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  • Will basketball really give Cleveland a $500M boost? CBS News, July 17, 2014

    LeBron James' return to the Cleveland Cavaliers may have captured the imagination of sports fans around the country, and nowhere more than in Cleveland. But there's no way his return will help the Cavaliers give the area's economy a $500 million lift as some have argued, according to economists contacted by MoneyWatch.

    The $500 million figure, released by Cuyohoga County Executive Ed FitzGerald earlier this week, "is as bad of an economic impact statement that I have ever seen," according to Victor Matheson, a professor of economics at the College of the Holy Cross, adding that "it is almost certainly a gross exaggeration."

    Vanderbilt University economist John Vrooman described the estimate as "pure pie in the sky." Both Matheson and Vrooman study the economic impact of sports. The Cavaliers couldn't be reached for comment. But Nathan Kelly, an official in Cuyohoga County, said the impact figures are for the Cavaliers as a whole and not James in particular, even though media outlets such as Bloomberg News argued that it was for the superstar.

    Kelly said the $500 million figure is "within a range" and not a formal analysis. "We are not budgeting on this," he added. However, Cuyohoga is betting that the Quicken Loans Arena, the Cavs' home court, will go to sellouts as it was during 2010, the last season James played.

    The Cleveland situation isn't unique. Economists have argued for years that sports fans and those trying to gain support for big sporting events often overestimate the economic impact of such events. Some business owners in New Jersey, for instance, have complained that the recent Super Bowl in the Garden State didn't bring them anywhere near the windfall they expected. Similar complaints have been made about the Olympics and World Cup.

    According to the analysis released by FitzGerald, the region expects $170 million from Cavs games "combined with indirect and induced impact, approximately $500 million annually for the local economy, especially through the restaurant industry, convention business, and hotels not just in Cleveland but throughout Cuyahoga County and Northeast Ohio." He described the estimate as "conservative."

    FitzGerald's analysis includes what economists call a "multiplier effect," which measures the impact of a dollar being spent at one business then being spent someplace else. Matheson likens it to pouring water from one bucket into another.
    Economists, though, are cautious about using this sort of data since there are always "leakages" in the process. Still, Cuyahoga County is basing its analysis on the idea that every dollar spent on the Cavs will be respent about three other times.

    The rest of Cayuhoga County's figures also don't stand up to scrutiny. About $129 million, or 25 percent of the $500 million estimates, comes from increased ticket revenue that goes directly to the Cavs. Another $171 million is expected to come from increased development around the Quicken Loan Center, while another $195 million will come from the playoff games the team theoretically should play in.

    However, Vrooman estimates that the team will probably gross about $1 million for these games, far lower than the $15 million figure incuded in the forecast
    "The ticket money has to come from somewhere ... and so the Cavs' coffers will overflow at the expense of the rest of the entertainment sector as well as the overall Cleveland economy," Vrooman wrote in an email. "The Cavaliers use a dynamic, or variable, pricing scheme that mimics the secondary (StubHub) market. If the prices rise, it is good news for the seller and bad news for the buyers. This scheme will capture all of the potential gains of the LeBron effect for the Cavs. Cavs fans won't know what hit them."

  • Esportes capitalistas, Brasil Economico 14/07/2014 (Translation)

    A maior parte dos donos de times na Europa é de amantes do esporte enquanto os norte-americanos estão mais preocupados com o lucro.

    Uma Copa do Mundo por ano. É o que a Liga de Futebol Americano, a NFL, organiza em um prazo mais longo. Com exatamente 32 times, como a Copa, o campeonato nacional leva quatro meses e comanda a maior arrecadação de eventos esportivos do país. Obviamente também, a maior audiência. Os times são divididos em duas conferências e cada uma produz um campeão. São eles que disputam, em fevereiro, a final do campeonato, o famoso Super Bowl que se tornou mais conhecido no mundo por conta dos comerciais milionários de televisão do que por causa dos passes, disparadas em direção ao fim do campo ou chutes naquele gol estranho e alto, que vale pelo menos 5 pontos. 

    O que conta nisso tudo é o projeto empresarial que se revelou o mais bem sucedido do mundo. Um modelo de negócio esportivo sem adversário à altura por enquanto. Vamos aos números, que sempre ajudam: em fevereiro, na final do último campeonato, 110 milhões de espectadores acompanharam ao vivo os encontrões e disputas em capo. Empresas interessadas em divulgar seus produtos pagaram US$ 4 milhões por comerciais de 30 segundos na televisão. A "empresa" NFL é uma máquina de fazer dinheiro tão competente que já planeja faturar US$ 25 milhões até 2027, o que igualaria a liga esportiva ao faturamento de empresas com McDonalds, Nike e a fabricante de pneus Goodyear. Tudo isso sem perder se quer um jogador para campeonatos estrangeiros e sem favorecer financeiramente os times das grandes cidades em detrimentos das equipes de mercados menores.

    John Vrooman, economista especializado em esportes e professor da Universidade Vanderbilt, comparou o que se faz na Europa com a organização dos esportes nos Estados Unidos. E me explicou que existem duas vertentes básicas: o modelo baseado no mérito (os melhores jogadores ganham mais e quem tem dinheiro para comprar o passe deles monta o melhor time) e o chamado modelo da solidariedade (a arrecadação com venda de ingressos e direitos de transmissão das partidas é distribuído igualmente entre os times). Existe, ainda, o modelo híbrido que faz um pouco de um e um pouco do outro.

    A NFL, e as outras três ligas importantes do país (beiseball, basquete e hockey), apostaram no tal modelo da solidariedade no que diz respeito aos direitos de transmissão nacionais. Mas enquanto os times da NFL não têm arrecadação alguma nos mercados locais, os times de outras ligas ficam com 50% do valor total da venda de direitos para a transmissão local de partidas, o que aproxima o basquete e o hockey americanos do modelo adotado pela maior parte das ligas europeias de futebol. Um pouco lá, um pouco cá.

    O que a Europa não tem são os limites de volume máximo que os times podem gastar com salários e os impostos altos para quem ultrapassa esse limite. A ideia é criar um pouco de equilíbrio entre as equipes para que as competições sejam duras e imprevisíveis, com chances para qualquer time. A NFL é a liga americana onde esse resultado é mais nítido. Já na NBA, que mesclou os dois sistemas, apenas 8 dos 30 times profissionais de basquete do país ganharam o campeonato nos últimos 50 anos.
    Na Europa, não existe unanimidade. Na Espanha, a liga que reúne os famosos Barça e Real Madrid está sendo pressionada para adotar um sistema mais solidário. Os dois times se tornaram os donos do campeonato no país e já abocanham 50% da receita com os direitos de transmissão dos jogos de futebol espanhóis. Quanto mais dinheiro têm, melhores jogadores do mundo podem comprar, e se tornam ainda mais imbatíveis. A Liga da Grã-Bretanha, a da Alemanha e a Francesa seguem um esquema híbrido que garante o incentivo ao desempenho dos jogadores e impede o fortalecimento financeiro excessivo de um time em relação aos outros.
    Nos Estados Unidos, nos quatro grandes esportes do país, os jogadores são organizados e brigam por fatias cada vez maiores da renda das transmissões dos jogos. Na liga que tem o melhor resultado, a de futebol americano, os jogadores também ganham mais. No novo contrato, passarão a ter 55% da verba das transmissões. Boa parte do dinheiro vai para planos de pensão e de aposentadoria e o restante reverte para os jogadores como salário. Os atletas, especialmente as grandes estrelas do esporte norte-americano, são milionários.

    Depois de analisar as percentagens e os volumes que se seguem aos cifrões, o professor Vrooman explicou que existe também o indivíduo. Ele também divide os donos dos times em duas categorias: os apaixonados pelo esporte e os que visam exclusivamente o lucro. "A teoria econômica diz que a distribuição igualitária da renda não vai afetar a competitividade entre os clubes e vai provocar apenas um achatamento dos salários dos atletas, mas isso só acontece quando o dono do clube está interessado apenas no lucro. Se o dono é o que eu chamo de um apaixonado pelo esporte, que está ali para ganhar o jogo e não apenas para acumular dinheiro, então a divisão equânime dos rendimentos leva a um equilíbrio maior e a salários mais altos. As evidências indicam que a maior parte dos donos de times na Europa é de amantes do esporte enquanto os norte-americanos estão mais preocupados com o lucro. Eu imagino que os donos dos times brasileiros são amantes do esporte e a divisão igualitária das receitas aumentaria o equilíbrio entre os times e elevaria os salários dos jogadores".

    Verdade seja dita, ele avisou que não conhecia a estrutura econômica do futebol brasileiro. Mas sabe da paixão do povo brasileiro pelo futebol. Por isso, arriscou o palpite. E não sou eu que vou explicar ao economista que no Brasil, cartola é bem mais do que algo que se usa na cabeça. E a comparação dá o que pensar. Dá para entender que aquele 7 a 1, com certeza, foi também uma goleada muito além do gramado.

  • Native Groups Look to Retire the Cleveland Indians' Chief Wahoo, NBC News, 6/23/14

    Amid the controversy surrounding the Washington Redskins’ team name, some Native American groups hope public outcry turns toward a different team’s symbol, more than 300 miles to the northwest: Chief Wahoo, the bright red, wide-grinning face of the Cleveland Indians baseball team.

    “It’s been offensive since day one,” Robert Roche, a Chiricahua Apache and longtime opponent of the Indians’ team name and logo, told NBC News. “We are not mascots. My children are not mascots. We are people.”

    Groups like People Not Mascots hope that new pressure will be applied to the Indians following last Wednesday's decision by the U.S. Patent and Trademark Office, which stripped the Redskins of its trademark and declared the team name to be “a racial slur.”

    The 2-1 vote came after widespread protests — from several news organizations to President Obama. Chief Wahoo's growing list of critics includes U.S. Sen. Sherrod Brown, a Democrat from Ohio who signed a letter with 50 other Senators opposing the Redskins’ team name. Brown supports keeping the Indians name but thinks the team should retire Wahoo, a spokeswoman said this week.

    The Redskins said it will appeal Wednesday’s ruling. The team won an appeal that challenged a similar 1999 trademark ruling.

    The Redskins could see sponsors walk away and corporate sales dry up if the team is seen as racist, Vanderbilt University economics professor John Vrooman told NBC News, but the trademark ruling is unlikely to affect the other professional sports teams that use Native American-inspired names or logos such as Chief Wahoo. |

    “This decision will probably not have a domino effect, because the Redskins name is uniquely a disparaging racial slur,” Vrooman said.

    Full statement.pdf

  • Europe: The Silicon Valley of soccer Fortune Magazine June 11, 2014

    After the World Cup wraps up, some 70% of the players will head back to their professional soccer jobs in just one region: Europe.

    With a home TV audience of 3.2 million in 2010, the World Cup is only surpassed by the Olympic Games as the planet’s biggest sporting spectacle. But unlike most Olympic sports, soccer isn’t a one-off that only grabs international attention once every four years.

    In Spain’s national league, every El Clásico match between archrivals Barcelona and Real Madrid draws a larger worldwide audience than the 110 million fans who watch the NFL Super Bowl, notes John Vrooman, a Vanderbilt University sports economist. And only 10% of Barcelona and Real Madrid fans actually live in Spain.

    But as internationally popular as the sport may be, it has a home. After the World Cup wraps up, some 70% of the 736 players involved–including most of the players on South American powerhouse teams Brazil and Argentina–will head back to day jobs at professional teams in one place: Europe.

    Europe employs over two-thirds of the best soccer players in the world. So, what is this industry cluster–this Silicon Valley of soccer–like?

    But with leagues in multiple neighboring countries competing for player services and no salary cap to put on the breaks, European soccer is a different beast altogether. Players receive over 70% of team revenues in the top five European soccer leagues, says Vrooman, compared to less than half in the NFL.

    That setup is great for players’ checkbooks. But it’s a road to insolvency for all but the top teams in places like Spain. Because of bad management and salary overspending, 19 of the 42 teams in Spain’s top two leagues have declared bankruptcy in the last decade. And professional teams owe the Spanish government 670 million euros ($910 million) in back taxes.

    European soccer is what a mathematician might call a “deterministic system.” That is, there is very little randomness in the league. You generally know who will win from the season’s first day.

    A 2013 study published by the European Commission found that between 2000 and 2012 the same three teams won 100% of the league titles in Spain, 92% in Italy and England, and 83% in Germany.

    Without an NFL-style shared revenue system, most of the money flows to a few top teams, who buy all the star players and leave everyone else with the talent and revenue crumbs.

    “The best financial analogy would be like comparing the NFL as a well-diversified S&P index portfolio with an all-or-nothing NASDAQ roulette wheel,” says Vanderbilt’s Vrooman. “European football, particularly in La Liga (Spain) and Serie A (Italy) is make-it-or-break-it unless you are one of the top three or four clubs.”
    ...

  • Will Brazil’s World Cup actually pay off? Fortune Magazine, June 9, 2014

    Based on South Africa’s experience since hosting the 2010 World Cup, the answer is no.

    In a mid-May meeting with sports journalists, Brazilian President Dilma Rousseff used a local metaphor to say that once the World Cup began, Brazilians would forget their worries. “Once the jaguar drinks the water,” she said, “this country will go crazy.”

    That Dilma (as she is known) hopes that the local populace will get swept up in the spectacle is understandable, considering the protests she’s endured over her government’s spending on the event.

    At the opening ceremony for the Confederations Cup soccer tournament in Brasilia last June, Dilma and Sepp Blatter, the president of FIFA, which runs the World Cup, were booed by protesters demanding better education, healthcare, and transportation.

    This May, demonstrators angry that the country was spending money on new stadiums — whose estimated costs have risen by half since 2010, to $3.5 billion — instead of low-income housing held another wave of protests in 18 Brazilian cities. Some held banners saying, “FIFA go home.”

    Polls taken by the Folha de São Paulo show that support for the World Cup has fallen from 79% in 2008 to 48% today.

    Even Brazilian soccer star Pele has begun to complain.

    “It’s clear that, politically speaking, the money spent to build the stadiums was a lot,” he said recently in Mexico City. “Some of this money could have been invested in schools, in hospitals.”

    If history is any guide, Dilma will get her wish and public discontent will turn into happiness once the first game starts. But that euphoria will pass. And it won’t answer whether spending billions to host a World Cup makes economic sense, especially for a developing country in dire need of basic improvements.

    “World Cups are notoriously bad economic development anchors, particularly in developing countries, and four of the last five hosting countries have lost money,” says John Vrooman, a Vanderbilt University sports economist.

    South Africa’s experience since hosting the 2010 World Cup illustrates Vrooman’s point.

    Like Brazil, South Africa built and upgraded several stadiums (10 in its case, compared to Brazil’s 12). And, as in Brazil, several were located in cities with no major professional teams to take them on after the Cup.
    ...

  • Are the L.A. Clippers Really Worth $2 Billion? USAToday, May 31, 2014 (AP)

    A high-profile NBA franchise in a major media market was suddenly available. A handful of power brokers from the technology, entertainment and venture capital fields were lining up for a chance to join the party.

    And all the while the clock was ticking on the bidding, with the league waiting and threatening to impose its will on the process if Donald and Shelly Sterling didn't unload the Los Angeles Clippers.

    The result? A $2 billion record bid from former Microsoft executive Steve Ballmer that sent sticker shock through the worlds of sport and finance.

    The offer, which comes after recorded racist comments made by owner Donald Sterling prompted the NBA to force a sale of the Clippers, is among the highest amounts ever paid for a pro sports team. It roughly ties the $2 billion paid for baseball's Los Angeles Dodgers in 2012 and exceeds the $1.47 billion paid for soccer's Manchester United in 2005.

    A perfect storm may have inflated the price.

    A small time frame to negotiate, skyrocketing television rights fees that pushed professional sports franchise values through the roof, an owner-friendly collective bargaining agreement negotiated in 2011 and Ballmer's own desire to land the team after missing out in his bid to buy the Sacramento Kings last year collided to drive the Clippers price into the stratosphere, experts say.

    Ballmer may have overpaid for the Clippers through an economic theory called "the winner's curse," which states that the winning bid is always the highest bid and not necessarily the most accurate one.

    But with a meeting scheduled for Tuesday in which the NBA was expected to vote to oust the Sterlings as owners of the Clippers, the window for negotiating a deal was closing quickly. That can often prompt prospective buyers to be more aggressive with their initial offers than they normally would be, according to John Vrooman, profressor of sports economics at Vanderbilt.

    But Ballmer had good reason to overpay, Vrooman said. The Clippers will soon be renegotiating their local television packages. Their current deal reportedly nets them about $20 million annually.

    Thanks to the team's recent success, star power on the roster with Blake Griffin and Chris Paul and a voracious Los Angeles marketplace that could include bids from three networks, the revenue gained from a new contract will be much closer to the estimated $200 million that the Los Angeles Lakers earn annually as part of their deal with Time Warner, Vrooman said.

    On top of that, the NBA will get a new national television contract in 2016 that figures to add another $50 million to each team's balance sheet.

    The expected television revenue alone — not even taking into account revenue from tickets, luxury suites and in-arena advertising — pushes the value of the Clippers to the $1.2-$1.6 billion range, Vrooman said.

    "These buyers are perhaps irrational and exuberant but n ot altogether foolish," Vrooman said. "There is method to Ballmer's 'madness.'"

    The extra $400 million added to Ballmer's bid is what Vrooman called the "blow-away factor" — additional money aimed at grabbing the seller's immediate attention and emphatically distancing his bid from others.

    "About $1.6 billion of the price is sustainable investment and the extra $400 million may be what a billionaire owner with a Harvard degree in economics simply wants to pay for his NBA buzz," Vrooman said.

    Owning a sports team has always been one of the ultimate status symbols, with billionaire playboys flexing their financial muscle to purchase the biggest, shiniest toys available. But in recent years, thanks to resounding victories by owners over players in collective bargaining negotiations, sports teams are getting closer to becoming fool-proof moneymakers as well.

    The rising prices have led to concerns about a bubble in the pro market similar to the one that brought about the housing crash. Vrooman said the lack of inventory separates pro sports from real estate.

    "The housing bubble was caused by too many houses being built whereas this bubble is caused by too few franchises being created here and abroad," Vrooman said.

    Full interview. pdf.

  • Is Steve Ballmer overpaying for the LA Clippers? CBS News, May 30, 2014

    Former Microsoft Corp. (MSFT) Chief Executive Steve Ballmer's $2 billion bid for the LA Clippers is higher than some sports economists say the franchise is worth.

    Vanderbilt University Professor John Vrooman expected the team to fetch between $1.2 billion and $1.6 billion. Victor Matheson of the College of the Holy Cross told CBS MoneyWatch that he guessed the Clippers were worth "maybe $900 million" and was surprised by amount of Ballmer's bid.

    Vrooman, a distinguished professor of economics, told MoneyWatch: "This is still risky business, and risky cash flows are not worth as much as certain cash flows, but about $1.6 billion of the price is sustainable investment and the extra $400 million may be what a billionaire owner (with a Harvard degree in economics) "simply wants to pay for his NBA 'jones.'"

    Ballmer can certainly make a difference for the Clippers, which as Vrooman notes, earn a paltry $20 million for broadcast rights. However, he has to avoid the pitfalls that many owners face in letting their passion for the sport cloud their business judgment.

    "The revenue side usually takes care of itself, but the soft salary cap and hard luxury tax are tough to maneuver, and player roster composition has humbled even the best businessmen as NBA owners," Vrooman noted in an email. "The Brooklyn Nets new ownership, for example, has the league's highest payroll at about $100 million, but they will probably have to pay a luxury tax equal to that amount next season. That cuts into the positive cash flow big-time, and a club can squander its revenue advantage in one season."

    Ballmer's bid isn't expected to encounter opposition from the NBA, which is eager to extricate the team from the clutches of Donald Sterling, whose secretly recorded racist rant lead to his lifetime banishment from the league and the NBA's requirement that he sell the team.

  • NBA’s quick action helps rescue Clippers’ brand, Associated Press, 5/4/2014

    AP. From the moment Donald Sterling’s racist comments hit the Internet, the walls began closing in on the NBA.

    Players considered skipping a playoff game. Fans inundated the Los Angeles Clippers’ offices with vitriol. Sponsors ran from a franchise on the rise. The scandal pushed the league — not just the Clippers — to a perilous spot.

    In just three days, on the strength of Commissioner Adam Silver’s decision to ban the Clippers’ owner for life, a hands-on engagement of corporate sponsors and a savvy marketing response that started with coach Doc Rivers helped the league turn a dark moment into a defining moment.

    Silver’s decision to ban Sterling, fine him $2.5 million and urge the league’s 29 other owners to vote to force a sale of the Clippers was immediate. The outrage in his voice resonated with players, coaches, calmed corporate partners and likely saved the league millions of dollars.

    As Silver was delivering his verdict, the front page of the Clippers’ website was splashed with the words “We Are One” in white on a plain black background. Other teams quickly joined in with their own “We Are One” front pages, including the Portland Trail Blazers, the Utah Jazz and even the NHL’s Los Angeles Kings.

    It was a phrase that Rivers had written to inspire the team in the locker room following their loss to the Golden State Warriors in Game 4 of their first-round playoff series, shortly after Sterling’s words made news.

    Rivers had no idea he was starting a movement.

    “You just do something. I knew they were being pulled in a thousand directions and I just thought, ‘I don’t care what we do. Let’s do it together as a group.’ That was my only focus on that. It wasn’t a rallying campaign for anything, anybody outside the team,” Rivers said.

    “The fact that it’s made it outside, that’s fine. But I just need us to stay together.”
    It resonated with fans. Quickly #weareone was trending on Twitter. Fans at Game 5 chanted the words as the Clippers rallied against Golden State.

    The NBA was planning to roll out a new playoffs commercial that night. League marketing officials recognized the power of the slogan and quickly added one last frame to the television spot to include it with the logo.

    According to Nielsen, the Clippers-Warriors game Tuesday night after Silver’s announcement drew 4.7 million viewers, making it the highest-ranked cable program that night and the most-watched cable game of the NBA playoffs to that point. Sunday night’s game, after the players doffed their Clippers-emblazoned warmups at center court, drew 6.47 million but was broadcast on ABC.

    Team sponsors and advertisers that had decided to step back started to return. If they stayed away, the decision would have been potentially devastating for a team that until just a few years ago was still struggling to find an identity as Los Angeles’ other NBA team.

    Kia Motors suspended its relationship with the Clippers on Monday, but the automaker was back on board following Silver’s announcement. Adidas, which moved to disassociate itself from the team on Tuesday morning before Silver spoke, came back by the afternoon.

    Silver’s words also helped quell concerns with other sponsors. Among them was Kumho Tire, which announced a leaguewide partnership just before All-Star weekend in February. Marketing officials reached out to corporate sponsors after the story hit, trying to assure them it would be addressed quickly and firmly.

    So what if Silver, the league and the Clippers dropped the ball? What if the response didn’t satisfy players and prompted the Warriors to walk off the court before Game 5 started as they had discussed?

    John Vrooman, professor of sports economics at Vanderbilt, estimated the Clippers’ sponsorship deals bring in $10 million to 13 million annually, much of which likely would have likely been lost as advertisers continued to flee the tarnished Clippers brand.

    A canceled playoff game would cost the Clippers about $1 million in tickets, concessions and advertising, Vrooman estimated, and also could have hurt the league’s television contract negotiations that are about to begin. The new deal is expected to net each team about $50 million a season, Vrooman said, which is almost $20 million more than they make under the current contract.

    Although the drama with Sterling could go on as the sale of the team is debated, the Clippers and the NBA in effect distanced themselves from Sterling with Silver’s decisive action, USC’s Carter said. It’s possible the Clippers franchise will emerge stronger than before.

    Full interview .pdf

  • Donald Sterling could face big tax bill if Clippers are sold, CBS Money Watch, 5/2/2014.

    Los Angeles Clippers owner Donald Sterling, who this week was banned for life by the NBA for racist remarks the league said he made in a recorded conversation, might face a huge tax bill if he is forced to sell the team.

    According to published reports, NBA Commissioner Adam Silver is trying to force Sterling to sell the Clippers, which Sterling acquired in 1981 for $12.5 million. The team is now worth about $1 billion, which means Sterling, and possibly his heirs, may face a significant tax payment on the capital gains involved in a sale. Slate writer Jordan Weissman figures that if the 80-year-old Sterling earned a $700 million profit on the deal, he would need to pay $233 million in taxes based on the 20 percent capital gains tax for high earners and California's 13.3 percent state income tax rate.

    Sterling's exact potential tax burden is difficult to calculate since it depends on his estate planning, among other things. There are also estate taxes to consider for his heirs.

    More clear is that Sterling would reap a rich reward for selling the Clippers, which until recently had long been regarded as one of the NBA's worst teams. Parties rumored to be interested in buying the franchise include Oprah Winfrey, technology titan Larry Ellison, media mogul David Geffen and boxer Floyd Mayweather Jr.

    Vanderbilt University economist John Vrooman adds that the major North American professional sports leagues are cash cows, noting that ownership is "risk free... because of the market power [they] have over fans, media outlets and players."

    For instance, the Clippers' TV rights contract expires in 2016 and will attract at least three bidders, including SportsNet LA, which is owned by the Los Angeles Dodgers; Time Warner Cable (TWC), which Comcast (CMCSA) and Fox Sports West, owned by 21st Century Fox. According to Vrooman, the Clippers could get about half the $180 million the more successful Los Angeles Lakers get from their broadcast partners.

    Another problem for the Clippers is the fact that they play in the Staples Center, which is controlled by AEG, which owns stakes in the Lakers and the Los Angels Kings hockey team. The Clippers do have options, including a possible move to Seattle, which lost its NBA team the SuperSonics to Oklahoma City in 2008.

    "If the unfavorable Staples center deal becomes a problem, the Clippers could be bought and relocated to Seattle, where a new arena deal would also increase the value of the franchise by 25 to 30 percent," Vrooman wrote in an email.

    Ironically, Sterling's ineptitude as an owner may attract more potential buyers, given that he saw the value of his investment soar 75-fold over a period of three decades, Vrooman said.

    Full interview .pdf

  • Are Predators right about Shea Weber's worth? The Tennessean, April 28, 2014

    David Poile often answers the question with a shake of the head and a deep breath.
    When the Predators general manager is asked whether he will trade captain Shea Weber, he says no. The scene played out yet again a couple of weeks ago.

    The idea can't be dismissed automatically, however. While the 28-year-old Weber is arguably the best player the Predators ever have developed and is one of the top defensemen of his generation, he makes $14 million per season — $13 million of which must be paid in a lump sum.

    It's a lot of money for a smaller-market NHL franchise such as Nashville, but Weber's overall value to the Predators remains extraordinary.

    For almost 27 minutes in every game — Weber's average time on the ice this season was 26:54 –— they know they are safe on the defensive end of the rink. He brings a lot on the offensive end as well, leading the team in points this season with 56.

    On Monday, he was named a finalist for the Norris Trophy as the NHL's best all-around defenseman for the third time. His decline is maybe five or six years away, as blueliners tend to drop off later in their careers than forwards.

    However, with Poile saying the Predators are in a "rebuild on the fly" after missing the playoffs for the second year in a row, and with Weber owed $42 million worth of bonus payments over the next four seasons, is the time right to trade him? Not until 2018-19 does his contract go down to a more manageable $6 million per year with no bonuses.

    From a hockey perspective, it might make more sense than ever to trade Weber. But from a business perspective, it's not such an easy call.

    "It is often in the best interest of mid-market teams to trade one star player for many younger players of equal value on the ice. This strategy reduces payroll and diversifies risk," Vanderbilt University sports economics professor John Vrooman said. "There is a trade package that would make sense for the Preds as they reload, but the package must fill Weber's gigantic skates on the blueline and provide offense and youth. This is probably not going to happen."

    The Predators need young, NHL-ready forwards. The franchise has long been known for developing strong defensemen, but it has failed with scorers. David Legwand's 63 points in 2006-07 is still the high mark for a player the Predators developed.

    Beyond Weber is a group of defensemen that could remain with the Predators for a decade — Seth Jones, Michael Del Zotto, Roman Josi and Mattias Ekholm will all be 24 or younger next season. Jones is seen as a potential franchise defenseman, someone who could handle Weber's role after the latter goes into decline.

    So why wouldn't the Predators deal their strongest chip to add desperately needed offense?

    Weber's contract doesn't contain a no-trade clause, which means the Predators can deal him to any team. The moribund Edmonton Oilers, for instance, have a lot of skilled, NHL-ready forwards, but they lack a blueliner.

    The Philadelphia Flyers, who signed Weber to a mega-offer sheet in 2012 that the Predators matched, also have a solid group of young, NHL-ready forwards who could fit with Nashville.

    But none of the forwards with those teams are superstars. None are currently on a Hall of Fame career trajectory like Weber.

    And rarely does a team get equal value when it trades a superstar. The Oilers, for instance, dealt away their 1980s team that won five Stanley Cups. None of those moves kept the Oilers competitive.

    The Predators threw a party in front of Bridgestone Arena on July 24, 2012, just after matching the offer sheet for Weber. Having lost all-star defenseman Ryan Suter, a free agent, to the Wild earlier in the offseason, they needed to celebrate some good news.

    They had seen other teams poach their players — Dan Hamhuis to Vancouver, Scott Hartnell and Kimmo Timonen to Philadelphia, Paul Kariya to St. Louis — so the decision to match Philadelphia's mammoth offer was a victory for a smaller-market franchises. And with the Predators needing to fill seats, the move also spoke volumes to the fan base.

    Fast forward to this season. Despite missing the playoffs for the second straight year, Bridgestone Arena was at 97 percent capacity, according to ESPN.com's attendance tracker. The 16,600 average attendance was also the third best in franchise history. There is no doubt that Weber's presence helped.

    "In order to survive and make it to the Stanley Cup playoffs on a consistent basis, mid-market clubs like the Preds must stay on the fine edge of efficiency," said Vrooman, the Vanderbilt professor. "Forget the short run … Shea Weber is still too valuable in the long run … to trade any time soon."

    Full interview .pdf

  • Braves stadium costs rise for Cobb taxpayers, Atlanta Journal-Constitution April 18, 2014 

    At a packed town hall meeting just days before Cobb commissioners voted in favor of a new Atlanta Braves stadium, Chairman Tim Lee faced a barrage of concern about the financial burden on taxpayers.

    Stadium costs rise photo How much are Cobb County taxpayers on the hook for the Braves new stadium? That all depends on how one spins ... read more

    But Cobb’s share of stadium project expenses is in fact rising.

    Taxpayers are on the hook for an additional $18.2 million in estimated borrowing costs that have surfaced since the stadium deal was approved by Cobb commissioners, an examination by the Atlanta Journal-Constitution has found. County finance officials plan to roll the borrowing costs into the 30-year public bonds to be issued for the project, bumping the bond amount to $386 million from the $368 million approved by Cobb commissioners in November.

    But the additional borrowing costs push the county closer to the edge of its self-imposed $24 million ceiling for annual debt payments. Cobb Finance Director Jim Pehrson said a recent calculation with current interest rates showed projected annual payments of $23.5 million on a bond package of $386 million.

    The new costs also raise the specter of other unknown expenses that may await taxpayers. In February, the AJC reported the county will likely need to spend at least $6 million on public safety upgrades, plus hire more officers and buy more patrol cars because of the stadium.

    And there could be more costs on the horizon.

    The additional borrowing costs identified by the AJC don’t include potentially millions more for outside attorneys and consultants needed to negotiate agreements with the Braves and provide other services related to the stadium deal. There’s also a traffic study that will be completed later this year that will determine if the $14 million the county has set aside for stadium transportation needs is enough.

    Critics see these expenses as the cost of rushing through the deal without considering all of its ramifications. Commissioners approved the public financing plan just 12 days after announcing it. Experts say the deal is following the pattern of other large publicly backed stadium projects, where actual costs invariably exceed initial projections.

    The county and team still must negotiate detailed agreements covering construction, transportation and operations at the new stadium. Those agreements include potentially millions of dollars of expenses and spell out who pays what.

    “These agreements are all very critical in determining the ultimate social cost and private benefit balance of this ramrod stadium deal,” said John Vrooman, a Vanderbilt University sports economist. “The devil is still in the details, which have been shrouded in secret from Cobb County taxpayers and Atlanta Braves season-ticket holders.”

