On the court, LeBron James is money.

And off, he means even more money for the Cavaliers.

Since James entered the NBA, the value of the Cavs' franchise jumped 85 percent to $477 million last year — the largest percentage increase in the league, according to Forbes.com.

The team is ranked as the fifth-most valuable in the NBA, climbing over larger markets in the past several years, thanks in large part to James' on-court success.

But that team value — which factors in the arena — and ranking could take a serious hit next year.

As the NBA season kicks off this week, James is entering the final year of his contract with the Cavs, and there's plenty of media and fan speculation that he might bolt to a big-city market such as New York City when he becomes a free agent. The question of whether he stays or goes likely will hound James all season.

If he does leave, the psychological blow to Cleveland sports fans would be immense. But it also would be a huge financial blow to the team itself.

The franchise value would fall because majority owner Dan Gilbert — who bought the team for $375 million in 2005 — would have a hard time increasing sponsorship and TV deals without the homegrown superstar, experts said....

''I think almost all of the above-normal gains in franchise value are attributable to LBJ,'' said John Vrooman, a Vanderbilt University economics professor and sports economist. ''It is safe to say that the Cavs' value is now well over $500 million.''

The only teams with higher value than the Cavs last year were the New York Knicks, Los Angeles Lakers, Chicago Bulls and Detroit Pistons...

Even if James decides to leave — and Vrooman doesn't think he will because of the league's salary-cap restrictions and the collective bargaining agreement — the team value won't be decimated, Vrooman said.

''In the event that the Cavs were to lose LBJ, they would drift back into the mid-market mediocrity of the pack at No. 15 because of the sweet arena deal they still have with Gateway,'' he said. ''Mr. Q, [Gilbert] of course, knows this and will do whatever it takes to keep King James and his money machine.''

James reportedly will make $15.7 million this season — a relative bargain, given his financial worth to the team...

While teams in the money-making NFL machine may be less likely to feel the brunt of the recession because of the league's huge popularity, many debt-laden teams in the NHL and NBA might find themselves in trouble and end up selling for sharply lower valuations.

Last season, the average team annual revenue was about US$200-million in NFL and MLB; US$170-million in the Premier League; US$120-million in the NBA; and about US$90-million in the NHL, according to John Vrooman, a sports economics professor with Vanderbilt University.

"I have always called the NFL the perfect portfolio because the extensive revenue sharing removes the threat of a team having a bad season or being located in a financially depressed region," says Prof. Vrooman. "The NFL is solid and almost recession-proof."

NFL teams with new restaurant-and luxury box-filled stadiums, including the Dallas Cowboys' US$1.1-billion complex, are in an even stronger position because of the new revenue streams they generate from their state-of-the-art facilities.

It's no surprise that 19 of the 24 billion-dollar sports franchises in the world in the world belong to the NFL.

"In the NFL, the cash flow is major and almost a sure thing for 24 of the 32 teams," says Prof Vrooman. "Twothirds of the money comes from common NFL sources such as the mega-TV contract of US$117-million per club."

Given the dependable revenue sources, valuations for NFL teams run on average at five times a team's revenue. With its new arena, the Cowboys are valued at six times their revenue.

The average NFL team would have almost twice the value of the average NBA, NHL, MLB and Euro football club with exactly the same cash flow because of their more reliable revenue streams, says Prof. Vrooman.

A federal bankruptcy judge Wednesday rejected both bids to purchase the Phoenix Coyotes, slamming the door on Canadian billionaire Jim Balsillie but inviting the NHL to take a shot at making its offer more acceptable to the court.

Technology mogul Balsillie wanted to buy the and move it to Hamilton, Ontario, without the NHL's blessing.

That option was rejected by Judge Redfield T. Baum in a ruling that came 19 days after the two bidders vied for the team in a bankruptcy auction and more than five months after majority owner Jerry Moyes filed into bankruptcy.

John Vrooman, a Vanderbilt University economist, also sees the ruling as a significant victory for the NHL and other professional sports leagues that feared the Coyotes could set a precedent for team owners to file for bankruptcy to force relocations against league wishes.

The National Hockey League and its peers, such as the and NBA, tightly guard their ability to decide who owns their teams and where those teams play.

"It's a victory for the NHL, clearly," Vrooman said. "They were under damage control to show they had the ability to control their own house."

The league must now fully satisfy the court's concerns to seal a victory.

"In parlance, the court is passing the puck to the NHL, who can decide to take another shot at the sale net or it can pass off the puck," Baum said in his written ruling.

