Related Articles

37 users responded in this post

Subscribe to this post comment rss or trackback url
mygif
Sisyphus said on March 5th, 2013 at 9:17 am

There is an argument to be made that the maximum salary cap also serves to keep LeBron et al from sucking up the entire pool of capital to pay the rest of the labor force. LeBron profits from facing teams that are, at least, competitive since that produces a stronger product, which generates a stronger fan base, which increases the value of his ancillary revenue streams. That is to say, if no one wants to watch the NBA because it’s just LeBron walking all over the Washington Generals, then his value as a spokesman to sell shoes, cereal, cars and clothing drops. He loses all of those lucrative opportunities.

In the end, this is all about a market that is trying to regulate itself to protect individual actors from making bad decisions that decrease the value of the entire market, which means that even if you don’t like sports (which I don’t, really), you can find some interest in the economic interplay between teams and leagues, and see it as a sort of laboratory for economics in general. That would make the NCAA with it’s unpaid labor a Dickensian dystopian industrialization phase.

ReplyReply
mygif

Oh man, it just occurred to me: is there an economic-type board game themed around sports franchise ownership? Because I would play the shit out of that.

ReplyReply
mygif

I’m not that knowledgable about all of this as the UK situation doesn’t have salary capping. So what you get here is that footballers get paid obscene amounts and … well, for the last decade large amounts of them have had serious cashflow problems.

(Actually, a great case study here is Rangers FC. One of the two ‘Old Firm’ Glasgow teams, who between them won every top Scottish football league for more than the last two decades, and are a leading cause of death in Glasgow.

Rangers announced they’d outspend against Celtic for decades. And, er, have now gone bust, but been allowed to keep their titles.)

How do you view European-style pays?

ReplyReply
mygif
smwilliams said on March 5th, 2013 at 10:27 am

Comments have sort of touched on it, but the key is realizing a team’s value isn’t an indicator of how profitable it is. As opposed to say Apple, who ships units every day of every year of dozens of different products, sports franchises are dependent on income from finite sources, namely ticket sales and television rights contracts. I’d wager a lot of owners don’t turn a year-to-year profit because when you spend 75 million on labor alone, you better have one hell of a cash flow.

So, yes, LeBron James is probably severely underpaid because the value he brings to a team is greater than his salary. But his presence also allows lesser players to pull in seven figure salaries who are a net negative to their employers. Unless you think fans would pay 100 bucks a ticket to watch the last guy on each team’s bench to play basketball.

The structure is somewhat socialist in nature. LeBron cedes earnings to guys who otherwise would be making one-tenth of what they make to basically be practice dummies. Players unions agree to these sorts of caps and floors of spending to benefit all its members, not just the superstars (who rake in multiple times their salaries through endorsements alone).

ReplyReply
mygif
ralphdibny said on March 5th, 2013 at 10:33 am

Houston kinda shitty? While the city of Houston has its problems, if I were a millionaire athlete, it would be one of my top choices of places to live.
http://www.forbes.com/sites/morganbrennan/2012/07/26/houston-tops-our-list-of-americas-coolest-cities-to-live/

ReplyReply
mygif
Scavenger said on March 5th, 2013 at 11:08 am

Houston is a great city with one problem…Houstonians.

ReplyReply
mygif

Interestingly, Sisyphus’s and Johnny’s comments hit on the 2 main advantages of salary capping listed on Wikipedia (…what? This topic is interesting to me but I don’t know much about pro sports and even less about economics), namely parity between teams and preventing teams from going broke. Which point to 2 big differences between a pro sports league and a regular (free-market?) economy:
1. It’s bad for the league as a whole if teams regularly go broke (Wikipedia: fans won’t get so invested in the sport if their team is constantly in danger of going under). It sounds like you think this wouldn’t be an issue since you dismiss the team owners’ claims of poverty, but the situation could change drastically without the cap.
2. It’s bad for the league as a whole if there’s no real element of competition between the teams. (No one gets off on watching the Microsoft/Apple race…OK, bad example.)
So what would you do with these if you took off the salary cap?