    Full interview.pdf

  • Lackluster Vikings winning the Internet, MPR Minnesota Public Radio, Apr 10, 2014

    Listen Story audio

    If pro football kept score in web clicks instead of touchdowns, the Minnesota Vikings might already have a championship trophy.

    The team ranks among the worst in the NFL on the field, yet it draws millions of viewers to its Vikings Entertainment Network, an in-house media factory that cranks out three TV shows and five radio programs a week and runs a popular website.

    While the network can't block for Adrian Peterson or add zip to a Christian Ponder pass, the media machine is becoming a major part of the team's business model, generating viewers and, potentially, ticket sales. The site is drawing viewers and money in ways a five-win team would never expect.

    No doubt those numbers have jumped the past few years, though sports media observers think online revenue pales in comparison to television and radio rights for now.

    Vanderbilt University sports economist John Vrooman estimates 40 percent of NFL revenue - about $5 billion to $6 billion a year -- still comes from TV rights for games.

    Still, Vrooman says revenue from the NFL Ventures division, which includes content providers like the NFL Network and NFL.com, has grown to nearly match ticket and stadium revenues, which he pegs at about 20 percent of league revenue.

    ...

  • March Madness Money: Louisville Wins Again, Fiscal Times/Yahoo Finance, March 21, 2014

    Louisville University will be looking to defend more than one title as this year’s chase for the men’s college basketball championship heats up.

    The school had the most profitable college hoops program in the country by far, earning $26.7 million from July 1, 2012, to June 30, 2013, according to figures from Vanderbilt University economist John Vrooman.

    Complete figures for NCAA D1 Basketball.

    The Cardinals took in $42 million in revenue and had $15.6 million in expenses. Louisville’s long-time rival, the University of Kentucky, came in sixth place, earning $23 million in revenue and $9.5 million in profit, according to data from Vrooman.
    The rest of the top 10 includes a who’s who of college basketball powerhouses:  Syracuse University, Duke University, University of Arizona, Indiana University, University of Wisconsin and Ohio State University.

    Related: The Real Sweet 16: College Basketball’s Most Profitable Programs

    Louisville and its money-making Division I brethren however, are the exception rather than the rule. Vrooman estimates that there are about 50 profitable college basketball programs in the whole country. Many successful teams, such as Wichita State, either lose money or break even. A handful of colleges earn a profit on both basketball and football outside a major conference...

  • スーパーボウル、全米熱狂のワケ (Wake of the Super Bowl Frenzy) 2014/01/28, 日本経済新聞 (Nikkei Asian Review)

    NFLに詳しい経済学者、バンダービルド大のジョン・ブルーマン 教授は語る。
    プロリーグは一方の損失が他方の利益になるゼロサムゲーム。 利益を分配すれば(敗者になった時の)リスクを避けられる。おかげで繁栄が持続する」...

    Vanderbilt University professor John Vrooman, an economist who is very familiar with the NFL, says “Pro leagues are a zero sum game, where one side’s loss is the other’s gain. By sharing profits, teams can avoid risk (for the times they lose), which allows them to continue to prosper.”

  • Sport takes a back seat at Super Bowl, Australian Financial Review, 01 Feb 2014

    When the Seattle Seahawks and Denver Broncos face off for the NFL Super Bowl XLVIII this weekend, in many ways the event will be more economic than sporting.
    The NFL’s version of the grand final has become a big post-season party for the league, players and sponsors. And it’s all about money.

    Advertisers will pay $US4 million ($4.5 million) per 30 second television commercial to promote their products to the 111 million viewers expected to tune in. Scalpers will earn more than $US3000 per match ticket on the secondary market.

    With a new $US1.5 billion arena, MetLife Stadium, hosting the event at New Jersey, a “warm” winter’s day of 8 degrees is forecast. It will be the first time in Super Bowl history it has been played outdoors in a northern state. The NFL claims that New York City will also receive a $US600 million boost from the event.

    Television networks paid $US42 billion in 2011 to air NFL games through to 2022, and a fair chunk of the price represents the Super Bowl rights. The big event is their chance to recoup.

    The players from the winning team receive about $US60,000 each in prizemoney, while the losing players will pocket half that amount and there are, of course, indirect financial benefits.

    Not that the fans will be feeling too sorry for the players. The average player salary in the NFL is $US2.3 million – almost 10 times that of a typical Australian Football League player.

    The other telling economic aspect of the match is the 30-fold explosion in secondary market ticket prices, said John Vrooman, an economics professor at Vanderbilt University.

    “The NFL creates an excess demand for Super Bowl tickets from the supply side because it simply wants the game sold out for TV,” Vrooman said.

    The NFL’s allocation formula for tickets deliberately creates a bottleneck. Season ticket holders for the two participating teams must divide up only 35 per cent of the tickets.

    “As a result the average regular season MetLife Stadium ticket price for the New York Giants of $120 increases 10-fold in face value of $1200 on the primary ticket market, and then explodes 30-fold to about $3600 on the secondary sellers’ market,” Vrooman said.

  • NFL takes aim at $25 billion, but at what price? USAToday, January 31, 2014

    NEW YORK — Sunday's Super Bowl at MetLife Stadium in East Rutherford, N.J., might be the most popular and expensive television program in U.S. history – about 110 million viewers watching a football game that commands nearly $4 million for a 30-second commercial.

    Tickets at the 50-yard line cost about $10,000. A 20-ounce cup of Bud Light will cost $14.

    "Nothing is really sacred anymore," said John Vrooman, a sports economics professor at Vanderbilt University.

    It won't stop there. The National Football League hopes to achieve $25 billion in revenue by 2027, up from about $10 billion now. Several analysts told USA TODAY Sports that the NFL can get there, but it will be an expensive journey. More palatial stadiums. Expanded playoffs. More exposure in more places, including smartphones, games in London and more Thursday night games sold to the highest-bidding network.

    NFL Commissioner Roger Goodell gave the magic number at a meeting of NFL team owners in 2010: a goal of tripling league revenue in 17 years. If it happens, the NFL would have more income than the gross domestic products of dozens of small countries and would be in the same financial district currently occupied by gigantic global brands such as McDonald's, Nike and Goodyear Tire, each of which recently took in about $21 to $28 billion annually.

    Who will pay the price? Fans, sponsors and broadcasters. The NFL remains the most popular sports league in America, and it commands a premium. If the average NFL fan thinks the cost of attending games is already too high, how about paying ever-higher prices to watch games on ESPN and the NFL Network? Cable and satellite TV providers pay ESPN an average of $6.04 per subscription per month, more than double from 10 years ago and dwarfing the likes of CNN (63 cents) and TBS (72 cents), according to SNL Kagan, a market research firm.

    The NFL declined to release financial data, but an estimate of its revenue can be pieced together through various sources by economists and market researchers.
    That $10 billion pie is roughly sliced four ways:

  • About $5 billion from media and television rights to broadcast games.
  • About $1-2 billion in sponsorships, such as its long-running deal with PepsiCo, worth about $90 million to $100 million per year.
  • About $2 billion related to attendance and ticket sales.
  • About $1 billion in merchandise and licensing.
  • Growing to $25 billion annually will require compound annual growth of about 7 percent, around $1 billion per year.

    CBS, Fox, NBC and ESPN provide the NFL with a total of about $5 billion to $6 billion annually from contracts that run through 2021-22.

    Vrooman, the Vanderbilt economist, says the NFL can get there primarily because it's a monopoly – the richest sports league on the planet with a business plan built largely through the Sports Broadcasting Act of 1961, which allows sports leagues to pool their television rights for sale to the highest bidder, protecting them from antitrust laws.

    "The monopoly rule is to gouge half as many fans more than twice as much on everything," he said. He also predicts the league will become "increasingly more exclusive with the same general formula of fewer fans having access at higher prices to generate more certain media, venue and gate revenues."

    The NFL disputes that, noting its commitment to broadcast some games on free over-the-air TV networks, which helps it reach bigger audiences. Even games on ESPN, for example, are available on free TV in local markets. But the league is not shy about its appetite for growth.

    For better or worse, the road to $25 billion probably requires some variation of the following, analysts told USA TODAY Sports.

    More new and upgraded stadiums. This year's Super Bowl is in chilly New Jersey, a reward for the Jets and Giants building the swanky MetLife Stadium, which opened in 2010. Yet it has been 11 years since the Super Bowl was in 70-degree San Diego, where the Chargers still play in outdated Qualcomm Stadium.

    To keep revenue growing, the NFL needs stadiums that are big moneymakers, such as AT&T Stadium, home of the Dallas Cowboys, where suites cost up to $500,000 per year and fans pay more than $80 for seats in the upper deck end zone. Levi's Stadium, the new $1.3 billion home of the San Francisco 49ers, opens later this year and will host the Super Bowl in 2016. Later that year, the Minnesota Vikings will open their new stadium.

    The risk for the NFL is that it might price out everyday, jersey-wearing fans, who might decide they'd rather watch games on high-definition TV anyway. Attendance accounts for only about about 25 percent of NFL revenue, and at times there have been signs of sagging demand. Three of the NFL's four first-round playoff games this year struggled to sell out. Will fans keep going to games if the price keeps rising and the view is better on TV?

    More weeknight games, anyone? The NFL has been shopping a Thursday night package to TV networks and could announce a buyer soon with possible simulcasting on the NFL Network, the league's cable outlet. NFL games once were mass-delivered for television consumption on Sunday afternoons and Monday night.

    NBC, for example, pays about $1 billion per year for its package of Sunday night games and playoff games.

    More televised content. If there's demand, create more supply. That's why the league is considering expanding the playoffs, creating another product to sell to networks eager to capture big live audiences. The NFL also is turning the offseason into a moneymaker by televising the NFL Combine in February and the NFL Draft in April, which has expanded from one day to three days, including two nights in prime time.

    New markets. The NFL has been priming London as a market, with two sold-out games there last year and three games on tap in 2013. Meanwhile, Los Angeles hasn't had an NFL team since 1994. Moving existing teams from weak markets into bigger vacant markets might give team owners a better way to increase their shared revenue as opposed to adding more franchises to the 32-team league.

    Conversely, Los Angeles has value to the NFL as a bargaining chip – the unstated threat of moving into that big, empty market can help existing franchises wring out taxpayer dollars for stadium upgrades and new construction.

    Get ready for NFL teams to make "renewed threats of franchise relocation to leverage public money for private stadiums in the second venue revolution, just like the first (round of stadium upgrades) over the last two decades," Vrooman said. "Monopoly power over TV rights and franchise location is what provides the real engine for the economic growth of the most powerful sports league in the world."
    to stream games onto phone screens. The NFL also recently made deals with Twitter and Microsoft's Xbox, giving it new revenue streams in growing interactive and social media.

    With more viewers consuming video content online instead of on cable, cable companies and cable channels could see subscription revenue plummet. Those channels – including ESPN and the NFL Network – can try to recoup that revenue through online content, but it might not be as lucrative.

    Television. The NFL's TV rights contracts soon will be worth about $7 billion per year combined, with most of them starting this year and lasting through 2022. What happens in 2023?

    To get to $25 billion, the NFL probably needs about $15-17 billion from networks.
    If networks pay it, those costs likely will be passed down to the consumer. ESPN likely would ask for higher rates from advertisers and higher subscriber fees from cable distributors, and even viewers who don't like football would pay more because cable channels are not offered a la carte.

    The NFL said it is committed to staying on free television, not just cable, where it has its own network and can reap cable subscription revenue in addition to advertising revenue.

  • Road ahead for college football players union isn't an easy one, CBS: MoneyWatch, January 30, 2014

    The obstacles members of the Northwestern University Wildcats football team face on the road to forming a union are formidable.

    Northwestern, not surprisingly, argues that such a relationship doesn't exist. Whether the players can make such a claim against the NCAA, which seems to be the focus of their wrath and also is opposed to their efforts, also is unclear. The players, though, do have the backing of the First,  there are a myriad of legal questions that need to be answered, such as is there an employer/employee relationship that exists between the players and the Evanston, Ill. school that meets the criteria set by the National Labor Relations Board (NLRB). 

    Northwestern, not surprisingly, argues that such a relationship doesn't exist. Whether the players can make such a claim against the NCAA, which seems to be the focus of their wrath and also is opposed to their efforts, also is unclear. The players, though, do have the backing of the NFL Players Association, the union that represents their counterparts in the pros.

    "Most of the grievances cited by the players concern the NCAA as a monopolistic cartel that wields unbalanced and unreasonable labor market power against the players in terms of compensation and scholarship limitations among other issues," writes Vanderbilt University Economist John Vrooman, a former college football player who studies the economics of sports, in an email. "The issue here is that the NCAA is clearly a cartel but it is not necessarily the employer."

    The other obstacle facing the players affiliated with the National College Football Players Association is a practical one. Since members of the team graduate, creating a cohesive bargaining unit will be difficult if have to frequently recruit new members. That's one of the reasons why efforts to unionize teaching assistants on college campuses have faltered.

    Indeed, the battle over whether TAs can bargain collectively has raged on for years. As Inside Higher Education noted, the NLRB has issued contradictory rulings on the topic. In a 2000 case involving New York University and the United Auto Workers (UAW), the NLRB allowed unionization only to reverse itself four years later in a case involving Brown University. A year later, NYU withdrew its recognition of the UAW, which led to a TA strike that failed because of lack of support

    The second NYU unionization push began in 2011. A regional NLRB official rejected the new petition but after it was appealed to the full board, the NLRB decided to review its 2004 case. Meanwhile, NYU and the UAW struck a deal at the end of last year that could lead to at least some graduate assistants being recognized.

    Even so, the Northwestern case raises many serious issues for the NCAA about the economics of college football, particularly at elite Division I teams. According to Vrooman, only about 53 of the 2,000 or so college sports programs in the U.S. are profitable.  The fortune few make tens of millions of dollars. Meanwhile, a report released last year by the National College Players Association found that 86 percent of student athletes live in poverty. The NCAA recorded a record surplus of $71 million in 2012. During that same time, its net assets were more than $566 million, about double where they were at the end of the 2006 school year. 

    "The real issue ultimately derives from the NFLs exploitation of (the) amateur intercollegiate football system for its minor league player development system," Vrooman says, adding that the National Basketball Association is in a similar situation with college basketball.

    "Logistics and legal issues aside, the collectivization of college athletes is not altogether out of the question. The NFL and the NCAA have both been found guilty in Federal Court of behaving as unlawful cartels in violation of Section 1 of the Sherman Act."

    But Vrooman notes that Marvin Miller faced the same obstacles in 1966 when the Major League Baseball Players Association was formed. Two years later, the union negotiated the first collective bargaining agreement in sports.

  • Notre Dame deal a touchdown for Under Armour, CBS MoneyWatch.com January 24, 2014

    The world of college sports is filled with haves and have nots. Notre Dame's sports program is one of the fortunate few 'haves' that turn a profit, making it attractive to companies like Under Armour, which announced Tuesday it had inked a deal with the school.

    According to data the South Bend university filed with the U.S. Department of Education,  for the fiscal year ending June 30, 2013,  it earned more than $108.5 million in revenue from athletics on expenses of about $88.8 million.

    Most of the revenue to college sports programs comes from football and men’s basketball, which schools used to fund less-popular sports.

    Vanderbilt University economist John Vrooman estimates that only 53 of the 2,000 or so collegiate athletic programs are profitable and notes that Notre Dame's earnings of $19.7 million places it in fourth place between the Universities of Texas and Oklahoma.  Many programs also receive additional subsidies from their schools. 

    Notre Dame, which was founded in 1842, is in a unique position compared with other colleges, making it prime pickings for a company like Under Armour. Under the new deal, the sportswear company will provide Notre Dame with uniforms, shoes and equipment for its varsity teams.

    Its 10-year deal with Under Armour is worth about $90 million, making it the most valuable shoe and apparel contract in the history of college sports.

    “.. this represents the largest financial commitment ever made by a brand to a university, it will provide the critical resources we need to enable our student-athletes to compete at the highest levels,” said Notre Dame Athletic Director Jack Swarbrick in a press release.

  • Companies vie for naming rights to Nashville Sounds' new ballpark, TENNESSEAN, Jan. 21, 2014

    The start of construction on the new Nashville Sounds stadium is still a week away, but companies have already started vying for the rights to put their name on the $38 million minor league ballpark.

    The stadium, scheduled to open in April 2015, is expected to revitalize the area surrounding the Sulphur Dell site and bring new energy to a team that has been playing at 35-year-old Greer Stadium. The new 10,000-seat facility brings a host of branding opportunities for local companies.

    In 2003, when the Sounds were planning a downtown riverfront ballpark, Memphis-based First Tennessee Bankhttp://images.intellitxt.com/ast/adTypes/icon1.png announced a $275,000-a-year naming-rights deal with the team, but the stadium never materialized…

    Recent stadium-naming deals in Triple-A baseball markets ranged from $300,000 to $750,000 annually for 15 to 20 years, according to John Vrooman, sports economics professor at Vanderbilt University. He said he expects the cost for naming rights for a Nashville stadium would be similar to those for venues in Columbus, Ohio, and Sacramento, Calif., and range from $500,000 to $750,000 annually for 20 years.

    Vrooman said his best guesses for contenders include companies in the city’s health care and financial services sectors, citing Regions Bank, Bank of America, SunTrust, Pinnacle Financial Partners, First Tennessee and Fifth Third Bancorp as potential candidates.

  • Some Are More Equal Than Others, The Australian, January 2014

    Promotion and relegation provide an exciting concept, it is true.  It is the staff of life to premier leagues in football round the world.  But it’s not the only way of looking at organising sport.  Having no particular expertise in this area but sensing that division would be the way of the future in cricket, I did some reading last year into the historical and intellectual bases of equalisation in sport in the US: in particular a collection edited by John Vrooman, The Economics of the National Football League (2012).  The parallels with cricket are obviously imperfect.  But I think the implicit notions of how a sport is followed are quite instructive.

    Sixty years ago, a sub-committee of the US House Judiciary Committee investigating monopoly power made a celebrated study of Major League Baseball.  Following what was known as the ‘Celler Hearings’, for the committee chairman Congressman Emanuel Celler, was an economist at University of Chicago, Simon Rottenberg, who published what is regarded as the first significant paper on the subject of the economics of sport, ‘The Baseball Players’ Labor Market’ (1956).  It was Rottenberg who first stressed the importance to sporting competition of uncertainty of outcome and distribution of talent: ‘The nature of the industry is such that competitors must be of approximately equal ‘size’ if any are to be successful; this seems to be a unique attribute of professional competitive sports.’ This ‘invariance principle’ was because a league in which the strong simply soaked up all the talent would defeat itself.

    Explicitly collusive measures against unfettered competition at the time, however, were circumscribed by America’s strict anti-trust laws, so stringent, in fact, that it was illegal to sell any more than local broadcasting rights to sporting contests; any collective action was construed as restraint of trade.  The disparity of the value between the local rights available to, for example, teams in New York and small market teams like Green Bay alarmed National Football League commissioner Bert Bell, with his famous vision of a league in which ‘[o]n any given Sunday, any team in the NFL can beat any other team’.  The NFL had an abiding commitment to equalization measures, its player draft dating back to 1936.  So after the NFL’s first attempt to bundle its television rights was blocked on anti-trust grounds by the Department of Justice, Bell’s successor Pete Rozelle successfully lobbied Congress to exempt sales of broadcast rights for football, baseball, basketball and hockey, the Sports Broadcasting Act becoming forerunner of other equalization measures, including a hard salary cap.

    The NFL is less equal than it was, but more than 70 per cent of revenue in the world’s most successful football competition is still shared, including an annual $US4 billion in television rights, and Rottenberg’s original thesis sits little modified. As Vrooman says: ‘Sports leagues are unique in that individual clubs are mutually interdependent in their cooperative production of competitive games. As joint members of natural cartels each sports team is only as strong as its weakest opponent.’ The point is this: private owners in the NFL, the biggest sporting competition in the world, whose main aim is franchise profit, choose to achieve this by centralising and evenly distributing revenues so that the result of no game is foreordained, and every game is a potential television ‘blockbuster’.

    International cricket is different in key respects, of course.  It’s not a league as such, although it does have ranking tables, and it can’t do much about distribution of talent when it is constrained by geographic boundaries, although players are also more mobile than they were.  But the ICC does have global events to which it sells the rights that depend on uncertainty of outcome, and cricket elsewhere is paying some lip service to equalisation, at least in theory: even if it is doubtful how binding they are, salary caps operate in the IPL and the BBL.  So how does cricket’s global ‘cartel’ benefit from the rich becoming richer?  Doesn’t the ICC’s strategic plan speak of ‘More Competitive Teams’ and ‘Promoting the Global Game’?  Isn’t the lack of other equalisation measures all the more reason to tred vary warily where further inequalities are concerned?

    I stress that these are early thoughts, based on limited detail: I offer this simply in the spirit of context for what should be a key cricket debate, in which, I think, we all have a stake.  And like I said, in some senses this merely regularises what has already long been the case: that the cricket world is profoundly, if not irrevocably divided, and observes the Golden Rule of Arts and Sciences.  But I’m not sure how in the long term entrenching that divide benefits even those on the right side of it.

  • Sports economists: What's at stake for Vanderbilt football? Nashville Business Journal, 1/14/2014

    Attendance at Vanderbilt University football games was down six percent last season, despite the star power of outgoing head coach James Franklin and the team coming off of back-to-back bowl appearances.

    According to data collected by Al.com, the Southeastern Conference led the nation in attendance, increasing 1 percent overall, averaging 75,582 fans per game. Vanderbilt averaged 35,675 fans, higher than before Franklin came in, but more than 2,000 shy of 2012, underscoring the challenge the school may face as it looks to replace its coach while holding the attention of its fan base.

    John Vrooman, a sports economist at Vanderbilt, conceded challenges, but said much of the framework and overhead capital for successful SEC football are now in place, citing the administration's commitment to take the program to a new level…

    "There will probably be some unavoidable short-term dip in corporate sponsorships and season ticket sales, but the program will rebound between the lines and on the bottom line," Vrooman wrote in an email. "James Franklin was an accomplished recruiter and promoter and Vanderbilt football is clearly improved over where we were three years ago, but the enemy of sports business is risk and uncertainty. It is important for the new head coach to re-establish certainty, confidence and continuity necessary to consistently win in the SEC."

  • Top-value football: Mack Brown's Longhorns raked in $900 million in 16 years for UT, CultureMap, 12.20.13 

    You might call Mack Brown the master of pigskin profit.

    In 16 seasons as head coach, Brown’s University of Texas football program has raked in more than $940.2 million in revenue — with pure profit of nearly $675 million. Brown’s time at the team’s helm ends Dec. 30with the Longhorns’ appearance in the Alamo Bowl.

    To be sure, Brown isn’t solely responsible for generating that pile of cash. But when you’re essentially the CEO of a multimillion-dollar business, you deserve more than a pat on the back if you achieve success. (Undoubtedly, a more than $5 million annual salary is a rich reward.)

    A CultureMap review of UT and U.S. Department of Education records shows that football revenue at Texas shot up more than 690 percent from $13.8 million in the 1997-98 school year to $109.4 million in 2012-13.

    Football profit in 2012-13 totaled $81.7 million, up more than 865 percent from almost $8.5 million in 1997-98. During that span, the Longhorns clinched the 2005 national football championship and played for the 2009 national championship.
    Given those eye-popping numbers, it’s no surprise that Forbes magazine just anointed the Longhorns as college football’s most valuable team, worth an estimated $139 million.

    “The team’s unprecedented value is built on the back of the nation’s most dedicated fan base, which has helped Texas lead all schools in merchandise sales, secure the most lucrative school-specific TV deal and become the only college football team in history to cross $100 million in revenue, which the Longhorns have done for the last two seasons,” Forbes said.

    To determine college football’s most valuable teams, Forbes weighed each team’s value to its athletic department, its university’s academic endeavors, its athletic conference and its school’s local economy.

    As outlined by Forbes, the Longhorns picked up $34.5 million from ticket sales in 2012-13. Most of the team’s remaining revenue came from contributions ($30 million), royalties and sponsorships ($26 million) and distributions from the NCAA and Big 12 ($15 million).

    “If you were ever looking for a recession-proof business, you wouldn’t need a college degree to see that football is a no-brainer,” according to Businessweek.
    It’s also a no-brainer that Brown has played a pivotal role in ratcheting up the business of football at Texas.

    UT grad John Vrooman, a professor at Vanderbilt University who specializes in sports economics, said Brown restored stability to the Longhorn football program and “reconnected” the Bevo brand to the glory years of the revered Darrell K. Royal.

    “Mack Brown generated revenues by glad-handing boosters and playing for national championships,” Vrooman said, “but his major contribution was to slam shut the revolving coaching carousel that followed DKR.”

    Vrooman said it’s vital for UT to keep pace with “fads” in college football coaching, but it’s even more important to protect the long-term value of the Longhorns brand.

    “Texas football more than pays for itself, and even if the new coach’s salary approaches the $7 million to $8 million Nick Saban range, it will still be less than my rule of thumb of 5 percent of the Texas football budget,” Vrooman said. “The Longhorn brand is all about winning, and short-term winning becomes a long-term tradition of winning that sells itself.”

  • Of Course Money Gets Your Baseball Team to the Postseason, U.S. News & World Report, October 28, 2013 

    What do the Boston Red Sox and the St. Louis Cardinals have in common? Both are in the World Series right now, of course. And both have payrolls at well over $100 million, putting them in the upper reaches of the Major Leagues.

    Are those two facts related? Data suggest they are. During the last 10 years, the payrolls of teams that make it to the American League and National League Championship Series have generally averaged higher than the league average. This year, the discrepancy is particularly wide. The four teams that made it to the NLCS and ALCS had an average payroll of nearly $160 million, compared to a league average of $106 million. The league median payroll was even lower, at $92 million.

    Of course, it's not a hard-and-fast rule that money buys championships. If it were, the New York Yankees would be in the World Series every year. The truth is a bit more complicated.

    "The actual performance during the regular season is an accurate reflection of the quality of the team and there is a bimodal distribution of wins based on payrolls," says John Vrooman, economics professor at Vanderbilt University, in an email to U.S. News. That's a pretty stat-heavy statement, but boiled down, Vrooman says winning is based on how good the team is, but money can have a lot to do with quality.
    He explains there are two types of teams: high-payroll clubs that stock their roster with expensive players and smaller, mid-market clubs that buy "discounted bargain talent." High-payroll clubs can have some of the most talented players in the league, says Vrooman, but it can come at a steep price tag – perhaps too steep.

    "[T]heir performance is somewhat risky business and very often the clubs are overpaying for their wins," he writes.

    Meanwhile, teams like the Tampa Bay Rays and the Oakland Athletics, which have among the lowest payrolls in the league – both around $60 million – have often made it into the postseason.

    Given a team's ability to buy talent, it can surprise even sports economists when lower-payroll teams succeed.

    There have been years where lower-payroll teams have done remarkably well. In 2007, three of the teams that made it to the championship series started off the season among the 10 bottom payrolls in the league. In 2006, teams with a wide range of payroll levels also made it to the playoffs.

    Still, though some lower-payroll teams do make it to the division series sometimes, teams with more money at their disposal have been more likely than their lower-paying brethren to advance. In the last 10 years, 16 teams in the top 20 percent of payrolls have made it to the championship series, along with 14 in the second 20 percent. The bottom three-fifths of the league have fared far worse.

    So why don't all teams simply shell out massive sums for the best players? For one thing, having the money for Alex-Rodriguez-level salaries is not a luxury every team can afford. But there's also the reality that baseball is a business. Teams have to balance the desire to win games with the desire to reap profits. And different teams fall at different places along that spectrum.

    While spending big might be correlated with getting to the playoffs, paying out big salaries by no means guarantees a playoff berth – just ask this year's Yankees or the Philadelphia Phillies for proof of that. And though payrolls have a lot to do with win-loss records, they certainly shouldn't be considered a predictive factor in the postseason, says Vrooman. Rather, he says luck is perhaps the strongest force in the playoffs and World Series.

    "MLB has engineered a combination of a long season where the best team wins with relative certainty and postseason, where the team that wins is subject to the bats and balls of outrageous fortune," he writes.

  • Will Titans leave following Adams' death? A Vanderbilt sports economist weighs in, NASHVILLE BUSINESS JOURNAL, Oct 21, 2013

    Despite the passing of team owner Bud Adams, the Tennessee Titans are unlikely to leave Nashville, according to John Vrooman, a sports economist with Vanderbilt University.

    Kenneth Stanley "Bud" Adams brought the Titans to Tennessee after the 1996 season (under the Oilers moniker), but don't expect the franchise to move following Adams' passing, says John Vrooman, a sports economics professor at Vanderbilt University.

    "In the current NFL environment it is unlikely that the team will be relocated," Vrooman wrote in an email to the Nashville Business Journal. "And it is unlikely that the ownership changes will result in major personnel moves as long as the team remains competitive."

    Los Angeles has been pushing for an NFL team, but it’s unlikely to land the Titans, Vrooman said.

    "The empty L.A. market will probably be filled with a relocation franchise in the next couple of years … and it is doubtful that the Titans will jump to the top of that list, which includes the San Diego Chargers and the St. Louis Rams and other clubs issuing requests for public stadium subsidies," wrote Vrooman.

    Following Adams' passing, Buffalo Bills owner Ralph Wilson is the only remaining original American Football League franchise owner. The rumors that the Bills would leave Buffalo were put to bed, for now at least, late last year when the Bills signed a 10-year lease with its stadium, bKenneth Stanley "Bud" Adams brought the Titans to Tennessee after the 1996 season (under the Oilers moniker), but don't expect the franchise to move following Adams' passing, says John Vrooman, a sports economics professor at Vanderbilt University.

    "In the current NFL environment it is unlikely that the team will be relocated," Vrooman wrote in an email to the Nashville Business Journal. "And it is unlikely that the ownership changes will result in major personnel moves as long as the team remains competitive."

    Los Angeles has been pushing for an NFL team, but it’s unlikely to land the Titans, Vrooman said.

    "The empty L.A. market will probably be filled with a relocation franchise in the next couple of years … and it is doubtful that the Titans will jump to the top of that list, which includes the San Diego Chargers and the St. Louis Rams and other clubs issuing requests for public stadium subsidies," wrote Vrooman.

    What happens next for the Titans depends on the line of succession, wrote Vrooman, who noted that Adams has two daughters. He suspects the transition will be as seamless as when the daughter of late Chicago Bears' owner George Halas took over the team following his death in 1983.

    Adams has previously said he he expected to leave the team to his daughters and the family of his deceased son. He's said that he envisioned Kenneth Adams IV, who has worked under several Titans executives, eventually running the team, as he said his daughters weren't interested.

    "If the heirs are self-sufficient enough to afford the inheritance taxes on a $1 billion franchise that originally cost $25,000 in 1959, then the club will be operated pretty much as before with perhaps a slightly more conservative long-term approach to player development and the bottom line," wrote Vrooman. "If not, then the club may have to be cashed out and sold, and [its] future scenario may not be as predictably stable."

  • Washington Redskins Name Change, Washington Post, Interview 9/26/13

    One question I have is comparing 2013 v the last time this issue really flared up. We’re trying to explain why this is happening now and if there is anything different that would change the outcome.  

    The persistence of the not so subtle racism inherent in the name "Redskins" will probably not go away in spite of the huff and puff obstinance of ocurrent owner dan snyder. i seriously doubt whether the name issue has escaped the contstant attention of groups like AIM. This time the resistance does seems stronger as more progressive news organizations such as Slate have joined the recent reprise.
     

