Could Your City Give a Sports Team a Good Home?

Posted on October 31, 2011 by Arturo

Arturo Galletti is the Co-editor and Director of Analytics for the Wages of Wins Network. He is an Electrical Engineer with General Electric in the lovely isle of Puerto Rico, where he keeps his production lines running by day and night (and weekends) and works on sport analysis with his free time.

“In the middle of difficulty lies opportunity.”

-Albert Einstein

Can your city Support a new Professional Sports Team?

Let’s start with the graphical answer.

What inspired this particular graph? A few posts back, fellow WOW writer Devin Dignam identified 6 cities that are very difficult markets for their NBA teams. I liked this post a great deal. So much so, that I decided to extend it and flip it around. Rather than ask who shouldn’t have a team, I decided to ask who should.

In my previous post on the state of the lockout, I pointed out that NBA bemoans its economic situation and shrinking profits but their approach at solving the problem is fairly narrow.

The profit equation for any business is simple : Profit = Revenue-Costs. The NBA is focusing largely on cost-cutting (and mostly on the player side) and are leaving a humongous opportunity on the table to increase revenues.

It all comes back to a simple question: Which cities can best support an NBA team? Or for that matter, any professional (MLB,NFL,NBA or MLS) sports team ?

If the NBA can properly answer this question, they can go from worrying about shrinking profits and contraction to talking about record revenues and expansion.

Let’s see if we can help them out (while answering the broader question).

Before we get to the good stuff, I need to get some explanations of terms and links out of the way:

The work done in this piece draws a lot from the fantastic work by The Business Journals site in their OnNumbers section. Particularly their pieces on Sports Capacity , Overextended Sports Markets, Viable NFL, MLB and NBA markets as well as the link to Metropolitan Areas Total Personal Income for 2010.
The data for this piece is a drawn from the US Department of Commerce (for US markets), OnNumbers estimates for Canadian Markets, and the Goverment of Puerto Rico.
“Pro teams”: the number of NFL, MLB, NBA, NHL, and MLS teams in a city. The cost of adequately supporting a franchise was estimated by OnNumbers to be:

$85.4 billion for MLB
$37.6 billion for the NHL
$36.7 billion for the NFL
$34.2 billion for the NBA
$15.4 billion for MLS.

“Total personal income(TPI)”: the sum of all money earned by all residents of an area in a given year. Using team revenue data and average ticket prices one can calculate amount of TPI needed to adequately support a team in each north american professional sports league.
“Available personal income(API)”: simply TPI less the cost it takes to support the city’s pro teams. If API is positive, it means that you are good to go for a franchise. If API is negative, then you really need to figure out where you are going to move your team. Only teams in the NFL, MLB, NHL, NBA and MLS are counted for this calculation.

All that nice data is here as a google doc .

Let’s start with the negatives first. Which markets cannot support the teams they have?

There are 19 cities that qualify as overextended. The table ranks each city in terms of the gap in income to support the franchise as a percent of the Total income for the metro Area. To me, this is an important distinction because it allows to identifies markets like Indianapolis, Charlotte, San Francisco, Detroit and Salt Lake (15 thru 19) that could very well be able to support the current franchise load if they achieve some measure of economic growth in the next few years.

Milwaukee comes out on top of my rankings because I am assigning them a 70% share in supporting the Green Bay Packers. The cities in the top three (Milwaukee, Cleveland and Denver) reveal an interesting problem: as it decreases in popularity, Major League Baseball is going to find it increasingly difficult to support the current franchise load. Eight of the ten teams in the top ten field MLB franchises and would clear their gap by losing those teams.

For the non MLB cities on the list:

Buffalo is already in an NFL timeshare with Toronto.
New Orleans had the NBA repossess their team.
Winnepeg gets the benefit of the doubt in hockey-mad Canada.
Nashville is a victim of NHL overexpansion and can be addresed by a quick relocation

The NBA has 11 teams on that list. They break out as follows:

Victims of a bad economy: Pacers, Bobcats,Warriors,Pistons, Jazz.
Cities with a johnny-come-lately MLB expansion problem: Denver, Phoenix.
Candidates for relocation: Bucks, Cavs, Hornets and Timberwolves.

