Daniel, Rascher and Matt, Brown and Mark, Nagel and Chad, McEvoy (2009): Free Ride, Take it Easy: An Empirical Analysis of Adverse Incentives Caused by Revenue Sharing. Forthcoming in: Journal of Sport Management
Download (346kB) | Preview
A fundamental belief in professional sport leagues is that competitive balance is needed to maximize demand and revenues; therefore, leagues have created policies attempting to attain proper competitive balance. Further, research posits that objectives of professional sport teams’ owners include some combination of winning and profit maximization. Although the pursuit of wins is a zero sum game, revenue generation and potential profit making is not. This article focuses upon the National Football League’s potential unintended consequences of creating the incentive for some teams to free ride on the rest of the league’s talent and brand. It examines whether an owner’s objectives to generate increased revenues and profits are potentially enhanced by operating as a continual low-cost provider while making money from the shared revenues and brand value of the league. The present evidence indicates that, overall, being a low-cost provider is more profitable than increasing player salaries in an attempt to win additional games.
|Item Type:||MPRA Paper|
|Original Title:||Free Ride, Take it Easy: An Empirical Analysis of Adverse Incentives Caused by Revenue Sharing|
|Keywords:||free riding; free ride; football; profit maximization; regression; owner incentives|
|Subjects:||L - Industrial Organization > L8 - Industry Studies: Services > L83 - Sports; Gambling; Recreation; Tourism|
|Depositing User:||Daniel Rascher|
|Date Deposited:||12. Oct 2010 18:23|
|Last Modified:||15. Feb 2013 23:20|
#25 Los Angeles Clippers. (2008, December 3). Forbes. Retrieved from http://www.forbes.com/lists/2008/32/nba08_Los-Angeles-Clippers_322952.html
Alesia, M. (2002, October 20). Expert: Colts' claim is suspect. The Indianapolis Star. Retrieved from www.indystar.com
Alexander, D. L., & Kern, W. (2004, February). The economic determinants of professional sports franchise values. Journal of Sports Economics, 5, 51-66.
Badenhausen, K. (2004, November 1). Buddy system. Forbes. Retrieved from http://www.forbes.com/business/forbes/2004/1101/056a.html
Badenhausen, K., Ozanian, M., & Settimi, C. (2008, September 11). The richest game. Forbes. Retrieved from http://www.forbes.com/2008/09/10/nfl-team-valuations-biz-sports-nfl08_cz_kb_mo_cs_0910intro.html
Barrett, W. (2003, September 1). Going back to Houston: Like so many of America's sports-hungry cities, Houston, Tex., saw its longtime National Football League team move to another region of the country, only to have it replaced by another franchise. USA Today Magazine (Society for the Advancement of Education). Retrieved from http://www.usatodaymagazine.net
Bell, J. (2004, July 5). NFL’s tug-of-war over revenue. USA Today. Retrieved from http://www.usatoday.com/sports/football/nfl/2004-07-05-revenue-cover_x.htm
Bell, J. (2006, March 8). NFL owners accept player union proposal with 30-2 vote. USA Today. Retrieved from http://www.usatoday.com/sports/football/nfl/2006-03-08-labor_x.htm
Bloom, H. (2006, October 24). The good news a new MLB labor accord, the bad news a new MLB labor accord II. Sports Business News. Retrieved from http://sportsbiznews.blogspot.com/2006_10_22_archive.html
Brown, M. T., Nagel, M. S., McEvoy, C. D., Rascher, D. A. (2004). Revenue and Wealth Maximization in the National Football League: The impact of stadia. Sport Marketing Quarterly, 13, 227-235.
Burke, M. (2003, August 29). Turning $500 into a $573 million NFL team. Forbes. Retrieved from http://www.forbes.com/forbes/2003/08/29/cz_mb_8029giants_print.html
Burke, M. (2008, September 29). Colt 45. Forbes. Retrieved from http://www.forbes.com/forbes/2008/0929/083_print.html Cat, F. (n.d.). Mikebrownsucks.com mission statement. Retrieved from http://www.mikebrownsucks.com/mission_statement.html
Clayton, J. (2008, May 20). NFL owners vote unanimously to opt out of labor deal. Retrieved from http://sports.espn.go.com/nfl/news/story?id=3404596
Cleveland, W. S. (1979). Robust locally weighted regression and smoothing scatterplots. Journal of the American Statistical Association, 74, 829–836.