    The most obvious difference between now and that last publicized reminder in the mid-1990's is the change in ownership in 1999 from Jack Kent Cooke estate to  Snyder and the cycling of NFL stadiums that occurs about every 20 years. Privately finaced (by Cooke) FedEx Stadium opened in 1997 at a cost of $251 million. snyder borrowed a significant (read nfl max) of the original $750 million purchase price and has since sought out every revenue crook and cranny to retire that debt. the generation long season-ticket waiting list has been reduced to zero for certain high priced seats as snyder has tried to max out the revenue potential of Cooke's money machine. snyder is still a prisoner of the fedex revuenue stream and that obsession could and should trump his phoney reliance on the racially troubled past (read george marshall) of the Washington Redskins. One of the major economic theories about racial discrimination is that it is inconsisitent with the profit max motive (read snyder) and can therefore not survive in a truly competitive environment. the only way this  name can survive is in an environment of monopoly power (only nfl club in town) or is the racism is consistent with the values of the redskin nation. The Baltimore Ravens and Washington Nationals, Capitals, and Wizards (whose name was changed from the Bullets in 1997) can perhaps leverage the Redskins in the mid-atlantic sports market but the name change ultimate depends on the values of the Redskins corporate sponsors and corporate season-ticket, luxury-seat base.  

    Snyder has said he is not going to budge.

    Nonetheless, we are looking at the various pressure points. There is a new push among advocates, trying various routes, which we can discuss on the phone.
    The polls show a subtle change in public opinion. Nationally the number of people who say it is offensive has crept up. And regionally --  we don’t have a bench mark from the 90s sadly --  but as of this year a quarter of the folks we polled said the name should go, with support for a change highest among college educated African americans.  

    Check out the infamous race related history of the Redskins. I think the Redskins were considered the team of the South before the AFL-NFL war in the 1960's and it was the reluctance of then owner George Marshal to expand into the South that  created the organization of the AFL in 1960. I think the redskins were that last team to racially desegregate in the mid 1960's. Marshall once said that the redskins would sign black players when the harlem globetrotters signed white players.  the redskins name change was marshall's idea in the early 30's....I think the team was previously called the braves in boston...just like the boston baseball braves who are now the atlanta braves (by way of milwaukee). braves may be objectionable to some native americans but redskins is objectionable to all.
     

    In fact college education seems to be the big demarcation between those pro and con. And the proportion of college educated residents in our region keeps growing with each census. So in 1990 we had 38 percent of adults with college degree or more. Now it’s 47.   The one piece that I need to explain better is the economic one. I get different takes on whether it would cost the team and the league or whether it would be a windfall. Brand might lose value but people will rush out to buy the new licensed merch, etc.  

    Forbes values the redskins at $1.7 billion (twice the highly leveraged price paid by snyder in 1999) and sets the brand portion of value at $145 million or about 8.5% of total value. By comparison the Dallas cowboys are valued at $2.3 billion with brand equity of about 12.5%. It is doubtful the brand equity would suffer if the redskins changed the name to reds or skins or redhawks, but there is the risk that the brand value could erode if the club racial values are called into question. This should be a no brainer positive sum decision for such a profit maximizer as dan snyder.  

    Then there are advertisers. I am told they basically don’t care because they are more dependent on the NFL than ever to reach a mass audience. Is that true? I also read that a greater share of revenues for the teams comes from local sources. Obviously Snyder cares most about what the die hard fans say. But already a higher proportion of regional folks support a change than nationally so if that trend continues, is it possible it will start to affect luxury or corporate box sales?  

    my best guess is that the redskins equally shared national revenue is slightly less than 50% of an estimated $380 million. The current tv contract pays the skins and avergae of $127 million which will jump by about 60% to an average of $190 million over the next 9 seasons 2014-22. this should measure snyders cushion and the strength of his reluctance to change the name.  

    more recently for the more valuable clubs like the cowboys and skins along with the patriots, giants, jets ,bears, eagles and other top tier revenue nfl clubs (including the baltimore ravens) the share of revenue derived from unshared venue money has doubled since the debut of fedex stadium. this is the weakness of dan snyders defiant defense against doing the right thing. venue revenue includes concessions, sponsorships, naming rights, club fees and luxury suite leases. this revenue stream could be as much as a third of the skins total revenue and it is critical to snyder and it is the most vulnerable to social reaction against even the hint of racism. Major sponsors include bud, coke, comcast, fedex, and verizon all of whom would join the movement if they sensed the backlash. then there are the luxury suites holders and club seat patrons who are usually corporation ranging from large publicly held corps to small law firms. This is where snyder is vulnerable to boycott or the influence of strong sponsor suggestion. snyder is not as cash strapped as in the past but he is still senesitive to the bottom line and is the ultimate promoter in his own mind, not unlike george marshall who created the negativity to begin with. In the end even the most scheming revenue squeezing profit maximizer should see the writing on the fedex walls . The corporate gains from a name change far exceed the individual losses, and the losses from clinging to the heritage of george marshall's race-based mascot far exceed the potential losses.  This is a no-brainer positive-sum economic move. The ghost of George Marshall is gone: its time to change the name.
     

  • Titans, Predators have propelled Nashville into big leagues, The Tennessean, September 22, 2013

    On Nov. 4, there were so many Chicago Bears fans in Nashville that they caused a beer shortage at downtown bars and restaurants.

    Five months later, on April 6, there were so many Chicago Blackhawks fans in town that their jerseys and fan garb turned Broadway into a giant red canvas.


    There are several other factors that have led to Nashville’s growth. It simply can’t be placed with the arrival of the two sports teams.

    “Rather than the teams driving the economic engine, it is more likely that they are following in its wake,” Vanderbilt economics professor John Vrooman said. “The economic viability of the Predators and Titans is probably more a welcome symptom or result of this natural endogenous growth rather than a driving cause.”

    Yet there is an emotional and intangible element to the professional teams locating to Nashville.

    Said Vrooman, “Both clubs serve in an economic and social network that unifies Nashville in lively discussions around the water cooler, and both clubs serve as intangible but real links in the economic grid of the metro Nashville.”

  • Nashville Predators remain hot draw for Midstate hockey fans. The Tennesean, June 22, 2013

    … Average paid attendance of 14,000 in the 17,113-seat arena is still important for the Predators, but it’s now more of an afterthought. According to figures the team provided the Metro Sports Authority, the Predators averaged more than 15,000 paid attendance for each of the past three seasons.

    That means the franchise can set its sights higher. Said John Vrooman, a sports economics professor at Vanderbilt: “Paid attendance of 16,000 is the new magic number for the Preds.”

    The Predators averaged 15,126 in paid attendance this season, which was shortened from 82 games to 48 games — 24 at home — because of the NHL lockout. Nashville had more games with at least 16,000 in paid attendance (seven) than games with 14,000 or less (six).

    There were no games for which every ticket was sold — the Predators handed out an average of 1,904 comp tickets per game. Comps are generally given to sponsors, charities, schools, players and others.

    In the previous two regular seasons, both with 41 home games, the Predators had higher average paid attendance and lower comp average. In 2011-12 the averages were 16,103 in paid and 646 comp. In 2010-11 they were 15,525 in paid and 650 comp.
    With average paid of attendance of 16,000, the Predators would join elite company.
    Teams in the NHL’s “middle class” have average paid attendance of 16,000 to 19,000 and are worth $200 million to $250 million, Vrooman said. The Predators were valued at $167 million in the most recent Forbes listing.

    Many middle-class teams — which also happen to be in bigger markets than Nashville — have greater financial freedom to reinvest in payroll than the Predators.

    The Sharks are considered the gold standard of Sun Belt expansion teams from the 1990s. They are valued at $223 million (15th in the league), according to Forbes, and have sold out 17,562-seat HP Pavilion for 134 consecutive regular-season games.

    Last season the Sharks had the ninth-highest payroll in the 30-team NHL and the 10th highest in 2011-12, according to nhlnumbers.com. Nashville’s payroll was 24th in 2013 and 27th in 2011-12.

    With their current momentum, the Predators can get to 16,000 in average paid attendance and turn the gains into “a stable long-term accumulation of veteran and homegrown talent,” Vrooman said…
    ,,,

  • NFL Plays Offense to Get Public Money for Stadiums, Stateline, April 22 2013

    The Buffalo Bills wrapped up a deal to pay for $130 million in upgrades to its stadium last month. As part of the deal, New York state government will pay $54 million and, in return, get a skybox to promote the state to businesses.

    The Minnesota Vikings are lining up contractors to build a long-sought stadium with a price tag of nearly $1 billion, even though the state has nowhere near the money it needs to pay its third of the costs.

    And the Carolina Panthers scaled back their plans for a stadium overhaul, after North Carolina lawmakers refused to go along with the team’s idea of raising local taxes for stadium renovations. Now the Panthers want $113 million in improvements, less than half of the club’s original proposal.

    Yes, after a timeout for the recession, the National Football League is back in the game of getting public money to pay for better stadiums. In many cases, teams want to replace or renovate stadiums finished during a 1990s sports construction boom.

    As finances for states and cities improve, many of their marquee teams are asking for help—and threatening to leave for Los Angeles if they do not get it. That leaves public officials in a bind. They may not want to raise taxes, but they do not want to be blamed for losing a city’s favorite team...

    NFL teams want stadiums with plenty of pricey luxury boxes, and they want to be able to sell “personal seat licenses” that allow season ticket holders to keep their seats from year to year. The franchises can hold onto that money, instead of sharing it with the rest of the league, if it is used to pay for stadium improvements.

    “The NFL is somewhat different than the other leagues, because it doesn’t really matter where the teams play; it only matters that they are playing in a new, heavily subsidized luxury suite venue,” said sports economist John Vrooman of Vanderbilt University.

    The football league’s lucrative TV deals — which will soon bring in $6 billion a year — and its extensive revenue-sharing make location less of an issue than in other sports, Vrooman said. The league splits up that TV money, and NFL teams share a bigger portion of the league’s revenues than clubs in other professional sports leagues. NFL clubs get about 60 percent of their income from revenue-sharing, compared with 40 percent for pro baseball, 20 percent for basketball and 10 percent in hockey.

    The influx of money from luxury suites and personal seat licenses has helped NFL teams rely less on public money to build new stadiums, but it also makes it harder for average fans to afford tickets.

    “Over a very short period, the venue structure of an entire league will have been transformed from multipurpose public stadiums designed for maximum fan welfare to publicly subsidized, exclusive, football-only venues designed for maximum profit,” said Vrooman.

    He also noted that many of the clubs now asking for new stadiums were among the first to build in the 1990s stadium construction boom. Owners may be losing their tax advantages for leasing those stadiums. In financial statements published by Deadspin, the Carolina Panthers said their depreciation schedule for the stadium and other improvements was 15-25 years, Vrooman noted. The stadium has been open for nearly 17 years.

    Still, it is difficult for public officials to say “no” to NFL teams, because the stakes are so high.

    Right now, the San Diego Chargers and the St. Louis Rams (which left Los Angeles in 1994) are threatening to leave for Los Angeles. At least seven other teams have made the same threat in recent years, according to Vanderbilt’s Vrooman.

    “In the NFL’s extortion game, the L.A. market may be more valuable to the NFL empty than occupied,” he said...

  • As Carolina Panthers’ stadium talks trudge on, a closer look at the economics Charlotte Business Journal, Feb 28, 2013

    Talks continue on whether and how to use taxpayer money to revamp Charlotte’s NFL stadium, and one of the main points cited by Carolina Panthers officials and supporters of the proposed deal is the economic benefit created by the team. …

    The framework of a deal endorsed by Charlotte City Council members calls for state and local taxpayers to contribute $200 million toward a $300 million package of renovations and improvements at the stadium, plus extras such as a $30 million indoor practice field. An increased tax on local restaurant meals would provide most of the city’s $144 million commitment; the state has yet to say whether it will kick in the $62.5 million requested in the deal. The state legislature also must grant the city the authority to raise the meals tax.

    According to the USC study, the Panthers directly contribute 4,415 jobs and create $361.5 million in annual economic gains for the region. The calculations include Panthers staffers, executives, players and coaches as well as the impact of 10 home games and other events at the team’s privately held stadium. Counting spinoff effects of the additional spending and jobs created by those games, employees and related vendors and tourism, the total impact reached $636 million annually, the USC study determined.

    “Most of these numbers are exaggerated,” said John Vrooman, a sports economist at Vanderbilt University, who looked over a brief synopsis of the impact study provided by the Charlotte Business Journal. “The jobs created are usually secondary labor market jobs that are seasonal and low-wage. The permanent jobs are very few, and players usually spend the majority of their income outside of regional Charlotte. So most of the income and employment effects leak out of the regional economy.”…

    Vrooman poked holes in the notion of the Panthers and other sports franchises making a meaningful difference in the local economy. He said impact studies tend to be biased and fail to recognize the net loss of spending by residents and companies on other entertainment options.

    “The Panthers are great for the owners — including all NFL owners — and their fans to a lesser extent, but for the rest of the taxpayers, not so much,” Vrooman said….
    A $200 million investment looks better when compared with some of the taxpayer tabs for new NFL stadiums in other cities. The Minnesota Vikings will break ground next fall on a $975 million stadium; public money accounts for half the cost. And in Indianapolis, 86 percent of the $720 million price tag for a new stadium opened in 2008 came from, yes, taxpayers.

    Vrooman said the ratios are upside down in the Panthers talks. Instead, he thinks local and state government should be paying one-third or less of the cost.

    The Panthers, he added, will see the value of the team increase. Beyond that, Vrooman takes another argument made by some in town and flips it, too. The Panthers, using fans’ seat-license fees and bank loans, paid for the construction of the uptown stadium, footing the entire $187 million bill. State and local government kicked in $60 million in land and road and site improvements. CEOs and politicians alike have said in recent months that because the city got such a good deal the first time, making an investment now is more than merited.

    “The unfortunate aspect of the current deal is they are now asking the public to subsidize a quasi-private business,” Vrooman said. “The economic impact of a stadium is about the same as a shopping mall, under the best scenario. We don’t usually subsidize malls. Why should we subsidize stadiums?”...

  • NBA’s best player (LeBron James) isn’t best-paid, Miami Herald, Feb 17, 2013

    When LeBron James walks onto the court for Houston’s NBA All-Star Game Sunday, he’ll do so as the undisputed king of his sport.

    Named the league’s most valuable player three times in the past four years, James is once again dominating the NBA and most likely headed for his fourth MVP award — two fewer than Michael Jordan — with presumably a long career still ahead.

    But while James is the most valuable player in the NBA, he’s nowhere close to being the league’s highest paid. Of the 10 players voted into the starting lineup of Sunday’s All-Star Game, five earn more than James, whose salary for this season ranks 13th in the NBA.

    James’ decision a while back to “take my talents to South Beach” was a case of trading dollars for victories. The league caps what teams can spend on salaries.
    The bimonthly checks cut by team owner Micky Arison this year will equal a bargain come season’s end: $17,545,000.

    Kobe Bryant of the Los Angeles Lakers, the league’s highest-paid player, will earn about $10 million more than that this season...

     “Per year, if there were no salary-cap restrictions, I think he’s worth well over $100 million, easy,” said Shane Battier, the Heat’s heady forward and former Duke University schoolmate of Heat CEO Nick Arison.

    That’s $100 million per year...

    According to one numbers cruncher — John Vrooman, an economics professor at Vanderbilt University — Battier’s figure is an overestimation of James’ worth by about $60 million. Here is how his math works: Vrooman used an advanced metric known in the sports world as “win-share,” which assigns a number to each player on a team based on his contributions, both offensively and defensively, for a season. Last season, when James led the Heat to the championship, he had a win-share value of 14.5, which translates to 31.5 percent of the 2011-12 Heat’s 46 regular-season wins.

    Next, Vrooman factors in the Heat’s approximate total revenue — $150 million last season, according to Forbes magazine. Vrooman contends that two-thirds of that money rightfully is owed to the players. (The owners would say otherwise. As a result of negotiations that ended the 2011 lockout, the NBA Players Association settled for a 50-50 split.)

    Two-thirds of $150 million is $100 million and 31.5 percent of that (James’ win-share) is $31.5 million.

    “So [James’] true economic value with the Heat is roughly equivalent to his current endorsement income of an estimated $33 million,” Vrooman wrote in an email.

    "[James] is paid about one-half of his worth to the Heat."

    “By comparison [Dwyane Wade’s] 2011-12 salary of $15.7 million is closer to his true value to the Heat of 7.7 win-shares, which converts to about $16.7 million last season.”

    ...Complete Vrooman Interview, 2/12/13

  • Super Bowl: 5 raisons qui font de la NFL la plus riche, La Presse,03 février 2013

    Match de football pour les uns, rendez-vous publicitaire ou social pour les autres, le Super Bowl est l'événement sportif de l'année en Amérique du Nord, avec des cotes d'écoute de 113 millions de personnes aux États-Unis et 9 millions au Canada. Un succès populaire et commercial qui témoigne de la santé financière de la NFL. Mais quel est le secret du circuit de sport professionnel le plus riche sur le continent?

    1. Un pour tous, tous pour un!

    Douce ironie, la NFL a bâti son modèle d'affaires sur un principe peu populaire au pays du capitalisme: le partage des revenus. Une idée que le commissaire Pete Rozelle a imposée au début des années 60 pour les revenus nationaux de télé, inexistants à l'époque mais qui feront la fortune de la NFL dans les décennies à venir. Depuis 20 ans, les inégalités augmentent toutefois dans la NFL. Les revenus télé sont toujours divisés également entre les 32 équipes, mais les revenus de commandites locales, une nouvelle manne pour les équipes riches comme Dallas (80 millions par année), ne font l'objet d'aucun partage. Résultat: entre 1993 et 2009, les revenus nationaux (partagés également entre les équipes) sont passés de 75% à 63% des revenus totaux de la ligue.

    2. Lucratif, le petit écran

    Les salaires des 1700 joueurs de la NFL cette saison: 3,4 milliards (pour les amateurs de hockey, c'est 100 millions de plus que les revenus totaux de la LNH la saison dernière). Les revenus de télé de la NFL: 4 milliards. À partir de 2014, la NFL générera environ 6 milliards de dollars en revenus télé aux États-Unis. Selon la nouvelle convention collective, les joueurs ont droit à 55% des revenus nationaux de télé et 40% des revenus locaux des équipes.

    3. Des proprios en chair et en os

    La NFL est la seule ligue à interdire à une entreprise d'être propriétaire. La NFL pense que ses propriétaires auront ainsi davantage leur équipe à coeur. Ces règles compliquent toutefois la vente d'une équipe, surtout dans le cadre d'un héritage. Selon Forbes, la NFL compte 20 équipes valant plus de 1 milliard, comparativement à 6 équipes pour la NBA, le baseball majeur et la LNH réunis. La valeur moyenne d'une équipe de la NFL: 1,1 milliard.

    4. Investir dans le béton

    En 1999, les contribuables américains ont reçu une bonne nouvelle de la NFL: la ligue a mis sur pied un programme de prêt à ses équipes pour construire des nouveaux stades. Résultat: les 12 stades construits depuis ont été payés à 59% par des fonds privés, comparativement à seulement 26% de fonds privés pour les 13 stades entre 1995 à 2002. Le stade le plus coûteux jamais construit aux États-Unis, le MetLife Stadium (1,6 milliard), a été entièrement payé par les Giants et les Jets. La NFL prête jusqu'à 200 millions à ses équipes pour construire un nouveau stade, mais se rembourse ensuite avec une partie des revenus des loges.

    5. La paix syndicale

    Depuis la grève des joueurs en 1987, la NFL n'a subi qu'un seul conflit de travail avec ses joueurs - le lock-out de 2011, qui n'a pas forcé l'annulation de matchs -, comparativement à deux conflits au baseball majeur, trois dans la LNH et quatre dans la NBA. Cette paix syndicale n'a pas empêché les propriétaires de la NFL d'obtenir en 2011 des concessions salariales de 480 millions par saison des joueurs, dont la part des revenus est passée de 53,3% à environ 47%. L'une des raisons de la paix syndicale dans la NFL: la carrière d'un joueur est plus courte (3,8 ans e

    - Avec  John Vrooman, professeur d'économie à l'Université Vanderbilt

  • Labor deal has Lightning owner Jeff Vinik optimistic about future, Tampa Times, January 13, 2013

    In the end, owner Jeff Vinik said, the Lightning will be better off financially because of the new collective bargaining agreement.

    With the owners now getting 50 percent of revenue (up from 43 percent under the old agreement) and revenue sharing of $200 million a year (up from $150 million), there certainly will be more money in every owner's pocket.

    But consider this: Assuming league revenue grows 6 percent annually (it grew 7.2 percent under the old deal), the salary cap in 2021-22, the last season of the new 10-year deal, would be $96 million, according to an analysis by Canada's Globe and Mail newspaper. The salary cap floor would be $70.9 million.

    The Lightning's payroll this season: $63 million, about $7 million under the $70.2 million cap.

    In other words, Tampa Bay, a small-market team that annually loses money and is in the lower tier of the league in terms of revenue, according to Forbes magazine, must drastically grow its business to keep up with the projected salary inflation.
    "Those numbers don't scare me," Vinik said. "I hope the league does prosper to that extent. … To the extent we get to that level, that would be awesome, because that means the game of hockey is really booming in North America."

    Though Vinik would not say (and probably can't say yet) if the new agreement makes the Lightning a break-even franchise or even a money-maker, he did say, "I think if we continue to do what we've done the last three years — we've built a great organization on and off the ice — we should be in good shape."
    One reason he cited is expanded revenue sharing.

    The distribution is difficult to figure because even this season the amount available will be calculated on total league revenue. Individual team revenues will determine which organizations benefit, though the formula is not clear.

    According to the NHL, "The distribution of the revenue-sharing pool will be determined on an annual basis by a revenue-sharing committee on which the (players union) will have representation and input."

    There also are those who do not believe expanded revenue sharing will have much of an effect.

    In an email, John Vrooman, a sports economics professor at Vanderbilt, said the NHL's $200 million revenue sharing "is considered a joke in a league with $3.3 billion in revenue."

    "The owners argue this sharing arrangement is comparable to (Major League Baseball), where national revenue is shared equally and 31 percent of local revenue is pooled and shared. MLB shares $400 million on local revenues of $6.6 billion, which is about twice the size of NHL. The difference, of course, is that national revenue in MLB is about three times the size of NHL revenue even in relative terms."

    ...

  • FALCONS STADIUM: Public asked to pay high price for wonder, Proposal would use $300 million in taxes. Atlanta Journal-Constitution December 16, 2012.

    For $18 million, the cost in 1965 to stamp out a cookie cutter ballpark south of the Capitol dome, Atlanta became big league.

    Atlanta Stadium --- later Atlanta-Fulton County Stadium --- was a shrine to symmetry, its roundness an insult to architecture. Yet to a region new to the exclusive ranks of Major League Baseball and the National Football League, it held the mystery and wonder of a concrete crop circle.

    Five decades later, plans are proceeding for a new stadium, a tricked-out convertible that will cost at least five times more than that first home of Southern professional sport. Wonder costs a lot more than it used to.

    In the intervening years, generations of stadiums and arenas have risen and crumbled.

    Some have been the product of good timing --- the Atlanta Committee for the Olympic Games converted its main stadium for the 1996 Games into the Braves current home, Turner Field.

    Others have been financed the old fashioned way --- Philips Arena, which replaced the Omni as the home of the Hawks, was paid for through a combination of bonds, rental car tax funds and private investment.

    All, as with the proposal for the 20-year-old Georgia Dome --- another publicly financed project --- have been touted for their promise to enhance Atlanta's status as a major league city and fuel economic development downtown.

    Looming over the latest plan is the ongoing issue of the public being asked to help pay for the construction of a grandiose building that buffs a private enterprise's bottom line. Opinion polls have consistently tilted against the current plan of contributing $300 million in hotel-motel tax money toward a nearly $1 billion retractable roof stadium in which all revenue would flow to the Atlanta Falcons.

    Scholars have noodled over the various financing formulas that have fueled stadium construction around the country. They've largely concluded that there is little need for the public to be involved in the lucrative business of big-time professional sport.

    Vanderbilt's John Vrooman, an expert in sports economics, said that owners are progressively footing more of the bill for stadium construction. Falcons owner Arthur Blank's agreement to pay for 70 percent of the new stadium is generous by current standards, but, Vrooman said, the 30 percent share for taxpayers "is still way too much for the public to pay for a private monopoly business."

    Backers insist that the deal is a no-brainer, seeing how the public share comes from a tax largely paid by visitors and considering all the long-range economic benefits the new stadium will generate.

    Having already agreed to kick in $700 million, Blank was asked last week why he just didn't pay for it all. He answered, "This is not really about me and my personal solution. It's about the right solution for the franchise and the state and all the other events (outside Falcons games) that I think are very important.

    "We're putting up an awful lot of capital, taking on all of the capital risk and taking on all the operating risk. We think it's a pretty fair formula." "The private sector is being asked to do more, take on more risk, assume more operating control, " said Blank, who insists that is exactly what is happening in Atlanta.

    Countered Vanderbilt's Vrooman, "The basic rule of venue finance is simply that the guys who benefit should be the same guys who pay --- nothing more and nothing less."

    "Blank bought the Falcons for about $545 million in 2002 and they are currently valued at less than $900 million, " he added. "If they capture all of the revenues from a new venue, then the franchise value will leap by 20 to 25 percent to about $1.1 billion."


  • Death sentence for PSU football? Not so fast. Pittsburgh Tribune Review, December 2, 2012

    College football success at the big-time level often is measured in terms of national championships or conference titles or BCS bowl appearances. This season Penn State will have none of these things.

    Yet its 8-4 record (6-2 in the Big Ten) has been marked as a superior achievement or even a miracle by many, including and especially those who believed the exact opposite might occur…

    It was, in fact, a vast, overwhelming majority of college football insiders and outsiders, observers and participants whose predictions for Penn State football ranged from dire to apocalyptic after NCAA president Mark Emmert announced oppressive sanctions in the wake of the Jerry Sandusky sex-abuse scandal.

    It’s hard to fault anyone for expecting the worst. The penalties included a $60 million fine, forfeiture of all wins since 1998, a four-year ban from bowl games (including a two-year ban from the BCS playoff starting in 2014) and a reduction of maximum scholarships allowed per year from 25 to 15 over the next four years.

    The Big Ten also banned Penn State from its conference championship game for four years and took away $13 million in bowl revenues during that time.

    Not since Southern Methodist became the first and only Division I (now FBS) football program terminated by the so-called “death penalty” in 1987 had such severe penalties been dispensed. In fact, some asserted the death penalty was preferable to the Penn State sanctions’ long-term effects…

    “Penn State football will not recover for a decade,” said Vanderbilt sports economist John Vrooman…

    So what happened?

    It was a weak Big Ten, but mainly coach Bill O’Brien, the unexpected successor to Joe Paterno, grabbed the rudder and steadied his listing program. The departures hurt, but all except one of the 18 recruits from the 2012 class remained. One of them, Brian Gaia, a defensive lineman from Maryland, said, “The score is 6-0, and we have not lost the game,” according to his father, Tim Gaia.

    Meanwhile, linebacker Michael Mauti and other seniors screamed their commitment, then backed it up. O’Brien and his staff did some significant coaching, even surmounting an 0-2 start that momentarily appeared to confirm the dire predictions. O’Brien ended up as Big Ten Coach of the Year. In any other season, it would have been Ohio State’s Urban Meyer, another first-year coach saddled by sanctions (although not nearly to the extent of Penn State’s), who led the Buckeyes to a 12-0 record.

    “Penn State’s 8-4 makes Urban Legend’s 12-0 seem like chump change,” said Vrooman, invoking Meyer’s nickname.


  • Economics professor sees framework of NHL labor deal. TENNESSEAN Nov 21, 2012   
    John Vrooman, Ecomonics Professor at Vanderbilt
    As the NHL and NHL Players’ Associations continued their collective bargaining sessions, one cliché painfully and forcefully came to light: sports is a business.

    Since the league locked out its players on Sept. 15, both sides have hassled over economic elements — namely hockey-related revenue.
    In the last year of the previous collective bargaining agreement, the players received 57 percent of hockey-related revenue, the owners 43 percent. The owners have tried to push the split closer to 50-50 in order to recoup some of those losses.

    The players have said they can see the difference moving in that direction gradually, but don’t want a quick shift. The league said it made $3.3 billion in revenue in the 2011-12 season.

    After months of negotiating and media rhetoric, talks for both sides finally may come to a head this week. With October and November games canceled, the league and the NHLPA are set to engage today in New York to see if they can bridge the gap between the two sides — player contract length and structure also has emerged as a point of contention.

    If they can’t, a portion of December games likely will be the next to go, though it’s unclear if the NHL will cancel the entire month at this point.

    To help explain where the two sides are from an economic standpoint, and how the lockout may hurt Nashville, The Tennessean talked with Vanderbilt sports economics professor John Vrooman.

    How does this lockout impact the Nashville market?

    John Vrooman: “At first the effects of a short lockout would have been minimal, but now I suspect that the longer lockout effect will be similar to the fans’ reaction to 2004-05.

    “Attendance after 2004-05 was remarkably resilient in the traditional hockey market, but in the non-traditional markets not so much. The gate in the NHL is over 55 percent of overall revenue.

    “One of the unfortunate outcomes of the timing is that the NHL was just beginning its symbiotic national TV relationship with NBC after a decade of national media instability.”

    You’ve often discussed the NHL’s “Southern Strategy” and the issues that have come with it. Is the league’s lockout cycle correlated to this?

    John Vrooman: “Yes, on both the revenue and cost sides, the Sun Belt expansion has put the squeeze on the NHL bottom line.

    “On the revenue side, the Sun Belt clubs have been placed in mid-markets with nontraditional hockey fans. This reduces average club revenue and increases its volatility. Risky cash flow is worth less than certain cash flow in financial terms.

    “On the cost side, the addition of nine teams in nine years increased the demand for relatively scarce skilled hockey talent, and as a result player salaries exploded from 1995 to 2004.

    “The purpose of revenue sharing is to remedy the first problem, and the imposition of the hard salary cap is designed to remedy the cost side of the problem. In the sports business, cash flow certainty is critical on both the revenue and cost sides of the equation.

    “The 2005 CBA rectified the cost problem (with the exception of signing players to long-term salary cap-circumventing deals) but the revenue side ... not so much. Revenue sharing is still a major shortcoming in the current NHL.”

    How far apart are the sides?

    John Vrooman: “The current sets of proposals are not really that far apart, and they further rectify the cost issues of the league, but the revenue-sharing proposals by the league are inadequate.

    “Players’ share of (hockey-related revenue) should be set at 50 percent, and this was obvious from the beginning. The spread began when the owners wanted to cut the players share from 57 percent to 43 percent and then revised to 47 percent when the players dropped to 53 percent.

    “While I think the players’ share should be greater than 50 percent, the eventual outcome is obvious ... this is not rocket science. There are associated problems about when the 50/50 split should be reached over the course of the deal (players later and owners sooner), but the basic deal is right there to see.

    “The question is also whether the owners will honor existing contracts such as those for (Predators defenseman Shea) Weber, (Wild forward Zach) Parise and (Wild defenseman Ryan) Suter.”

  • Sports economist supplement. The Tennessean November 21st, 2012

    For today’s piece in The Tennessean we talked with Vanderbilt sports economics professor John Vrooman about the NHL lockout and where it stands from a monetary perspective. Here are some other parts of our interview with Vrooman. Answers are in italics.

    When the NHL lost a season in 2004-05, the eventual collective bargaining agreement put into place was seen as favorable to the league. Why is it no longer considered a workable from the NHL’s perspective?

    JV: The CBA after the 2004-05 lockout was indeed a philosophical leap from the previous regime when salaries increased from 56.6 percent of hockey-related revenue in 1994 to 75.6 percent of HRR in 2004. This CBA was considered a shutout for the owners and the newly confrontational NHLPA was basically hammered into submission. As the CBA evolved the only loophole that seemed to emerge was the salary cap circumvention invention of the front end loaded long-term contract that was remedied somewhat by the (Ilya) Kovalchuk rule. This is the same deal that the Philadelphia Flyers offered (Predators defenseman) Shea Weber that was matched by the Preds. I see two additional major real world problems with the league as the CBA expired. The first is the inadequacy of the revenue sharing rules established by the CBA. Most of the revenue sharing rules were established so that smaller revenue clubs could afford make the salary cap minimum. In the current negotiations the owners have proposed that revenue sharing be increased by 33 percent to $200 million league-wide. This degree of solidarity among the league owners is considered a joke in a league with $3.3 billion in revenues. The owners argue that this six percent sharing arrangement is comparable to Major League Baseball, where national revenue is shared equally and 31 percent of local revenue is pooled and shared. MLB revenue shares $400 million on local revenues of $6.6 billion, which is about twice the size of NHL. The difference of course is that national revenue in MLB is about three times the size of NHL revenue even in relative terms.