The NBA needs to be thinking about finding markets for these four teams. Let’s identify the candidates.

There are 37 markets in the US and Canada that could support a new or an additional NBA Team. New York and LA lead the list but already carry two franchises each, so let’s leave them as backup options. Of all the candidates with an NBA team already, I am only going to consider Chicago. That gives us:

That’s 23 markets available for expansion (including Puerto Rico yay!) plus a second Chicago team as number 24. The most logical candidates to me would be: Chicago, Riverside-San Bernardino-Ontario (the Inland Empire), Bridgeport-Stamford-Norwalk or a general Connecticut team, Vegas, and Montreal as fallback option. So one option could be for the NBA could “encourage” their owners to say:

Move the Bucks to Chicago
Move the Cavs to Conneticut
Move the Hornets to Vegas
Move the T-Wolves to the Inland Empire

Every single one of those owners would see their franchise value significantly accrue from such a move. Each one would be a trade up in terms of market size and income available. An additional plus is that 3 of those markets would be NBA only and new markets for the league.

Plus I can see the jerseys now for the Empire team:

Those are not the balls you're looking for

Sometimes, these things just write themselves.

-Arturo

6 cities that could support NBA teams

Posted on October 30, 2011 by Devin Dignam

The other day I wrote a short post about six NBA cities that shouldn’t have NBA teams. Reader greyv knew exactly where I was headed with this, because now I’m going to look at six non-NBA cities that could support an NBA team.

A quick explanation of terms is at the bottom, because we know that everyone would rather get to the good stuff first!

6. Austin, Texas

Metro Population: 1 716 289
10 year Population change: +37.3%
Pro teams: 0
Total Personal Income: $66.9 Billion

Texas already has NBA teams in Dallas, Houston, and San Antonio. But Austin is growing very quickly, currently has no pro teams, and can pull people from surrounding areas like Houston, which is the 5th largest market in the US (in terms of total personal income). Like all of these cities, Austin also has the facilities to host NBA games.

Dre’s relocation recommendation – Let’s move the Bucks from Milwaukee here. Texas needs another talented injury prone international center!

5. Las Vegas

Metro Population: 1 951 269
10 year Population change: +41.8%
Pro teams: 0
Total Personal Income: $69.3 Billion

It should be no surprise that the host of the 2007 NBA All-Star weekend is on this list. Like many cities, the area has suffered a bit during the recession, but still boasts an impressive 10 year growth rate and has no other pro teams. If the NBA can get over the gambling issue, Vegas is exactly the kind market the NBA should enter.

Dre’s relocation recommendation – How about we move the Denver Nuggets here. If Devin is going to move my team I’d like to keep it within road trip distance of Colorado.

4. Bridgeport-Stamford-Norwalk, Connecticut

Metro Population: 916 829
10 year Population change: +3.9%
Pro teams: 0
Total Personal Income: $69.9 Billion

While the area doesn’t have as large of a population as current NBA cities, it’s very wealthy and doesn’t have any pro teams. It would be Connecticut’s first NBA team, and relatively close to New York City. Perhaps they could name the team after P.T. Barnum in some way? That’s all the Bridgeport knowledge this Canadian has.

Dre’s relocation recommendation – How about the Utah Jazz? The Jazz should be required to be in a city that has nothing to do with their name.

3. Montréal, Québec

Metro Population (2006): 3 635 571
10 year Population change: +9.3%
Pro teams: 2 (and one CFL team :))
Available Personal Income: $83.0 Billion

Montréal is certainly a world-class city, and it has produced several relatively high-profile basketball players (Bill Wennington, Samuel Dalembert, Joël Anthony, and Juan Mendez come to mind). But everyone knows that Montéal is a hockey-town. Could the city that abandoned the Expos harbour an NBA team? The only way to know for sure would be to give it a shot.

Dre’s relocation recommendation – How about the Minnesota Timberwolves?Canada needs some Love and the move isn’t that far.

2. Riverside-San Bernardino-Ontario, California

Metro Population: 4 224 851
10 year Population change: +29.8%
Pro teams: 0
Total Personal Income: $125.8 Billion

Like Texas, California can support another NBA team, and the region around the impostor Ontario would be perfect. The Inland Empire has a very large income base and no pro teams. Bonus to (most) NBA fans and 28 of the NBA’s owners: the area is very close to LA, and would likely reduce the income bases of the Lakers and the Clippers, who have been exploiting their large income bases in very different ways.

