Podcast: Impact of NBA Lockout Strategies on Fans & Economies

Posted on October 17, 2011 by Mosi

Available in Several Internet Locations Near You

Direct Download – NBA Lockout Reactions and Strategies
The iTunes Store – Wages of Wins Podcast
Our RSS Feed – Wages of Wins Podcast Feed

Sports economist David Berri discussed David Stern and Billy Hunter’s recent media tour with Mosi Platt from the Miami Heat Index.

Highlights

Why do fans like Arturo Galletti and Ty Willinghanz from the Courtside Analyst blog get so upset with lockouts and strikes by professional sports that they refuse to watch the games when the work stoppage is over?
In a press conference at the Beverly Hills hotel, Billy Hunter said the owners will experience pain just like the players during the lockout. He said franchise values wouldn’t recover until 2023 and some teams may have to fold if they lockout the players for an entire season. Does that provide the NBPA leverage in collective bargaining?
In “Heads the Owners Win, Tails the Players Lose”, Berri argued the NBA owners will get what they want from their negotiations with the players association. If the NBPA is following the same strategy the MLBPA successfully used against Major League Baseball owners in 1994, then how can that be the case
What are the differences between the MLBPA and NBPA?
Why does the NBPA seem so concerned about system issues? Isn’t the split of BRI the only thing that matters?
Previous research by sports economists Dennis Coates and Brad Humphreys illustrated that per capita income was not affected by work stoppages in professional baseball, football and hockey. Additional research showed sales tax receipts in Florida also were not affected by work stoppages in professional sports. Are those findings still relevant in this recession? Does the NBA lockout reveal potential flaws in the Hooters business model?

Wait there’s more?

Dre here! Mosi Platt has been a podcasting machine this weekend. In case you missed it his other two podcasts can be found here

Why David Stern is full of it

Posted on October 14, 2011 by Andres Alvarez

I have Mike and Mike to thank for making my morning commute just a little brighter. This morning they had David Stern on, which wasn’t good for my happiness level. Here were some of David Stern’s points.

1. The Owners are being more cooperative than the players

This is such a ridiculous thing to say. We need to remember that this is a lockout! That means the owners started it! Why should the players be as cooperative as the owners here? By being cooperative the owners get more money. By being more cooperative the players lose money.

2. The world has changed and the owners are losing money

David Stern pointed out 57% is no longer feasible. Now let’s point out that number is tied to revenue! That means the players salaries stay flat relative to how the league is doing. The NBA may be losing money but it isn’t due to the player salaries, it’s due to external costs. Stern brought up two, which I’ll go into more detail below.

3. Charter jets are expensive

This is an ever popular topic. Oil prices have gone up and planes use oil so this is an unforseen cost that can explain the issue teams are having with money! I decided to look up the cost for a charter jet (I used a 737-200 and 727-200 as my plane type) the prices I’ve seen are around $7,000 hourly. I decided to go ahead and up the cost to $10,000 hourly to adjust for any fuel arguments. A round trip flight to Boston to Los Angeles is around 11 hours (courtesy of Google Flights) Using these two numbers we can get a fun upper bound estimate. If every team paid $10,000 an hour per flight and every flight was a Boston-Los Angeles length flight then the total flight budget for the regular season(41 flights for 30 teams) would be $135 million. The league is claiming losses of over $300 million. In the worst case flights only explain $135 million in total cost! That means the actual hit would have to be somewhere between what the NBA actually expected the flights to cost and the increase in value. In short even if we buy that the NBA was shocked by changing fuel prices and that they paid top dollar for the flights and every flight was as long as can be they still come up over $200 million short. That means every other excuse the NBA is using would have to cover the rest of those costs. That brings me to another point.

4. The NBA needed more employees to handle ticket sales.

David Stern said that demand for the game had dropped. Of course this isn’t true. The way he sold it was that because people were buying tickets in smaller bundles (e.g. sets of 10 instead of sets of 40) that more employees were needed to handle sales. His two main cost points were charter jets (see above) and this! First off are we expected to believe that low wage workers to sell tickets could even make a decent dent in $300 million? Second, do we really believe the NBA is losing costs to employees? Employees were one of the first casualties of the lockout. The NBA has shown no problem cutting employees to cut costs. If they were losing money since the last CBA does Stern really expect us to believe they’d be content losing costs to employees?

David Stern isn’t addressing anything

I didn’t hear David Stern explain how the NBA was going to try and curb the uncontrolled costs. I didn’t hear David Stern explain how the NBA would try to increase revenue. I heard David Stern say the players need to fork over money to help the owners. The issues put forward by the owners seem flimsy. Also if the issues are enough to put the NBA in danger, why aren’t the owners trying to do anything to deal with them in this CBA? David Stern and the owners have done nothing to address the issues and have essentially asked the players for a check. The negotiations have nothing to do with the issue in fact! They have everything to do with the size of the check.

As an NBA fan I want this lockout to end. That said, when I hear David Stern talk, I can’t help but feel more upset at the fact that I am being lied to and the wrong people are being blamed. Instead of locking out the players perhaps the owners should have locked themselves out and hired a new commissioner.

-Dre

How the NBA is playing the media (and some fans)

Posted on September 24, 2011 by Andres Alvarez

What do you think?

We’re fans of the facts here. And here are some facts we have laid forth recently:

In the NBA, players salaries — as a percentage of revenue — is fixed
In the NBA, cities pay most of the cost for stadiums.
NBA teams appreciate in sales value.
Owners, therefore, are in a great position to make money off their teams.

During the lockout, though, the owners have adamantly argued that they’ve been losing money. And although this argument is old (as The Wages of Wins notes, sports owners have claimed they are losing money since the 19th century), people in the media (and some fans) are still buying the NBA’s story. Here is how it seems to work:

NBA: We’re losing money!!
Reporter: Some crazy economist in Utah says your costs are way low. How are you losing money?
NBA: How do you think we’re losing money?
Reporter: I don’t know. Maybe, gas prices or insurance premiums on players’ health?
NBA: Feel like writing an article up on that?

During the lockout there has been a lot of speculation as how the NBA could be losing money. Some is flat out wrong, such as blaming player salaries. Other theories might be reasonable. The point is that we don’t know. The NBA has kept its mouth shut and letting others do the talking. After all, if the players eventually buy the NBA’s story, profits will only go up.

The sad part is that this strategy appears to be working. The players have conceded something by agreeing to give up some of their salaries to help the owners out. We’ll have to see how this plays out, as the season is still in jeopardy.

Unfortunately, though, if there is a season and this strategy works, we’re almost assured to see the same story again in a few years. After all, we have been seeing this story for more than a century!