Puzzling Economics of Sports

[northernflame]

This tounge-in-cheek look at the economic of professional sports versus those in other professional disciplines. A lot of questions ... no answer!

Favourite highlights:

"Why is it that no one complains when Ray Romano ("Raymond") gets $50 million a year—$1.8 million per episode—which takes about the same time to film as a baseball game;... Or when news anchors—a.k.a. teleprompter readers—and talk-show hosts ink eight-figure contracts? But let Alex Rodriguez sign for $25 million a year or let the mean baseball salary hit $2.5 million and commentators and the sports-talk-radio crowd get in a dither? "


"And why is it that movie fans don't blame Tom Cruise, Russell Crowe or Julia Roberts for driving up the cost of going to a movie, or John Grisham's healthy royalties for the price of our beach books, while we blame A-Rod or Sammy for increasing the price of baseball tickets? Of course, none is correct: the demand for players, or actors or writers, is a derived demand and thus their salaries stem from higher demands on the part of fans for the final good or service they produce. (If Randy Johnson were to bring the heat for free or Shaq were to clank free throws off the rim for no charge, it would have no more than a negligible effect on Diamondback or Laker tickets; club owners would simply pocket the savings.) At least we ought to be consistent in our errors and hostility. "

And a link to the article:

http://www.econlib.org/library/Columns/y20...rsonsports.html

Although the author tounge in cheeks claims not to know the answer, part of it must be misguided moral outrage; part of it must also be irrational love of our sports teams (the latter being something that I readily admit to being guility of). :P

[looooob]

Originally posted by northernflame@Feb 10 2005, 01:15 PM
This tounge-in-cheek look at the economic of professional sports versus those in other professional disciplines. A lot of questions ... no answer!

Favourite highlights:

"Why is it that no one complains when Ray Romano ("Raymond") gets $50 million a year—$1.8 million per episode—which takes about the same time to film as a baseball game;... Or when news anchors—a.k.a. teleprompter readers—and talk-show hosts ink eight-figure contracts? But let Alex Rodriguez sign for $25 million a year or let the mean baseball salary hit $2.5 million and commentators and the sports-talk-radio crowd get in a dither? "


"And why is it that movie fans don't blame Tom Cruise, Russell Crowe or Julia Roberts for driving up the cost of going to a movie, or John Grisham's healthy royalties for the price of our beach books, while we blame A-Rod or Sammy for increasing the price of baseball tickets? Of course, none is correct: the demand for players, or actors or writers, is a derived demand and thus their salaries stem from higher demands on the part of fans for the final good or service they produce. (If Randy Johnson were to bring the heat for free or Shaq were to clank free throws off the rim for no charge, it would have no more than a negligible effect on Diamondback or Laker tickets; club owners would simply pocket the savings.) At least we ought to be consistent in our errors and hostility. "

And a link to the article:

http://www.econlib.org/library/Columns/y20...rsonsports.html

Although the author tounge in cheeks claims not to know the answer, part of it must be misguided moral outrage; part of it must also be irrational love of our sports teams (the latter being something that I readily admit to being guility of). :P

sorry I'm too lazy to read the whole link

but I would guess the difference is when Ray Romano gets a billion dollars a year....all of us with TV sets suffer equally (or thankfully change the channel)...it's not like LA is 'stealing' him from Milwaukee

when Bruce Willis gets 20 Million a movie, it doesn't change the fact that Atom Egoyan can still make a cheap quirky movie that will be watched by his niche of fans,and billions of Bruce Willis fans can go on watching their movies

when you have unequal markets competing for assets, that's where the problems lie

you don't see that in the NFL and as a result I don't hear nearly as much complaining about whether Brett Favre is overpaid or not...he's a rich guy, like Willis or Romano, but his industry can afford it...and the good people of Green Bay wisconsin don't worry about losing him to Dallas or New York

[RogerWilco]

If a movie ticket cost $65 a shot then I think you would hear people complain.

[albertGQ]

Thats why I don't complain about the player's salaries

[peter12]

Romano's and Willis's salaries are sustainable. They correlate to their popularity. Sport players salaries for the most part do not correlate to demand.

