How to Choose a Market in Sports

A few weeks ago, Arturo and Devin – in two separate posts – wrote about which markets deserve and don’t deserve an NBA franchise.   These posts considered a few objective factors about a market in ascertaining where the NBA should locate its teams.

Today at Freakonomics, I took a very different approach.  Currently in North American sports leagues, the existing owners in each league determine whether or not the league should enter a new market.  In contrast, European sports leagues – like the English Premier League – rely upon market forces to make this decision.

Although individuals – like Arturo, Devin, and the owners – can consider a variety of factors in making this decision, I do not think (echoing the arguments of Friedrich Hayek) that an individual – or a committee – can do this job as well as a market.  For example, I think it is entirely possible that a smaller market could support a team if the people in this market are especially interested in NBA basketball.  In contrast, a team in a larger market might struggle to find success if the people in the market are not generally enthusiastic and/or the ownership of the team does a poor job of selling the team.  The latter appears to be the case in New Orleans, where ticket sales seemed to improve when the NBA assumed ownership of the team.  In other words, one of the problems in New Orleans might have been incompetent owners (a problem we also see historically with the LA Clippers).

Beyond invoking Hayek (not one of my favorite economists of all-time, but someone who certainly understood the problems of central planning), my post also links how teams are allocated to the history of labor disputes in North American sports.  And although I have little hope that what I suggest will ever be adopted, hopefully it does give people something to think about.

Let me close by thanking Matthew Phillips.  Matthew is an editor at Freakonomics, and he is the person who makes my recent posts in that forum look (and read) so good.  Today, unfortunately, is Matthew’s last day at Freakonomics and I would just like to thank him in this forum for all his help.

– DJ