ReplyReply
mygif

How do you view European-style pays?

Football’s relegation system means that capping isn’t strictly necessary – the competitive field becomes an almost-pure exercise in capitalism. Teams can risk over- or under-spending as they like, because failure brings with it real consequences – e.g. you get kicked out of the top league and have to play in the sucky second-tier league, or even lower if you continue to play badly there.

Of course, this gives teams the opportunity to live out their own micro-sized boom-and-bust cycles, as well as realistically model the fact that capitalism tends to entrench the rich – the likes of Arsenal, Manchester United, Liverpool and Tottenham Hotspur are realistically never going to leave the Premier League at this point unless they are mismanaged to the point of total incompetency or unless they are hit by a meteor (I am sure plenty of Man City fans would root for Man U to be hit by a meteor) and this gives a bit of a lie to the “oh any team can eventually make it to the Premier League and compete for the title” spiel.

ReplyReply
mygif
Sisyphus said on March 5th, 2013 at 1:29 pm

I second Liam’s call for a sports economics management game (either board game, or electronic simulation, I’m less choosy). That would be utterly sweet!

ReplyReply
mygif

Football Manager is the classic game for it in football. (Actually, it was originally Championship Manager, but they lost the license and made a new version which is better than the thing currently called CM. Or something.) It’s ridiculously mainstream amongst geeky sports fans in the UK.

I’ve not played in years, but it combines deep gaming with actually testing one’s computer processing speed.

Decent review is here. http://www.rockpapershotgun.com/2010/11/29/gareth-campesinos-reviews-fm-2011/

(By which I mean “indie rock singer reviews it by detailing how it works as an obsession and analogy/substitution for life”.)

ReplyReply
mygif

Lebron is not getting paid at the max level. Bosh gets a higher salary than him. He and Wade both left money on the table to create the Miami Superfriends. Less attractive markets can be successful, but it nearly always requires a combination ofhaving the luck to acquire a superstar and great management. If geography didn’t dictate my Timberwolves fandom, leaving me with little to cheer for in years, and no sympathy for other fans of abysmal teams, i’d feel sorry for Raps fans. Your team is going nowhere with colangelo at the helm.

ReplyReply
mygif

Lebron is not getting paid at the max level. Bosh gets a higher salary than him.

Actually, they get paid the same. Which is fine: Bosh is overpaid too, albeit not as overpaid as Gay or Johnson. And LeBron is only “not at max level” if you assume the max level is what he could have earned staying with Cleveland. He’s certainly earning individual max for where he is playing now.

Your team is going nowhere with colangelo at the helm.

Oh lord don’t get me started on Bryan Colangelo.

ReplyReply
mygif
Jonathan Roth said on March 5th, 2013 at 2:58 pm

While I’m not very knowledgable about sports, I wonder if the answer would be something of a “moneyball” style solution. In other words, figure out what traits are essential to winning a game and aren’t valued by most. In baseball, the saber metrics people valued the ability to get on base vs. the dramatic power hitters and bunters that struck out or were tagged out more often. In the book “the power of habit” there is a similar example involving the Tampa Bay Buccaneers. If there can be new solutions for baseball and football, then why not basketball. I’m sure there are a bunch of intelligent and creative statisitician fans of the sport who could crunch the numbers and spot these traits. What do you guys think. (I third Liam’s game suggestion, especially if it was newbie friendly to those of us that don’t know much about sports.) (and yes, I am one those “I don’t even watch sports and I don’t get sports” people, which is why I like it and am really impressed when a work gets me interested in something I usually don’t care about, such as “moneyball” with baseball and statistics or “the big year” and bird watching or “world war z” and zombies.

ReplyReply
mygif

The problem with trying to Moneyball your way out of this is that large-market teams can go after traditionally undervalued skills too. (They might be less likely to do it initially, because they’re more risk-averse, but once the small teams start winning games the big teams will start copying them).