[Lurch]

when Bruce Willis gets 20 Million a movie, it doesn't change the fact that Atom Egoyan can still make a cheap quirky movie that will be watched by his niche of fans,and billions of Bruce Willis fans can go on watching their movies

when you have unequal markets competing for assets, that's where the problems lie

Don't movies compete over actors who have box office appeal? Seems exactly like sports to me, with each movie equivalent to a team. I'm sure Egoyan would love to use actors with the ability to bring in fans but simply cannot afford them. Differnce to me is that the nature of the competition between end products is different, i.e. Egoyan's fans do not care that the film is 'successful' whereas sports teams fans do.

Romano's and Willis's salaries are sustainable. They correlate to their popularity. Sport players salaries for the most part do not correlate to demand.

By the leagues own measure, NHL players are about 25% overpaid overall, NFL players not overpaid at all, and basketball I'm not too sure about but I think their soft cap is tied to revenues. Further, NHL players in many cities are not overpaid b/c they create more than enough revenue to pay their salaries - the problem is not all teams have the same demand. Where is your evidence to suggest that athletes are grossly overpaid as a group when the only example is some NHL players, and as a group they are only 25% overpaid at most???

[northernflame]

sorry I'm too lazy to read the whole link

but I would guess the difference is when Ray Romano gets a billion dollars a year....all of us with TV sets suffer equally (or thankfully change the channel)...it's not like LA is 'stealing' him from Milwaukee

[I]when Bruce Willis gets 20 Million a movie, it doesn't change the fact that Atom Egoyan can still make a cheap quirky movie that will be watched by his niche of fans,and billions of Bruce Willis fans can go on watching their movies

when you have unequal markets competing for assets, that's where the problems lie[/I]

you don't see that in the NFL and as a result I don't hear nearly as much complaining about whether Brett Favre is overpaid or not...he's a rich guy, like Willis or Romano, but his industry can afford it...and the good people of Green Bay wisconsin don't worry about losing him to Dallas or New York

You are falling into the fallacy of cost driving ticket prices again. Last I checked an Adam Egoyan film was not substantially cheaper than any other movie. Logically, what you should be asking yourself is, IF Atom Egoyan makes movies for much lower cost, why does seeing one of his films not cost any less than standard Hollywood fare? (As I recall, last time I was home in Calgary (middle of January) I spent $12.00 to see 'Hotel Rwanda' at the Globe and, presumably, the Globe is the type of theatre where you would see Egoyan's films.). Answer? I may prefer Egoyan over any other autre, but obviously this is not true of the general public (by the way I do think he has done some iof early work was quite nteresting).

Bang on in stating the problem is unequal markets. However, stating that, say, Jarome Iginla is worth more in New York City than Calgary is not the same thing as saying players in general are over paid.

Nor does it necessarily mean that a salary cap is the only means of redressing the imbalance.

[looooob]

Originally posted by northernflame@Feb 10 2005, 02:15 PM

You are falling into the fallacy of cost driving ticket prices again.

ummm. no I"m not. I never mentioned ticket prices

I've never blamed NHL salaries on ticket prices, and frankly I don't mind paying what I do to watch the Flames

I also not rabidly pro-cap

I do think there is in an economic imbalance in prosports that partially feeds a competitive imbalance though

edit: and just to show we're on the same page, the last movie I saw was Hotel Rwanda, at the Globe, in mid-January. maybe we were there the same night.

I guess I figure all movies are 12 bucks b/c Willis movies are bloody expensive but millions watch them, whereas Hotel Rwanda will be watched by less people, but each willing to pay more for a quality show. Don Cheadle probably makes more for the "Oceans" movies than he did for a tour de force role in Rwanda--but I guess he's savvy enough to know the Oscar buzz will bump up his marketability....I'm digressing I think

[northernflame]

ummm. no I"m not. I never mentioned ticket prices

I've never blamed NHL salaries on ticket prices, and frankly I don't mind paying what I do to watch the Flames

I also not rabidly pro-cap

I do think there is in an economic imbalance in prosports that partially feeds a competitive imbalance though

edit: and just to show we're on the same page, the last movie I saw was Hotel Rwanda, at the Globe, in mid-January. maybe we were there the same night.