    The second problem is that the NHL owners need to be protected from themselves. Former Preds owner Craig Leipold is a prime example. As a member of the negotiating committee Leipold is one of the hardliner owners and yet he has become the greatest abuser of the Kovalchuk exception. This summer the Minnesota Wild signed Zach Parise and Ryan Suter both to long-term deals for $98 million each. It is almost as if Leipold needs to be saved from himself, but a large part of the cry for a salary cap restriction is indeed for owners to protect themselves from themselves.


    Based on what you’ve read about the two sides’ proposals who is telling the truth, the league saying both sides are far apart economically, or the union saying they’re close economically?

    JV: After the smack down the players took in the 2005 CBA, the owners established the framework for a livable system for both sides. In this lockout the players are closer to the truth than the owners whose objections often seem trivial in the face of their quantum gains after 2004-05. Perhaps the brinksmanship of former MLBPA director Donald Fehr is somewhat to blame, but as the offers now sit on the table the owners current objections seem to be without merit. The reduction of the cap from 57 percent to 50 percent of HRR is not chump change although there are some remaining debates about the definition of the HRR base.

    Fehr has often touted baseball’s system and the importance of revenue sharing. But has revenue sharing contributed to parity in baseball? Is there parity in baseball, or a system that is more bent towards players’ salaries?

    JV: Of all of the major sports leagues, MLB is currently in the best shape. MLB began extensive revenue sharing after the strike of 1994-95 and currently competitive balance in MLB has simultaneously approached the optimum. By comparison the NBA is somewhat imbalanced and predictable and the NFL has almost become too random in terms of continuity and team quality. This is by design: the NBA model is dynasties and stars and the NFL model is parity. Ironically since the 2004-05 lockout the NHL had approached the optimal balance of MLB in terms of year-to-year team performance. This is also by design. The NHL prefers team production and moderate balance compared to the NBA that prefers superstars, dynasties and unfortunately, doormats. The difference in marketing strategies ultimately derives from the relative importance of superstars for national TV revenue vs. team production for gate revenue.

  • Ditching Dooley comes with a price for UT. Nashville Business Journal November 19, 2012

    The decision to fire Derek Dooley from his football coaching position at the University of Tennessee will not be a cheap one, according to John Vrooman, a sports economist at Vanderbilt University.

    Because Dooley's contract runs through 2016 with a $5 million buyout clause, and because of instability at the UT athletic department, the new coach is likely to request a similar guarantee in a contract, Vrooman said. This comes on top of the UT athletic department's $3.98 million deficit for the 2011-2012 season.

    "In essence the Vols are now paying twice for coaching salaries until they break out of this vicious circle," Vrooman said in an email. "The problem now is that amateur college football has become a mega-business governed by quick-fix results at the bottom line, where the quest for short-run return on investments by high-rolling donors holds little or no promise for long-run program stability. Welcome to the SEC, where football is high-stakes risky business."

    The new coach will be the college's fourth in the last five years, with Phil Fulmer getting fired in 2008 and Lane Kiffen leaving in 2010 to take the head coach position at the University of Southern California.

    While a new coach can generate fan interest, it can also mean unrealistic expectations, Vrooman said.

    "The best way to generate fan interest is ultimately to win," he said. "In my experience, the most critical factor in winning in college sports (or any sport) is obviously overall talent, but also consistency in coaching ... conversely, discontinuity in coaching is a program killer, regardless of talent level."

  • Building support for stadium funding in Charlotte. Charlotte Business Journal  11/16/2012

    The Carolina Panthers’ effort to win support for public funding for stadium renovations appears to be near a successful conclusion. Which seems a little strange since the NFL franchise is still at least a month away from unveiling its plans for Bank of America Stadium.

    No details from its yearlong study of the facility’s future led by a renowned stadium architect have been revealed — not the scope, cost or timeline.
    So why does it seem public dollars are all but committed?

    Leverage, of course, is all on the Panthers’ side. But there is also the process the Panthers have followed — a steady, months-long behind-the-scenes operation that has included conversations between team executives and government leaders and staff.

    The numbers that have been floated have ranged from $100 million to $200 million, although it’s unclear if the team expects tax dollars to fund the entire package of improvements…

    That’s certainly the message delivered and received by civic and business leaders here. Last week, the Charlotte Business Journal revealed that Los Angeles Mayor Antonio Villaraigosa and prospective bidders from California had approached team owner Jerry Richardson with inquiries about buying the team and moving it…

    Sports economist John Vrooman, who studies stadium and franchise issues at Vanderbilt University, says the fairest way to invest public money in these types of projects is to tax the fans and local businesses benefiting from the deal.

    Using tourism taxes for sports facilities “falsely” prioritizes the team’s finances over other needs, he says.

    Instead, Vrooman favors ticket and concession taxes paid by fans attending games as well as incremental property taxes. Beyond that, “the economic multiplier effects of NFL stadiums are less than an average shopping mall, and the public does not usually subsidize malls.”

    Seat licenses bought by fans paid more than half of the cost of the stadium that opened in 1996. Because there is no public stake in the stadium now, it would seem to give the Panthers greater flexibility to sell and relocate. And, as has been made clear, Los Angeles wants one, perhaps two, franchises for a planned stadium backed by facilities firm AEG. The NFL has repeatedly said there are no plans to expand beyond the current 32 teams…

  • How NFL stadium funding has worked in other cities. Charlotte Business Journal 11/16/2012

    Since Bank of America Stadium opened in 1996, 25 of the 32 NFL franchises have opened a new home or made major upgrades to existing stadiums.

    ...

    Experts such as Marc Ganis, an industry consultant to pro sports franchises, say such investments pay off in various ways, from cash, in the form of tourism and spending, to cachet, as in national attention surrounding big-league teams. Others, though, say tax money could be better spent. In addition, smaller sports cities tend to pay a higher proportional amount to keep their teams.

    “Larger cities have greater social overhead burdens to worry about and can frankly afford to call a team’s bluff when they threaten to leave,” sports economist John Vrooman of Vanderbilt University wrote in an analysis of the Chiefs’ renovations. “So the extortion leverage is greater in smaller cities. ... If their extortion bluffs are called, owners become very creative in building venues with their own money.”

    Among the creative owners cited by Vrooman? You guessed it: Jerry Richardson.

  • Predators rallied businesses to boost team finances, but league lockout means few returns Nashville Business Journal 11/16/2012

    ...Nashville’s business community has been a key figure in building the Predators’ financial and fan base over the past decade.

    The Predators’ season ticket holders are comprised of more fans than corporate groups, according to John Vrooman, a sports economist at Vanderbilt University.

    The team expanded its corporate offerings in recent years to draw more sponsors...

  • The Real Deal: Once a point of civic pride, the stadium could end up being another mistake on the lake. Cleveland Scene, November 14, 2012

    City Hall, the salt really hit the wound when the price started circulating.

    Somewhere around a billion dollars: That was reportedly the figure when the Cleveland Browns franchise passed from the standoffish Randy Lerner to Tennessee businessman Jimmy Haslam. A billion.

    The figure wasn't much of a surprise to anyone who pays attention to sports economics. NFL franchises — even the ones with only one winning record in 10 years — have only ballooned in value in the last decade. What irked local officials, particularly Cleveland Councilman Mike Polensek, is that the same team price-tagged at a billion dollars was at City Hall earlier this year, asking for another handout.

    The request stirred up old resentment. Under the contractual obligations of the city's lease with the Browns, Cleveland is required to make annual payments of $850,000 to the team for major repairs to the stadium. This time, the Browns asked for the next six years' worth of payments up front, in one $5.8 million bundle, for "urgent work" on structural repairs and seat refurbishment. City Council agreed.

    But in the aftermath of the Browns' sale, with hindsight, the request for that much money from a cash-strapped city struck some as unseemly.

    "Here's the Browns at the time, they don't want to spend a nickel for anything or contribute to it, but then Randy Lerner sells the team for a billion dollars," Polensek tells Scene. "With all the issues we're contending with in this town, you would think the people who have the financial wherewithal would step up to the plate. But that don't happen. That's life."

    More specifically, that's life for cities with publicly funded stadiums, which today translates into just about every stadium built in the last 20 years.

    While everybody loves the hometown team, the house of play is likely a strain on public coffers, largely thanks to tax-code gymnastics, jaw-dropping subsidies, and bond debt. Cleveland's deal for Browns Stadium was one of the first such arrangements, and set the tone for much of what followed.

    And Cleveland's stadium deal is reaching a critical point. It's powered largely by the sin tax, which not only hits a significant milestone this year in its funding schedule, but also is set to expire in 2015. Talk has already been percolating about extending the tax. But politically, the prospects are tough.

    At the same time, the team's new ownership has been looking for ways to improve and repair the facility. And city officials are clamoring for anything that will wave a magic wand and change the stadium from the city's greatest welfare recipient into a money-generator.

    When Art Modell announced that he was moving the Browns to Baltimore in November 1995, the question of whether Cleveland would get a replacement team was still up in the air. A year later, after the city took the NFL to court, a settlement was reached that would return football to Cleveland in 1999. What wasn't settled was whether another team would jump its market and relocate to Cleveland, or if the new Browns would be an expansion club.

    That question was largely settled after teams like Cincinnati and Tampa Bay used the threat of a Cleveland relocation as leverage to get new stadium deals. NFL officials finally green-lit an expansion team for Cleveland in in 1998. Al Lerner stepped up and paid the $530 million expansion fee.

    But the team needed a new stadium.

    The facility was paid for by a package of taxes, including a sin tax on alcohol and cigarettes; a two percent admission tax on all city events; an 8 percent parking tax; and a $2 fee attached to car rentals. This was combined with chunks of cash from the Browns and the NFL, who as part of its settlement with the city kicked in $48 million -— money that the league immediately recovered from Lerner's expansion fee.

    In the end, the cost of a new stadium ran to an estimated $314 million. The split came down to roughly 75 percent public funding, and 25 percent private money.

    According to the new deal, the city owns the structure, but derives no taxes from the facility, nor any profits from what the Browns pull in on game day. And the city pays the debt service. At last count, the city will be making payments until 2027 totaling near $141 million. In return for all this, the Browns pony up $250,000 a year for the nearly exclusive use of a facility.

    "Obviously, it was one-sided," says Polensek. "As I said publicly at the time, the team, and the NFL, they got all the profits. We got all the bills. We have the liability."

    John Vrooman, a sports economist at Vanderbilt University, agrees.

    "The public/private split probably should have been more like 25/75," he says. "But try telling that to a city government and electorate that had just lost their beloved Browns."

    A lot of books have been pushed into print recently unpacking the long-con that is stadium construction. The timing isn't coincidental. The first stadium building bonanza kicked off in the mid-'90s, and by now sports economists and researchers have finally put their arms around enough data to box the phenomena into trend analysis that cuts through the fog of boosterism usually attached to such projects.

    When stadiums are pitched to the public, they're often trumpeted as economic engines. Supposedly, the activity in the stadium on game day causes a chain-reaction of spending in the neighboring bars, restaurants and hotels. According to researchers, this is largely smoke.

    "Smaller sports venues may have economic spin-offs, but they must anchor larger redevelopment projects, like Jacobs Field and Gund Arena being linked to the Gateway Project in Cleveland," Vroomman says. "In this large development scheme, there are linkages to the economic grid that can deliver multiplier effects. The irony here is that the new breed of stadiums are built to internalize almost all spending connected with the sporting events or concerts, and therefore there is really no new money injected into the local economy. If there is any spending down by the lake, then it comes at the expense of business somewhere else."

    Cleveland is far from alone in the pain. It's become standard operating procedure in cities with sports teams for the owners to demand a new facility, often at public expense. To understand why, you have to throw your brain back into the mindset of the mid-'90s.

    At that time, shock waves were still reverberating from the unthinkable: In March 1984, the Baltimore Colts packed up literally in the middle of the night and moved to Indianapolis. That gave team owners everywhere the threat, whether spoken or implied, to move their teams to more lucrative cities and venues. As a result, public officials across the country became terrified of having their careers or legacies tarnished by being branded as the one who let a beloved franchise get away. So when the time came to belly up to the bargaining table, they were willing to sign off on complex stadium financing plans that parked much of the fiscal burden on the public sector.

    Vrooman's upcoming book slaps the time period with a fitting title: "the relocation/extortion derby expansion," a run when 13 franchises leveraged possible relocation to win heavily subsidized stadiums. According to Vrooman's research, an average of just 26.6 percent of the funding for these facilities came from the private sector; the rest landed on taxpayers.

    Things were bound to change, but only after the NFL deemed the extortion had gone too far — which is to say, when the league's own money was on the line. In 1999, New England Patriots owner Robert Kraft announced that he was moving his team from Boston to Hartford, Connecticut. The move would have screwed the NFL out of one of its biggest television markets, prompting the league to step in with a new initiative.

    Called the G-3 program, it allowed the NFL to loan out money for new construction in top markets. The loan is repaid by the team from the profits made on luxury boxes.

    With this new source of funding in place, more private money has gone into newer stadiums. According to Vrooman's research, the 12 stadiums constructed under a G-3 arrangement had an average private share of 59 percent.

    ...

  • Can Ralph Wilson Stadium keep up in the NFL? The Buffalo News October 10, 2012

    Buffalo Bills owner Ralph C. Wilson Jr. made front-page headlines the day he announced his team wouldn’t play in its Orchard Park stadium after its lease expired.

    “When it was built, it was a great stadium, an ideal stadium,” Wilson told The Buffalo News. “But things change over the years.”

    Wilson made those comments 23 years ago.

    It was August 1989, and he was talking about the lease that would expire nine years later, in 1998.

    Fast-forward to 2012, when the 39-year-old Ralph Wilson Stadium has become the sixth oldest of 31 National Football League stadiums.

    Once again, the stadium has become the focal point in sticky lease negotiations among the Bills, New York State and Erie County.

    Close observers of the negotiations say there’s been a sense that the next long-term lease, expected to be 10 years long, may be the last one at the county-owned facility.

    By the time a new lease would be up, presumably in 2023, the stadium would be 50 years old. In the world of National Football League stadiums, that’s ancient.

    Many Bills fans have been clamoring for years for a new stadium, in locales ranging from downtown Buffalo to Niagara Falls to even Batavia. That still seems like a long shot, though, with an expected price tag of more than $800 million.

    Last fall, Wilson himself admitted that the stadium needs a lot of work, as he lobbied for extensive renovations.

    “We want the state and the county to put some substantial money into fixing this stadium up,” he said. “It’s crumbling right now. But we don’t want a Taj Mahal. We just want a nice, clean place to watch a football game.”

    Since that comment, the Bills have asked for stadium renovations costing between $200 million and $220 million. Some observers say that won’t be enough to ensure the stadium’s long-term viability in the NFL.

    “If ‘The Ralph’ is renovated as recently discussed, the life expectancy is still a very short five to 10 years, tops,” said John Vrooman, sports economist at Vanderbilt University. “The renovations necessary to bring ‘The Ralph’ up to NFL speed would be more in the ballpark of those recently completed for the Kansas City Chiefs in 2010 and the Green Bay Packers in 2003.”


  • Cowboys Stadium still fine-tuning fan fare to compete with TV at home
    The Dallas News, 20 September 2012


    The Dallas Cowboys sank their share of $1.2 billion into the team’s stadium in part to compete against the average fan’s stocked fridge, comfy couch and high-definition TV.Cowboys Stadium — a tourist attraction in its own right — did just that at a record cost when it opened. But that hasn’t allowed owner Jerry Jones and his family to sit on their hands.

    As the Cowboys play their fourth regular-season home opener Sunday in Arlington against the Tampa Bay Buccaneers, the team is still fine-tuning its pregame and in-game fan experience to compete with the living room experience. They’ll do it by adding children’s activities, improved scoreboard information and cellphone apps, and expanding outdoor plaza hours and entertainment...

    NFL officials have long said the only entertainment option that competes with watching an NFL game in person is watching an NFL game on TV. While some other franchises are trying to keep up with the Joneses and their showplace stadium, the Joneses have to worry about keeping up with Fox, ESPN and others….

    To compete on and off the field, many sports teams are always anticipating their next stadium upgrade. The Texas Rangers recently announced their third consecutive eight-figure, offseason update to the team’s 18-year-old ballpark.

    At Cowboys Stadium, the tweaks are more modest in scale. With one of the league’s newest and most luxurious stadiums, there are few obvious big-budget upgrades needed or available.…

    For several years, the NFL has focused on narrowing the gap between the home and stadium experience. That started in part with the adoption of high-definition TV sets and ever-expanding network coverage on game day.

    Despite the NFL’s massive TV contracts, stadium revenue — from tickets to food sales — has become an increasingly important part of team income.…

    John Vrooman, a Vanderbilt University economics professor who has written about the economics of the NFL, said stadium sales accounted for about 10 percent of team revenue about 15 years ago. That number is now 20 percent for an average club and potentially closer to 50 percent for the Cowboys thanks to the success of their stadium, Vrooman said.

    He acknowledged that his numbers are estimates because many NFL teams are privately owned and aren’t required to reveal most of their finances.

    Vrooman, who described the NFL as “recession-proof,” said the revenue split will change again soon when the league’s new broadcast contract increases from $4 billion to $6 billion annually.…

  • NHL lockout could disrupt Preds' momentum, Nashville Business Journal September 17, 2012

    Downtown businesses and Predators enthusiasts can generally agree that no time is a good time for an NHL lockout, but coming on the heels of retaining Shea Weber and two consecutive second-round playoffs, the timing is less than ideal…

    The Predators sold out a record 25 games last season and have increased attendance each year, going from four sold-out games in the 2009-10 season to 16 in 2010-11. As of August, the team had a 94 percent renewal rate for season ticket holders, up from 91 percent last year.

    While the timing of the lockout “isn’t perfect,” the Predators have continued to demonstrate a commitment to building a strong team by extending contracts with players Kevin Klein, Gabriel Bourque and Craig Smith, in addition to deals with Weber and Pekka Rinne, said Vanderbilt University sports economist John Vrooman.

    “Some casual fans may be alienated by the lockout, but most season-ticket hockey fans (are) die hard, and the Preds should withstand the lockout even in our nontraditional hockey market, particularly in light of their recent signings in the face of the lockout threat,” Vrooman said..

  • NFL Values: The Business of Football, Forbes, 9.5.12

    NFL PSLs have become risky investments


    Cincinnati Bengals

    Average return on investment: -7%
    Average 2012 price: $880
    Average original price: $949
    Year of stadium opening: 2000


    It cost $458 million to build Paul Brown stadium, which opened in 2000, and just $44 million of it came from the Bengals, according to a study by John Vrooman, a sports economist at Vanderbilt University. PSL sales helped the Bengals raise $27 million of their payment. ...

  • In Stadium Building Spree, U.S. Taxpayers Lose $4 Billion, Businessweek, September 5, 2012

    New York Giants fans will cheer on their team against the Dallas Cowboys at tonight’s National Football League opener in New Jersey. At tax time, they’ll help pay for the opponents’ $1.2 billion home field in Texas

    That’s because the 80,000-seat Cowboys Stadium was built partly using tax-free borrowing by the City of Arlington. The resulting subsidy comes out of the pockets of every American taxpayer, including Giants fans. The money doesn’t go directly to the Cowboys’ billionaire owner Jerry Jones. Rather, it lowers the cost of financing, giving his team the highest revenue in the NFL and making it the league’s most-valuable franchise...

    Tax exemptions on interest paid by muni bonds that were issued for sports structures cost the U.S. Treasury $146 million a year, based on data compiled by Bloomberg on 2,700 securities. Over the life of the $17 billion of exempt debt issued to build stadiums since 1986, the last of which matures in 2047, taxpayer subsidies to bondholders will total $4 billion, the data show…

    In the case of Cowboys Stadium, opened in 2009, the subsidy to bondholders will be $65.3 million over 29 years. The 40-year debt issued by the New York City Industrial Development Agency to help build the new Yankee Stadium for owners Hal and Hank Steinbrenner will cost taxpayers $321.5 million. Similarly, a football stadium for the Indianapolis Colts, owned by Jim Irsay, benefits from $209.3 million in tax exemptions, and one for the Arizona Cardinals, owned by Bill Bidwell, $125.9 million. None of the teams would comment…

    The stadium can hold more than 100,000 spectators, including standing room. It has a retractable roof and massive glass doors on each end. A 600-ton, four-screen video structure hangs 90 feet (27 meters) above the middle of the playing field and stretches from one 20-yard line to the other. Tickets to tour the building, which also houses art exhibits, cost $17.50 to $27.50 for adults.

    There are 15,000 club seats and 320 suites with polished marble floors and granite counters. The suites, arrayed over three levels, lease for $100,000 to $500,000 a season, according to a study by John Vrooman, a Vanderbilt University economist…

  • Why Preds need to make playoffs Nashville's decision to go all-in on Weber puts team on financial hot seat, ESPN August 9, 2012

    On the Fifth Avenue side of Bridgestone Arena hangs a banner. On this sign is the chiseled stare of Shea Weber's face. Underneath the photo in big block letters it reads: "I'm in ... Are you?"

    The Nashville Predators have clearly wasted little time to revel in their much-celebrated decision to match Philadelphia's 14-year $110 million offer sheet to their captain -- Nashville announced the move on July 24. The team release called it "the most important hockey transaction in franchise history." The Predators decided on an outdoor news conference one day later, so their fans could watch live and in person.

    In small-market Nashville, it was clearly a watershed moment for the franchise. But Nashville's decision to match the deal also put the Predators on the financial hot seat in the immediate future and put a premium on making the playoffs next spring.

    Weber's contract calls for him to be paid $27 million in the first calendar year alone -- on top of a $13 million signing bonus. The question is whether this will change how the Predators, who said they planned to reach the upper levels of the salary cap at the start of the summer, do business with their hockey operations. For a team that had never given more than $31.5 million over the life of a contract before 2011-12, it could either force the Predators to tighten finances to a degree, or spend more loosely to enhance their investment….

    "Most mid-market clubs budget their payroll based on regular-season performance, and the playoffs are pure profit," Vanderbilt University economics professor John Vrooman said. "The Preds may have put themselves in a moderately risky spot where they are budgeting payroll based on the best-case scenario of making it into the second round of the playoffs."

    According to Vrooman, mid-market clubs near the $600,000 revenue mark per playoff home game. Because of this bump, Nashville's ability to put a winning team on the ice would be paramount to get that bonus. This could likely mean the Predators do more in regard to player acquisitions, rather than less, to make the playoffs in future seasons.

    "Given the current financial structure of the NHL, the Preds had little or no choice but to match the high Flyers offer," Vrooman said. "On the revenue side, the fortunes of mid-market clubs depend heavily on the teams' performance on the ice, which in turn depends on consistency on defense. Given the successful defensive philosophy of the Preds, it was paramount to retain two of the three legs of their core defensive triangle..."

    Currently, according to CapGeek.com, the Predators are at $53.7 million in terms of next season's cap hit. The salary-cap floor is listed at $54.2 million, but that could change with the expected new collective bargaining agreement. A new deal could open up an entirely new set of problems with the Predators and Weber's contract, if agreements are lowered and limited.

    "If the max length of prorated contracts is cut to five years in the new CBA, this might also eliminate the mid-market Preds as a player in the free-agent market," Vrooman said.

    But the key fact remains the same for Nashville, even if its effects are murky.

    "As the Preds now sit, they have retained two-thirds of their core defense," Vrooman adds. "When this game of musical chairs began, Preds management would be extremely pleased with the ultimate outcome."

  • Fans hold Nashville Predators' future in wallets after huge Shea Weber deal
    The Tennessean Jul 26, 2012


    At the Nashville Predators’ souvenir shop inside Bridge-stone Arena, anything with Shea Weber’s No. 6 on it — T-shirts, jerseys, caps, you name it — was a brisk seller Wednesday.

    It might have been because the store was offering a $6 discount. But the more likely reason was fans, including several hundred who crowded a news conference in 95-degree weather outside the arena, showing their appreciation for the team’s move to keep the popular defenseman.

    Now, Predators officials are banking on that enthusiasm continuing through the next 14 seasons, helping them not only justify the second-richest deal in National Hockey League history but also to pay it off.

    “It’s for you. You deserve it,” Predators CEO Jeff Cogen told fans celebrating the team’s decision to match Weber’s 14-year, $110 million offer sheet from the Philadelphia Flyers.

    It’s a big financial gamble for the Predators, a small-market team that depends partly on a government subsidy and whose chairman says has not turned a profit.

    But team officials say the potential cost of losing Weber, especially after already losing fellow defenseman Ryan Suter to free agency, would have been even greater.
    It probably would have resulted in a weaker team on the ice, potentially causing fan enthusiasm to wane just a season after the team had a record 25 home sellouts, Cogen said. Less fan interest would translate into fewer ticket, souvenir and concession sales; reduced television ratings; and other drags on the team’s bottom line, he said.

    “We made the investment we had to make to protect the fan base,” Cogen said, including the 94 percent of season-ticket holders who have renewed for the upcoming season.

    Sports economists say it is a wise move.

    “The Preds could not have lost two-thirds of their defensive stars (Weber, Suter and goalie Pekka Rinne) and survived at the box office in a nontraditional hockey market,” said John Vrooman, a sports economist at Vanderbilt University.

    Although Weber’s deal will be heavily front-loaded — he’ll get $80 million in the first six years — it shouldn’t hinder the team’s ability to keep or sign other high-quality players, the economist said. Only the 14-year average annual payout of $7.8 million is counted toward the salary cap, and the Predators are $14 million under it even with Weber’s deal, Vrooman said.

    “In the sports business, it sometimes is profitable to take a short-run payroll loss to establish long-term revenue gain,” Vrooman said.

    “The Preds had no choice but to sign Weber to a long-run deal.”


  • Penn State hit with severe financial penalties. CNN/Money July 23, 2012

    Penn State University was hit with an unprecedented series of financial penalties Monday as the NCAA and Big Ten conference announced sanctions related to the school's child abuse scandal.

    The financial penalties are likely the first of many payouts the university will make.
    Along with a loss of football scholarships and a four-year prohibition on postseason play, the university has agreed to pay a $60 million fine that will be used to help the victims of child abuse.

    In a separate enforcement action, the Big Ten announced that Penn State will not receive a share of the conference's bowl revenues for four years, a hit of around $13 million.

    The actions against Penn State, taken together, are likely to dramatically reduce the recruiting prowess and on-field performance of one of the nation's most storied football programs.

    In some respects, the non-monetary penalties imposed by the NCAA might have the largest effect on the athletic department's finances.

    Football players are now eligible to transfer to other institutions without penalty, scholarships have been reduced by 40% and the team has been barred from post-season competition.

    While Penn State was spared the so-called "death penalty" some were expecting -- in which a sports program is shut down entirely, typically for at least one year -- the sanctions will make it difficult for the university to field a competitive team.

    "This might not be a sudden shut-down death penalty, but is very close to slow death by attrition," said John Vrooman, a sports economist at Vanderbilt University.

    "Penn State football will not recover for over a decade," Vrooman predicted, citing the example of Southern Methodist University's program, which was given the death penalty in 1987 and has yet to fully recover.

    For its part, the NCAA says the Penn State penalties are worse than the death penalty.

    "The NCAA sanctions on Penn State, taken in sum, far exceed the severity of shutting down a program for a year or two," the group said on its website. "What some refer to as the death penalty was not severe enough."

    Lackluster performance on the field coupled with the fresh memories of the Sandusky affair could lead to reduced enthusiasm from fans, who provide much of the program's revenue in the form of ticket and merchandise sales.

    "Nittany Lion fans will still be faithful," Vrooman said. "But State College will be an empty place on fall afternoons."

  • NCAA sanctions deal lethal blow to Penn State. Pittsburgh Tribune-Review
    July 23, 2012


    Just after the NCAA announced its major sanctions against the Penn State football program Monday morning, CBS Sports recruiting analyst Tom Lemming received a text message from the father of a Nittany Lions player who he did not identify.

    “He asked me, ‘Do you know of any good schools for my son?’ ” Lemming said.
    And so it begins.

    The actual effect of the sanctions — the most severe since Southern Methodist got the so-called death penalty in 1987 — will not be known for at least a couple of years. But this much appears certain: Penn State “is gonna take a hit,” Lemming said.

    Faced with a four-year ban on bowl games and four years of scholarship limits reduced from 25 to 15 annually, not to mention the persistent cloud of the Jerry Sandusky child abuse scandal and subsequent cover-up, the program faces an uncertain and grim future. Every player on the team will be allowed to transfer, current recruits can escape their commitments and future recruiting will be drastically affected.

    “At least it’s not the death penalty,” said Lemming.

    Only once, against SMU, did the NCAA shut down a Division I program entirely. But NCAA president Mark Emmert said the possibility of the death penalty was discussed.
    Some, however, believe these sanctions might be worse…

    Vanderbilt sports economist John Vrooman was even more pessimistic.
    “Penn State football will not recover for a decade,” he said. “The killer sanction is the 40 percent reduction in annual scholarships for four years. This is not sudden death but a slow death by attrition.”
    ...

  • Expect Nashville Predators to keep Shea Weber: Experts say team can't afford not to. The Tennessean Jul 19, 2012

    Hockey writers and analysts said Thursday they expect the Nashville Predators to match the Philadelphia Flyers’ offer sheet to captain Shea Weber.

    Nashville has until 11:59 p.m. Wednesday to match the offer, which according to a source, is $110 million over 14 years.

    The contract is front-loaded, with $52 million in bonuses in the first four years, according to a source.

    And after already losing one All-Star defenseman this offseason when Ryan Suter signed his 13-year, $98 million deal with the Minnesota Wild, the Predators are in too tough of a spot not to match an offer, analysts said…

    Vanderbilt University economics professor John Vrooman, who specializes in sports economics, shared that logic.

    “The Preds are at a position where they can withdraw and rebuild or continue to play with the big boys,” Vrooman said. “Based on (general manager David) Poile’s remarks after the loss of Suter, I suspect that they will move forward and match the offer for Weber.”


  • Under loan program, Bills, NFL could help foot stadium bill. Buffalo News, June 21, 2012

    The last time the Buffalo Bills worked out a new lease deal for Ralph Wilson Stadium, in 1998, New York State was on the hook for the whole $63 million in renovations.

    The Bills paid none of it.

    This time around, the Bills are asking for stadium renovations costing between $200 million and $220 million, according to Erie County Executive Mark C. Poloncarz.
    But now the Bills -- along with the National Football League -- are being asked to provide tens of millions of dollars for the improvements.

    Times have changed in the NFL.

    Long gone are the days when the public sector was expected to carry most, if not all, of the load for a new stadium or massive renovation project, as New York State did in helping fund a new 15-year lease in 1998.

    Having an NFL team pay a sizable amount for stadium renovations is far from unprecedented.

    In both Kansas City and Green Bay, other "small markets," the team and the NFL combined to pay for at least one-third of the renovations.

    The silver lining for the Bills, though, is that any share above $25 million the team pays toward a large stadium renovation project could be matched by the NFL.

    It's part of the an NFL loan program called G-4. The loans are a vehicle for the NFL to help finance either the construction of new stadiums, or the renovation projects at existing ones, such as The Ralph.

    The program is designed to help stabilize franchises seeking to build or renovate stadiums. Under it, the league can match, up to a certain point, a contribution a team makes to the project.

    Those close to the current lease negotiations among the Bills, Erie County and New York State say that the G-4 funding is considered key to helping pay for the renovations needed in any new lease agreement. The Bills' current stadium lease runs out July 31, 2013…

    The Green Bay Packers and the NFL combined to pay 43 percent of the $295 million renovation of Lambeau Field in 2003, while the Kansas City Chiefs and the league contributed one-third of the $375 million renovation of Arrowhead Stadium in 2010, according to John Vrooman, a sports economist at Vanderbilt University.

    Asked to hazard a guess about what could happen in Buffalo, Vrooman cited the Kansas City case, where the team and league combined to pay one-third.

    "The Chiefs' split was more like what will probably happen for the Bills," he said.

    Bills officials repeatedly have said they won't comment on any details of lease negotiations, but they told The Buffalo News in April that a renovation would include structural and infrastructure improvements to bring the stadium up to modern standards and a total renovation of the exterior gates to create communal areas for fans to gather around the stadium.