I think the only real long-term solution is to arrange things so that different teams have roughly equal revenue potential. This means one of two things:
-Make it so that most of the money flowing into the sport is coming from national television or other team-neutral sources (i.e., the NFL solution).
-Make it so that all the teams have roughly equally sized fanbases (meaning that New York probably needs about 5 teams for every pro sport in existence). I guess college sports kind of do this, except when they don’t.

Otherwise you’re always going to have weird distortions in the game coming from off-field wealth disparities.

ReplyReply
mygif

NPR recently addressed this too: http://www.npr.org/blogs/money/2013/01/25/170176590/at-17-5-million-a-year-lebron-james-is-underpaid

Their point was that salary caps prevent one team from outclassing all the others, which keep teams competitive which maintains a fanbase who buy the merchandise and make endorsement deals possible.

ReplyReply
mygif
Dean Hacker said on March 5th, 2013 at 5:31 pm

Ok. Great article.

Of the North American pro sports leagues, the NBA would be the best served by adopting the Premiere League model of relegation. NBA teams have their fates disproportionately effected by star players. Where LeBron, CP3, Melo or Dwight Howard play has a massive effect on the fates of their franchises and the other franchises in their division. The NBA owners, therefore, have tried to limit their options as much as possible. There are max contracts, max contracts for new teams are lower than legacy teams, there are salary caps and luxury taxes to prevent talent from gathering together and etc.

Essentially, the only way to lose a top talent after you have drafted him is mismanagement. You cannot be outbid for his services, you have the right to match any offer in the first year of free agency and the largest markets are almost always out of the bidding. What is amazing is that all those players have managed to change teams fairly recently.

That is where relegation would be useful. Some teams just do not deserve repeated passes at high draft picks, revenue sharing and everything else.

ReplyReply
mygif
Michael P said on March 5th, 2013 at 6:07 pm

Yeah, like Forbes is a good judge of what’s cool.

ReplyReply
mygif
bunnyofdoom said on March 5th, 2013 at 7:52 pm

Just a question. MGK I know you’re Canadian, and even though I’m pretty sure you’re not a hockey fan from pretty much everything even tangibly related to sports on this blog (and you live in Toronto which has no team), I’m just wondering if you held a similar opinion and views on the NHL lockout earlier this year.

ReplyReply
mygif

While most point to MLB as the worst possible system, since modern free agency began in 1975, it’s had only one franchise relocate (even the NFL can’t say that). Small market teams are able to regularly profit (if not regularly compete), there are no caps on individual player salary, and the sport still generates—roughly—75% the revenue the NFL does (the NBA sits at, roughly, 40%).

Coming from New York, I’m sure my opinion holds little value here (even if it I root for the Jets, Knicks and Mets), but the NBA’s system of reducing management flexibility hurts everyone. Teams can’t dump salary for prospects, can’t outspend other teams, and are forced to overspend on mediocre talent due to absurdly high salary floors (85% of the cap).

ReplyReply
mygif

Perhaps we should introduce salary caps for owners?

ReplyReply
mygif

For those wondering about possible ways number-crunchers might find new ways to apply metrics for basketball, thus changing previously under-valued players into possible moneymakers, consider the potential of CourtVisionAnalytics (using geography techniques to map basketball shots, assists, misses, rebounds, etc., at: http://courtvisionanalytics.com/

For what it’s worth, LeBron & Bosh are both included in this Heat vs. Thunder matchup from the NYT, using CVA’s maps:
http://www.nytimes.com/interactive/2012/06/11/sports/basketball/nba-shot-analysis.html?_r=0

Dunno how much GMs and owners are going to use this to either headhunt players or tell their coaches what the team should be practicing, but the maps are geeky fun to gawk at.