I guess I figure all movies are 12 bucks b/c Willis movies are bloody expensive but millions watch them, whereas Hotel Rwanda will be watched by less people, but each willing to pay more for a quality show. Don Cheadle probably makes more for the "Oceans" movies than he did for a tour de force role in Rwanda--but I guess he's savvy enough to know the Oscar buzz will bump up his marketability....I'm digressing I think

I was there on the opening night ... it was a Friday night I think.

Did you know that Denzel Washington and Will Smith were both offered Cheadle's role in Hotel Rwanda? At least that is what I heard.

[RougeUnderoos]

One thing that drives a lot of us crazy is that we pay for the opportunity to play the games these guys do. None of us, I'm sure, pay for the opportunity to pretend we are Ross Gellar, nor did we grow up practicing to be Ross Gellar or dream of being Ross Gellar and have Ross Gellar wallpaper and we didn't play Ross Gellar with our friends in the back alley.

Personally, I don't begrudge the players their money. Hell, the NFLers should probably make more money.

If the Flames could be a solid franchise under a system in which Mike Commodore get paid 130 million dollars a year then I'd still cheer for the team. But since that can't happen, I will begrudge the fact that they refuse to play a game for 40 times the average salary a regular Canadian makes not playing a game.

[Resolute 14]

Ray Romano gets $50 million a year to make his TV show because ratings justify it. His network gives him that because his show turns a profit for it. If Romano's show could not support that kind of salary, Romano would either see his income reduced on his next contract, or see his show cancelled.

Romano's salary fluctuates with his ability to generate revenue. Or, he plays by the rules of the free market system.

Atheletes on the other hand, and hockey players in particular, refuse to play in a free market system. They want their salaries to be tied to the ultimately irrelevent benchmarks of goals, assists and points. The points atheletes argue their value upon has a limited coorelation with their monetary value to their employer. Their salaries - like Ray Romano and Bruce Willis - should be tied to the revenue they generate.

[northernflame]

One thing that drives a lot of us crazy is that we pay for the opportunity to play the games these guys do. None of us, I'm sure, pay for the opportunity to pretend we are Ross Gellar, nor did we grow up practicing to be Ross Gellar or dream of being Ross Gellar and have Ross Gellar wallpaper and we didn't play Ross Gellar with our friends in the back alley.

Personally, I don't begrudge the players their money. Hell, the NFLers should probably make more money.

If the Flames could be a solid franchise under a system in which Mike Commodore get paid 130 million dollars a year then I'd still cheer for the team. But since that can't happen, I will begrudge the fact that they refuse to play a game for 40 times the average salary a regular Canadian makes not playing a game.

You make some valid points. Although I do think if you checked, quite a number of people do actually attend acting classes. :P

I don't begrudge the players a thing. And I don't begrudge the owner's right to make a fair return. And I certainly don't want to see the Flames go ... up to a limit.

Seriously, we have transferred millions of public funds to professional sports; we allow them monopoly power; that's not enough so now they want to fix players costs. And what is the underlying strategy? As always, it's extortion - without this the team will leave. I am tiring of it.

There are other ways to address competitive imbalance and to ensure the smaller markets are able to exist. So why haven't the owner's considered those? At the end of the day, after all, it's not the player's greed that got us to this point, it's the owner's ineptitude at managing themselves.

[northernflame]

Ray Romano gets $50 million a year to make his TV show because ratings justify it. His network gives him that because his show turns a profit for it. If Romano's show could not support that kind of salary, Romano would either see his income reduced on his next contract, or see his show cancelled.

Romano's salary fluctuates with his ability to generate revenue. Or, he plays by the rules of the free market system.

Atheletes on the other hand, and hockey players in particular, refuse to play in a free market system. They want their salaries to be tied to the ultimately irrelevent benchmarks of goals, assists and points. The points atheletes argue their value upon has a limited coorelation with their monetary value to their employer. Their salaries - like Ray Romano and Bruce Willis - should be tied to the revenue they generate.

This is curious post.

I thought the whole point of the lockout is that the players want a free market system, while the owner's are looking to regulate.

[shoestring]

Originally posted by northernflame@Feb 11 2005, 10:30 AM

This is curious post.

I thought the whole point of the lockout is that the players want a free market system, while the owner's are looking to regulate.

Makes sense to me,50 mill watching ray,roy whatever,nobody watching the nhl.
Why the players don't want to build revenues is beyond me.