    The G-4 loans serve as an incentive to push teams into building or renovating their stadiums...

    "The G-4 loan program is unique in that the repayment to the league is basically secured by the league's own revenue," Vrooman said.

    That also means, of course, that the Bills have helped subsidize stadium construction and renovations in other cities...

    Whatever the final price tag of the stadium renovation sought by the Bills, it likely won't be the only cost of the new lease. The last time a deal was struck, Erie County picked up the cost of annual upgrades, stadium maintenance and game-day expenses -- costs that likely will be part of any new deal.

    That could push the total price tag, depending on the length of the lease, up in the neighborhood of $300 million.

    That's a lofty total, for sure, for an existing stadium, but by NFL standards, it's quite modest.

  • Proposed Coyotes deal stirs questions Glendale likely to OK hefty arena subsidies Arizona Republic Jun. 6, 2012 / USAToday 6/7/12

    Glendale's proposed $17 million taxpayer-funded arena-management deal with the Phoenix Coyotes for next year would be the only one like it among the Valley's major sports teams and may be one of the most lucrative in the National Hockey League.

    The city would pay the team's prospective owner anywhere from $10 million to $20 million a year over the 20-year life of the deal, for a total of $300 million, leading some sports-industry experts and Glendale leaders to question whether it is more lucrative for the team than necessary.

    A 4-3 majority of the Glendale City Council appears poised to approve the lease agreement with likely Coyotes buyer Greg Jamison to operate the city-owned Jobing.com Arena.

    None of the other professional sports teams in the Valley -- the Arizona Cardinals, Phoenix Suns and Arizona Diamondbacks -- receives a tax-funded subsidy to run its stadium or arena, sports executives and local government officials said.

    "It's very, very large relative to anything," said John Vrooman, a sports economist and Vanderbilt University professor. "It's probably a blanket fee that covers lots of other things."

    Glendale will also foot the bill for $24 million in capital improvements to the 9-year-old arena. Glendale officials expect to collect roughly $2.2 million in annual rent payments, ticket surcharges, sales taxes and other fees. They also cite the intangible benefits of keeping the team in Glendale, among them hundreds of jobs and thousands of visitors.

    Executives with the Suns, Diamondbacks and Cardinals declined to comment on the proposed deal between Glendale and Jamison. Privately, they say they want the hockey team to stay in the Valley because having four major professional-sports teams in one market contributes to community pride and notoriety.

    However, one executive said the city's arena-management payment to Jamison likely would also be used to offset operating losses in running the Coyotes. Two executives said they were unaware of any other professional-sports franchise in the country that received such a lucrative subsidy from a municipality.

    While Glendale Mayor Elaine Scruggs and two other council members have publicly questioned whether the proposed fee is too steep, other city leaders say the figure is supported by months of research on operation costs.

    The sports authority is set to pay arena manager Global Spectrum about $315,000 this year, plus up to $100,000 in incentives for bringing in more events or operating the arena efficiently, said Ron Minegar, the Cardinals' chief operating officer.

    The cost to operate the stadium has never reached what Glendale is poised to pay Jamison. The proposed Glendale subsidy also appears to be higher than that for other NHL teams.

    The Nashville Predators, a team that faced the Coyotes in the second round of the Stanley Cup Playoffs, are known across the league for a favorable deal with the city and Tennessee. Last year, the Predators collected $12.4 million in management fees, incentives and reimbursement for arena losses from both government entities.

    "It's probably the most favorable deal in the league, and here come the Coyotes with an even better one," said Vrooman, the sports economist.


  • Glendale shares details of deal with potential Phoenix Coyotes buyer. Arizona Republic Jun. 4, 2012 / USAToday 6/5/12

    A proposed 20-year agreement with a likely Phoenix Coyotes buyer may cost Glendale more than $45 per resident each year over the life of the deal.
    The city appears poised to pay a group led by former San Jose Sharks chief executive Greg Jamison nearly $325 million over 20 years to operate and make improvements to the city-owned Jobing.com Arena.

    Glendale also has spent the past three years trying to secure a new owner for the Coyotes. The National Hockey League has owned the team since 2009 when then-owner Jerry Moyes entered the team into bankruptcy. A handful of potential buyers have come and gone and Glendale has pledged two, $25 million payments to the NHL to cover team losses.

    Glendale and NHL leaders are now banking on Jamison, a longtime sports executive who turned around another financially struggling West Coast hockey team, the San Jose Sharks. Jamison has said he hopes to capitalize on the Coyotes' deep playoff run this season to increase ticket sales and bring in more sponsorships for the team.
    But such success may not translate into smaller payments for Glendale.

    A Republic analysis revealed that even if the Coyotes went to the Stanley Cup Finals for the next 20 seasons and the arena booked 30 sold-out concerts each year for the next 20 years, Glendale could still expect to lose about $9 million annually.
    That figure does not include the city's annual arena debt payments, which will average about $12.6 million a year over the next 20 years.…

    Sports economist John Vrooman said the team brings intangible benefits to Glendale, but the balance sheet may not add up for taxpayers. "(The city) needs to make sure the costs and benefits are all lined up and match up," said Vrooman of Vanderbilt University. "The benefit and the cost doesn't seem to match up in this case."

  • La taquilla como estrategia competitive, «La reventa es fruto de la ineficiencia de los clubes», asegura el catedrático Vrooman, La Nueva Espana, 5 de mayo 2012

    «Las técnicas de gestión económica deben mejorar en los clubes deportivos si quieren optar a un mayor volumen de ingresos». John Vrooman elude las astronómicas cifras que rodean al mundo del deporte en materia de derechos televisivos para centrar su atención en la elección del precio de las entradas como fuente de ingresos a explotar, un recurso que ve ineficiente en determinados ámbitos profesionales. Su conclusión se obtiene en el análisis que ha realizado de los conjuntos que militan en dos de las competiciones más importantes del mundo: la NFL (liga de fútbol americano) y la MLB (liga de béisbol americano). El catedrático de la Universidad Vanderbilt, de Estados Unidos, participa hoy en la segunda jornada del séptimo congreso sobre economía del deporte que organiza en la Laboral la Fundación Observatorio Económico.

    «Hay clubes que dan preferencia a que el campo esté lleno antes que a maximizar sus beneficios con la asistencia de público. Esto impide que puedan recaudar un volumen de ingresos que, a lo largo de una temporada, conllevaría poder evitar que recurran a las subvenciones públicas para cuadrar sus cuentas», afirma John Vrooman. El economista norteamericano cree que la existencia de la reventa supone una pérdida económica para las entidades deportivas que podría tener remedio si se llevaran a efecto nuevas técnicas de venta. «Cada butaca de un campo debe tener un precio diferente porque todas ellas son distintas. El mercado secundario de venta de entradas existe como respuesta a una necesidad que no cubren los clubes. La reventa se erradicaría si se mejorara esta política», subraya el estadounidense. En su estudio estima que el índice de venta por canales extraoficiales puede llegar a alcanzar un 20% y también valora la existencia de plataformas a través de internet en Norteamérica que, al contrario de lo que sucede con la legislación española, operan de forma legal para vender localidades.

  • The real deal: Market analysis reveals sports' most overvalued and undervalued assets ESPN The Magazine May 2, 2011

    For all the sports cliches about Americans rooting for the underdog, the public sure gives a lot of support to the richest of the rich: pro sports owners. And there seems to be no slowing of financial affection. In 2010, Forbes estimated that the average NFL team is worth $1 billion -- more than four times the average team revenues in 2009 -- and that value has increased since the 2011 labor dispute. So how are owners staying on easy street? A three-part answer:

    Pro sports are exempted from antitrust laws, so it's nearly impossible for new leagues to compete. This allows the NFL to act as a cartel when negotiating broadcast rights, creating bidding wars that've increased its TV revenue 80-fold since 1970.

    The self-made sports owner? Doesn't exist anymore. A 2011 Marquette Law School report shows that 23 of the NFL's 32 teams play at sites that were more than 50 percent financed by the public. Only the Jets/Giants, Patriots and Panthers built their stadiums with no public financing. And recently, the old leagues have learned a new trick: personal seat licenses. These force fans to cough up more money for the right just to buy tickets. Plus, teams sell the licenses through a publicly run entity (income tax free), and the owners receive a huge tax break on their already massive profit. "The value of a franchise jumps by as much as 25 percent to 30 percent after a club moves into a publicly subsidized venue," says Vanderbilt sports economist John Vrooman.

    Owners have what Vrooman calls "monopsony" power over the players. That's his term for the big four leagues' ability to be the only bidder for talent. In other words, a major leaguer can't go anywhere else in the U.S. to find an employer comparable to MLB to compete for his services, which means baseball can, and does, restrict salaries, especially for its nonveterans. "They might be paid only 25 percent of their true worth," Vrooman says. Underpaying the young but talented allows owners to reward their stars with megabucks -- creating the notion that players are overpaid -- while still keeping overall labor costs below what a competitive market would bear.

  • Profit eludes Nashville Predators despite on-ice success, public money.Is team’s business model sustainable?  The Tennessean, April 29, 2012

    Millions of dollars in public funds and unsurpassed on-ice success have not been able to turn the Nashville Predators into a profitable business.

    The leader of the local ownership group said members have been forced to put $60 million of their own money into the operation over the past five years, largely to cover losses. The city has given the Predators $38.6 million in the same period.
    With the financial failures of other Sun Belt professional hockey teams in Dallas, Atlanta and Phoenix, the question then becomes: Is the Predators’ business model sustainable?

    And how helpful is a playoff run in building the kind of loyal fan base that sustains the more financially successful Northern teams?

    Little detail is known about the finances of most professional hockey teams because they, like many other sports teams that receive public dollars, do not share financial statements with their government partners and taxpayers.

    When a failure emerges — such as the bankruptcy of the Phoenix Coyotes in 2009 with $80 million in debt — details do come to light. In the three years before bankruptcy, that team’s owner said, he lost $73 million.

    As the Predators and the Coyotes square off for Game 2 today in the Western Conference semifinals, both teams benefit from fan momentum at a critical time.
    The National Hockey League bought the Coyotes out of bankruptcy and is now trying to sell the team, possibly to a group of local Arizona investors.

    Likewise, Tom Cigarran, who chairs the Predators ownership group, said his group is hunting for additional investors willing to kick in $15 million to $25 million.
    Cigarran, citing improved attendance and other business accomplishments, predicted the Predators will turn the corner soon on profitability.

    And the city of Nashville has indicated it is willing to continue its public funding. Since 1997, Metro and the state have given the hockey team $107.8 million through a contract that has been renegotiated once with more generous incentives.

    It is common for cities to provide financial assistance to sports teams with the idea that it will boost the local economy. Many cities, including Nashville, pay to build hockey arenas. But most limit their funding to paying debt on the buildings and capital improvements.

    Nashville’s contract goes beyond that, paying the Predators to operate the arena, providing financial incentives to book non-hockey events and covering most of any losses associated with running the building. And the state kicks in some tax dollars, too.

    The Predators received $11.62 million last year in state and city money.
    Nashville Mayor Karl Dean’s office said it is confident in the Predators’ stability, but other Metro officials expressed concern that the owners say the team is still not profitable.

    “It concerns me that a business we have invested so much money in, and so much of our brand as a city, for the operation to tell us that they’re not making any money,” said Steve North, a board member of the Metro Sports Authority, the landlord at the arena. “It frightens me that the lessee … can’t make money.”

    Cigarran said the team’s business operations are pointed in the right direction. Attendance at hockey games has steadily increased from an average 14,000 tickets sold per game two years ago to 16,200 this year. That includes 25 sellouts in the regular season alone this year, compared with four sellouts two years ago.

    Predators CEO Jeff Cogen said revenue from private sponsorships at the arena — another important benchmark of success for sports franchises — is up about 25 percent since he and Chief Operating Officer Sean Henry were hired in 2010. Cogen would not disclose the number of sponsors or how much revenue they generate.

    Television ratings have been improving, as well. The improved ratings, which equate to about 10,000 fans watching each broadcast, are important as a demonstration of the level of the fan base.

    Local ratings for hockey broadcasts vary greatly among NHL markets. Pittsburgh led the way last year with an 8.68 local rating for Penguins broadcasts, while the Florida Panthers, who play in south Florida, were last with a 0.16 rating.

    However, Vanderbilt University economics professor John Vrooman, who specializes in sports business, pointed out that the NHL’s business model is not built around broadcast revenue.

    “The national television presence of the NHL is weak compared to the rest of the big four,” Vrooman said.

     “If the council decides to offer incentives to the team, it needs to be under the agreement that Nashville has access to their audited financials,” Metro Councilman Josh Stites said. “I guarantee no other team investor has invested so much without seeing the team’s financials; why should we be any different?”

    As for the Predators’ current playoff run, Henry said it would help the team’s balance sheet, though not as much as postseason success once did. Before the existing collective bargaining agreement, teams were able to keep 100 percent of playoff profits, but now a large percentage is sent to the league to be included in overall revenue sharing.

    Henry said deep playoff runs do help the community feel more invested in the team and therefore improve season ticket sales.

    But Vrooman said the Predators still stood to pocket hundreds of thousands of dollars per playoff home game, and the team owed it to the public to prove it is still losing money despite the extra revenue.

    “On top of player cost certainty and busting into the second round of the playoffs, the Preds already have what is widely held as the best, most lucrative arena lease in the league,” Vrooman said. “If the Preds are crying poverty now, then Smashville probably needs to see the proof.”



    Henry, the Predators’ chief operating officer, contends the team already gives a lot of financial information to Metro government, and Cigarran said the ownership group deserves to keep its business dealings private.

    Vrooman said team markets like Nashville, without a long history of professional hockey in general, are at a disadvantage because it’s more difficult for the teams to maintain fans when they have losing seasons.

    “The problem is that Sun Belt demand for hockey depends on the teams winning while the traditional markets (like Detroit, Chicago and Boston) had a fixed and rabid clientele,” Vrooman said.

    The upcoming collective bargaining agreement negotiations with the NHL players union will be important to the Predators’ future. The central questions will be how much revenue does the league split with players and how much do large-market teams in Toronto, Boston and Chicago share with small-market teams like Nashville.
    ...

  • A's Debate Oakland v. San Jose for a New Park, National Public Radio KQED News, April 19 2012

    The San Francisco 49ers will hold a ceremonial groundbreaking for their new stadium Thursday. It's been years in the making, and one of the most controversial decisions the team made was to leave the city they're named for and locate almost 40 miles away, in Santa Clara. And they're not the only local sports franchise looking to head south. The owners of the Oakland A's would like them to become the San Jose A's.  

    These relocations are inspired not so much by the fan base or the availability of land, but by the proximity to corporations who are an increasingly important source of revenue...

    John Vrooman is a sports economist on the faculty of Vanderbilt University in Nashville. He says corporate clients are the most important ticket buyers. "It's true for the Sharks, it's true for the Warriors, it's true for the Raiders, and it's going be true for the Athletics," Vrooman said. Corporate clients are valuable in sports because they commit to -- and pay for -- their season tickets and luxury suites months, or even years, in advance.  And those sales don't depend on how well the team is playing, who the opponents are, or the weather at game time. 

    To change that, Oakland's conceived a huge project -- a new ballpark for the A's, a separate football stadium for the Raiders, a new basketball arena for the Golden State Warriors, and more, on 750 acres between the Coliseum BART station and the Oakland Airport. The concept's called Coliseum City...

    Critics say Coliseum City is just a pipe dream that has no chance to succeed, that will just delay the inevitable loss of the teams.  But economist John Vrooman says don't write the East Bay off. "Oakland is just living the classic life cycle of an American city," he said. "And it doesn't end in death. It ends in rebirth. And the city evolves, and constantly, like a phoenix, it just comes back up from the ashes," said Vrooman. "This would be a good spot for it to happen..."
    ...

  • Santa Clara Borrows Against Odds of Gain With 49ers. Business Week, April 19, 2012

    Michele Ryan says Santa Clara, a Silicon Valley city of 116,500, overreached by betting it can build a $1.18 billion stadium for the National Football League’s San Francisco 49ers without dunning taxpayers.

    Elected officials, in borrowing $950 million for the project from firms led by Goldman Sachs Group Inc. (GS) (GS), went beyond the $114 million investment approved by voters, says Ryan, who teaches high school mathematics. Groundbreaking for the field is today, with the team planning to move in for the 2014 season.

    Santa Clara is about 45 miles (72 kilometers) south of San Francisco, where the 49ers missed a chance to go to the Super Bowl when they lost their conference championship playoff to the New York Giants in January. The team hasn’t played for the NFL title since 1995 and made the postseason last year for the first time in a decade. In December, two power outages at the 69,900- seat Candlestick Park held up a nationally televised game.

    After a year of study, the 49ers said in 2006 that the team would move to Santa Clara, the site of its headquarters and a training center, and leave 52-year-old Candlestick Park.

    Unanswered questions remain about what happens when the loan from Goldman Sachs and 15 other firms matures in 2015 and has to be refinanced, said Jamie McLeod, a City Council member who opposed municipal financing. The cost of subsidies has risen for facilities including the Louisiana Superdome in New Orleans, Lucas Oil Stadium in Indianapolis and in Ohio, where Cincinnati is selling a hospital to cover debt for venues used by Major League Baseball’s Reds and the NFL’s Bengals.

    Although the city’s general fund is supposed to be spared, the “obvious problem for the taxpayers of Santa Clara becomes inadequate debt coverage,” said John Vrooman, sports economist at Vanderbilt University in Nashville, Tennessee.


    Taxpayer costs haven’t been detailed beyond $75 million from municipal agencies and special districts, plus a “half- hearted promise prohibiting the use of Santa Clara city funds for funding or operating the 49ers stadium,” Vrooman said.

    “The wording of the deal has been vague and confused from the beginning,” Vrooman said. “If a private professional sports club takes public money, then the public should be privy to quasi-public details.”


  • How the Champions League is Selling European Football Short, The BLIZZARD, Issue Zero

    "This is not ugly 'Americanisation' or greed over grass roots: it is rather the Europeanisation of European Football," wrote John Vrooman, economics professor at Vanderbilt University, in his 2007 essay The Unification of European Football, published in the Scottish Journal of Political Economy.

    Arguing for the economic desirability of a closed league by calculating that fans would rather see their side win a close game than hammer weak opposition, he proposes three conferences of ten teams based on economic strength: six English, two Scottish and two Dutch teams in a northern conference; four from Spain, four from France and two from Portugal in the west; and five from Germany and five from Italy in the centre."
    ...

  • What's the Bills' game plan? Significant outlay of public dollars will be needed for upgrades to nearly 40-year-old stadium, Buffalo News April 14, 2012.

    The Buffalo Bills are proposing a renovation of Ralph Wilson Stadium rather than a more extensive "gutting of the building."

    It's expected the cost of the stadium renovation the Bills want will be a little bit more than $200 million, according to a source familiar with the Bills' stadium study. That is a similar sum to the total amount taxpayers put up the last time the lease was negotiated.

    "If you walked into this building in 1973 as a general fan, it's not a heckuva lot different," Bills Chief Executive Officer Russ Brandon said. "By NFL standards, our building is old. It needs to be updated. It needs to be refreshed."

    Brandon would not disclose the projected cost of the renovation but said talk of a $100 million price tag is way too low.

    "The number $100 million has surfaced somehow," Brandon told The Buffalo News. "That was an uninformed, uneducated figure. That number did not come from us. This will be well north of that."

    "In the retrofit, you're looking at $450 million to $500 million," Brandon said. "You're looking at huge public funds and bonds. Then you're looking again at PSLs and much higher ticket prices. We don't believe there's sufficient public support or sufficient fan interest in making that kind of investment."

    How the Bills would propose to pay for a renovation to the stadium is still unclear.
    "Unfortunately, there is an inverse relationship between the size of the home market and the public split of sports venue costs," said John Vrooman, a sports economist at Vanderbilt University. "But the Bills still have to pony up their fair share."

    Smaller markets, Vrooman said, often pick up a greater share of the cost because the market can't "generate the cash flow necessary for private funding."

    Despite that, he said, even teams in smaller markets have paid for a larger portion of construction costs in recent years compared with deals put together in the mid-1990s amidst an expansion of the league that saw teams move from city to city.

    In Kansas City, for example, the Chiefs paid $125 million toward the stadium retrofit completed in 2010.

    The creation of an NFL loan program that uses shared revenue to finance a portion of construction projects has also helped ease demands at the negotiating table throughout the league, Vrooman said….

  • Analyst: Tim Tebow could make big bucks in NY move. Metro April 09, 2012; CBS Sports April 13, 2012

    When the Jets traded for Tim Tebow the move was immediately panned as a publicity stunt and marketing ploy. The Jets, after all, are New York’s second favorite football team after the Super Bowl-champion Giants.

    Tebow is poised to double his marketability and he is already one of the top five most marketable players in the NFL, according to John Vrooman, sports economist at Vanderbilt University.

    “Tebow’s value in New York City is obviously higher with the Jets because he is playing in the largest television market in the world. The New York market of 7.5 million television households is five times the size of Denver with 1.5 million households,” said Vrooman.
     
    “The unfortunate aspect for Tebow is that he is still being paid [based on] his contract in Denver. If he gets to play and increase the overall marketability of the Jets then his worth will have more than doubled with the move, and this should be reflected in his next contract.”…
      
    “The absolute negativity of the Tebow haters limits his appeal, unless he can win them over on the field. Religion and politics are issues to avoid in general public discussion because they are so polarizing,” Vrooman said.
     
    “Tebow’s conspicuous expression of his beliefs polarizes football fans in the same manner that evangelical religion has polarized the current political discourse. This polarization reflects more about our weaknesses and cultural intolerance than Tebow’s conspicuous Christianity…”
     
    Since the Jets view him as a backup and their Wildcat quarterback, it is hard to imagine too many fans forking over season ticket money to see Tebow play a dozen snaps a game. Vrooman speculates that only if Tebow wins the starting job will game day tickets see a “moderate” uptick.

    Given his move to New York, his jersey will almost surely be the NFL’s top seller this year, but neither jersey or ticket sales will be a windfall for the Jets.

    “Season ticket sales particularly for premium seats will not be affected by this controversial move. The only significant impact might be on merchandise sales but that is relatively insignificant in the NFL business model,” Vrooman said.

    “The NFL is a $10 billion industry, but only $270 million revenue comes from NFL Properties licensing fees and it is shared evenly with the rest of the league. It is estimated that the league retail merchandise sales are just below $3 billion and the clubs probably only get about five percent of those sales in royalties. The direct economic effect of ‘Tebowmania’ is relatively small and short lived. Unless Tebow wins, the ‘Tebowmania’ experiment will probably have the same ultimate impact as ‘Linsanity.’”

  • Net gains: Playoff-bound Blues seek first profit since 2006, St. Louis Business Journal March 23, 2012.

    As the first National Hockey League team to clinch a playoff berth, the St. Louis Blues   stand to gain more than the Stanley Cup. The Blues also could see their first profitable season since 2006.

    “My best guess is that the Blues can gross as much as $900,000 to $1 million per home playoff game and probably net $600,000,” said John Vrooman, a sports economist at Vanderbilt University. Vrooman estimates the Blues will have to make it to at least the second round of the playoffs to turn a profit for the year.

    The Blues have lost an average of $5.1 million per year over the last five seasons, according to NHL rankings compiled by Forbes magazine. The team’s only trip to the postseason in that time, in 2009, resulted in a 4-0 loss to the Vancouver Canucks in the first round. Their last recorded profit was $1 million three years earlier.

    How much the Blues could earn in the postseason depends on several factors, including whether they win home ice advantage, which is based on the standings at the end of the regular season, how far they go and how many games they play.

    Each NHL playoff round has a potential of seven games, with the team with home-ice advantage getting four games at home. If the Blues were to secure home-ice advantage and win each round in seven games, playing the maximum possible 16 games at home, they could make about $10 million in the postseason.

    The Blues announced March 16 that ticket prices for the 2012-2013 season would jump about 10 percent, with the average ticket costing about $44, compared with about $40 this season.

    Raising ticket prices marked a big turnaround for the Blues, a team that five years ago, on Jan. 13, 2007, drew fans into the Scottrade Center not with hopes of a Stanley Cup run, but by giving away free food and drinks for the entire stadium.

    While the ticket price increase was not drastic, Vrooman warned that it could backfire, especially if the postseason does not live up to some of the lofty expectations.

    “Raising ticket prices after successful seasons is common practice in professional sports, but it breaks the implicit contract between the club and season ticket holders who have stayed with the Blues through bad seasons with the promise of enjoying good ones at a reasonable price,” he said.


  • Nashville businesses welcome NCAA fans | The Tennessean March 16, 2012

    This weekend’s hoops will be the first time since 2005 that Nashville has hosted early-round tournament games and the ninth instance since the early 1970s.

    The second- and third-round tournament games here are expected to provide an economic lift not only to bars and restaurants, but shops, rental-car agencies and other businesses stretching from Lower Broadway all the way to Franklin.

    In 2005, the Nashville Sports Council estimated that the men’s tournament games injected more than $8 million into the local economy, though some question the tournament’s real economic impact.

    Vanderbilt’s John Vrooman, who studies the economics of sports, said official forecasts are often “over-inflated” because they assume the outcome of the best-case scenario will be true.

    “While basketball fans and our local hospitality industry may experience some economic gains, the net result of a basketball tournament is probably zero,” as major events tend to crowd out the rest of the local economy, Vrooman said.

    It’s a phenomenon that some economists call “the displacement effect,” when locals opt not to shop, dine and otherwise spend money to avoid teeming crowds...

  • Basketball tournaments boost Nashville's economy, profile. The Tennessean February 26, 2012

    A basketball blitz is about to hit Nashville starting in three days, and Andrew Putman can’t wait...

    The madness begins Wednesday, when the Ohio Valley Conference men’s and women’s tournaments tip off at Municipal Auditorium. A Murray State alumni group already has reserved Bailey’s entire second floor for much of the four-day tournament’s run.

    Almost simultaneously, the Southeastern Conference’s women’s tournament will start rolling on Thursday at Bridgestone Arena. Then the arena will host early-round NCAA men’s games in mid-March when postseason play picks up steam.

    Besides pumping at least $15 million into the local economy, the tournaments will further solidify Nashville’s growing stature as a sports destination, outside experts say.

    And Music City wants an even greater sports-related economic jolt. Local officials hope to land an NHL All-Star game, the NCAA “Frozen Four” hockey tournament and some Olympics trials, among other events, in coming years. …

     “Music City is not yet Sports City,” said John Vrooman, a Vanderbilt University sports economist. “There is a critical-mass necessary — and we are well below that threshold.”

    Experts say Nashville has other weaknesses, primarily financial, that it must overcome to become a bigger player on a national sports stage.

    Such limited financial resources also make landing a Major League Baseball or NBA team in Nashville extremely unlikely, Vrooman said. The Predators and Titans have pretty much tapped the region’s luxury seating market, a vital source of revenue for a pro team’s financial success.

    The region has about 1 million TV households, well below the 1.5 million and 2 million levels considered a prerequisite to support at least three major league teams.

    “A marginal third franchise would struggle in a two-team market like Music City,” Vrooman said…

  • Schools set for financial bonus of March Madness. Nashville Business Journal
    February 17, 2012


    Schools set for financial bonus of March Madness

    For a select few, it’s about winning it all. But for most, it’s just about getting the invitation.

    In fact, each postseason NCAA tournament basketball game is worth $1.4 million to the team’s conference in a payout that is typically made over six years, according to a 2010 analysis by CNBC sports.

    In that way, March Madness has become a pivotal marketing tool that raises the awareness of an entire university in the eyes of potential applicants and donors.

    “Much of the intangible benefit to the schools comes in the form of prestige that becomes tangible through increased alumni giving and student applications. This is particularly true for small private schools like Duke, (Vanderbilt), and Wake Forest not to mention recent upstarts Butler and George Mason,” said Vanderbilt University sports economist John Vrooman.

    Of the $846 million in revenue for the NCAA in 2010-11, $180.5 million was returned to the conferences of the teams participating in the tournament based on a certain formula, Vrooman said.

    For example, in 2011, the SEC got a league-wide payout of about $15.6 million, which was split evenly among the 12 teams and ranked sixth out of the division one conferences...

  • How Small-Market Teams Survive Baseball Economics, CNBC, 30 Jan 2012

    Spring training starts on Feb. 18, when pitchers and catchers begin reporting to training camp. As is the case before the first pitch of every opening day of Major League Baseball, teams talk playoffs and maybe winning a World Series.

    For the New York Yankees, Philadelphia Phillies and other bigger-market franchises, the talk turns into reality more often than not, because they usually have the money to field the best players.

    But for smaller-market teams like the Kansas City Royals or the Pittsburgh Pirates, the chatter is more along the lines of how to survive economically, let alone compete.

    Although it's not easy, analysts say, the teams can do both.

    The moneyball theory that captured MLB economics over the past 20 years is still in play.

    The concept, which actually dates to Brooklyn Dodger days, is to find good, but inexpensive, players by using certain statistics — most often on-base and slugging percentage, while ignoring the traditional numbers of stolen bases and batting average.

    With moneyball, the 2002 Oakland Athletics had about $41 million in salary. They won the American League West division, but lost in the playoffs to the Minnesota Twins, another small-market team.

    In contrast, the New York Yankees had a payroll of some $125 million in 2002 and failed to make the World Series.

    Payroll is just one part of the financial equation for small-market teams, says John Vrooman, a professor of sports economics at Vanderbilt University.

    "The key to success for them is risk-free, luxury-seat money from new ballparks and lucrative regional TV contracts," explains Vrooman, a former college football player. "This has made many teams 'legitimate contenders.'"
    ...

    Started in 1996, the revenue-sharing model initially only required that ticket-sale funds be distributed among MLB teams; now it includes local funds from luxury-box sales, TV deals and food-and-drink concessions.

    All of the money goes in a pool that's distributed evenly among the 30 teams, with the majority of funding going to those in need.

    The recipients, however, can spend the money any way they wish, says Vrooman.

    "Midmarket clubs like Pittsburgh, Miami (Florida) and Kansas City have had in the recent past, payrolls lower than their revenue-sharing payment," he says. "There needs to be strict assurances that the revenue-sharing money is spent on payrolls. Right now, there isn't..."

  • Arena's tax revenue lags: Special district's low revenues hurt ability to make payments, Louisville Courier-Journal, January 20, 2012

    The basketball games and concerts are packed, but what’s going on outside the KFC Yum! Center may be cause for concern.

    The revenue needed to pay for the 15-month-old arena at Second and Main streets is falling short of expectations, putting the project at risk of failing to cover its debt and having its bonds relegated to “junk” status.

    The main culprit is lagging revenue in a special taxing district that forms the foundation of the arena’s financing plan and is supposed to provide the Louisville Arena Authority with more than enough cash to pay its $349 million in bonds.

    The six-square-mile district’s poor sales-tax performance may force the authority to dip into its reserves — including money set aside for maintenance — to make routine debt payments.

    Because less money is being generated to cover debt, two credit-rating agencies have threatened to downgrade the arena bonds. Moody’s Investors Service expects to make its decision by early April. The other agency is Standard & Poor’s.

    But arena authority officials predict the struggles in the taxing district won’t last, and they shrug off concerns that the project may not be able to meet its debt.
    They cite the emergence of new businesses near the complex and rising city hotel taxes in the past year — an indicator of a stronger economy.

    The arena uses a state program called tax-increment financing, or TIF, which relies on a steady increase in tax revenues. When those revenues grow, a small portion of the increase is returned to the project developer to pay off debt, and the rest goes to the government.

    For the KFC Yum! Center, they are collected from the largest area allowed by law — six square miles.

    The revenue shortfall had little bearing on the first arena debt payment of $2.5 million, for 2010. The authority had more than $10 million available to cover that amount.

    The authority expected to have $26 million available — including $6.7 million from the taxing district — for its 2011 payment of $19.1 million. Instead, the district produced only $2.1 million in 2010, which goes toward the 2011 payment.

    Sales taxes in the arena district dropped 9 percent in 2009 and grew slightly more than 1 percent in 2010, according to the revenue department. Figures for 2011 aren’t yet available.