ReplyReply
mygif
Hypo-Calvinist said on March 5th, 2013 at 11:40 pm

“The ‘always side with labour over bosses’
rule is never stronger than when one is talking about pro sports, because without the players there would literally be no product”

always side with labour over bosses is certainly a good rule of thumb, but is never weaker than when talking about laborers whose minimum salary is $490,180.
That is the 2013 NBA minimum for a player with 0 years of experience.

http://www.hoopsworld.com/nba-minimum-salaries/

A better example ,for me, would be an area where the laborer is under-paid & under attack from government & management, say teachers, for one of hundreds of examples.

ReplyReply

mygif

Yeah, but that 490,000 dollars is partly compensation for being living product generating several times that amount in revenue, and for a career that’s often less than a decade long.

ReplyReply
mygif
Hypo-Calvinist said on March 6th, 2013 at 6:26 am

If anything, I think players should make more, I’m just taking issue with the never stronger.

ReplyReply
mygif
Sisyphus said on March 6th, 2013 at 9:26 am

I agree with Hypo-Calvinist. A teacher in an inner city school will make around, say, $45,000 per year. Multiplies out by a 30 year career, that’s $1,350,000 (less taxes, the start-up cost of getting a Master’s degree, etc.). An NBA benchwarmer will make, in his 10 year career, $4,900,000, without the expenses of a real start-up cost. Adjust for taxes, saying he’s keeping around 60% of his income, that’s $2,940,000. He’ll also be retiring at around 30 or 33 years of age.

So, yes, always side with labor, but damn it would be nice to see LeBron on a teacher’s picket line some time in solidarity.

ReplyReply
mygif

Agreed, the players got annihilated on the new deal in the NBA. Still, nothing is quite as ridiculous as NCAA athletics where we have to constantly accept the batshit premise that college athletes who bring in millions of dollars of revenue shouldn’t be paid.

ReplyReply
mygif
Simon Jones Who Is Blogless said on March 6th, 2013 at 5:40 pm

The more serious end of college sports in America strikes me is one of the more morally dubious premises I’ve come across. Not only are they making millions for other people, the risk of injury and the wear and tear on their bodies that they’re giving up are costing them years of earning capability as well.

Though, on a side note my dad used to play Australian Rules Football professionally as a teenager, something he actually had to give up when he went to university because they were being paid what was essentially beer money at the time and he’d make more with a shitty part time job.

Which mostly leads to the fact that people should seriously watch The Club.

http://en.wikipedia.org/wiki/The_Club_%281980_film%29

ReplyReply
mygif

that shot at nerds in the annotations is pretty annoying. Things like that make it understandable to me that they don’t want to associate with anyone but those THEY identify as nerds.

ReplyReply
mygif
Tim O'Neil said on March 7th, 2013 at 4:40 am

How about we index all player salaries to a certain proportion of the median index in the city they play – like, say, a New York player gets can only be payed, max, 10x the median salary of a New York resident.

And then we nationalize the sports leagues so that all sports revenue goes into municipal budgets. Because any other solution, and any other possible explanation for the criminal misallocation of precious resources that goes with “professional sports” (including collegiate sports) is simply a blot on the national conscience.

ReplyReply
mygif

The first time I heard about professional sports players striking I thought ‘how greedy!’, but I was also twelve; since then and every other time, even a cursory examination of the facts favors the player side. This is true in nearly all labor disputes, as mentioned above, but the smokescreen about ‘higher ticket prices’ and yes, painting the players (but not the owners somehow) as money-grubbing greedos is always irritating.

I don’t like sports but I can accept them as a form of entertainment in which I simply am not interested, except at the college/high school level–there they are actively sucking up resources desperately needed for say, education, in addition to not paying the product.

ReplyReply
mygif
Brian T. said on March 7th, 2013 at 2:31 pm

College basketball has been a lot more fun to watch than NBA games since at least the period when Allen Iverson kept getting arrested for stuff. Especially during the era when players started attacking obnoxious fans during games and junk like that.

It makes more sense to me to be passionate about somebody’s favorite college team than to pay any attention to the NBA.