Collective bargaining agreement between the National Hockey League and the National Hockey League Players’ Association. (2005, July 22). Retrieved from http://www.nhl.com/cba/2005-CBA.pdf
Daugherty, P. (2008, November 2). Doc calls Mike Brown out. Cincinnati Enquirer. Retrieved from http://news.cincinnati.com/article/20081102/COL03/811020446
Donatelli, J. (2003, December). Surf's up: Los Angeles fans do indeed love pro football, but they have better things to do than sit around and worry about landing a new team. Football Digest. Retrieved from http://findarticles.com/p/articles/mi_m0FCL/is_4_33/ai_110312192
Dosh, K. (2007, June 28). Does revenue sharing in MLB foster competitive balance? Retrieved from http://mvn.com/mlb-braves/2007/06/28/does-revenue-sharing-in-mlb-foster-competitive-balance/
Fort, R. D. (2003). Sports economics. Upper Saddle River, NJ: Prentice Hall.
Fort, R. D, & Quirk, J. (1995). Cross-subsidization, incentives, and outcomes ion professional team sports leagues. Journal of Economic Literature, 33, 1265-1299.
Foster, G., Greyser, S. A., & Walsh, B. (2006). The business of sports. Mason, OH: Thompson South-Western.
Gerrard, B. (2005). A resource-utilization model of organizational efficiency in professional sports teams. Journal of Sport Management, 19, 143-169.
Harris, D. (1986). The league: The rise and decline of the NFL. New York: Bantam.
Helyar, J. (2006, March 6). Labor peace threatened by rift between owners. Retrieved from http://sports.espn.go.com/nfl/news/story?id=2354095
How the NFL levels the playing field. (2003, January 27). Business Week. Retrieved from http://www.businessweek.com/magazine/content/03_04/b3817003.htm
Jerry Jones fined six-figures for revenue-sharing comment. (2009, September 13). Retrieved from http://www.sportingnews.com/nfl/article/2009-09-13/jerry-jones-fined-six-figures-for-revenue-sharing-comment
Késenne, S. (2000). Revenue sharing and competitive balance in professional team sports. Journal of Sports Economics, 1, 56-65.
Kovacevic, D. (2005, May 1). The debate about the Pirates’ demise always comes back to team payroll: In the age of revenue sharing and television contracts, how much are the Pirates making and what are they doing with the profits? Pittsburgh Post-Gazette, p. C-1.
Kroll, L. (2008, March 5). The world’s billionaires. Forbes. Retrieved from http://www.forbes.com/lists/2008/03/05/richest-people-billionaires-billionaires08-cx_lk_0305billie_land.html
Lewis, M. (2003). Moneyball. New York: W.W. Norton & Company.
Lopatka, J. E, & Herndon, J. B. (1997). Antitrust and sports franchise ownership restraints: A sad tale of two cases. The Antitrust Bulletin, 42, 749-791.
Ludwig, C. (2008, November 24). Vote now: Bob Castellini or Mike Brown? Dayton Dailey News. Retrieved from http://www.daytondailynews.com/o/content/shared-gen/blogs/dayton/chickludwig/entries/2008/11/24/vote_now_bob_castellini_or_mik.html
Marburger, D. R. (1997). Gate revenue sharing and luxury taxes in professional sports. Contemporary Economic Policy, 15, 114-123.
Martzke, R. (2005, February 4). NFL still working to finalize TV rights deal. USA Today. Retrieved from http://www.usatoday.com/sports/football/nfl/2005-02-04-tagliabue-tv_x.htm
Maske, M. (2005, April 19). TV deals show league’s might. Washington Post. Retrieved from http://www.washingtonpost.com/wp-dyn/articles/A825-2005Apr19.html
Mason, D. S. (1997). Revenue sharing and agency problems in professional team sport: The case of the National Football League. Journal of Sport Management, 11, 203-222.
Miller, P. A. (2009). Facility age and ownership in major American team sports leagues: The effect on team franchise values. International Journal of Sport Finance, 4, 176-191.