Dre’s relocation recommendation – The Cleveland Cavaliers. With the Clippers improving thanks to Griffin’s amazing play we need another terrible team in California to take its place.

1. New York City

Metro Population: 18 897 109
10 year Population change: +3.13%
Pro teams: 10
Available Personal Income: $587.3 Billion

I know what you’re saying: “New York? But it already has two teams!” Very true. But NYC is the biggest market in the US, and it’s not even close — its total personal income is nearly double that of LA, which is the second largest market. Look at that available personal income! New York could probably support several additional NBA teams, and it would help to make the NBA more balanced. In the past, the Knicks have been able to spend and spend with little consequence to their bottom lines. A couple more NBA teams in the city would bring the Knicks back towards the rest of the league.

Dre’ relocation recommendation – The New Orleans Hornets. Chris Paul wants to go to New York and he could do so without having to play with Melo!

Explanation:

“Metro Population”: the population of the Metropolitan Statistical Area.
“Pro teams”: the number of NFL, MLB, NBA, NHL, and MLS teams in a city.
“Total personal income(TPI)”: the sum of all money earned by all residents of an area in a given year. Using team revenue data and average ticket prices one can calculate amount of TPI needed to adequately support a team in each north american professional sports league.
“Available personal income(API)”: simply TPI less the cost it takes to support the city’s pro teams. Minimum income bases were estimated (see linked article) to be $85.4 billion for MLB, $37.6 billion for the NHL, $36.7 billion for the NFL, $34.2 billion for the NBA, and $15.4 billion for MLS. If API is positive, it means that you are good to go for a franchise. If API is negative, then you really need to figure out where you are going to move your team. Only teams in the NFL, MLB, NHL, NBA and MLS are counted for this calculation.
“Win/Loss Record”: win-loss record, which includes winning percentage
“Playoff Appearances”: the number playoff appearances divided by the number of years in the NBA

- Devin

Coming tomorrow – Arturo batting clean up provides the ultimate article on NBA teams and the cities that deserve them.

How a Sports Economist Talks Smack

Posted on October 29, 2011 by Andres Alvarez

Dave Berri, the General Manager of the Wages of Wins Network, is a lifelong Detroit Lions fan. I myself am from Denver Colorado and as a result am a Denver Broncos fan. This Sunday our teams will meet and that of course required some amount of smack talk. I thought you all would enjoy a look at how a Professor in Sports Economics talks smack:

Here is the real contest:

Will Tim Tebow:

A) Survive the game?

B) Get knocked out of the game and watch from the sideline?

C) end up in a hospital

I think (b). What do you think?

We’ll have to wait until tomorrow to find out!

-Dre

The State of the Lockout

Posted on October 28, 2011 by Arturo

Five hundred twenty-five thousand
Six hundred minutes
How do you measure, measure a year?

-”Seasons of Love” from the musical Rent

Where were you a year ago today? What were you doing?

A year ago today, I was breaking down my final predictions for every team and every player for the 2010-2011 NBA season. I was enjoying a fabulous opening week to what would turn out to be one of my favorite all time NBA seasons (and maybe my favorite sports season in which one of my teams did not win).

Now I sit here waiting for the NBA owners and players to argue their way to an agreement to end a bitter lockout. As a fan, I can’t help but be angry at losing such an enjoyable part of my life. That’s the why of that particular quote. Because I love this game, and that love is a gift. The emotional side of me is desperately hoping that the NBA players and owners alike remember that and give us back the game.

The logical side of me understands that there are reasons for where we are, and given that, we may just be on the cusp of the end of that lockout, so I wanted to break down and summarize those reasons.

By the numbers of course.

$3.817 Billion Dollars in 2011

Money is of course at the root of the problem. Specifically, it’s Basketball Related Income (BRI for short) that the players and owners are currently arguing about.