But now that Lindsey brought it up, I’m going to be like “Sure, it brings in some money and prestige to the school but why aren’t they devoting more resources to the science department instead?”

ReplyReply
mygif
Tim O'Neil said on March 8th, 2013 at 1:47 am

If you want to defend college sports, you should read this first:

http://www.theatlantic.com/magazine/archive/2011/10/the-shame-of-college-sports/308643/

ReplyReply
mygif
Zifnab25 said on March 8th, 2013 at 6:01 pm

@Lindsey

The first time I heard about professional sports players striking I thought ‘how greedy!’

Typically, that’s because you don’t realize who they’re striking against. Once you discover who Jerry Jones is and how much he wants to charge you for nosebleed seats, you’re pretty much stuck siding with the players by default.

@MDK

And I have been trying to figure out how the league might stop doing this

I think a great place to start would be to start funneling money to all the people in the industry that *aren’t* making septuple digits. Maybe start with the stadium cleaning crew or the guys selling $40 peanuts. :-p

Points have been raised about the NCAA as well. The only thing more obscene than paying a professional athlete $15M/year is not doing it. I look at my alma mater The University of Texas bring in $100M/year, then ask “Where is all that money going?” The way they keep cranking up tuition every year, its clearly not going back to the school. And the athletes aren’t getting paid. So…

Seriously, you want to solve the whole “What are we going to do with these billions of dollars in sports revenue?” I’ve got a solution for you. Eisenhower-era 90% tax rates for everybody.

There. Problem solved.

ReplyReply
mygif

Wait, sports fans aren’t nerds? That’s surprising: I could’ve sworn when a dude is entirely willing to talk your ear off about the excruciating minutiae of an entire system you could not possibly care less about and is puzzled that you do not share his enthusiasm, let alone his command of trivial facts regarding that enthusiasm, you were obviously dealing with a nerd.

I guess I owe an apology to my brother-in-law for calling him a nerd when he would not STFU about baseball. Am I also allowed to rescind my apology for going on about why I was looking forward to the Guardians of the Galaxy movie? Or is that still considered a nerdy thing to do?

ReplyReply
mygif
highlyverbal said on March 9th, 2013 at 7:40 pm

@MGK: “it’s a classic prisoner’s dilemma”

Only for very odd values of “classic”!!

Let’s leave aside the minor missing details about the “classic” prisoner’s dilemma, such as the number of players or the mathematical boundary conditions of the pay-off matrix, etc. Because we know you don’t really have the gravitas to present a decent game theory analysis on just a blog post, so we all get that you mean some hand-waving-based version of game theory.

Your example still fails several _important_ criteria… first, and most egregious, the action choices are not blind/simultaneous. Owners can gather information about what offers are being made to various players to some degree. Other teams can be outbid. The salary cap room remaining for teams is transparent. An aggressive media helps broker useful information. Etc.

Second, the pay-offs for paying a player include non-economic values. Some teams wish to win a title, some wish to contend, some wish to rebuild, some wish to minimize costs, some wish to have splashy signings for reputation or seriousness. (Meaning there is no rational calculus producing defection, but instead rationally differing valuations. And there is resultingly less tension in “defecting” outcomes; the contenders and the rebuilders could be mutually satisfied.)

Finally, unless you know when the NBA is going to go out of business or have a new labor agreement, wikipedia thinks: “In an [...] unknown length game there is no fixed optimum strategy…” (ellipsis added)

========

The label I would suggest would be “race to the bottom.”

ReplyReply
mygif

I don’t watch sports or care about sports. Women are inferior to men and being gay is a mental illness, just like being ‘trans’. On a related note, the jews did 9/11 and blacks are not as smart as white people, their gigantic penises aside.

ReplyReply
mygif

Nobody deserves to be paid money for sports. Not players, not team owners, nobody. You want to play sports, sure, fine, but do it on your own dime and get a real job you lazy bum.

ReplyReply

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Please Note: Comment moderation may be active so there is no need to resubmit your comments