"As a matter of fact, the NHL had been cannibalizing itself by living off of five $50 million and four $80 million expansion fees in the overexpansion -- or Southern strategy -- of the 1990s. Adding the nine teams in nine years would, unfortunately, increase player cost more rapidly than revenues from expansion fees. This is what caused a big-time salary implosion at 75 percent of revenues that crashed the league in 2004."

"For the Pens, it's all about the future -- Sidney Crosby, Evgeni Malkin and Marc-Andre Fleury and the uncertain prospects of a new arena," Vrooman said.

The Penguins have an arrangement with Isle of Capri in which that gaming company will donate $290 million toward construction of a new arena if it gets the city's slots license; otherwise there is a Plan B proposal that uses a mix of funds from the team, the state and slots.

Vrooman said the Penguins are probably worth about $150 million, the same price the Blues fetched earlier this year, but that a new facility could inflate that.

"The value of a club is increased by about one-third when it moves into a new arena," he said. "So the value of the Pens with the Isle of Capri $290 million arena deal is worth perhaps even $190 million to $200 million and slightly less under Plan B.

"This all depends on how sweet the arena deal is for the new Pens owner. The prospective owner is paying for the Pens plus the option to move into a new arena, be it Isle of Capri or Plan B [in Pittsburgh] or the Sprint Center in Kansas City."....

...

Op-ed: Predators Deal Ain't Over 'Til It's Over, Tennessean 6/17/2007 - [Cached Version]

by JOHN VROOMAN

After the Nashville Predators ended their best regular NHL season on the ice with 110 points, absentee owner Craig Liepold (Racine, Wis.) soon sold the proud Preds to Canadian Jim Balsillie (BlackBerry techno-preneur from Hamilton, Ontario) for a cool $220 million.

In the hearts and minds of Predators fans there was a rush to judgment that Nashville’s ten-year NHL marriage was on the rocks.  Local and national media were sticking forks in yet another over-done Southern NHL hockey expansion experiment. Not so fast my friends – this team is not going anywhere anytime soon...

Op ed: Economics expert has a way that the Sounds ballpark could work for all Tennessean, 02/07/07 - [Cached Version]

by JOHN VROOMAN

There are two polarized sides to the economic debate surrounding the Nashville Sounds ballpark deal. In the academic world, economists unanimously hold that public subsidy of sports venues is never justified. In the case of tax increment financing (TIF), academics argue that any positive growth is an illusion that comes at the expense of negative growth somewhere else....

In the real world, the ideal sports venue public subsidy probably lies somewhere in between never and always, depending on the project. Society's welfare maxes out when the guys that benefit are the same guys that pay — nothing more and nothing less...

Rising NHL revenues both good news and bad,

"Teams are run on luxury boxes and club suites," said John Vrooman, a Vanderbilt economics professor who focuses on sports economics. "The marginal fan is becoming less and less important because the arena structure has turned hockey demand upside down. ...

"It used to be the regular fan was important. Now the corporate fan is what counts. The marginal fan in upper deck, the one you see on the videotron, doesn't reallymatter."...

METRO SUBPOENAED IN DEL BIAGGIO CASE,

John Vrooman, a Vanderbilt University economist who specializes in the business of sports, said he doesn't think Del Biaggio's problems will disrupt the team.

The fact that Del Biaggio is a minority owner should help, and Vrooman expects another investor to seamlessly step in.

The NHL is better positioned since the 2004-05 lockout, and the team has a generous deal in Nashville, he said.

"As long as your general partner is stable you're in good shape," Vrooman said. "Since the bankruptcy of the (Pittsburgh) Penguins in the mid- to late-'90s, the NHL has become very aware of bankruptcy problems

Owning a hockey team is not good business -- or is it?

"The fundamentals that we're being told about these teams certainly don't support the sale prices we're seeing, but the numbers don't lie," said John Vrooman, a Vanderbilt University economics professor who specializes in professional sports franchise valuations.

"The true value of a team is reflected more in the purchase price than it is in the rhetoric. Owners always poor mouth and say they're losing money, yet these franchises appreciate at rates that make them a high-performing investment, way beyond what we would think."

An economic view of the Brewers' chances Milwuakee Journal-Sentinel June 2, 2009

John Vrooman, an economist and sports fan at Vanderbilt University, has taken a look at the probability of a team making the playoffs in all four major sports leagues based on regular-season performance.

The most interesting of the analyses involves Major League Baseball. Vrooman calculates that a team needs to win 89/90 games to get into the playoffs. But here's the interesting part: "After a team has made the MLB playoffs the chances of advancing through the playoffs are unrelated to regular-season performance."