BRI includes pretty much any income received by the NBA, NBA Properties or NBA Media Ventures. It breaks down in three groups:

100% included:

Broadcast rights
Regular season gate receipts, exhibition game proceeds, playoff gate receipts
Novelty, program and concession sales (at the arena and in team-identified stores within proximity of an NBA arena), arena club revenues, and parking
Proceeds from team sponsorships, team promotions
Proceeds from summer camps
Proceeds from non-NBA basketball tournaments
Proceeds from mascot and dance team appearances
Proceeds from beverage sale rights
Proceeds from other premium seat licenses
Proceeds received by NBA properties, including international television, sponsorships, revenues from NBA Entertainment, the All-Star Game, the McDonald’s Championship and other NBA special events.

Partially included (this is the stuff Billy Hunter will point out gets taken off the top):

40% of proceeds from arena signage
40% of proceeds from luxury suites
45% – 50% of proceeds from arena naming rights

That number for 2010-11 was of course $3.817 Billion.

57%, 52%,50%

These are the the shares of BRI that the players and owners are specifically currently arguing about. 57% is the share that the players have enjoyed under the current Collective Barganing Agreement (CBA) with the owners. 52% and 50% are the numbers being touted by the two sides (with the players of course on the high end and the owners on the low end. The difference?

The Players are arguing a between a 9% and a 12% salary cut at this point ( a 3% loss) or about $70 Million dollars a year.

5.7 years and 8.4 gamechecks lost

If you look at all the data for the last 30 years, the average length of an NBA career is about 5.7 Years. In fact 80% of players will not spend a decade on the job.

Some simple math for you: 3% salary loss times 5 years is 15% salary loss over the course of a career, and this is much less than a 100% percent loss from losing a season. Even if the players could get back the full 57% share by losing a season they would end up losing money on the proposition (12% times 5 = 60% versus 100% for a season lost.

Seems like I want them to settle at 50% right? Not so fast. There is some margin to be gained for the players from a higher percentage share of the BRI.

If I assume the career length expectation from the table above, a worst case BRI share of 50%, new tv deals at 5% bumps every eight years and do some calculations I come up with the following: a 1% gain in BRI is worth 8.4 gamechecks lost for the players (or about three weeks). So going from 50% to 51% is worth shortening the season by 8.4 games (or in chart form):

January 6th, January 20th, February 5th and 50 games played

This are for the last lockout:

The date when the last lockout ended
The final agreement was signed
The new season began
Games played for that season

November 18th, December 1st, December 24th and about 74 games played

These are my predictions for the current lockout for the same. I think the final number will be 51% and that we will lose about 8 games (with the league schedule being heavy on back to backs).

2.9%,2.4%,8.2%

That’s the growth of BRI (which is also the rate of growth for player salaries), the general rate of inflation and the growth of team expenses from 2005 to 2011. These are the numbers are stress out the owners and motivate them.

To be fair, the economy was not so good.

Player salaries are fixed to league revenue growth but their expenses aren’t. If revenue growth is greater than expense growth everyone is happy. If not the owners start to lose earnings. There are three ways around that.

Increase revenue. Say for example by moving teams to more profitable markets or contraction.
Reduce expenses (i.e stop spending money like drunken sailors)
Cut player salaries

The owners of course chose number three.

If everything plays out like I think (51% BRI share for the players, about 6% revenue growth per season and a 5% tv deal bump) the numbers for the new CBA will play out like so:

If all that happens (and the owners keep their expense growth at about 6.4%), everybody wins. Including players, whose salary gets back to current levels by 2013.

Get to it guys.

-Arturo

6 NBA cities that don’t deserve a team

Posted on October 28, 2011 by Devin Dignam

With all the talk of “big market” and “small market” teams, one thing has been lost during lockout talks: some NBA cities just can’t support a team. To illustrate that in this post I’ve put together a list of six cities that, for various reasons, are very difficult markets for their NBA teams.

A quick explanation of terms is at the bottom, because we know that everyone would rather get to the good stuff first!

6. Salt Lake City

I remembered to turn out the lights when I left.

Metro Population: 1,124,197
Pro teams: 2
Total Personal Income:$55.5 Billion
Available Personal Income:-$5.9 billion
Win/Loss Record: 1633 Wins, 369 Losses, 54.4%
Playoff Appearances: 24 times in 37 years, 64.9%

The Jazz have been very, very good in Salt Lake City, sporting an impressive W-L record and reaching the playoffs in a high percentage of their years in the league. Fan support seems to be quite solid too. But the truth of the matter is that Salt Lake City just isn’t big enough for an NBA team. Even nearly three decades of sustained success on the court isn’t going to change that reality.