    The taxing district “will become self-sufficient again when the economy recovers, but this is way too much risk for Louisville to have taken from the beginning,” said John Vrooman, a sports economist at Vanderbilt University. “This volatility should have been anticipated before the debt was issued.”

    He said in an email that tax-increment financing is “very risky” for financing sports arenas and should not exceed 10 percent of the total debt. The tax plan makes up 35 percent of the KFC Yum! Center’s annual debt.


  • Go, Winnipeg Go! With the return of the Jets, our city got a lot more than a hockey team, Winnipeg Free Press 10/10/2011

    Twas the mid-1970s, and John Vrooman and his college buddies were sitting around watching television deep in the heart of Texas, when something strange and "mystical" appeared on the screen.

    It was a Winnipeg Blue Bombers football game. Vrooman and his football-mad cohorts were entranced.

    Images of this place called Manitoba began to ferment in their heads.

    "We thought there was something mystical about Manitoba," Vrooman recounted. "The big lakes. The native heritage. The plains. It was almost like we were called."

    On nothing more than a whim and thirst for adventure (which perhaps explained the stockpile of beer), the Texans piled into a BMW and drove straight from Dallas to the Great White North.

    They wheeled into Winnipeg, attended a Bombers game -- "I think they played the Argonauts?" -- bought some Bombers T-shirts and then drove further north just to dip their toes in a frigid Lake Winnipeg. You know, just to say they were there.

    Today, Vrooman teaches sports economics at Vanderbilt University, based in Nashville, and he has fond, albeit hazy, memories of his long-ago journey to Manitoba. But as one of the leading experts in his field in the United States, Vrooman has an understanding of the potential tangible and intangible benefits of the return of the National Hockey league to a small, Canadian Prairie city.

    "It kind of puts a small to mid-market city like Winnipeg on the map," said Vrooman, from his office in Tennessee.

    "It's a unifying force. There's a networking effect. It gives you something to argue about. That's what the Jets were in the past. That's what the Bombers are. They kind of bond the community together."

    Make no mistake: Of the handful of sports economists interviewed by the Free Press regarding the return of the NHL, the overwhelming consensus was that the financial spinoffs of the Jets' return will at best be difficult to quantify. There is only so much discretionary spending among residents.

    If $80 million is spent on Jets tickets annually, that will mean a similar amount will not be spent somewhere else. And if more money flows downtown to the MTS Centre and surrounding businesses, chances are less will be spent on entertainment or in malls in the suburbs…

    "When the teams leave, the catastrophic, scorched-earth scenarios are exaggerated," Vrooman said. "Although a lot of people thought that to rip hockey out of that town is like ripping a Canadian's heart out, the town is a lot stronger than that. There's a lot more to it (the community). What happens is people find other... economic alternatives and other economic activity that probably has more linkages to the real world than hockey does.

    "Economically, when you get a team, it's not the economic boom everybody thinks it is, and when you lose a team it's not the disaster everybody thinks it is."


  • Big Plan on Campus, Vegas Seven October 6th, 2011

    The goal has always been very simple,” UNLV President Neal Smatresk says. “We want a football stadium on campus. We’d like to host other events there. We’d hope a build-out of campus could really enhance the campus experience for our students and create a destination.”

    Everyone seems to know that while UNLV doesn’t lack for heart, it does lack a heart, a physical embodiment of its character. Only about 1,000 of the university’s 26,000 students live on campus. The school is bounded by four busy arterials. You can’t quite call its neighborhood a neighborhood. None of this is helped by the fact that the university’s football stadium is in the desert seven miles east, near Russell Road and Boulder Highway. Sam Boyd Stadium seats 40,000, but rarely have 40,000 sat there...

    The potentially good news for Smatresk is that an on-campus stadium—and much more—is also the dream of a local executive who is determined to make it come true.
    The name of the dream is UNLV Now. The project was announced Feb. 1, stalled in May by a recalcitrant Legislature and energetically revised in September. Behind it is the muscle and money of Majestic Realty—developers of the Staples Center in Los Angeles and Las Vegas’ Silverton Casino and Lodge—and the enthusiasm of Silverton President Craig Cavileer. The stadium itself is the centerpiece of a large retail and residential development that would ultimately occupy 150 acres at the campus’ southwest corner. The project envisions a 60,000-seat stadium, a renovated Thomas & Mack Center and 3,000 units of on-campus housing on land currently occupied, for the most part, by parking lots. (Garages would be built to recapture the lost parking.) The glue holding these pieces together is a 600,000-square-foot retail, restaurant and entertainment complex along a pedestrian street. Imagine Town Square at the edge of the UNLV campus—with a football stadium—and you get the idea. UNLV Now, says Smatresk, would create “a complete campus experience and build the quality and reputation of the university.”

    The funding mechanism was supposed to be straightforward. Earlier this year, the university and Majestic supported a bill in Carson City that would have established a Tax Increment Financing district for the project. Under the tax district, projected tax revenue from the project would underwrite financing. Once the Board of Regents approved the plan to pursue the tax increment legislation in February, the actual passage of the legislation was seen as a given.

    Instead, the bill proposed in Carson City, SB 501, turned into a train wreck. Legislation that was supposed to be centered squarely on the university got weighed down into a free-for-all sports-district bill that covered two other, unrelated stadium proposals in the Valley. The Legislature, already overwhelmed trying to close a massive budget deficit, bailed.…

    The project’s fate will depend on costs and financing. If not a tax district, then what? What are the projected revenue streams? How will the Majestic-university relationship work in practice? Neither Cavileer nor university officials are saying—they might not know yet—though Smatresk says $300 million would make the project happen. (Vanderbilt sports economist John Vrooman says that stadiums comparable in size to the original 40,000-seat version are running $250 million—$350 million with the retractable roof.) …

    The mix at UNLV Now is likely to have fewer “soft goods” retailers like clothing and more food and beverage. There will be lots of entertainment—movie theaters, maybe cosmic bowling. Smatresk asks us to envision an edgier Town Square, but he also notes that he’d like to see something a little bit more upscale than the usual suspects that surround college campuses—tattoo parlors, used bookstores, fast-food joints, copy stores and the like. He imagines something that would “attract not just college students but people from across the region.”

    In other words, edgy but not too edgy. The vague descriptions raise plenty of questions. Will students be able to shop in the relatively upscale stores Majestic would line up? Vanderbilt’s Vrooman cautions against counting on students to lead the way. “Most campuses are surrounded by retail space that meets the meager needs of college students: bookstores, coffee houses, beer bars and fast-food restaurants,” he says. “Think about it: Most major universities have one small strip of marginal economic activity that is not connected to the urban economic grid”—a scenario he says holds true even for “the drag” at the University of Texas, where Vrooman, like Cavileer, was a student. “Students have surprisingly little buying power and are a demographic to avoid when a business is thinking about location.” …

  • St. Louis Blues asking price out of their league, St. Louis Business Journal September 23, 2011

    With the Oct. 8 start of the Blues hockey season quickly approaching, industry experts agree there are only two sure bets in the team’s hunt for a new owner: It won’t happen before the season starts, and the sale price will not reach $200 million.

    The team’s high debt ratio, a high asking price and bad timing — numerous other NHL teams are up for grabs — are hindering the sale of the Blues, according to those familiar with the negotiations. And it’s not for a lack of interest.

    Blues owner Dave Checketts, chairman of SCP Worldwide , a New York-based sports, entertainment and media firm, previously said his goal was to complete the sale before the start of the season and that the team could fetch $200 million or more.

    But hockey insiders say that price is too ambitious. Max Chambers, a Canadian businessman and one of the interested buyers, said Sept. 21 that his $167 million all-cash bid for the Blues was turned down and that the counter-offer by SCP was $190 million, a price he is not willing to pay.

    Eric Gelfand, a spokesman for SCP, said that the company will not comment on the latest offer. “We are just going to remain silent as we have the whole time,” Gelfand said.

    Those identified as possible buyers include Chambers; Tom Stillman, owner of Summit Distributing and a minority owner of the Blues; and Matt Hulsizer, a Chicago businessman. Stillman’s first offer for the team, made in April, was about $110 million. The bid was turned down, and Stillman submitted a second offer in the same range.

    Before news of Chambers’ $167 million offer broke, one source familiar with the situation said the other bids were much higher than Stillman’s first offer, one of them closer to the $175 million the NHL’s Buffalo Sabres sold for earlier this year. Other sources, however, think the reason a deal has not been announced yet is because the offers are much lower or are coming from groups not deemed credible.

    Checketts owns an estimated 20 percent of the team, private equity firm Towerbrook Capital Partners, based in New York, owns an estimated 70 percent, and minority owner Stillman holds the remaining 10 percent.

    The Blues were valued at $165 million in 2010 by Forbes magazine in its annual list of NHL franchises, a 6 percent drop from the team’s 2009 value of $176 million. The 2010 Forbes value ranked the Blues as 23rd in a league of 30 teams. The Blues had an operating loss of $6.2 million in 2010, according to Forbes.

    All parties involved in the sale — SCP, Towerbrook and Stillman — have said little since a self-imposed Aug. 22 deadline to accept bids passed.

    Game Plan LLC, the firm hired to conduct the sale of the team, also did not return calls and requests for comment.

    The asking price for the Blues, which includes the minor league Peoria Rivermen and the lease for the Scottrade Center, is believed to be around $180 million.

    John Vrooman, a sports economist at Vanderbilt University, said if the Blues had an offer close to that asking price they would have announced a deal by now.

    Vrooman believes the Blues would have been long sold if a credible offer close to $175 million was on the table.

    The problem for Checketts, Vrooman said, is that he is trying to sell in a buyer’s market.

    “The problem they now face is that there are now several NHL clubs on the market,” he said.

    The NHL’s Dallas Stars filed for bankruptcy Sept. 15 and will be sold at a court auction. The New Jersey Devils also were put up for sale earlier this year and recently have denied reports that they are close to bankruptcy. The Phoenix Coyotes filed for bankruptcy in 2009 and were bought for $140 million by the league. After protracted negotiations with Hulsizer — and a possible move to Winnipeg, Canada — the team is still owned by the league and continuing slow negotiations with two bidders...


  • NFL labor deal to boost ranks of sports bankers, Nashville Business Journal September 2, 2011

    The NFL’s recent labor deal may force sports bankers to take a goal-line stand against new competitors.

    Provisions in the new contract offer guaranteed money to players, an attraction for bankers that previously made decisions based on mostly unscientific factors like personal character and projected draft pick.

    That unprecedented income stability also could have critical implications on Middle Tennessee’s high-wealth banking market, lowering the barrier of entry for bankers who want access to some of the country’s highest wage earners. The newcomers are forcing existing Nashville sports lenders to up their game by boosting their services.

    The biggest change in the league’s collective bargaining agreement involves how much and over what period of time certain players are paid -— a change that could be both good and bad for sports lenders.

    For example, rookie quarterback Cam Newton is guaranteed to make $22 million over the next four years as the top pick in the 2011 NFL draft. Sam Bradford, last year’s first-round choice by the St. Louis Rams, is eligible to make nearly $86 million over six years.

    The difference? Bradford’s earnings, minus his $50 million signing bonus, could stop at any moment. Newton, along with the majority of future first- and second-round draft picks, now has consistent income paid out on an annual basis instead of in a large sum -— a banker’s best friend...

    “In sports banking, NFL players previously presented a unique risk because NFL contracts are not guaranteed like those in the other major sports leagues. The new NFL (collective bargaining agreement) has compressed rookie salaries and contract duration, but the guaranteed portion of the contract has reduced the uncertainty for lenders,” said John Vrooman, a sports economist at Vanderbilt University...

  • Bradford investment pays off for Rams, St. Louis Business Journal August 26, 2011

    When the St. Louis Rams gave the richest National Football League   rookie contract in history to an unproven quarterback out of Oklahoma in 2010, some fans were understandably not dancing in the streets.

    The $78 million, six-year deal negotiated with Sam Bradford had outspoken fans flooding the phone lines to sports talk shows and furiously posting comments on Internet message boards.

    Bradford hadn’t even taken a snap in an NFL practice, let alone a real game. And there was that nasty shoulder injury that kept him out for his entire junior year with the Oklahoma Sooners.

    Was he really worth the biggest franchise contract ever?

    Apparently, the answer is yes. While it can’t be attributed solely to Bradford, the Rams fan base has been re-energized, new season ticket holders are piling on and existing season ticket holders are renewing at a record rate. That’s good news for a team that ranked near the bottom of the league in attendance last year.


    While everything may seem to be going in the right direction for the Rams, if the fans don’t show up for the games the team could soon leave St. Louis, said John Vrooman, a sports economist at Vanderbilt University.

    “St. Louis is by far the best baseball town in America, but it might also have the most fickle football fans in the country,” Vrooman said. “St. Louis has already lost the (Arizona) Cardinals, and it is in remote but possible danger of losing the Rams back to Los Angeles.”

  • Pro Franchise?  No Thanks. Two Unlikely Arenas Experience Success in the Recession, Next American City August 17, 2011

    Imagine opening a $276 million arena in October of 2007, only to have the economic recession rear its ugly head two months later (at least officially). To make matters worse, the arena will rely on funding from hotel taxes and car rentals—two sources that need tourism dollars in a strong economy. Meet the Sprint Center in Kansas City, Missouri. 

    Now picture a brand new $196 million arena opening its doors in August of 2008. By now, the recession is in full swing. A city proposal earmarks $178 million of the costs to come from upcoming sales-tax revenues. Consumer spending across the United States is dropping every month. Welcome to the BOK Center in Tulsa, Oklahoma. 

    Only 250 miles apart, Kansas City and Tulsa share a number of commonalties. Both cities are in the Great Plains region, with similar elevations and climates. And in the current economic recession, both cities are proud owners of profitable arenas—without a major sports franchise. 

    In the summer of 2005—only two months apart—Kansas City and Tulsa broke ground on new arenas. It was no secret that Kansas City wanted an NBA or NHL franchise, yet no agreement had been reached. Vanderbilt economics professor John Vrooman warned that the “build-it-they-will-come crap-shoot was way too much public risk for [Kansas City] to take.” 

    Regardless of intentions, both venues opened their doors without a prominent tenant. Currently, the Tulsa Shock of the fledgling WNBA represents the BOK Center’s most notable full-time resident. The Sprint Center is re-welcoming the AFL’s Kansas City Command after a three-year hiatus. Yet during a time when approximately half of the NBA and NHL franchises are losing money, the new arenas in Kansas City and Tulsa are generating profits.

    Kansas City received $1.8 million in revenues from the Sprint Center in 2010. Without a major sports team, the arena has greater flexibility in scheduling entertainment events. After a brief flirtation with the storied Pittsburgh Penguin franchise, the city cooled on the idea of acquiring a team. Kansas City mayor Sly James has been openly skeptical of taking on an expansion franchise, as ticket sales for sold-out concerts and special events can generate more revenue—with less overhead—than a host of sporting events that feature a perennial basement dweller.  Furthermore, pro franchises often arrive with the expectation of cut-rate leases and other deals—often at the expense of the city and taxpayers.

    The original plans to fund the two venues have had mixed results. Recent tax revenues from hotels and car rentals in Kansas City fell short of projections, while state law prohibits Tulsa from taxing the ticket sales of certain events—including the recent men’s basketball tournament. Both cities, however, are not complaining. As venues in more heavily populated areas struggle to stay afloat, Kansas City and Tulsa are plugging right along.

  • New Reality Means No Stadium, San Diego Reader, August 17, 2011

    When the economy weakens, resolve stiffens. Glum consumers do fewer giddy things. It’s becoming apparent that lack of buying by debt-sated consumers could push us into another recession, or close to one, and the pain could last years.

    In late July, Mark Fabiani, Chargers mouthpiece, lamented that the new state redevelopment law could crimp the team’s plan for a massively subsidized stadium downtown. Quoth Fabiani, “We now need to find alternative sources of funding.”

    How about the Chargers themselves? If they want a stadium in this new economic reality, they can pay for it. Fabiani, of course, was not suggesting any such thing: he wants the stadium to be part of a subsidized sports and entertainment district. Voters should thumb that down as decisively as Long Island voters recently rejected $400 million of bonds for a hockey stadium…

    Vanderbilt University economist John Vrooman estimates that in the early 1990s, before the league began its loan program, teams were only putting in 27 percent of stadium costs. Then after the league began providing loans, that percentage rose to 60.

    What the Chargers propose to pay is closer to the percentage that teams put in before the league’s loan program began, and quite possibly less


  • Suddenly, Tennessee Titans tickets aren't hard to get, TENNESSEEAN
    August 17, 2011


    A mostly down economy, a four-month labor lockout and recent mediocre won-loss records by the once-proud Tennessee Titans are causing a little pain at the box office.

    Ticket sales for the team’s 2011 home games are lagging behind last year’s pace, and a growing number of personal seat license (PSL) holders are putting their season tickets up for sale rather than attend all the games.

    Nevertheless, Titans officials remain optimistic the team’s 12-year streak of 125 consecutive sellouts at LP Field — which includes preseason, regular season and playoff games — won’t end this year.

    “We’re encouraged that we’ll be able to sell out all of our home games,” said Marty Collins, the team’s senior director of ticketing.

    Still, the secondary market seems filled with Titans tickets for individual home games or the full season. Sites such as Craigslist and others are littered with sales offers from ticket brokers and private owners.

    That’s a departure from the dozen previous seasons, when the entire home schedule sold out within hours of single-game tickets being made available to the public. This year, not a single regular-season home game reached sellout status when single-game tickets went on sale early last week.

    However, both home preseason games were sellouts, largely because of big purchases by corporate sponsors that plan to give the tickets to military personnel.
    Collins said 96.8 percent of Titans season ticketholders renewed for 2011, down slightly from 97.2 percent renewals the previous year.

    It was the third consecutive year the renewal rate has fallen, despite a six-week extension of the deadline to place ticket orders because of the lengthy lockout.

    The Titans now have 59,705 season ticketholders.

    According to a popular ticket search engine, FanSnap.com, secondary ticket sites had 6,000 to 9,000 seats available on Tuesday for each Titans home game for as little as $30 each, depending on the location.

    John Vrooman, a Vanderbilt University economics professor, said the Titans’ recent instability, a head coaching change, a newly acquired starting quarterback, the star running back’s contract holdout and other issues are dampening demand for tickets.

    “The good news is that most of the off-season moves were made to create increased stability,” Vrooman wrote in an email. “When team performance picks up (which it predictably will), single-game sales will again max out and as the long-term outlook improves, season-tickets and PSLs (personal seat licenses) will begin to strengthen.” ...

  • Glendale mum on life without Phoenix Coyotes The Arizona Republic, July 27, 2011

    If Glendale officials have a backup plan for Jobing.com Arena without the Phoenix Coyotes, they aren't sharing it.

    No plans have been made public, though some sports business experts and city leaders insist there must be one. A March records request for revenue estimates on other possible tenants or activities at the arena turned up nothing.

    The Coyotes had been playing in Glendale six years when then-owner Jerry Moyes in 2009 filed the Coyotes into bankruptcy. The NHL purchased the team as a temporary owner and has spent the past two years searching for a permanent owner willing to keep the team in Glendale. The city plays a key role because it must work out a lease with any team buyer.

    For the second year, the City Council in May agreed to pay $25 million to the National Hockey League to keep the team in Glendale another season. Anticipated buyer Matthew Hulsizer walked away in frustration last month. City Manager Ed Beasley said at that time that two to three other buyers had expressed interest.

    A deal is critical for Glendale, which borrowed $180 million to build the Coyotes' arena and makes debt payments of about $8 million to $10 million a year. Team fees and sales-tax dollars from fans who shop and dine at Westgate City Center on game nights help cover the annual bill.

    Glendale officials have said if the Coyotes leave the city could lose more than $500 million in sales-tax revenues and others fees, although that estimate assumes Westgate and the arena would draw in no sales-tax dollars if the team left...

    About 120 to 150 events a year are needed to keep an arena like Jobing.com "head-above the water self-sufficient," said John Vrooman, a sports economist at Vanderbilt University.

    Jobing.com Arena hosted 125 events last year, including Coyotes games.
    The Vanderbilt professor said Glendale needs to consider such options if it hasn't already.

    "Unfortunately, the Glendale backup plan is now way past the Plan B stage and the city should have made contingency plans in the beginning," Vrooman said. "Venue finance is like war. It's always good to have an escape strategy."

  • Do Vandy’s homers equal $$$? Nashville Business Journal, June 24, 2011

    College baseball isn’t typically a moneymaking sport. But Vanderbilt’s run in the College World Series will bring some tangible benefits. Business Journal staff writer Annie Johnson asked John Vrooman, a sports economist at Vanderbilt University, to share his thoughts about the finances of college baseball.

    The College World Series is the NCAA’s second-highest moneymaker behind the Final Four basketball tournament. (Football revenue from bowl games does not go to the NCAA but is given to the conferences.)

    The CWS is being played for the first time in the new TD Ameritrade Park in Omaha, Neb., that seats 24,000 at a cost of $140 million through 2030. It features 26 luxury suites and 1,000 club seats.

    It’s just like the big show: The revenue secret for collegiate baseball is a new stadium with luxury seats that lease for about $200,000 guaranteed.

    The estimated gate is about $5.5 million compared to last season’s $3.6 million in famed Rosenblatt stadium.

    Very few Division I baseball programs operate in the black: LSU, Texas, Texas A&M and Mississippi State are some that come to mind.

    The typical Division I expense budget ranges from $1 million to $2 million based on revenue of 50 to 60 percent of expenses. Vandy recently completed the $4.5 million expansion of Hawkins Field, including permanent outfield seats in 2009 and more than 3,000 chairback seats in 2006.

    In 2006, Division I baseball programs averaged about $924,000 expenses to generate only $214,000 in revenue. Average head coach salaries were about $125,000 of a total coaching budget of $250,000

    Collegiate baseball is fast becoming one of the most popular “low revenue sports.” The major problem is the late timing in June ... when “June madness” usually means the students have left campus.

    The main financial gain from the Commodores’ success between the lines (like Duke in basketball or Rice in baseball) is probably through increased revenue through alumni giving and other endowments. The non-financial gains to Vandy will be the continued quality of student-athletes attracted by Coach Tim Corbin’s proven program. There also will be a significant uptick in the number and quality of applications across the spectrum of students who want to be associated with winning.

  • How valuable are the Brewers' Fielder and Braun? Milwaukee Journal Sentinel, June 20, 2011
  • The two biggest stars on the Milwaukee Brewers are Prince Fielder and Ryan Braun But how valuable are they?

    I asked John Vrooman, a sports economist at Vanderbilt University, to take a look.

    Vrooman uses statistics such as WAR (wins above replacement player) and MRP (marginal revenue product, or how many people can stars put in the seats) to determine the player’s relative worth to the franchise.

    Here’s what he found.

    Over the last three seasons, Fielder’s MRP totaled $13.83 million. That compares to his salary of $18.67 million. In Vrooman’s view, Fielder was overpaid by a third.

    How can that be? Vrooman says Fielder’s relative decline in productivity last year (32 home runs, 83 RBIs) compared with his bump in salary meant Fielder was overpaid. In 2010, Fielder’s MRP was $3.33 million compared to his salary of $11 million.

    This season, Fielder is earning $15.5 million. Vrooman reasons that if Fielder has the kind of season he had in 2009 (46 homers, 141 RBIs) his salary could be justified in a larger market, but not in Milwaukee.

    Having said that, Vrooman believes general manager Doug Melvin made the right call in keeping Fielder on the team this season in an all-out effort to make the playoffs.

    Over the last three seasons, Fielder's WAR score was 11.2. That's a score all-stars generate, Vrooman said.

    Next up: Ryan Braun.

    Over the last three seasons, Braun’s MRP is about $15.9 million compared with his previously negotiated long-term salary of $2.78 million over those three seasons. In Vrooman’s economic universe, that’s good for the Brewers and bad for Braun. At least then.

    In 2008, Vrooman says, Braun’s MRP was $2.5 million while his salary was only $455,000. In 2009, his MRP was $7.6 million with a salary of just over $1 million. In 2010, his MRP dropped slightly to $5.8 million but his salary was still only $1.287 million.

    Vrooman said it was important that the Brewers signed Braun to the long-term deal that he got. In other words, sign your young talent to long-term deals.

    "This is exactly what Melvin and Mark Attanasio have done,” Vrooman said in an email. “The Brew Crew have no business in the top free-agent tier of overpaid talent."

    So far this season, Vrooman said Braun is on track for an MRP of $3.8 million compared with his salary of $4 million. And, based on his long-term deal, his salary will begin to increase in the years ahead.

    Braun's WAR score over the last three season is 12.9. That's a score produced by all-star caliber players.


  • The Public Dollars Fueling the NFL Dispute, Forbes/Real Clear Markets, June 1, 2011

    The current National Football League labor dispute is sometimes characterized as a battle between billionaire team owners and millionaire players. What's often left out, however, is the role that the American taxpayer is playing in this dispute.

    Through rich stadium subsidies and cartel powers granted to professional football by our representatives in Congress, we have helped to bankroll the gains in revenues that are now at issue in this clash.

    In particular, as Vanderbilt University economist John Vrooman argues in a chapter from a forthcoming book about the NFL (Economics of the National Football League, edited by Kevin Quinn), increases in local revenues spurred by government-subsidized stadiums lie at the heart of the dispute. ...

    The NFL and the players' union negotiated a collective bargaining agreement in 1993 that set the stage for the current impasse. The players gained free agency, but in exchange the league won the right to cap salaries at 64 percent of revenues. But those revenues included in the cap are calculated in a complex formula that allows teams to exclude certain local income from the shared pool. Over time, team owners naturally have tried to maximize those revenues that are unshared, including lucrative income from luxury boxes and club seats. According to Vrooman, revenues from stadium sites in the last twenty years have grown from 10 percent to 23 percent of total league proceeds.

    Taxpayers enabled much of this. Shortly after the 1993 bargaining agreement, the NFL embarked on an aggressive era of local expansion that included adding new teams in cities where politicians were desperate for a franchise and expanding the revenue capacity of most existing teams by building new stadiums. The end result was an addition of 25 new venues each boasting on average some 150 luxury suites and between 8,000 and 9,000 premium club seats. The first group of 13 stadiums, built before the NFL created its own loan fund to help finance new stadiums, cost $3.3 billion, of which only $888 million, or 27 percent, was private financing. Stadiums in St. Louis, Oakland (which was renovated, not constructed, for $128 million), Baltimore, Tampa Bay, Cleveland and Cincinnati were among those built primarily with public funds.

    With more owners clamoring for stadiums, the NFL then started a loan fund which has helped owners build or renovate another 12 venues. Still, taxpayers have borne about 40 percent of the nearly $8 billion in construction costs for these, though that number is largely skewed by the fact that the Giants and Jets privately financed their extremely expensive (some would say overpriced at $1.6 billion) new stadium. In other venues, including those in Indianapolis, Denver, and Chicago, financing from private sources amounted to less than one-third of the total cost, even with the NFL loan fund pitching in, Vrooman estimates.

    Those gains have come because of rich television contracts enabled by Congress. In 1961 the legislature passed the Sports Broadcasting Act, which gave the major pro sports leagues an anti-trust exemption so that the teams could band together in each league and negotiate national contracts. Otherwise, the individual teams would have been relegated to bargaining in each market with local stations for much smaller contracts, which would have almost certainly resulted in less revenue and complicated the NFL's revenue sharing arrangements. Annual rights have soared from $5.3 million in 1962 to $4 billion today, Vrooman estimates.

    ...

  • Breaking Down The CBA: Sports economists weigh in on the NBA owners’ latest proposal. SLAM Magazine, May 31, 2011

    The NBA Finals are here and with the commencement of the last round of the postseason, that and the Draft are the only remaining major events before the league’s Collective Bargaining Agreement expires at midnight July 1st. Unless you consider blatant posturing to be an event, which it could very well become given the cantankerous relations between the NBA owners and the Players Association.

    The two sides have had a salty relationship; not much has changed after the owners’ latest proposal, the details of which were noted in an April 26 memo the Players Association delivered to its players, as reported by SportsBusiness Journal May 16. The features of the owners’ proposal, which the players rejected, were as follows:

    –The implementation of a “hard” salary cap of $45 million, which would represent a nearly 25 percent reduction in the cap from its 2010-11 value of $58.044 million

    –The removal of fully guaranteed contracts under which a player wouldn’t be guaranteed more than 50 percent of a per-year salary up to $8 million and no more than 25 percent for any amount beyond $8 million

    –A decrease in the maximum money and years for which a free agent can sign a contract. A qualified veteran free agent, also known as player who qualifies for the Larry Bird Exemption, would be able to re-sign a deal with his team for no more than four years and would have annual salary increases of no greater than 3 percent.

    These players can re-sign for up to six years with annual salary increases up to 10.5 percent under the current CBA rules. (A player currently must go three consecutive seasons without being waived or signing a contract as a free agent to qualify as a “Bird” rights player, although that could be subject to change under a new CBA.)

    Likewise, a free agent signing with a new team would be able to sign a deal for no more than three years with annual salary increases of no more than 2 percent. These players can sign for up to five years with annual salary increases up to 8 percent under the current CBA rules.

    –The assignment of NBA players into four categories: Category A (a minimum salary player), Category B (a rookie wage scale player), Category C (a maximum salary player) and Category D (a player trying to fit onto a roster for whatever money remains after the players in Categories A, B and C are accounted for).

    John Vrooman, a sports economics professor at Vanderbilt University, noticed a different problem with the $45 million proposed cap – it misrepresents how the league has treated its luxury tax, which Vrooman claimed in an email message can be construed as a de factor hard salary cap.

    The luxury tax was implemented during the 2005 CBA negotiations and is intended as a way to cap each team’s spending. (Teams have to pay $1 for every $1 their payroll exceeds the luxury tax for that season.) The tax is determined by calculating 61 percent of that seasons’ projected basketball-related income. BRI is determined by a multitude of factors, including regular season gate receipts, broadcast rights and arena club revenues.

    The luxury tax was set at $70.307 million for the 2010-11 season, which denotes a BRI of approximately $3.457 billion. (Quick math: multiply $70.307 million by 30 teams, then divide the product of that calculation by .61 to attain the $3.457 billion figure.)

    Vrooman suggested that the NBA’s worst case scenario for revenue loss during the 2010-11 season will be five percent. Stern had contended in October that the NBA would lose roughly $340 million for the 2010-11 season, although the May 12 ESPN.com  report, among others, has stated sources admitting the projected loss for this season is $300 million. A loss of $300 million for the NBA would represent an approximate 8.7 percent drop in revenue from the projected BRI of $3.457 billion.

    Yet Vrooman wrote that in the scenario of a five percent drop in revenue, a $45 million hard cap would represent just 41 percent of basketball-related income, down from the luxury tax’s current place of 61 percent. Under Vrooman’s logic, a $300 million loss this season would result in a future $45 million hard cap representing a 43 percent cut of BRI. It’s important to note the implications of the hard cap potentially not taking effect until the 2013-14 season. However, it’s reasonable to assume that broadcasting rights and other basketball-related income can grow in future seasons – at least that’s a result one would expect if the NBA and the Player’s Union agree on a CBA. In that case, a $45 million cap could represent an even less significant part of BRI than 43 or 41 percent, if the league’s revenues grow from their current totals. (It’s also important to note that the current salary cap is defined as 51 percent of BRI.)

    Wrote Vrooman: “I get a creepy feeling that the NBA owners want to be like the hardcore NFL owners, who are intent on breaking the player’s union. Player salaries in the NFL have also been consistently around 58 percent of NFL revenues. There is no real increase in pressure on profits from player salaries in either the NFL or the NBA and the 20 percent cut in the [NBA] hard cap [from the luxury tax] is a grandstanding, union-busting proposal without merit. The NBA’s problem is the same as the NFL’s problem. There is way too much disparity among the clubs’ revenue streams, which is a problem that should be settled between rich and not-so-rich owners and not between owners and players.”

    Vrooman cut to the point about the NBA’s negotiating strategy on this chunk of the CBA. He said that in regards to the Bird Rights players, the owners are looking to settle for five-year max contracts which pay between six and seven percent annual raises; they’re looking at four-year max contracts that pay between four and five percent annual raises for free agents who sign with a different team, according to Vrooman.

