual fans who did not attend the game or watch it on TV, celebrates and experiences an enhanced sense of civic pride. From an economic perspective, the intangible benefits generated by sport are called nontraded goods, because you can’t buy a dozen World Series championships at the corner store. Even though these benefits are intangible, they are still important. Moreover, these intangible benefits may explain why local governments continue to subsidize professional sports facility construction despite the lack of economic impact from these facilities. Can intangible benefits from sport justify the large public subsidies for new stadium and arena construction? How valuable are these intangible benefits, in terms of dollars and cents? In the past few years, economists have begun to address these questions. Bruce Johnson surveys the emerging economic research on valuing the intangible benefits generated by sports and explains why this research is vitally important in the public debate over stadium subsidies.

Chapter 10: Facility Finance: Measurement, Trends, and Analysis

by Andrew Zimbalist and Judith Grant Long

Speaking of the public debate on subsidies for the construction of sports facilities, just how much of taxpayers’ dollars actually go to the construction of palatial new stadiums and arenas? A careful examination of newspaper and broadcast media coverage often reveals a number of different, conflicting reports of the total cost to the taxpayer of that shiny new arena downtown. Andrew Zimbalist and Judith Grant Long recently took a very close look at the nitty-gritty details of new stadium and arena construction deals and assessed just how much these projects actually cost taxpayers. Their provocative conclusion: a lot more than sports team owners would have you think.

Chapter 11:             Salary Arbitration in Major League Baseball

by John Fizel

In the final chapter of volume 2, John Fizel describes the interesting economics of salary arbitration in Major League Baseball. MLB team owners implemented salary arbitration as a cost containment mechanism, to rein in those spiraling salaries paid to athletes. But a funny thing happened on the way to cost containment: even though salary arbitration was designed to hold down salaries, and even though owners win the majority of arbitration hearings, salary arbitration in baseball has been very beneficial for baseball players. Fizel’s chapter explains why this interesting and surprising outcome occurred.

Volume 3: Bridging Research and Practice

Interaction between researchers and practitioners frequently leads to significant improvements in both research and practice, although it may take some time for the process to bear fruit. While such interaction is relatively common in disciplines like engineering and computer science, it is not as common in sports, and even less common in the sports business. However, consider the effects of the path-breaking statistical research on the performance of baseball players by Bill James. Although his work was initially disregarded by industry professionals, James’s research is now widely used by Major League Baseball teams and he consults for the Boston Red Sox. Based on anecdotes in Michael Lewis’s Moneyball, Bill James’s research has had a significant impact on Major League Baseball.

Movement scientists have also been influential in changing athletic performance in a number of individual sports. By studying the mechanics of athletes in sports like athletics, gymnastics, and swimming, researchers in kinesiology and movement science have improved the performance of athletes.

In volume 3 of The Business of Sports, we attempt to bridge the gap between business-related research on sports and the sports industry. The goal is to promote two-way interaction between researchers and sports industry practitioners. Scholarly research on the sports business has much to offer the sports industry, and careful attention to the important insights and experience of practitioners can lead research in new and exciting directions. Volume 3 contains chapters on topics that we feel holds great promise for productive future interaction between sport researchers and sport practitioners.

Perhaps the most exciting area for interaction between researchers and practitioners is the evaluation of player performance. For decades, player evaluation and scouting was exclusively the domain of ‘‘bird dog” scouts employed by professional sports teams. These scouts were primarily former players, and their evaluations of player performance were primarily qualitative and subjective. However, the past decade has seen a quantitative revolution in the evaluation of player performance. Teams in every major sport in the world-from soccer to ice hockey-have begun to explore the quantification of player evaluation. The first two chapters in volume 3 examine the frontiers of quantitative analysis of athletic performance.

Chapter 1:   A Simple Model of Worker Productivity in the National Basketball Association

by David J. Berri

In the first chapter of volume 3, economist David Berri describes a method of statistically analyzing the performance of professional basketball players. Berri believes that, much like the baseball players’ market before Billy Beane’s success as the general manager of the Oakland Athletics, the market for NBA players contains significant inefficiencies. Berri posits that NBA executives make persistent, systematic mistakes when evaluating players and has developed a method based on currently available statistics that can be used to exploit these inefficiencies.