Why? In the 14 seasons since the 1994 strike-shortened season, nine different clubs have won the World Series.

To have a 50-50 chance of making it into the playoffs, you should play at least .550 ball in baseball, .563 in the National Football League, .493 in the National Basketball Association and .492 in the National Hockey League, Vrooman reported.

So where does that leave the Milwaukee Brewers? Vrooman is a Brewers' fan and says the best strategy for the franchise is to try to get to 89 wins. "Then just get into the tournament where anything can happen," Vrooman wrote me in an e-mail.

"It's why Bobby Cox (of the Atlanta Braves) said the post-season is a crap-shoot," Vrooman said.

The Brewers won 90 games last year and got into the playoffs as a wild-card team.

Vrooman says baseball's July 31 trade deadline is huge for teams like the Brewers. "Clubs close to the threshold (of 90 wins) will beocme heavy players in the trade market because of the extremely high payoffs to talent acquisitions if the team is playing around .550 and has a shot at 90 wins by the end of the season," he said.

That would be the so-called CC Sabathia plan.

Vrooman notes that big-spending teams like the New York Yankees, Boston Red Sox, New York Mets and Chicago Cubs may get those 100 wins "but they are equally likely to lose to a hot wild-card in the playoffs."

The Brewers' record is 30-21. The team is on pace to win 95 games this season.

...Just two years ago, sports economist John Vrooman said, "the NFL is a perfect portfolio." If the economy has brought woe to the NFL, then we're all doomed. Doomed, I say!

"I don't know about the league office, but the teams themselves are still in pretty good shape," Vrooman said Friday.

Vrooman's base is Vanderbilt University, where he might never have met quarterback Jay Cutler if not for the seriousness of finals week.

"Tell him 'hi,' " Vrooman said. "And tell him I'm still waiting for him to show up at class."

As for the NFL's "perfect portfolio," the league gets approximately 60 percent of its revenue from its TV contracts that don't expire until 2011. These revenues are shared evenly among the 32 teams. Another 20 percent comes from the gate, again equally shared. The final 20 percent comes from venue revenues, which most significantly comes from premium seating, which is acquired through long-term leases.

"The league is so well-structured financially," Vrooman said. "They don't have any cost uncertainty because they have the salary cap. They don't have any revenue uncertainty because they have a TV agreement that expires in three years. They have luxury suites and club suites leased for 10 years.

"In this case, the league is protected through time. By the time the TV contract comes up again, we'll be out of this. That's why I said they're recession proof."

Only the venue revenues are not shared, which is why eight teams playing in outdated stadiums — Buffalo, Minnesota, Atlanta, Jacksonville, San Francisco, Oakland, San Diego and New Orleans (Kansas City is renovating Arrowhead to add premium seating) — squawk about how Dallas, New England and the Broncos have built-in advantages.

It's true the 20 percent revenue from gate receipts is vulnerable in a sagging economy. There have been more no-shows at Invesco. But Vrooman said even in the Great Depression, the entertainment industry held up.

"In times like these when everybody is uncertain and afraid, I think you'll see Bronco fans hold on to those season tickets," he said.

NFL offices operate without a cap, or floor on salaries and expenses. They can be controlled as the league sees fit. The NFL Network and its virtual pay-per-view concept may have started at a bad time. But it's a stretch to equate Goodell's doomsday memo on office cutbacks to the overall state of the game.

"When you see the percentages of 60-20-20 and only 20 percent is really volatile, I think you can see that the nature of the NFL 'recession' is not as deep as somebody who has an entire portfolio on the line," Vrooman said.

Why didn’t anyone catch on to Nashville owner Boots Del Baggio’s shady financial dealings? Nashville Tennessean columnist David Climer interviews Vanderbilt economist John Vrooman, who specializes in the business of sports, who said the NHL is “behind the other leagues” when it comes to checking the backgrounds and financial status of its owners because there is limited revenue sharing within the league.

“If you share so much money like the NFL does, you want to know everything about the owner,” Vrooman said. “In a league like the NHL that doesn’t share very much revenue, you just want that team to be viable.”

But Vrooman believes the Predators will survive. Del Biaggio’s 27 percent stake in the team can be replaced by a new partner, a loan or a combination of the two.

I admittedly don't follow other professional sports nearly as close as the NHL, and as a result, "relocation fee" is a bit of new vocabulary for me. There was apparently one involved when the Colorado Rockies franchise landed in New Jersey as the Devils back in 1982, although I'm unsure if that fee was merely used to compensate the New York franchises.