    The players who could lose out ultimately aren’t the veterans who would represent Category D, according to Vrooman. It’s the stars and superstars. “If we look deeper it is LBJ and D-Wade who are the truly exploited ones because of the individual veteran max-cap and they are carrying the other players on the court and to the bank,” Vrooman wrote. Vrooman went on to write that the NBA owners’ proposal is filled with ideas that are “extreme and without justification in fact.”

    Vrooman continued: “The NBA does not have a labor problem; it has a revenue sharing problem. In these proposals the NBA is demonstrating NFL extreme envy when the ideal NFL business model has been blown apart. Big Dave [Ed. note: David Stern] and the owners had better be careful because they might get what they ask for. The NFL has traded excellence for mediocrity through the hard salary cap in the name of competitive balance, and the NBA is on the fast track to do the same.”

  • Atlanta Thrashers never had Nashville Predators-like consistency, TENNESSEAN, May. 31, 2011
      
    The situations were similar yet so different.

    In 2007, the Nashville Predators were in danger of moving. It appeared they had been sold, but eventually they stayed in Nashville.

    On Tuesday, the Thrashers were sold to True North Sports and Entertainment and will be moved from Atlanta to Winnipeg, pending an NHL Board of Governors vote in late June.

    Why did this happen in Atlanta and not Nashville? Along with the local support the Predators received after their almost-sale to Canadian billionaire Jim Balsillie, there’s a simple fact why they have remained in Music City.

    “The core, the hockey way, has been consistent in Nashville, and the Thrashers have not had that,” said John Vrooman, a sports economics professor at Vanderbilt. “Nashville is the poster-child for continuity. How can you be more continuous than (General Manager David) Poile and (Coach Barry) Trotz?”

    In several ways this is true. Nashville’s hockey operations and coaching have seen minimal change. Only once in the franchise’s history has there been an assistant coaching change.

    The Thrashers, meanwhile, saw coaching upheaval in most years of their existence. From the 1999-2000 season through this year, the Thrashers used four coaches — five if you count the two times former GM Don Waddell stepped behind the bench.
    That led to an overall winning percentage of .447. The Thrashers made the playoffs once, in 2007, but were swept by the Rangers. Coach Bob Hartley, a Stanley Cup winner with Colorado, was fired six games into the following season.

    “In Atlanta they’ve had maybe five coaches in their existence. Over the same time period, the remarkable thing about the Preds is they’ve only had one GM and one coach,” Vrooman said. “Although Nashville has had turnover in ownership, they’ve had consistency on the ice, and that’s what you need.”

    Although the Predators have made it out of the first round of the playoffs only once in their 13-year history, consistency has been a tried-and-true recipe. Nashville made the playoffs six of the past seven seasons.

    “To succeed in those edge markets, you have to put a pretty good team on the ice,” Vrooman said. “Consistency has given the Preds the wherewithal to make it into the second round. They flirted with (moving), but they have a sort of consistency that they need to survive. If you’re on one of the edge cities in the Sun Belt, you need that.”

    Although the Predators have entrenched themselves in Nashville, the issues could crop up again after a few down seasons.

    “One of the problems with teams in the Southern market is if you don’t have a lot of success or at least reasonable success, it’s going to be harder to survive,” Trotz said. “You’re seeing that in the Atlanta situation, the Florida situation where they haven’t made the playoffs in a number of years. It’s hard to get people enthused about supporting a team on a very continuous basis.”

  • Should NFL players become like economics professors? Marginal Revolution, April 27, 2011

    With the lockout ending today, free agency would seem to be in place:

    In the union lawyers’ world, every player would enter the league as an unrestricted free agent, an independent contractor free to sell his services to any team. Every player would again become an unrestricted free agent each time his contract expired. And each team would be free to spend as much or as little as it wanted on player payroll or on an individual player’s compensation.

    The NFL Commissioner presents multiple reasons why this is a bad idea, most of which are obviously hypocritical (some players might get paid less!, and yet the players mostly favor the new system).  The serious argument I can see is that of competitive balance, but a) do fans really enjoy competitive balance or do they prefer national stage mega-rivalries of titans?, and b) there are ways to restore competitive balance other than using monopsonistic collusion in the labor market. 

    Here is a serious economic analysis by John Vrooman (pdf), and it suggests persuasively that sharing venue revenue can remedy the revenue imbalance problem and restore balance to the extent that is required.

  • U.S. winner would help race make leap in sponsors, Boston Herald, April 16, 2011 

    For the Boston Marathon to kick it up to the next level, marketing experts say an American needs to break the tape and don the laurel wreath in Copley Square.
    There’s no doubt it’s a world-class race, but a homegrown hero would be a boost.

    “Americans are more responsive to American heroes,” said Andrew Zimbalist, an economics professor at Smith College in Northampton. “It’s unfortunate, but that’s the way the marketing world works.”

    The Boston Athletic Association, which has organized the event since its inception in 1887, won’t provide financial details about the big race, but the Greater Boston Convention & Visitors Bureau estimates that the value of sponsorships is less than $10 million.

    Experts said that number would soar if Americans dominated the winners circle and the event, which already attracts 27,000 runners and 500,000 spectators, could grow even bigger.

    In 1985, Lisa Larsen Weidenbach was the last American woman to win the Boston Marathon and in 1983, Greg Meyer was the last American man to win.

    While Adidas is the “exclusive and official footwear and apparel supplier” for the 26.2-mile race, other athletic shoe companies including Nike, Reebok, Asics and Saucony would be vying for sponsorships if Americans were honored by the mayor at the finish line, according to John Vrooman, a sports economics professor at Vanderbilt University.

    “If Americans were on top, all the shoe companies would have a significant presence and sponsorships would be more competitive,” he said. “You’d also see all sorts of side deals.”

  • NFL's lockout unlikely to match length of NHL's, THE TENNESSEAN April 3, 2011

    The NFL hadn't suffered a work stoppage in nearly 30 years until last month, but Nashville sports fans are all-too-familiar with a sports lockout.

    It was about 6½ years ago that the NHL lockout knocked the Predators off the ice, shelving Music City's only other major professional team for the 2004-05 season. Now the NFL lockout, which began March 12, is threatening to scuttle a season for the Titans.

    Yet there are significant differences between the current NFL lockout and the last NHL lockout — both in the reasoning behind the stoppages and in their duration.
    NHL owners faced a more dire economic future at the time than do their NFL counterparts. That's largely why three national sports business experts this week said they feel that the NFL lockout will end before it claims an entire season.

    The NHL appeared to be moving toward financial crisis prior to its lockout, as a majority of the teams — especially those in smaller markets such as Nashville — were losing money.

    NHL salaries had jumped dramatically in the preceding decade, as player costs increased from 56.6 percent of total league revenue in 1994 to 75.6 percent in 2003, according to John Vrooman, a sports economist at Vanderbilt University.

    There was no salary cap in place at the time. That resulted in the kind of matchups that took place in the 2003 playoffs, when a Predators team with a $23 million payroll took on a Detroit Red Wings team with an $80 million payroll.

    There's no sense that the NFL, the world's most profitable sports league, was headed for a financial doomsday.

    In fact, Vrooman said that based on NFL Players' Association numbers, player costs accounted for 57.1 percent of total football revenue in 2009, which is well below the 68.5 percent they accounted for in 1993 — the year before the league implemented a salary cap.

    What's at issue for NFL owners, Vrooman believes, is that when the last collective bargaining agreement was agreed to in 2006, the players for the first time began getting a share of what's known as "venue revenue."

    It includes things like luxury suites, club fees and sponsorships, and it's turned into quite a cash cow with the proliferation of new NFL stadiums over the last 15 years.

    While the venue revenue has been great for the players and great for owners with new stadiums, it's also created a big gap between owners with new stadiums (such as Jerry Jones in Dallas) and those with old ones (such as Tom Benson in New Orleans).

    So Vrooman argues that one of the main reasons behind the lockout is that owners now want a bigger piece of the overall revenue pie in order to help old-stadium owners who aren't getting as much venue revenue.

    "The solution isn't (for the league) to hit the players again," Vrooman said. "The solution in the short term is to share more venue money with those smaller markets."
    Many fans could care less about all the numbers. Their question: Will there be football this fall?

    Swangard, McCann and Vrooman agree that the NFL lockout will not last for an entire season.

    One popular theory is that the closer players get to missing actual paychecks — they are paid only during the season — the more likely they are to lessen their demands at the bargaining table.

    That may be true, Vrooman said, but he also pointed out that owners — especially those in need of revenue to finance their new stadiums — could start to feel the pinch as well.

    "When I see Jerry Jones on TV these days, I don't see him as cocky as he usually is," Vrooman said. "I see a real concern on his face because ... he's got a $1.2 billion building and he's got to pay for it.

    "A lot of these teams just arrived in the new buildings, and even though the majority of them are getting subsidized, there's going to be more pressure than people think. There's a possibility they could be under a squeeze, too."

  • NFL Lockout Winners and Losers: Sports Bars, Spas, Beer and DIY, CNBC.com 11 Mar 2011

    Bunny’s Sports Bar and Pizzeria in South Orange, N.J., missed out on much of the 2010 NFL season because of renovations, but reopened in time for the Super Bowl in January with 18 new large-screen TVs, all installed with football in mind.

    Owner Leslie Pogany doesn’t even want to contemplate an NFL lockout.

    “The NFL keeps us going through the winter,” says Pogany, whose family has owned Bunny’s for 86 years and survived the Major League Baseball strike in 1994 mostly because of football.

    “People wait all year for football season. It would be terrible for the whole industry. It would be like the baseball strike — fans suffer, businesses suffer. We’re hoping cooler heads will prevail.”

    Lots of fans and business owners are hoping the same thing — from those who work in the stadiums to nearby hotels, bars, and restaurants, to city officials who have spent big bucks keeping teams and helping them build their stadiums.

    While the NFL Players Association cites a study that says a lockout would cost host cities $160 million each for the season, economists say the study is exaggerated and that most of the money that now pours into the stadiums will find its way to other entertainment venues or retail businesses.

    “It could be bowling or movies or opera or live theater,” says Andrew Zimbalist, professor of sports economics at Smith College in Northampton, Mass. “Most people have a leisure budget, and if they don’t spend $400 to go to a football game they will have $400 to go toward other activities. They’re going to spend that money at some point,” he said.

    One economist says the impact of a lockout would be felt primarily by people who are closely tied to the NFL. Most professional football stadiums, such as the Meadowlands in New Jersey or Cowboys Stadium in Texas, were built as “economic islands” in order to capture most of the money that comes in on game day, says John Vrooman, a sports economics professor at Vanderbilt University.

    “The bad news is we’ve probably given them too much public money to build those stadiums,” Vrooman said.

    “The good news is that an owner like Jerry Jones will be the guy who feels the impact the most and pays the price for that. Maybe that will bring him to the bargaining table.”

    However, Vrooman said, others with businesses or jobs that rely greatly on the NFL will also feel the pain — as well as communities that use sales tax from game days to fund schools or community services.

    “The people who will be the unfortunate casualties are those whose direct income comes from the stadium,” he said. “It may not be a lot, but it’s a lot for them.”
    ...

  • Businesses, charities depend on NFL, ESPN.com, AP, March 9, 2011

    Beyond the rich players and even wealthier team owners arguing over how to divvy up $9 billion in revenue a year, the people who would suffer most if there's no NFL season this year are those whose jobs, businesses and even charity work depend on games.

    It's the 2,500 ticket-takers, janitors and other game-day employees at the Superdome in New Orleans, and the suburban dry cleaner who washes all their uniforms.

    It's the receptionists and accountants for the New York Jets, and the high school band booster club that sells burgers and beer at Carolina Panthers games.
    It's the Episcopal church that sells parking spots for Tennessee Titans games, the hotel across the street from the stadium in Houston and the ticket broker who opened a store facing Cowboys Stadium.

    And on and on it goes, across the communities of all 32 teams.

    "It's like an earthquake -- there's a ripple effect out to other people, other parts of the region," said James J. Cochran, co-author of "An Event Study of the Economic Impact of Professional Sport Franchises on Local U.S. Economies" and an associate professor in economics at Louisiana Tech. "You can't really assume the impact is limited to the area around the stadium. You feel the shock everywhere along the way. It may not be the same shaking as at the epicenter, but you feel it."

    The NFL and the players union are talking with a federal mediator to work out a new collective bargaining agreement. If they don't have a deal by Friday afternoon, the owners could lock out the players or the NFLPA might decertify and take its fight to court. Either scenario would put the NFL on a path that might wipe out some or all of the upcoming season.

    To gauge the fiscal fallout of NFL games not being played, The Associated Press interviewed dozens of economists, business owners and team officials from across the country. Several themes emerged:

    • Teams would be hit hard because they collect a lot of the money spent on game days (concessions, parking, souvenirs), especially in newer stadiums designed to maximize their haul.

    Local tax districts would suffer, too, most of all in places where there are tariffs on tickets or parking spots to repay stadium costs. The way things are set up in Foxborough, Mass., revenue from the Patriots' stadium pays for big-ticket items such as school buses, school computers, highway trucks and fire engines. The town's capital budget -- the line item that would be hit -- already has been "starved out" for several years, skimping on all but the school buses, said Randy Scollins, Foxborough's finance director.

    "We have a big backlog of items that deliver services to town," Scollins said. "This would only delay that more."

    • With just eight home games per regular season, game days are only a part of a worker's income -- extra hours or a second job for stadium types, a busy day at the office for the waiter at a nearby sports bar. However, it's still money they are counting on.

    "The doomsday scenarios are exaggerated, but there will be innocent bystanders who are casualties of this," said John Vrooman, who teaches sports economics at Vanderbilt University. "The overall losses to these people are going to be small, but they're not small to them."

    • Overall, local economies would not see money so much lost as spent elsewhere. Fans would look to entertain themselves some other way on Sunday afternoons.
    "It's like a snowstorm," said Stephen Fuller, economist and director of George Mason University's Center for Regional Analysis. "The grocery store sells out, and the restaurants are closed. ... There's a redistribution effect."

    No calculation exists for the total number of people who would be affected by an NFL work stoppage, though it's certainly enough to fill a few stadiums.

    The NFLPA estimates there are an average of 3,739 workers at each game, and that does not include jobs at places near the stadium that are at least partly dependent on games, such as bars, restaurants, hotels and gas stations.

    How many dollars are connected to those people also is tough to determine. The figure thrown around most is $160 million per market over the regular season. It comes from the NFLPA, which arrived at that by using estimates teams relied on to win public funding for stadium construction.

    Several economists -- though not the league -- have said those estimates are overblown and it's also worth noting the figures include player salaries.
    ...

  • Titans can learn from Predators As NFL union talks continue, a look at the NHL lockout Nashville Business Journal, March 11, 2011

    The Titans have sold out every game since they’ve been in Nashville. With that type of revenue on the line, it’s possible an NFL lockout could be exponentially worse than what the NHL saw in 2004…

    The rhetoric between the National Football League and its players association is eerily similar to the chatter that happened prior to the hockey lockout of a few years ago, but the circumstances do differ: The NFL is the top sports league in North America with $9 billion in revenue. The Titans have sold out every game since they’ve been in Nashville. Conversely, the NHL brings in less than $3 billion a year, and the Predators still are seeking corporate partners.

    With that type of revenue on the line, it’s possible an NFL lockout could be exponentially worse than what the NHL saw in 2004 when several bars and restaurants shuttered, hotels had layoffs and part-time workers went without paychecks…

    Why have labor negotiations in the NFL become so tenuous that a lockout is on the horizon?

    John Vrooman, a sports economist at Vanderbilt University, says it’s all about stadiums. Vrooman recently wrote a report outlining a handful of reasons the talks have escalated.

    Namely, Vrooman believes solidarity between NFL owners and players has become more and more strained since 1993, when a luxury-seat stadium building “frenzy” helped increase the proportion of venue revenue to 20 percent from 10 percent of total revenue, thus splitting a “once-tight syndicate” into teams with new stadiums and those without.

    “The NFL’s current economic problem is not between owners and players,” Vrooman wrote. “It’s between owners of teams playing in new lucrative profit-max venues” and “those owners playing in older welfare-max cookie-cutter stadiums of the ’70s.”

    A possible solution? Vrooman suggests NFL owners should share more revenue from their venues.

  • Titans football brand remains strong, Nashville Business Journal, February 8, 2011

    So, you want to build an indestructible brand?

    Then you have a few lessons to learn from the Tennessee Titans. In fact, imagine your two most important employees – maybe not your best – but the ones you put in front of your company.

    Now, send them packing.

    Jeff Fisher is out. He’s been a calm and stable force in Nashville for 16 seasons who has wearied some tumultuous times: from Superbowl to sinkhole.

    And while Mike Munchak is in as the franchise's 16th head coach, he takes the reigns without the benefit of a franchise quarterback.

    That's because Vince Young is gone, too. The quarterback is arguably the most popular position on the team and an obvious leader on the field. The Titans have none.

    Except the Titans, like most NFL teams, will be just fine.

    There will likely be no dramatic drops in season ticket holders. No riots on the street. No huge loss of corporate sponsorships. The sky will not fall.

    That’s because most NFL teams have achieved the corporate dream – an indestructible brand.

    So how do they do it? It’s simple. Find 31 of your closest competitors, make them your friend and find a common interest. Then stay in business together for the next, oh, 100 years.

    Ok, maybe not so simple.

    But the NFL has used a similar formula to build a “bullet proof” brand, according to Vanderbilt sports economist John Vrooman, and here’s why:

    1.) Longevity: “The longer you’re there the more you become the face of the franchise and I think Jeff Fisher was a calm, reasonable face that Texans liked, that Tennesean’s like.” (And let’s not forget Bud Adams bought the team in 1960 for $25,000). And now, Munchak will become the first former player to coach.

    2.) Fan base: “It’s hard to bust up a season ticket base,” Vrooman said. How many coaches have the Dallas Cowboys gone through since Jimmy Johnson? And yet, they still remain one of the strongest sports brands in the world.

    3.) Natural Cartel: A dirty word? Or just good business? The courts have ruled on this, but the simple fact is that Dallas needs Nashville. And Nashville needs Atlanta. When there is no competitor, there is no business. Maybe there is something to be said for friendly competition.

    4.) Consider the industry: “Behind it all, the straw that stirs the drink is still money,” Vrooman said. Thousands of fans, high ticket prices, high beer prices, corporate sponsorships galore.

  • Predators’ seek cash, investment push could reach $25M, Nashville Business Journal, January 21, 2011.

    Nashville Predators Chairman Tom Cigarran knows no one is beating down the door to invest in a sports franchise that isn’t making money, especially one with a rich history of financial woes.

    But Cigarran has a plan: Keep it local, keep it stable, keep it in the hockey family.

    It’s a mantra that already is evident and will take center stage this year as the Predators continue their prowl for qualified investors ­— a search that will be key in growing the franchise into a stable economic driver for Nashville.

    Already, the balance sheet is looking better than it did last year. Attendance and corporate sponsorships are up. Now, Cigarran is looking to fill out the rest of the ownership team.

    Cigarran anticipates it will take about two years for the Predators to be fully financed by raising additional money — up to $25 million by one estimate. He’ll begin with a list of six people he feels fit the Predator mold.

    And while he isn’t naming names, the criteria include locally based investors who won’t have to stretch to make capital calls. He’s looking for business savvy people that like hockey, can work in a collaborative environment and aren’t looking to make an immediate return.

    It’s similar to the formula seen in other NHL cities.

    “Truth be known, there are usually better pure investments than sports franchises,” said John Vrooman, a sports economist at Vanderbilt University. “The sports business is no place for cold, hard financial numbers crunchers. They are few and far between, and they have usually been run out of the league by the aggressive young syndicates.”

    The Predators won’t discuss how much money they are looking for, but Vrooman estimates $20 million to $25 million in equity might do the trick.

    “Teams in the edge markets can do well if they win on the ice, but gate revenue (is) very volatile,” Vrooman said. The edge markets include the nine teams the NHL added as part of an expansion in the 1990s, like those in Nashville and Dallas.

    Vrooman said the Predators are probably worth around $160 million to $175 million, slightly more than they were in 2006 when the team was last flipped. In contrast, the original six NHL franchises could be worth two to three times more. And while nearly all of the edge markets have struggled, the situation is worse elsewhere: The NHL acquired the Phoenix Coyotes in October 2009 for $140 million when the team was in Chapter 11 bankruptcy.

    While Cigarran hopes the Preds will break even next year, Nashville investors need to be in it for the long haul.

    “There’s a lot of chemistry involved in picking the right people,” Cigarran said. “This is a long-term process and a long-term investment, and you better like and trust your partners or else you’re going to have a miserable time.”

    That was exactly the case last year, when former owner William “Boots” Del Biaggio was sent to jail for fraud, leaving the Predators searching for ways to buy back his portion of the team. And while the group ultimately got back that 27 percent, they learned a valuable lesson.

    For one, Cigarran plans to vet out-of-towners with more scrutiny than those in Nashville. That not only includes an intense financial review, but interviews with friends and former colleagues.

    “We’re never going to let people not from here (have) more than a certain percentage of ownership,” Cigarran said. “There’s no question that teams are worth more if you move them ... but that’s not why we invested. So if we have control, we can keep the reason why we invested paramount.”

    That means Predators fans are likely to see more involvement from the local business community.

    Vrooman said he was involved in discussions surrounding the Predators’ relationship with Vanderbilt Sports Medicine and the Children’s Hospital. He expects more interest from the medical community “not just for their bottom line but for their sense of community involvement.”

    And while Cigarran recognizes there is still work to be done, he is confident the groundwork has been laid.

    “There is a light at the end of the tunnel,” he said. “And it’s not a train.”

  • NFL labor clash fallout: Local businesses could take hit if owners, players fail to reach pact, Boston Herald January 10, 2011

    As the New England Patriots gear up for another playoff run, local business and civic leaders - just like the team - are taking it one game at a time, but they’re also worrying about next year.

    If the National Football League and the players fail to resolve their differences by March, Gillette Stadium could go dark next season - wreaking havoc on Foxboro and the region’s economy.

    “We are dependent on the revenues from ticket sales,” said Lynda Walsh, chairwoman for the Foxboro Board of Selectmen. “If the Pats don’t play, it would have an impact on the town, because we build our budget around that money.”

    The owners and the NFL Players Association are locked in a battle that could prevent the 2011 season. At issue is the owners’ proposed 18-game schedule, how the players would be compensated for it, rookie salaries and the division of profits between owners and players.

    NFL revenues reached $8 billion this year. But owners insist that too much of it - nearly 60 percent - goes to players. Team owners argue they have large debts from building stadiums, launching the NFL Network and other business opportunities, making it challenging to be profitable...

    John Vrooman, a sports economist at Vanderbilt University, said aside from money, the backlash against the Pats could be significant. He said the baseball strike during the 1994-95 season, which canceled more than 900 games including the World Series, took a terrible toll on revenue.

    “When Major League Baseball went on strike, it took two years to get fans to come back,” he said. “From a fan’s point of view, it’s a bunch of millionaires arguing with a bunch of billionaires.”

  • New Orleans Faces Competiton, SLAM Online, January 3, 2011

    It’s been more than eight years since the Hornets left Charlotte for New Orleans. To hear the way some non-NBA cities speak of their desire to acquire an NBA franchise, the Hornets won’t have a lack of suitors should they move again. Since the NBA bought the Hornets in early December for $300 million, speculation has ensued on whether they will stay in New Orleans.

    If the NBA wanted to let the Hornets move, there wouldn’t be a problem selling the club for a larger amount than the $300 million price tag at which they purchased it. The buyer would likely pay an amount respective of the city in which the Hornets would be placed. This can be compared the NBA’s case to MLB’s purchase of the Montreal Expos in 2002, after the league unsuccessfully tried to contract the club.

    John Vrooman, a sports economics professor at Vanderbillt University, explained MLB’s financial reward as a result of owning the Expos. The league paid $120 million for the Expos, moved them to Washington D.C. in 2005 — where they became known as the Washington Nationals — then flipped them in 2006 to Ted Lerner for $450 million. A publicly-funded $600 million-plus ballpark followed Lerner’s purchase.

    Vrooman added the NBA has already set a precedent when it gave Charlotte another expansion team in 2004 — the Bobcats. The ‘Cats paid a $300 million expansion fee and followed that in 2005 with brand-new Time Warner Cable Arena.

    “These two cases are similar in that the League as partners in ownership purchased/created the teams and then negotiated directly with [Washington] D.C. and Charlotte as take-it-or-leave-it monopoly leagues,” Vrooman wrote in an e-mail message. “In both cases, MLB and the NBA owners used their collective monopoly power to leverage maximum public venue concessions before selling the respective teams to wide-eyed owners.”


    Vrooman, the Vanderbilt economics professor, has an idea of what the NBA should do with the Hornets.

    “It should conduct a search for a legitimate local Gulf Coast owner who is not adversely affected by the economic downturn,” Vrooman wrote. “They should then sell the club for zero profit so as to give the new ownership a fighting financial chance to make a go in a city that has lost almost all of its vitally important corporate base.”

    He also left a lasting message on what he thinks tops the NBA’s wish list. “Never underestimate the NBA, MLB, NHL or especially the NFL,” Vrooman wrote. “Their single objective is to make a profit, not to maximize fan welfare.”


  • Can the Tampa Bay area sustain baseball? Tampa Tribune November 26, 2010

    Is the Tampa Bay area and Florida, for that matter - just a bad baseball market?

    Tampa Bay Rays principal owner Stuart Sternberg, some of the Rays' own players and countless sports commentators can't explain how one of the best teams in baseball could draw so few people to Tropicana Field last season.

    The economy has hurt somewhat, but attendance at Rays and Florida Marlins games has lagged for so long that more than a few people wonder if baseball works in Florida at all.


    John Vrooman, a sports economist at Vanderbilt University, said the team needs to squeeze more money out of its TV and radio broadcasts. The leaked documents suggest the Rays collected about $13 million from broadcast revenues in 2008. The Seattle Mariners earned about $64 million, the documents show.

    "Stadium this, stadium that," Vrooman said. "You can talk stadium all you want, but that's got to be remedied."

  • Canadian hockey teams see financial upswing  TENNESSEAN  November 18, 2010

    As general manager of the Vancouver Canucks, Brian Burke would wake up in the morning, open his newspaper and look at exchange rates.http://view.atdmt.com/CNT/view/252507318/direct;wi.300;hi.600/01/93855885http://view.atdmt.com/CNT/view/252507318/direct;wi.300;hi.600/01/93855885

    If Burke saw the slightest downward variance in value of the Canadian dollar, it would mean an expensive day.

    "If it moved a penny, like if it went from 64 to 63 cents, that change would cost me about between $215,000 and $300,000 on my payroll," said Burke, who held the role in Vancouver from 1998-2004. "This is back when payrolls were $30 million."

    Now, as the GM of the Toronto Maple Leafs, Burke no longer has this problem. The Canadian dollar trades almost on par with the American dollar. In 2009, Forbes rated the Leafs the most valuable franchise in the NHL — one of three Canadian franchises in the top 10. The only Canadian team without a payroll more than $50 million is the rebuilding Edmonton Oilers.

    "Hockey couldn't be any stronger in Canada in each of the markets maybe than it's ever been," Nashville Predators GM David Poile said. "The level of interest in hockey is at an all-time high in Canada."

    It didn't always used to be this way. But a strong Canadian dollar mixed with the NHL's economic structure and Canadian fan interest have reestablished Canada's footing in the league...

    "The fact of the matter is the bulk of their expenses they pay is in U.S. dollars. So, virtually all of their revenue is paid to them in Canadian dollars," NHL Deputy Commissioner Bill Daly said. "If the Canadian dollar is trading at a value of 60 cents on the American dollar and your American dollar payroll doesn't get the same discount, then you have less revenues to pay a bigger payroll."

    As the decade progressed, the Canadian dollar strengthened to the U.S. dollar. This leveled the economic strength of the U.S. teams against the Canadian teams.
    In 2003-04, the Calgary Flames, then considered a small-market team, became the first Canadian team to make the Stanley Cup finals since the 1993-94 Canucks.
    After the lockout of the 2004-05 season, the Canadian Assistance Program was put to rest...

    "The No. 1 factor in the rebound of Canadian franchises is the Canadian dollar," Burke said.

    The NHL is not like most major North American sports leagues. It has a television deal, but it's not a major moneymaking national deal like in Major League Baseball, the NBA or the NFL.

    Most of its revenue derives from local gate. According to an academic article "Theory of the Perfect Game: Competitive Balance in Monopoly Sports Leagues" by Vanderbilt sports economist John Vrooman, in 2006-07 the NHL brought in 52 percent from local gate revenue.

    The next closest major sports league in North America was MLB with 39 percent. The article says the NHL got 6 percent from its national media deal, whereas the next closest, Major League Baseball again, grabbed 17. Daly estimated the current percentage of gate revenue to be at 55 percent.

    This puts a high amount of pressure on the local attendance to succeed. In recent years, Canadian markets have led the way.http://view.atdmt.com/CNT/view/252507318/direct;wi.300;hi.600/01/94131999

    So far this season, the only Canadian team that has not played to 100 percent home capacity or above is the Ottawa Senators, who have played to 96.9 percent home capacity. This is almost identical last year when five were at 100 percent, and the Senators at 98.8.

    "When your revenue is certain and you're confident about it, then your expenditures can be certain, and when I say certain, that means you can go to the cap. And you don't need any wiggle room," Vrooman said. "When your expenditures are uncertain and your attendance is uncertain and iffy, it depends on how good your team is."
    Vrooman says this is why many Sun Belt and Southern teams such as Nashville can't spend the same types of dollars.

    "There's a lot of high variance and a lot of fluctuation of attendance in the South," Vrooman said. "I think you're seeing traditional Canadian hockey markets hanging tough, as opposed to the Southern markets with a high volatility. If you have a high volatility, you're more reluctant to spend money..."

    "NHL hockey is very, very healthy in Canada," Daly said "I can't tell you when or how (another Canadian franchise) is going to happen, but certainly a combination of the factors I've talked about — which is kind of the interest in NHL hockey in Canada, the Canadian dollar improving and increasing in value, and the new structure of the new labor agreement — all make it much more likely and much more possible that there will be additional franchises in Canada in the future."

  • Local sports teams tweak suite offerings Nashville Business Journal
    October 18, 2010

    Luxury suites at sporting venues provide fans with high-end food, sometimes a stocked bar, a great view of the game, comfortable seats and private bathrooms.
    But the suites, which are most often leased on multi-year contracts, also provide venue owners with a much-desired asset — consistent, uninterrupted revenue. This is especially desirable during a down economy.

    “The key and attraction to luxury suites and club seats is their longer-term leases,” said John Vrooman, sports economist at Vanderbilt University. “Usually they give a little bit of certainty in cash flow.”

    The recession has led to some adjustments designed to keep that cash flowing in.
    Some venues have divided suites into smaller boxes or divvied up use of a suite among two or three different entities to keep them filled, Vrooman said.

    Chris Junghans, senior vice president of corporate development for Bridgestone Arena and the Nashville Predators, said the arena has expanded its array of luxury seat offerings to attract a broader audience. He said suite sales at his venue have been strong.

    “One thing we realized about five years ago was that suites were not enough,” Junghans said. “We took suites and cut those up a bit. ... We’re trying to get people into the premium family.

    “We realized that there were a lot of companies that couldn’t afford or couldn’t manage 100 to 110 events a year. But 50 to 60 (events) was doable.”

    Vrooman said that can have up sides and down sides.

    “When you split up a suite, it becomes a little more risky to your revenue cycle,” Vrooman said.
    ...


  • Shaquille O’Neal plays new top cookie in Oreo ad campaign, Boston Herald, September 23, 2010 

    Basketball superstar Shaquille O’Neal is a master at dunking - Oreos, that is.The Boston Celtics center has joined a football champ, a tennis icon and a gold medal-winning speed skater in a new TV spot promoting one of America’s favorite cookies.

    In the 30-second commercial, O’Neal is teamed with Eli Manning, Venus Williams and Apolo Ohno - members of the so-called Double Stuf Racing League - to challenge a mysterious “hooded menace” who threatens to overtake the league.