Chapter 2:   Statistical Performance Analysis in Sport

by John Charles Bradbury

John Charles Bradbury has spent considerable time analyzing the on-field performance of Major League Baseball players. Bradbury’s chapter is an overview of quantitative of the techniques used to evaluate the performance of professional athletes. Bradbury shows how these tools can provide powerful new insights into player behavior. Anyone who wanted more details on how the A’s evaluate talent after reading Moneyball will find this chapter informative.

Chapter 3:   Sports Facilities and Urban Redevelopment: Private and Public Benefits and a Prescription for a Healthier Future

by Mark S. Rosentraub

Many large cities in the United States have struggled to revitalize their urban cores over the past few decades. Invariably, these attempts involve the renovation of existing sports venues or the construction of new ones. Can professional sports play a role in revitalizing American cities? Mark Rosentraub has a foot in both academia and practice. Rosentraub is an academic who has consulted on a number of high-profile urban redevelopment projects that had professional sports venues as their centerpiece. In his chapter, Rosentraub discusses some of the successes and failures of sports facilities as engines of urban redevelopment.

Chapter 4:   Revenue-Sharing and Agency Problems in Professional Sports Leagues

by Daniel S. Mason

Professional sports teams face a number of difficult problems. Some have been discussed in detail in previous chapters. Dan Mason addresses revenue sharing in professional sports leagues, an especially thorny issue. Every major sports league in North America engages in some form of revenue-sharing. But, as Mason points out, revenue-sharing generates a number of important incentives in sports leagues, and not all of them lead to an enhanced experience for fans. At the core of the revenue-sharing problem is an interesting economic concept, the ‘‘principal-agent problem.” Since this problem can be found in many settings in sport, and in other industries, this chapter has important insights in a number of business settings.

Chapter 5:   New Developments in Stadium Financing

by Dennis Zimmerman

A large number of professional sports teams in North America now play in newly built facilities. Despite the large amount of construction that has recently taken place, the near future promises to hold even more sport facility construction projects. How should sports facility construction projects be financed? The U.S. Congress addressed this issue in the 1980s when they explicitly prohibited professional sports facilities from being financed with tax-exempt bonds. However, a number of recent new stadium construction projects have been financed in ways that challenge the ban on tax-exempt financing of sport-facility construction. These challenges raise important questions about the role of sports in the economy. Dennis Zimmerman, a long-time analyst for the Congressional Budget Office and the Congressional Research Service, reviews the controversy surrounding the use of tax exempt bonds to finance sports facility construction.

Chapter 6:   Economics of Incentives in Individual Sports

by Peter von Allmen

Sports fans enjoy watching athletes give maximum effort in pursuit of victory, and the organizers of sports events earn the largest profits when they induce athletes to put forth maximum effort. But maximum effort is difficult to sustain, and athletes seeking long and profitable careers have an incentive to put forth the minimum effort required to win a given contest. This can lead to interesting economic problems in sports, especially individual sports. Peter von Allmen examines this tension between the organizers of individual sporting events like foot races and golf tournaments and explains how tournament organizers have devised compensation schemes to overcome this problem. This chapter provides insight into the skewed compensation schemes used in marathon races and other individual sports.

Chapter 7:   The Measurement of Efficiency in Sports Organizations

by Carlos Pestana Barros and Mario Teixeira

The performance of athletes is easily observable. Even if it is difficult to quantify and analyze, every sports fan and Monday morning quarterback can observe and evaluate the performance of a player. But what about managers and coaches? Managers play an important role in the performance of sports teams. As fans, we can occasionally catch a glimpse of the powerful effect that managers have on athletic outcomes-go for one or two, punt or try to pick up a first down, pull the goalie-this is the tip of the proverbial iceberg as most of the decisions made by managers and coaches are either impossible to observe or take place out of sight. This does not mean that coaches and managers cannot be evaluated. Economists have devised several methods to evaluate outcomes when specific events or decisions cannot be easily observed. Carlos Barros and Mario Teixeira provide an introduction to the analysis of efficiency frontiers, a powerful tool for evaluating both the performance of sports coaches and managers and, as this chapter shows, the overall effectiveness of sports organizations.