Thankfully, there are experts available for this sort of thing, and Vanderbilt economics profession John Vrooman is one of the best when it comes to sports economics. Digging through some of his papers on various topics, I found a list of recent franchise relocations and associated fees in one called "Theory of the Perfect Game":

In the NHL, none of the four most recent relocations came with a fee attached. The Raiders to Oakland case also didn't have a fee due to the fact it went through the courts (and it's my understanding they had to payout some cash during that process), while the other NFL and NBA moves have included fees of about $30-million.

The one major anomaly here is the Expos move to Washington, which involved Major League Baseball buying the troubled Montreal franchise and then selling it for the $450-million figure later on (making it more of a purchase plus relocation fee all rolled into one). Additionally, the Nats have to compensate the nearby Orioles with television revenues.

(Of note is the distance between the Washington and Baltimore ballparks — about 45 miles — and the fact that that's almost identical to the distance between Copps Coliseum and the Air Canada Centre. Obviously we're comparing apples and oranges with the two different sports leagues, but there's a precedent for a team relocating into another's territory, paying a massive fee and offering other concessions.)

Outside of the Nationals case, however, relocation fees have either been nonexistent or relatively easy to stomach. I wonder if an unprecedented $300-million fee in addition to the Coyotes purchase price will fall into the category of "unreasonable" or if that's what it will take to move a team into Southern Ontario.

How much is CC Sabathia worth?

John Vrooman is a sports economist at Vanderbilt University in Nashville. Among other things he studies baseball salaries and revenue.

We asked him to take a look at free agent pitcher CC Sabathia and what he might be worth in the baseball market.

The Brewers have offered Sabathia a five-year, $100 million contract. Most baseball observers expect the New York Yankees or another big-market club to offer him even more.

The problem with free agency, according to Vrooman, is that "the average bid is somewhat accurate but unfortunately for the winner the highest bid systematically overestimates the value of the player in a limited free agent market."

Vrooman believes that Sabathia will get a deal for five or six years at between $20 and $25 million per year.

But what about the Brewers? Vrooman says he doesn't think Sabathia is worth that kind of money to the Brewers. "As good as he is, he is probably worth only $15 million per year over five years for the Brew Crew," Vrooman said.

Sabathia, Vrooman figures, added approximately $5.2 million to the Brewers' revenue line. Based on that and Sabathia's winning percentage as a Brewer, Vrooman said Sabathia was worth $11.5 million to the Brewers in 2008.

That's the economic analysis. But we all know the free-agent market doesn't always follow such an analytical path. Which means Sabathia will likely be paid far more by some major-league club.

The Other Daytona 500 Winners–Private Equity?

...With average primary sponsorships running $18.5 million a year, according to Vanderbilt sports economist John Vrooman, it helps to get the most out of every penny...

The NFL Doesn't Want Your Bets,

At a time when states are facing major revenue shortfalls and slashing budgets for things like education, parks and public safety, some fans and state officials say the league's staunch stance against the proliferation of sports betting is unfair, especially in light of public funding that benefits the NFL's franchises. In the past two decades, according to John Vrooman, professor of sports economics at Vanderbilt University, the NFL has taken in nearly $17 billion in taxpayer subsidies to build new stadiums.

"These tickets are usually not resold, especially by Hawks fans," said John Vrooman, professor at Vanderbilt University who teaches a class on sports economics. "It would be like messing with the Hawks' mojo now to sell a piece of the action."

This is no cold economic calculus of preferences, profits and ability to pay. Emotions are involved.

"The 'I was there when the Hawks rocked the Steelers' effect is priceless," Vrooman said, revealing his bias. "There is no substitute."

Baseball's Shopping Season

"In corporate America, payroll is usually set to maximize the value of the firm. This is not always the case in sports," says John Vrooman, sports economist at Vanderbilt University.

In a league of its own The Economist, Apr 27th 2006

Second, the system lowers risk. “The NFL is a perfect portfolio,” says John Vrooman, a sports economist at Vanderbilt University, because one team's losing season and sagging revenues are offset by another team's banner year. The co-operative arrangements also make costs stable and predictable. Mr Vrooman reckons that even if another American sports league, or a big European football league, were to have similar cashflows to the NFL, the American league's teams would still be 50-60% more valuable because their business is so much less risky

Like any good syndicate, the NFL under Mr Tagliabue has also mastered politics. Mr Vrooman points out that the league likes to leave one prominent city without a football franchise, “like an empty seat in musical chairs”, so that teams in other cities can threaten to move if they do not get their way. This invariably prompts state and local governments to contribute public money to help teams that replace old stadiums with new ones. Los Angeles residents have been scratching their heads about why the country's second-largest city has had no football team since 1994. But the NFL has made far more money from new stadiums that have been built using Los Angeles as a threat, says Mr Vrooman, than it could have made by actually putting a team there. There is a lesson in all this for Mr Tagliabue's successor: competition is nice, but if you want it to be profitable, it helps to write your own rules.

