Franchise Relocations, Expansions, and Mergers in Professional Sports Leagues

Daniel, Rascher (2008): Franchise Relocations, Expansions, and Mergers in Professional Sports Leagues. Published in: The Business of Sports (2008)

Abstract

All three sections in this chapter are interrelated. Expansions and relocations, especially in the early years of a league, are often the response to upstart rival leagues. More recently, relocations have occurred because another city offers a better facility lease regardless of whether the league as a whole is better off or not. Relocations, more so than expansions, often end up in court whether as an antitrust case accusing the league of monopolistically restricting business or as an eminent domain suit attempting to prevent a team from relocating. Recent rulings have allowed a league to enforce a relocation fee that is commensurate with the harm caused to the rest of the league because of the move.

Rivalries often begin with a few teams in major cities competing head-to-head with the existing dominant league. Inevitably, the sport ends up with one major league providing top level play, begging the question of whether sports leagues are natural monopolies. This occurs either with a merger, a partial merger, an acquisition or, most commonly, a failed rival league. Often the incumbent league emerges from the rivalry a stronger, more stable business, having been forced to address a weakness exploited by the rival (e.g., MLB failing to recognize the western markets). Additionally, the new locations of franchises have often been vetted by the upstart rival to determine which few are most profitable and sustainable.

• Item Type: MPRA Paper
• Language: English
• Keywords: competition; expansion; relocation; merger; football; baseball; basketball; hockey; sports
• Subjects: L - Industrial Organization > L8 - Industry Studies: Services > L83 - Sports ; Gambling ; Restaurants ; Recreation ; Tourism

References

Young Hoon Lee and Rodney Fort, “Structural Change in Baseball’s Competitive Balance: The Great Depression, Team Location, and Racial Integration,” Economic Inquiry 43, no.1 (2005): 168.

Lawrence M. Kahn, “Sports League Expansion and Economic Efficiency: Monopoly Can Enhance Consumer Welfare,” CESifo Working Paper No. 1101: 22.

Rodney Fort, Sports Economics (Upper Saddle River, NJ: Prentice Hall, 2003), 135-45.

Rodney Fort, “The Value of Major League Baseball Ownership,” International Journal of Sport Finance 1, no.1 (2006): 9.

Thomas H. Bruggink and James W. Eaton, “Rebuilding Attendance in Major League Baseball: The Demand for Individual Games,” in Baseball Economics: Current Research, ed. J. Fizel, E. Gustafson, and L. Hadley (Westport, CT: Praeger, 1996), 26-28.

Donald A. Coffin, “If You Build It Will They Come? Attendance and New Stadium Construction,” in Baseball Economics: Current Research, ed. J. Fizel, E. Gustafson, and L. Hadley (Westport, CT: Praeger, 1996), 42-46.

Dennis Coates and Brad R. Humphreys, “Novelty Effects of New Facilities on Attendance at Professional Sporting Events.” Contemporary Economic Policy, 23, no.3 (2005): 436-55.

Paul D. Staudohar, “Baseball's Contraction Pains,” NINE: A Journal of Baseball History and Culture 11, no.2 (2003): 73-84.

Gerard S. Mildner and James.G. Strathman, “Baseball and Basketball Stadium Ownership and Franchise Incentives to Relocate,” in Sports Economics: Current Research, ed. J. Fizel, E. Gustafson, and L. Hadley (Westport, CT: Praeger, 1999): 75-94.

Daniel A. Rascher, and Heather Rascher, “NBA Expansion and Relocation: A Viability Study of Various Cities.” Journal of Sport Management 18, no.3 (2004): 274-95.

Dean V. Baim,. and Larry Sitsky, The Sports Stadium as a Municipal Investment (Westport, CT: Greenwood Publishing Group, 1994).

Wilbur C. Rich, The Economics and Politics of Sports Facilities (Westport, CT: Quorum Books, 2000).

Dennis W. Carlton, Alan S. Frankel, and Elizabeth M. Landes, “The Control of Externalities in Sports Leagues: An Analysis of Restrictions in the National Hockey League,” Journal of Political Economy 112, no.1 (2004): 268-88.

J.C.H. Jones, and D.G. Ferguson, “Location and Survival in the National Hockey League” Journal of Industrial Economics 36 (1988): 443-57.

Glen Seredynski, J.C.H. Jones, and D.G. Gerguson, “On Team, Relocation, League Expansion, and Public Policy: Or, Where Do We Put This Hockey Franchise and Why Would You Care?,” Seton Hall Journal of Sport Law 4 (1994): 663-700.

Angelo Cocco, and J.C.H. Jones, “On Going South: The Economics of Survival and Relocation of Small Market NHL Franchises in Canada,” Applied Economics 29 (1997): 1537-52.

James Quirk, and Rodney D. Fort, Pay Dirt: The Business of Professional Team Sports (Princeton, NJ: Princeton University Press, 1992).

Andrew Zimbalist, May the Best Team Win: Baseball Economics and Public Policy (Washington, D.C.: Brookings Institution, 2003).

Evan Weiner, and Heather Rascher, A Business History of Professional Football, Unpublished manuscript (2005).