5. New Orleans

You know leaving New Orleans was for the best.

Metro Population: 1,167,764
Pro teams: 2
Total Personal Income:$89.3 Billion
Available Personal Income: -$18.4 billion
Win/Loss Record: 913 Wins, 941 Losses, 49.2%
Playoff Appearances: 12 times in 23 years, 52.2%

Even in the best of times, New Orleans was not a very big market. The Saints have been in New Orleans since the 60s, and there wasn’t enough local income available to the Hornets when they first moved there in 2002. Then Hurricane Katrina hit, which only made everything worse. Eventually, former owner George Shinn had to sell the team to the NBA, and it’s only a matter of time before the team is moved somewhere else.

4. Minneapolis

Hey Kevin Love, come on over!

Metro Population: 3,317,308
Pro teams: 4
Total Personal Income:$233.3 Billion
Available Personal Income: -$39.4 billion
Win/Loss Record: 705 Wins, 1067 Losses, 39.8%
Playoff Appearances: 8 times in 22 years, 36.4%

The Twin Cities are actually a pretty big market — the 18th largest in Canada and the US, in fact. However, the area has four professional sports teams, and because of this the TPI is significantly negative. It’s likely that either the Timberwolves or the Wild will find themselves playing somewhere else in a couple of years. And although the T-Wolves have been in the area longer, they have a terrible track record, and seem more likely to be moved.

3. Milwaukee

No one wants to be here.

Metro Population: 1,555,908
Pro teams: 2
Total Personal Income:$178.4 Billion
Available Personal Income: -$58.8 billion
Win/Loss Record: 1825 Wins, 1669 Losses, 52.2%
Playoff Appearances: 26 times in 43 years, 60.5%

Another shame. The Bucks are a historically good team in a small market, but the problem is that the area also has an MLB team. Also not very helpful is the fact that the franchise’s best days are behind it, with a disproportionate amount of success coming during its early days. Attendance has been low for several years, and the owner of the team, Herb Kohl, has been whining about his team’s financial situation for years. Unless the owners get a very favorable new CBA, Milwaukee could be on the way out. (Editor’s Note: It’s even worse if you count the Green Bay Packers)

2. Cleveland

I can't believe I stayed in Cleveland for 7 years

Metro Population: 2,077,240
Pro teams: 3
Total Personal Income:$227.7 Billion
Available Personal Income: -$71.4 billion
Win/Loss Record: 1540 Wins, 1790 Losses, 46.2%
Playoff Appearances: 18 times in 41 years, 43.9%

While the Cavaliers have been in the league for about as long as the Bucks, they have not had nearly the same level of success. And because Cleveland is a bigger city than Milwaukee, this would be okay, except for the fact that Cleveland has two additional pro teams. As it stands, Cleveland is the second most overextended sports market in North America. The long Rust Belt decline and Mr. Comic Sans certainly don’t help either. LeBron James had the right idea: it’s time for the NBA to get out of Cleveland.

1. Denver

Seeya!

Metro Population: 2,543,482
Pro teams: 5
Total Personal Income:$293.7 Billion
Available Personal Income: -$87.4 billion
Win/Loss Record: 1369 Wins, 1469 Losses, 48.2% (NBA)
Playoff Appearances: 22 times in 35 years, 62.9% (NBA)

Like Minneapolis, Denver is actually a large market. However, Denver is the most overextended sports market in North America. There are five pro teams there! There is not enough money in the Denver area to support so many teams. In order for there to be enough money to go around, the city would have to lose either the Rockies or two of the Broncos, Nuggets, and Avalanche. MLB teams do not move very often and the NFL is very popular, so the best bet would be that the Nuggets and Avalanche could be on the way out in the near future. Which is a shame, because the Nuggets — as well as the Avalanche, but no one cares about hockey (says the Canadian) –have had a lot of success in Denver. As long as the team is doing well — as it has done recently — it has a chance of sticking around, but whenever it hits a sustained down period…be prepared Nuggets fans, be prepared.