PESCA: To get into that exclusive Coaches Club, one doesn't simply buy a ticket. One must first buy a personal seat license. Think of PSLs as a ticket to buy a ticket. John Vrooman, an economist at Vanderbilt University, says PSLs are a good deal for the public because they allow teams to finance new stadiums through their own fans and not all the taxpayers in a community. They've been around for a while. What's new is that the Jets have put their best PSLs up for bid online, which, according to Vrooman, is a pretty savvy move.

Dr. JOHN VROOMAN (Economics Professor, Vanderbilt University): It's called perfect price discrimination. What you're trying to do is to get every fan to pay the most they possibly would for a season ticket.

Jeremy Hobson: London's mayor expects 10,000 Americans to fly over for the sold-out game. Wembley stadium is asking fans to dress in Dolphins or Giants colours -- spelled "COLOURS" on the website -- to show the NFL there's a market in the U.K.

Good idea, says Vanderbilt University Sports Economist John Vrooman:

John Vrooman: Everything the National Football league does has some sort of capital investment mentality to it. They're always looking for the payoff in something, and rarely do they want the payoff to be immediate.

Vrooman says that means the NFL may be dreaming about a team in the U.K. down the road -- and all the TV revenue that would go with it.

Driving a hard bargain with the NFL, San Diego Source June 11, 2009.

As John Vrooman of Vanderbilt University has shown, it is possible to privately finance an $800 million stadium by leveraging the lucrative and unshared revenues that flow from luxury boxes, personal seat licenses and ancillary stadium revenues (sandiego7.pdf).

49ers calling plays in Santa Clara San Jose Business Journal December 7, 2007.

"The problem you have is that the city is a small political entity... being asked to support a wider economic event."

What's more, Vrooman says, is that the economic impact rarely matches the promises.

"NFL stadiums are really bad anchors for economic development," he says, adding that the stadiums are used generally just 10 to 12 times a year and meanwhile are surrounded with a big empty parking lot. "It's just a waste of space."

John Vrooman, who teaches economics at Vanderbilt University, noted there appears to be "an asymmetry" between what fans would contribute and what's requested from Santa Clara - which has a smaller tax base than San Francisco.

Team officials said fans will contribute through ticket and parking taxes and that some will buy special seat licenses that will pay exclusively for building and maintaining the stadium.

But Vrooman wasn't convinced: "In this proposed deal," he said, "the 49er nation is taking a free ride."

Professor John Vrooman at Vanderbilt University said, "The total broadcast licence fees of Yankees and Mets is almost 10 times as much as the sum of lower 8 teams such as the Brewers and Pirates."

These licence fees are stable revenues for them even in a depression. Professor John Vrooman said, "Though it is possible for teams to decrease incomes from sponsors and advertisement in depression, it is rare cases that baseball fans cancel cable TV. Watching TV is cheaper than other amusements."

In addition, "YES" network is owned by the Yankees. The Yankees acquire a lot of profits from "YES." Forbes estimates the amount of the YES TV revenue at $150 million.

General motors decided to quit sponsor contracts with Yankees and Pirates.

Professor Vrooman said, "The teams which largely depend on revenue from sponsorships and advertisement have been damaged more. Cancellation of sponsorship contracts damages small market teams."

GM bankruptcy: GM sponsor fees necessarily reduced Yomiuri Shimbun.

...Professor John Vrooman at Vanderbilt University said "GM will cut the total amount of their advertising budget and shift from the brand image advertising for the long term effect to sales promoting advertising for the short term sales effect. GM's TV advertising budget will be cut in half."

NFL owners decide they 'can't live with' collective agreement , Toronto Globe and Mail, May 20, 2008

"I don't think the NFL has any labour problems at all," said John Vrooman, a professor at Vanderbilt University who writes extensively on NFL economics. "At 60 [per cent of revenue], there's a lot of room for them to make money. But you've got the classic conundrum of a cartel. It only works as long as no one cheats on the cartel. And the only guys who haven't cheated in the NFL are the guys crying. Ultimately, [the wealthiest teams] will have to share some revenue with those teams because the guys at the bottom don't have any wiggle room.

"Part of the problem is more money is going to the players than they're used to," Vrooman added, "but [the wealthiest teams] are also squeezing their younger brother and the younger brother is screaming about it."