MLB at a crossroads, day 214: Twins will play through '03. (2002, June 7). SportsBusinessDaily. Retrieved from http://www.sportsbusinessdaily.com/index.cfm?fuseaction=article.main&articleId=66626&keyword=twins,%20lawsuit,%20contraction
Monk, D. (2002, December 6). Are losers liable? Cincinnati Business Courier, 19(34), 1.
Mulligan, M. (2007, January 25). He'd be a proud Papa Bear. Chicago Sun-Times. Retrieved from http://www.suntimes.com/super/mulligan/229185,CST-SPT-mully25.article#
National Football League collective bargaining agreement. (2006, March 8). Retrieved from http://www.nflplayers.com/user/template.aspx?fmid=181&lmid=622&pid=0&type=l
NFL team valuations. (2005). Forbes. Retrieved from http://www.forbes.com/lists/2005/30/Income_1.html
O’Sullivan, T. (2002, September 25). The doom of McAdoo. Retrieved from http://www.hoopshype.com/articles/clippers_osullivan.htm
Palomino, F., & Rigotti, L. (2000, November). The sport league’s dilemma: Competitive balance versus incentives to win. Retrieved from University of California, Berkeley Institute of Business and Economic Research, Web site: http://repositories.cdlib.org/cgi/viewcontent.cgi?article=1021&context=iber/econ
Pappas, D. (2002, February 4). The numbers (part six): Profits and revenue sharing. Baseball Prospectus. Retrieved from http://www.baseballprospectus.com/article.pho?articleid=1333
Questions and answers about the NFL labor talks. (2006, March 8). Retrieved from http://sports.espn.go.com/nfl/news/story?id=2351462
Rascher, D. A. (1997). A model of a professional sports league. In W. Hendricks (Ed.), Advances in the economics of sport: Vol. 2. (pp. 27-76). Greenwich, CT: JAI Press.
Ross, S. (2000). Myths, realities, and creative approaches to antitrust and franchise relocation issues. Antitrust, 14, 57-62.
Rovell, D. (2003, April 17). Owed to Donald Sterling. Retrieved from http://espn.go.com/nba/s/2003/0417/1540659.html
Scully, G. W. (1989). The business of Major League Baseball. Chicago, IL: University of Chicago Press.
Scully, G. W. (1995). The market structure of sports. Chicago, IL: University of Chicago Press.
Snel, A. (2005, April 20). As Rays whiff, front office scores. Retrieved from http://news.tbo.com/news/MGBHBR3UQ7E.html
Standings. (2008). Retrieved from http://www.nfl.com/standings
Szymanski, S., & Késenne, S. (2004), Competitive balance and gate revenue sharing in team sports. The Journal of Industrial Economics, 52, 165-177.
The Oakland Raiders, Plaintiff, Cross-Defendant and Appellant, v. National Football League, Defendant, Cross-Complainant and Appellant; Paul Tagliabue et al., Defendants and Respondents. 2001. Ct. App. 2/2 B163115 Los Angeles County Super. Ct. No. BC206388.
Vrooman, J. (1996). The baseball players’ labor market reconsidered. Southern Economic Journal, 63, 339-360. Weir, T. (2002, October 16). New revenue likely won't help payrolls. USA Today. Retrieved from http://www.usatoday.com/sports/baseball/salaries/2002-10-16-revenue_x.htm
Weisman, L. (2006, March 5). NFL labor talks stall, free agency postponed again. USA Today. Retrieved from http://www.usatoday.com/sports/football/nfl/2006-03-05-labor-talks_x.htm
Wertheim, L. J. (2007, November 27). The quiet owner: Paul Allen. Sports Illustrated. Retrieved from http://sportsillustrated.cnn.com/2007/writers/the_bonus/11/27/paul.allen1203/index.html
Zimbalist, A. (2001, August 20-26). Teams riding high, despite NFL’s protest. SportsBusiness Journal, 4(18), 46.
Zimbalist, A. (2004, April 5). Break up the Yanks? We owe them thanks. SportsBusiness Journal. Retrieved from http://www.sportsbusinessjournal.com/article/37925