Chapter 8: New Franchise Location in Major- and Minor-League Baseball

by Michael C. Davis

As we write this preface, the Seattle SuperSonics, an NBA team playing in the fourteenth-largest media market in the United States, may be moved to Oklahoma City, Oklahoma, currently the nation’s forty-sixth-largest media market. What makes a viable market for a major-league sports franchise? How many viable markets exist in North America? Since the western exodus of the Dodgers and Giants from New York City in the 1950s, franchise moves have been of intense interest to sports fans. This has continued for decades, as sports teams continue to move across North America. Michael Davis examines franchise moves and the determinants of a viable host market for a professional sports team. Davis sheds light on where teams may move and which teams may move, interesting topics for both sports fans and sports business executives.

Chapter 9:   The College Football Postseason Mess: Economic Perspectives

by Michael Mondello

Only one top tier sport in all of North America does not crown a postseason championship based on a knock-out elimination process: NCAA Football in the ‘‘Bowl Subdivision.” Sports fans and media commentators constantly bemoan the lack of a college football playoff. As a number of previous chapters in The Business of Sports have pointed out, the design of tournaments is fundamentally an economic decision made by the organizers of sports leagues. Michael Mondello traces the history of the college bowl system and examines this system through the lens of economics. The chapter identifies a number of institutional factors that keep the bowl system in place and explores the incentives created by this system. Mondello also offers an alternative to the existing system that avoids many of the existing flaws.

Chapter 10: Player Drafts in the Major North American Sports Leagues

by Kevin G. Quinn

Reverse-finish talent dispersal drafts have been a feature of professional sports leagues since the early part of the twentieth century. Drafts are so ingrained in the fabric of professional sports that many fans never stop to think about how drafts came to be a part of North American professional sports, what they are intended to accomplish, and how effective drafts are at accomplishing their stated goals. But drafts do not have to be an integral part of a professional sports league. The major professional football leagues in Europe do not have talent dispersal drafts. Kevin Quinn takes a careful look at these questions. This chapter contains two conclusions that will probably surprise even the most informed sports fan: despite the claims by sports leagues, drafts do little to promote competitive balance in sports leagues; and despite the seemingly large salaries paid to rookie professional athletes, drafts almost certainly reduce the earnings of athletes.

Chapter 11:             Globalisation and the Evolving Player-Agent Relationship in Professional Sport

by Daniel S. Mason and Gregory H. Duquette

Agents play an increasingly important role in professional sports. As recently as twenty years ago, it was not uncommon for players to negotiate their own contracts, eschewing advice from professional agents. However, the modern sports market contains significant opportunities for athletes to earn money from sources outside athletic performance, contracts have become more complex, and higher salaries provide players with incentives to engage in sophisticated financial management practices. The relationship between players and agents is not as straightforward as might appear at first glance. Daniel Mason and Greg Duquette discuss the interesting features of the relationship between professional athletes and their agents. Because the agent-athlete relationship has many factors in common with the extensively researched principal-agent contracting relationship an extensive body of scholarly research exists in which to understand how athletes and agents interact.

Chapter 12: A Review of the Post-World War II Baseball Card Industry

by Arthur Zillante

Many sports fans of a certain age have fond memories of collecting and trading sports cards. Taking a longer perspective, baseball cards, in one form or another, have been around since the late nineteenth century. Despite this long history, a number of interesting events have taken place in the baseball card industry over the past twenty years that fundamentally changes this industry. Arthur Zillante documents the interesting economic history of the baseball card industry-the story of the firms that produce baseball cards and their rocky relationship with athletes and teams. Zillante’s story contains interesting elements of intellectual property rights, antitrust law violations, product differentiation, and the surprising revelation of a long-lived industry in decline.

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