Term
| Why sports are important to Americans? |
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Definition
1) public good- can't exclude someone from being a sports fan/can enjoy team without paying anything
2)create a sense of community
3)demand for sports is inelastic |
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Term
| Are sports isolated from macroeconomic downturn? |
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Definition
not completely
attendance has remained strong although NFL cut jobs and secondary market fix prices have fallen |
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Term
| Business model change in sports (mainly baseball) |
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Definition
Larry Lucchino (CEO of Red Sox) at the forefront of the movement
Camden Yards
-moved to downtown business sector
-people would go after work and with clients, luxury boxes
-businesses now willing to spend a lot on stadium ads
NFL a little different because only 1 game a week |
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Term
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Definition
| first person to organize baseball players into a labor union and in 1972 was at the head of the first labor strike |
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Term
| What are owners' objectives with their teams? |
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Definition
-win a championship but remain fiscally sound (don't go bankrupt)
-positive popularity
-gain utility from owning a sports team
-business contracts and building brand strength |
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Term
| When did baseball become a national pastime? |
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Definition
| 1881- American Association charged 25 cents a ticket, allowed drinking at games, played on sundays and beer magnates sponsored it |
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Term
| Does an owner want to maximize income of the team or all assets related to the team? |
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Definition
why pay A-Rod 252 million
-acquiring Arod will raise value of naming rights and other businesses will profit from A-rod-->sell more tshirts, merchandise
-japanese use baseball as advertising, make loss with teams |
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Term
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Definition
-produce where marginal revenue equal MC but charge where Q from MC/MR intersection hits the demand curve
-produce less and charge more
-Q leagues control is the # of teams
relative to demand, leagues keep number of teams low so that they can leverage the cities that don't have teams with those that do
-w/monopolies PS increases while CS decreases |
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Term
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Definition
-owners want to have a sold out stadium even though not economically efficient
-want to maximize all revenue hot dogs, drinks, etc. |
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Term
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Definition
Small but Significant Non-Transitory Increase in Price
-if a firm is able to increase its price by 5% or more and not have consumers flee to another product or experience a decrease in profit then it has a monopoly |
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Term
| Barriers to entry in sports leagues |
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Definition
-facilities (expensive and require amenities)
-need brand name to generate revenue and history to have a passionate fan base
-TV deals
-minor leagues to develop talent |
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Term
| Sherman Anti Trust Act 1890 |
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Definition
-prevented contracts that unreasonably restrain trade
-forbid monopolizing an industry |
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Term
| Single entity argument for sports leagues |
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Definition
-no team alone can produce the NBA or MLB, need to depend on each other
-if single entities, then leagues can't violate anti trust retrain of trade ruling |
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Term
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Definition
-needle sued saying NFL contract with Reebok was a restraint of trade
-reebok got sole license
-supreme court found that NFL was not a single entity for licensing |
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Term
| Sports Broadcasting Act 1961 |
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Definition
| -collective TV contracts with leagues, w/equally distributed money for competitive balance |
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Term
| Non-Statutory Labor Exemption |
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Definition
-allows a union to bargain away free labor market in exchange for other benefits
-players forced to join labor unions |
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Term
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Definition
-labor can't be protected by exemption from antitrust and labor law at the same time
-NFL players assoc. has to decertify to sue NFL for antitrust violation, then rectify after new CBA agreed |
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Term
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Definition
| prevented players from disbanding to sue owners |
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Term
| Why owners believe you can't have completely free markets? |
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Definition
-teams in different size markets so there will be revenue imbalance
-owners who need a player to promote other business will offer more for that players
-winners curse: owners who overvalue player will get the player
-players think they are better than reality because of media overhype
-winner take all nature of sports - teams that win are rewarded disproportionately
-auction game- push individuals into irrational decisions |
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Term
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Definition
| owners bargain unified with union, outline general framework in which individual teams and players bargain (minimum wage with other agreements) |
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Term
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Definition
-looks at last two contracts offers between players and owners and must pick one
-negotiations that are far apart usually agree to deals that are closer together to avoid risk on both sides before date
-arbitrators supposed to compare player to others with similar ability |
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Term
| baseball free agency today |
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Definition
-first 2 years no bargaining rights
-year 3-6: eligible for salary arbitration
-after 6 years free agent |
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Term
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Definition
| any team that signed a FA would have to give back compensation to be determined by league commissioner |
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Term
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Definition
a team could resign one player that put them over the salary cap
-hope was that rule would aid small market teams to retain their players |
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Term
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Definition
-intention to turn soft salary cap to hard salary cap
- teams withheld 10% of every player's salary which would be kept by the owners, shared, or returned to the players depending on players' share of BRI
- |
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Term
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Definition
-got blacklisted from NFL and sued them on Anti-Trust grounds
-won and supreme court ruled that nfl did not have AT exemption like baseball |
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Term
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Definition
| sued for players' rights to have free agency and won based on AT rules |
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Term
| Revenue sharing in the NFL |
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Definition
-national media and licensing distributed throughout whole league
-gate sharing 2/3 to home team 1/3 for league to distribute
-supplemental revenue sharing- money given from rich to poor
-about 75% of all revenue is shared in NFL |
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Term
| pitfalls of marginal revenue product |
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Definition
-have to select best measurement of each category
-imprecision in stats because doesn't account for performance of other players and situational events (health, chemistry)
-hard to capture nonlinearity of sports |
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Term
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Definition
-owners discrimination- paying minorities less, etc. -- better off not discriminating
-coworkers discrimination- dissipates over time
-customer discrimination- minorities offer less MRP and therefore get paid less, no market pressure that can get rid of this type |
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Term
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Definition
| -uncertainty in outcomes of game and season and uncertainty across seasons |
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Term
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Definition
| the higher the coefficient (greater the area of A) the more inequality exists |
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Term
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Definition
-each team taxed 34% local revenue
-funds distributed equally to all teams in league
-revenue from national and international tv market distributed in split pool system |
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