    Roger Noll, a sports economist at Stanford University, said he’s not surprised that Kraft Foods selected O’Neal. ‘If you’re going to run a commercial with multiple people, you would only consider those who are well-known,” he said. “Dwyane Wade is a better basketball player, but he’s not as recognizable as Shaq.”

    John Vrooman, a sports economist at Vanderbilt University, said Shaq is the perfect addition to the Oreo campaign. “He’s a lovable giant,” he said. “He’s kid friendly, and moms love him.”

    Vrooman estimates O’Neal could earn up to $1 million for the spot depending on how long it runs. “I’m sure he is the highest-paid athlete in those ads, followed by Eli, Venus and Apolo,” he said. “Shaq is at the top of his popularity.”

    Sports marketing experts say the 7-foot-1-inch O’Neal, who earned $15 million from endorsement deals last year, could add to those numbers as a member of the Boston Celtics. Boston signed him to a two-year, veteran-minimum contract worth about $3 million.

  • Stadium Bonds Near Strikeouts. SmartMoney, September 15, 2010

    The Memphis Redbirds Triple-A baseball team is chasing a playoff title and could repeat as champions of the 16-team Pacific Coast League.

    However, the tax-free bonds the nonprofit ownership took out to buy the franchise, build the 14,200-seat AutoZone Park, and support inner-city sports programs are getting closer to striking out.

    Revenues have slipped, and the annual $5 million in debt payments has proved too great a burden, says John Pontius, treasurer of the only nonprofit group to own a Triple-A baseball team.

    Last week, bond trustee U.S. National Bank filed a regulatory notice indicating bondholders would receive a partial payment on a portion of the Memphis Redbirds Baseball Foundation's $50 million in muni bond debt…

    Not every stadium-linked muni bond will have trouble. The New York Yankees, for example, were able to get about $225 million from a tax-free bond sale when they built a new $2.3 billion ballpark, which opened in 2009.

    John Vrooman, a professor of economics at Vanderbilt University, says stadium financing has long been an area where governments have worked with sports franchises and found loopholes in Regan-era reforms intended to restrict favorable public financing interest rates.

    "The Yankees are making payments in lieu of taxes to retire these tax free munis, and this is on the biggest possible scale you could have," he says, meaning those bondholders won't sweat repayment. "The Yankees are secure, they shift risk everywhere, they're diversified."

    The stakes are far smaller in Memphis, but the sources of revenue and the economics of the Redbirds' customer base are vastly different.

    "That kind of specificity, particularly in a small market, I think the flags should go up," regarding bond risk, says Vrooman.

    Meanwhile, the Redbirds began their Pacific Coast League championship playoffs Wednesday night against the Tacoma Rainiers. The team offered two-for-one discounts.

    "It's always been a good little baseball town, but it's poor," said Vrooman. "At a time like this, it doesn't matter how good the team is."

  • Tax funding for KFC Yum! Center falls short, Louisville Courier Journal, September 15, 2010

    Paying for the KFC Yum! Center depends on more people spending money downtown, but the plan to use rising sales tax revenues to cover part of the arena debt failed to produce a single penny last year.

    Arena officials expect the sales tax receipts to rebound once the facility opens and the economy recovers, but the missed projections show the risks of relying on a growing economy and steady increases in spending at bars, restaurants, hotels and stores.

    And if sales tax projections continue to lag, Metro Government could have to come up with an extra $3.3 million to cover arena costs as early as 2012.

    The arena would have to exhaust all revenue sources, such as the tax rebates, sponsorship money and any operating profit, before asking Metro Government to contribute more money. The city’s annual contribution to the arena is capped at $10.8 million…

    This year’s debt payment is due to be just $2.5 million, and the arena authority’s budget passed this week shows $10.2 million available to cover it. But those payments are scheduled to rise to more than $19 million annually starting with the first full year of operations in 2011, putting more pressure on the tax rebates.

    During the arena’s first decade, property and sales taxes account for, in some years, as much as one-half of the money set aside for debt payments. Other sources include the city’s contribution of at least $6.5 million, sponsorships and premium seat fees.

    Citing concerns about tax revenues being available to pay off debt, analysts at Standard & Poor’s last month warned they were considering downgrading the arena bonds to “junk” status.

    Those who study tax increment financing say wild swings in sales taxes make the structure a risky way to pay down debt.

    “When you do these projections, you have to do a worst case scenario. You have to be conservative, particularly on sales tax,” said John Vrooman, a Vanderbilt University sports economist. “The worst case scenario looks like it’s happening right now.”

  • Listen to story Tommy John' surgery can extend careers of pitchers. National Public Radio Marketplace, August 27, 2010

    HOST:
    In the sports pages today, we saw a modern story of risk and return. Stephen Strasberg is one of the best -- and best paid -- rookie pitchers in baseball history. But the Washington Nationals ace has torn his elbow ligament. And he'll most likely need a procedure known as Tommy John surgery. What it means is, Strasberg will be recuperating for a year and a half or so. But when he comes back, he'll likely be as strong as ever. Maybe stronger.

    Marketplace's Gregory Warner reports, Tommy John surgery is changing the business of baseball.

    Gregory Warner: The procedure's nickname comes from the first player to have it done. Tommy John had pitched 14 seasons of pro ball when he had what everyone thought was a career-ending tear to his elbow ligament. Then in 1974, a surgeon replaced that ligament with a tendon taken from Tommy's forearm. Less than two years later...

    Russell Huffman: Tommy John went on to have a very successful career as a pitcher.

    Russell Huffman is an orthopedic surgeon at the University of Pennsylvania. He says with a 90 percent rate of success, Tommy John surgery has given thousands of athletes a second chance at play...

    For baseball team owners, Tommy John surgery has become a kind of insurance. The National's gave Stephen Strasberg a record $15 million contract. John Vrooman is a sports economist at Vanderbilt University.

    John Vrooman: Well, if he has a career-ending injury, then that cash flow goes away, and I think what Tommy John does is it just kind of cuts off this risk.

    And makes teams more willing to throw big money at an arm that hasn't been tested in the major league. And since studies show that the hardest throwing pitchers are most likely to need a Tommy John, it could make everybody play a little closer to the edge.

  • The Latest NBA Conspiracy Theory: The formation of the LeBron-Wade-Bosh trio raises eyebrows. SLAM Online August 24, 2010

    If you haven’t read enough about the Miami Heat’s free agent collection of LeBron James, Dwyane Wade and Chris Bosh, well, here’s one more story to satisfy your appetite. Many theories have been brought up for how the Heat secured James and Bosh to free agent deals in addition to re-signing Wade. Some folks, including a Knicks-loving filmmaker, have suggested the process was rigged.

    John Vrooman, a sports economics professor at Vanderbilt University, hinted at a set-up while falling short of calling it a conspiracy.

    “The NBA’s overt strategy of preferring dynasties over competitive balance and star players over team production runs through everything they do,” Vrooman wrote in an e-mail message...

    “The reason the salary cap is soft is so that conservative owners could be protected against maverick owners, while at the same time not killing the chicken that laid the golden egg. The Larry Bird exception is a classic example of the NBA’s reasonable desire to preserve existing teams,” Vrooman wrote of the exception that allows a team to exceed the cap in order to re-sign what’s typically a franchise-type player.

     “The NBA has by default reached the reasonable conclusion that familiarity and personal competition between DWade and LBJ and Kobe [Bryant] feed national TV ratings and it does indeed,” Vrooman wrote.

    “Whether or not [Commissioner David] Stern’s token attempts to preserve the Raptors and Cavs, to fine owners for tampering, and then somehow to stand for the Heat’s free agent bonanza on the heels of the Celtics’ Big Three and the mystery move of Pau Gasol to join Kobe in L.A., is conclusive evidence of this open and overt strategy of dynasties over [competitive] balance is an empirical question that is subject to debate.”

    It’s a loaded statement that should be broken down. Stern, or any part of the NBA for that matter, has not appeared to do anything to aid the Raptors and Cavaliers after the departures of their franchise players. In fact, Stern fined Cavs owner Dan Gilbert $100,000 for comments he made about James in a letter to Cavs fans, and in a follow-up phone interview with the Associated Press, after James announced he would sign with the Heat.

    The tampering charges Vrooman wrote about were in regards to the $100,000 fine handed to Mavericks owner Mark Cuban and $10,000 fine given to then-Suns general manager Steve Kerr for comments made about James prior to the official start of free agency in July.

    The references to the formation of the Celtics and Lakers’ cores are self-explanatory. The Big Three coming together in Boston raised some eyebrows after then-Timberwolves general manager Kevin McHale and Celtics Executive Director of Basketball Operations Danny Ainge — Celtics teammates in the ’80s — made a deal to trade Kevin Garnett to Boston. It was a trade that appeared unbalanced at the time.

    Gasol’s deal to the Lakers raised suspicion in even more folks, namely Spurs head coach Gregg Popovich. He stated the trade was “beyond comprehension” and that there should be “a trade committee that can scratch all trades that make no sense.”
    Points that Vrooman raised have been at the core of debates among NBA fans and critics. In his opinion, there isn’t much room for discussion.

    “The debate shouldn’t last long, and the empirical question is easy to answer. There have only been six different NBA championship clubs and home markets in the 27-year modern era of the soft salary cap (1984-2010) and we all know who they are, including DWade and the Miami Heat. There is no doubt: This imbalance is by design.”

  • Is The NBA Really Losing Money? Sports economists weigh in after players receive high-priced deals. SLAM Online, August 10, 2010

    Now that this summer’s NBA free agency period has calmed down, we can attempt to make sense of the dizzying array of money that changed hands. While NBA fans tend to be somewhat jaded by the exorbitant salaries doled out to even under-performing players, this summer’s spending awoke even the most mellow fans. Call it the Summer of Skepticism.

    It was during All-Star Weekend in February that league commissioner David Stern claimed the NBA was projecting a loss of $400 million for the ‘09-10 season. In mid-July, Stern lowered that number to $370 million. That figure is important because Stern has used it to highlight the financial struggles the League has been in for several years. Of course, it might not be realistic despite the League’s efforts to show the NBA player’s union its financial books.

    John Vrooman, a professor in sports economics at Vanderbilt University, said that the revenue numbers for the League should be accurate because they’re used to determine basketball-related income, which helps determine the following season’s salary cap. The problem might lie on the cost side.

    “Acceptable accounting costs include depreciation of 50 percent of the franchise price in the first five years of ownership, salaries paid to ownership and families, interest on ownership loans to the franchise and fees paid to management companies that have the same team owners,” Vrooman wrote in an e-mail message.

    He added that when owners in all sports leagues complain about the costs of running their team, people remain skeptical until they “see behind the smoke and mirrors,” as Vrooman wrote. “Sports accountants are paid to turn profits into losses for federal/state tax shelters but also for cries of poverty when posturing for public sentiment in the collective bargaining process,” Vrooman said.

    “This internal contradiction in basketball-related income growth will be difficult for NBA owners to wink and nod their way out of,” Vrooman said.

  • Predators launching corporate ticket package: Sponsorships, ticket sales vital for healthy sports franchises, Nashville Business Journal, August 6, 2010

    The Nashville Predators are aiming at deep-pocketed corporate clients with a posh season ticket package to be announced today. Through a sponsorship with Lexus of Nashville, it’s a deal one local sports marketing expert valued at up to $500,000 a year.

    Beginning this fall, first and second row seats at Predators games will now be known as the Lexus Inner Circle, the first effort to package seats on the glass for sale to the corporate world…

     “The target is squarely on the corporate client,” said John Vrooman, a sports economist at Vanderbilt University. Other hockey clubs use similar packages, which are akin to courtside packages in the NBA.…

    “The Preds season ticket base is probably one-third corporate dudes and two-thirds hockey fans. This is the opposite of the formula for success in the NHL where the fans are two-thirds corporate suits and only one-third die-hards,” Vrooman said. “In targeting the suits, the Preds are trading the ‘maybe’ for the ‘sure’ in their cash flow, and this enhances the value of the franchise.”

    The Bridgestone deal in February was estimated at $2 million to $2.5 million a year, and Vrooman said the Lexus partnership is a key next step for the Predators.

    “Corporate sponsorships are critical for the bottom line of the Preds,” he said. “It is less volatile and risky than normal gate revenue, and it is pure money in financial terms. Gate revenue is more risky than venue revenue because it depends on the uncertain performance of the team on the ice…”

    Vrooman estimated the sponsorship is worth $250,000 to $500,000 a year. Lexus of Nashville’s partnership includes not only its name on the Inner Circle but also TV spots, website exposure and sponsorship of overtime shootouts, which would suggest the deal is near the higher end of that estimate.


  • Shaq name means green: Newest Celtic could score on endorsements
    Boston Herald, August 6, 2010.

    Don’t be surprised if Jasper White does an ad campaign that temporarily rebrands his seafood restaurant “Summer Shaq” to celebrate Shaquille O’Neal joining the Boston Celtics

    “We definitely like the ‘Summer Shaq’ connection,” said White, the celebrity chef behind the Summer Shack concept. “It’s a great fit and a great idea.”
    ...

    Sports marketing experts say the 7-foot-1-inch O’Neal, who pulled in $15 million from endorsement deals last year, could see more green after landing in Boston.

    “Shaq is a marketing giant,” said John Vrooman, a sports economist at Vanderbilt University. “He will benefit from the Hub’s strong media presence, where there’s money to be made on local endorsements.”

    O’Neal ranked sixth in the latest Sports Illustrated highest-earning athletes list, pulling down $36 million last season including his $21 million paycheck from the Cleveland Cavaliers. Boston signed him to a two-year, veteran-minimum contract worth about $3 million.
    ...

  • Rangers Bidders Face Daunting Task Of Pegging Team's Value. DOW JONES DAILY BANKRUPTCY REVIEW, 4 August 2010

    Ahead of a Wednesday bankruptcy auction that promises fierce bidding for the Texas Rangers, the baseball team's would-be buyers must try to peg the franchise's true value, an elusive number that depends as much on egos and division standings as it does on cash flow.

    Buying a sports franchise often has more to do with a billionaire's dream of hoisting a championship trophy than acquiring a profitable business. As such, figuring the ultimate value of the Rangers is a murky exercise that is complicated further when considered through the spectrum of a Chapter 11 auction.

    Outspoken Dallas Mavericks owner Mark Cuban, Houston businessman Jim Crane and a group led by strikeout king Nolan Ryan are among those expressing interest in the Major League Baseball club.

    The winning bidder could be the one whose visions of sitting in the owner's box compel him to pay more than the team may actually be worth.

    "Because ... there are only 30 MLB clubs and so many potential sportsman owners, who are interested more in ownership perks and winning championships than the bottom line, it is not uncommon for bidders to exaggerate the true value of the club," said Vanderbilt University sports economist John Vrooman.

    The instantaneous nature of an auction and the uncertainty among bidders about how much rivals are willing to pay could cause the Rangers' price tag to blow past what the team would have fetched in a sale negotiated outside of bankruptcy protection, he said.

    Another factor in the value of a sports franchise is the team's on-field success.
    This season, the Rangers surged to the top of the American League West standings. The team is winning on a tight budget compared with big-spending rivals, and that could boost the team's value, Vrooman said. The division-leading club could see the increased revenue that comes with a playoff season while keeping costs lower by relying mainly on younger and cheaper players.


  • Boston stars’ pay some of tops in U.S. sports. Boston Herald, July 22, 2010  

    The Celtics may have lost this year’s NBA championship to the Los Angeles Lakers, but three of the team’s players are among America’s highest-paid athletes, Sports Illustrated says...

    Vanderbilt University sports economist John Vrooman said he’s not surprised seven Hub players made the cut.

    “New England’s sports market is sports heaven,” he said. “If you examine the last decade, the Patriots have led the way, the Celtics had a rebirth, the Red Sox are always in contention and the Bruins are coming on strong.”
    ...

  • Cowboys Stadium produces more tax income than predicted. Dallas Morning News, July 11, 2010

    Arlington voters agreed in fall 2004 to help fund Cowboys Stadium by enacting new taxes. More than 5 ½ years, a full NFL season and one global recession later, numbers are now available to start judging how well financial projections compare to reality.

    It turns out the amount of tax revenue is far better than originally predicted for 2010. Arlington owes $20.4 million in bond payments this year but is on track to generate more than $27 million from taxes dedicated to that debt.

    An economist who has researched Cowboys Stadium previously and a finance professor with expertise in municipal bonds looked at the city's numbers and said there appears to be little danger that Arlington couldn't meet its obligations. They also said there's a good chance the city could pay the bonds off years early.

    The city's deal to spend $325 million to help pay for the $1.2 billion stadium was made a few years before the nation slid into what's described as the worst economic downturn since the Great Depression.

    The city's portion of debt is paid with proceeds from a half-cent sales tax increase, 2 percent hotel-motel tax hike and 5 percent increase in car rental tax.

    A second group of bonds – nearly $147 million – issued to help finance a portion of the Cowboys' debt is also faring well, maybe even better than the city's share.
    Those bonds would be paid by the Cowboys if the ticket and parking taxes, which the city has referred to as user taxes, were inadequate to make debt payments. But for the stadium's first year open, those taxes raised about $15.2 million compared with the $9.3 million originally projected.

    The current amount of money generated by those taxes is sufficient to make the annual bond payments, even when those escalate to nearly $26 million. The payments fluctuate throughout the years and even drop as low as $3.2 million in 2029 and 2030.

    John Vrooman, a Vanderbilt University professor who studies sports economics, agreed to look over the city's bond figures for The Dallas Morning News. He said in an e-mail that the ratio of debt to revenue initially looks "a little sketchy," particularly for a decade beginning with 2018. But he wrote in his analysis that the $20.5 million reserve fund plus overages that accumulate in the early years will help offset that.

    "It is also important to remember that this is the same tax base that retired Rangers stadium debt early," Vrooman wrote.

    The city's $135 million bond package for Rangers Ballpark was paid off in 10 years instead of the projected 20 years.

    Vrooman said Arlington residents should feel "relatively safe" about the financial health of the bonds, although he's not a fan of many stadium deals. Although the cost split between the city and Cowboys is better than many stadium financing deals, he said that "does not serve to justify the use of public money for private Dallas Cowboys gain."

    There are essentially two sets of bonds. One group is the city's responsibility and paid with the sales, hotel-motel and car rental taxes.

    The second set is paid with a $3 per vehicle stadium parking tax and a 10 percent ticket tax. Those count toward the Cowboys' share of the project. The benefit of this approach for the Cowboys – instead of simply increasing ticket prices by the same amount as the tax – is that it's not subject to league revenue sharing.

    Vrooman said the Cowboys don't appear to face a big risk from the bonds paid with ticket and parking taxes. He wrote that the coverage rate – revenue compared to payment – of 2-to-1 is "relatively safe."

  • Corporate ownership losing the race, National Post, July 9, 2010. Canada.com

    One day before Miami Heat free agent Dwyane Wade and his pal Chris Bosh announced they would be playing in Florida next year, Wade held court with Mickey Arison.

    Arison, the billionaire Heat owner who made his money as CEO of Carnival Cruise Lines, presumably promised to pull out all the stops to build a championship-calibre team for his franchise player. Not just a contender. A dynasty.

    It must have been reassuring. Less than 24 hours later, Wade and Bosh were on ESPN talking about winning handfuls of championships for Arison's franchise.

    Perhaps lost on Bosh is that winning has already been to Miami, and likely didn't need directions from him. Not lost, however, is the underlying message that Bosh had decided he could not bring winning to the Toronto franchise, owned by Maple Leaf Sports and Entertainment.

    It would be reassuring for Wade to hear Arison's team vision directly. As the owner, he is one person tied to the franchise for the long haul, and the one person whose vision matters. It is one of the advantages teams with sole or majority ownership hold over corporate ownerships such as MLSE, of which the Ontario Teachers' Pension Plan holds a majority stake.

    "In theory, the corporate owner's general manager is charged with maximizing franchise value, and this is particularly the case when the majority owner is the Ontario Teachers' Pension fund," said John Vrooman, a sports economist at Vanderbilt University in Nashville. "In pro sports ownership, it is very common for the single owner to sacrifice team value for wins."

    When you look at the last decade of NBA champions, sole owners, or those with majority stakeholders, have nearly run the floor...

  • Public funds would back Phoenix Coyotes bidder, Arizona Republic 4/15/2010

    Glendale's deal to help Chicago sports mogul Jerry Reinsdorf raise up to $165 million to buy and run the would be unprecedented in the National Hockey League and perhaps all professional sports, experts said Wednesday.

    Under the agreement presented to the City Council this week, a special funding district created by Glendale at the city's sports and entertainment hub would provide Reinsdorf with up to $65 million to help purchase the team from the NHL and as much as $100 million to cover operating losses over five years.

    The funds would come from higher parking fees and bonds backed by commercial landowners near the Coyotes' home, Jobing.com Arena. ...

    Reinsdorf also would not risk losing his own investment to purchase the Coyotes.

    Reinsdorf plans to offer $100 million to buy the team from the NHL with the city's $65 million available if the league seeks a higher price.

    The agreement with Glendale calls for the city to fully reimburse Reinsdorf, owner of the Chicago White Sox and Bulls, if the Coyotes remain unprofitable after five years.

    In that scenario, the city would seek to sell the NHL team for no less than his original equity or cover the team's losses as it continued to operate. Glendale would keep any amount above the selling price if the team were sold, a source close to the negotiations confirmed. ...

    Experts say no other city has made such a favorable deal with a professional hockey team.

    "I have worked with dozens of government entities, and I can't think of anyone who would entertain anything like this," said Marc Ganis, a sports- for 20 years and president of Chicago-based Sportcorp Ltd. "But the whole bankruptcy situation has been unprecedented."

    The Coyotes entered bankruptcy nearly a year ago after failing to turn a profit for years. The team is expected to lose at least $20 million this season, despite success on the ice. The team made this year's playoffs, which began Wednesday.

    The closest comparison to Glendale's situation could be Nashville and the Predators hockey team, according to John Vrooman, a sports economist and professor at Tennessee's Vanderbilt University.

    Nashville pays the Predators roughly $5 million per year as part of an effort to retain the team after it was on the verge of being sold and moved to Canada, Vrooman said.

    That pales in comparison with Glendale's promise to Reinsdorf....

  • Sign, sign, everywhere. Signs pop up at Fenway as team cashes in on Championships, Boston Herald, April 12, 2010 

    The pitches at Fenway Park don’t just come from the mound.Ads surround the ballfield, causing some to long for the days when they could watch a game without being bombarded by signs.

    “Fenway is a gem that shouldn’t be messed up by all those signs,” said John Vrooman, a sports economist at Vanderbilt University. “Fenway belongs to the Sox, but it also belongs to baseball and should remain pure.

    ... Andrew Zimbalist, a sports economist at Smith College, said the Red Sox are following a marketing trend in professional sports. “Throughout major league baseball there’s been an increasing commercialization or exploitation of the available space in ballparks for signs,” he said.

    ...

  • Bridgestone to brand Nashville arena, Nashville Business Journal Feb 23, 2010.

    The Sommet Center could become Bridgestone Arena as early as next week, officials said at today’s announcement that Bridgestone Americas Inc. and the Nashville Predators hockey team have reached a naming rights agreement for the downtown arena.

    Local sports business experts said the deal makes sense for both the team, whose financial strength has been called into question as of late, and Nashville-based Bridgestone Americas, which has been aggressively building brand recognition through sports sponsorships.

    The financial terms of the five-year agreement were not disclosed. John Vrooman, a sports economist at Vanderbilt University, said it is probably worth between $2 million and $2.5 million a year, based on other recent naming rights deals in the NHL.

    Noting the downtown arena’s frequent name changes, Vrooman’s only criticism of the deal was its length.“They need a little bit more stability in the deal. They can’t keep changing the name,” he said. “When I hear five years, I hear caution.”

    Bridgestone has other sponsorship deals with the NHL, NFL, PGA golf tour and Major League Baseball. Vrooman said that, in this economy, there are some sponsorship bargains in the NHL and the naming rights deal likely offers Bridgestone good exposure at a decent price.

  • Some NHL Teams Skate On Thin Ice As US Economy Struggles Dow Jones Bankruptcy Review, January 15, 2010

    As a still-sputtering economy leaves arena seats empty and keeps corporate sponsors on the sidelines, several National Hockey League teams are skating on thin financial ice, sports experts say.

    The Phoenix Coyotes' Chapter 11 filing last year demonstrated to some observers the NHL's strategy to place teams in southern markets may be faltering. This season, a number of franchises are grappling with rising expenses and lower attendance.

    Worse, the league's paltry revenue from its national television contracts provide little financial buffer to struggling franchises in places like Nashville, Tenn., and Columbus, Ohio. In the past two decades, the NHL aggressively expanded into nontraditional markets, placing nine teams in the southern United States. Of those nine, seven recorded an operating loss last season, according to Forbes magazine's annual study. Eight rank in the bottom half of attendance for the 30-team league.

    The league's other big problem, according to many observers, is its U.S. television contract. Television is a major driver of revenue for the other sports leagues but is a weakness for the NHL.The NHL struggles to attract viewers, in part, because many of its games are shown on the little-watched cable network Versus. This season, more U.S. viewers typically tune in to Bravo's "Real Housewives" series than watch NHL games on cable.

    Smaller television contracts mean less money to be shared among teams, removing a potential safety net for struggling teams, says John Vrooman, a sports economist at Vanderbilt University.Only about 6% of NHL teams' total revenue comes from national television contracts, compared with 25% in the National Basketball Association and 60% in the National Football League.While the NBA or the NFL may have one or two teams on the "edge of financial difficulties," Vrooman said, "in the NHL, you're talking about the bottom five or six teams in the league."

    To be sure, other sports leagues have their share of recession-related problems. A majority of NBA teams are reporting attendance declines this season, and 40% of teams lost money last season. At least two NFL teams are rumored to be relocation candidates due to financial difficulties.However, more television money and greater revenue sharing lower the risk of financial difficulties in those sports.

    ...The Islanders, once among the sport's premier franchises, is also struggling because the team's 1972 arena lacks the revenue-generating luxury amenities NHL teams need to be financially healthy, Vrooman said.Islanders owner Charles Wang proposed renovating Nassau Coliseum as part of a massive real-estate development but ran into resistance from local officials. Last year, Wang said the Islanders could move if the project was not approved.

    There are also indications of trouble for the Nashville Predators. That city's Metro Sports Authority has expressed concerns that poor attendance and mounting financial losses could allow the team to relocate. A clause in the team's arena lease allows it to opt out after this season if the Predators record a cumulative operating loss of $20 million since 2007 and average fewer than 14,000 spectators per game.The team is averaging just 238 fans above that minimum level this season.

    Leagues can also help facilitate a sale to a new owner with deeper pockets.Still, bankruptcy filings are not unprecedented in the NHL. Of the five major sports teams ever to file for Chapter 11, four played hockey. Now, experts say, it's even more difficult for billionaire owners and national television contracts to shield sports teams from financial woes.

    "There is not as much financial wiggle for sports franchises as there was in the past," Vanderbilt's Vrooman said. "It's no longer a recession-proof industry."


  • Nashville enters major leagues, Nashville Business Journal, Jan 1, 2010

    “The only way an intermediate-size or mid-size city can compete is by giving public subsidies, and we’ve kind of given the max here,” said John Vrooman, a Vanderbilt sports economics professor. “... We’ve given (Titans owner) Bud Adams a lot of money, and we’ve given the Preds a pretty favorable arena deal.”
    ...
    Meanwhile, the Predators’ ownership group, led by David Freeman, can exercise an early lease termination clause in May 2010 if the team accrues operating losses of $20 million and fails to average 14,000 in attendance.

    ”And, there’s no place for them to go, Vrooman said.“There’s good news and bad news,” he said. “… The bad news is that we have given them the ranch. The good news is that they’re not going to get a better deal anywhere.”


  • Business-wise, Vince Young's stock is rising, Tennessean Nov 22, 2009

    But sports fans adore comeback kids, said John Vrooman, a sports economist at Vanderbilt University and a former college football player.

    "If there is anything America loves more than a natural-born winner who blows everybody away with pure speed, it is a superstar who gets knocked down but not out … and then comes back off the mat," Vrooman said.

  • LeBron means le cash for Cavs, Akron Beacon Journal Oct 24, 2009.

    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...

  • For Predators, making playoffs is lifeblood. Small markets need cash, fan buzz to survive, experts say. THE TENNESSEAN, October 8, 2009.

    "In nontraditional markets, with the possible exception of a place like Dallas, it's very important (to be a playoff team) because attendance, ticket sales and even corporate sales are very sensitive to how well the team is doing,'' said John Vrooman, a Vanderbilt University economics professor with a background in pro sports economics.

    "In more traditional markets, the attendance is … inelastic. The fans are more likely to be there day in and day out. The rest of the teams? If they want to make money, they have to win.''


  • THE TROPHY BUSINESS: As recession sinks team valuations, vanity is back in play, The National Post- October 03, 2009
    FINANCIAL POST VERSION
    / CBC VERSION

    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.

    In leagues that share less revenue, individual teams face a greater risk "to the ups and downs of good and bad seasons and regional business cycles," says Prof. Vrooman. "This is especially the case in smaller marginal markets.

    "The big exception, however, is teams that play in major markets, such as New York and Toronto, "where the home teams reap the benefits of monopoly power in major [North American] TV markets, regardless if they win or lose," he adds.

  • Balsillie urged to set up league to rival NHL: Sports economist says Canadian billionaire will never get into the National Hockey League now, but could set up in cities like Hamilton and Winnipeg - Canada.com, CanWest, October 2, 2009
    FACE-OFF VERSION

    If the National Hockey League doesn't want him, Canadian billionaire Jim Balsillie should just start his own league.

    "I'm not going to tell him what to do, but his money would be better served if he did,'' Vanderbilt University sports economist John Vrooman said in a telephone interview on Thursday. "He could call it the Northern Hockey League or maybe the southern Ontario Hockey League.

    "He could put Hamilton right at the middle of it. Winnipeg wants hockey [back] ... they could have the Jets, the new WHA Jets or something. . . . He's smart enough that he can figure this out.''

    Balsillie ended his bid to buy the bankrupt Phoenix Coyotes and move them to Hamilton after his offer of $242.5 million US was rejected Wednesday by U.S. Bankruptcy Court Judge Redfield T. Baum.

    Baum also rejected the NHL, which had vehemently opposed Balsillie's bid and entered its own $140 million US bid when other suitors -- Chicago sports magnate Jerry Reinsdorf and Ice Edge Holdings, a group of U.S. and Canadian investors -- dropped out of the bidding process. Baum's rejection of both bids appeared to put Ice Edge back into the picture and, in Vrooman's eyes, put Balsillie, the co-chief executive officer of BlackBerry maker Research in Motion, into the position of rival league maker.

    "Something like this happened to [Texas oil tycoon] Lamar Hunt in 1960. He tried to get intoaional Football League and they said no,'' Vrooman continued. "What Lamar Hunt did was he went across the street and started the American Football League. Within 10 years, the National Football League was forced to let all 10 teams in instead of just one, so it would have been easier initially to just let his one team in.

    "This is also where the World Hockey Association came from.''

    When Canadian cities such as Edmonton, Calgary and Winnipeg saw little hope of being considered for NHL expansion, they jumped at the chance to become inaugural WHA teams for the 1972-73 season.

    "The original idea in Eastern Canada was that the guys in Western Canada can't play hockey,'' said Vrooman. "So that left Western Canada wide open and boom, you have the World Hockey Association. That's what his next economic move would be . . . because I think his future with the NHL is gone.

    "If you're going to leave viable cities without teams, then those viable cities will find teams and start another league. That would be kind of his next possible move."

    And the NHL's next move?

    "To get in here [Phoenix] and resurrect this franchise as soon as possible and collectively I think they can do it. They have to get that thing going and in good faith negotiate with Glendale at least until the new collective bargaining agreement is established [after the 2010-11 season] and then they can look at relocating this team to Seattle, Kansas City, or maybe Las Vegas.

    "I think in this case, [the NHL is] making the right decisions, particularly the way [Balsillie] tried to circumvent the bylaws and constitution."

    "What Canadian fans need to understand is that the social welfare of all fans would be better off if the Coyotes were in Hamilton, Ont. It would be better off for the Leafs fans because ticket prices would be lower, there would be more hockey where people like it more . . . all the arguments they make are correct, but the purpose of the league is not to maximize everybody's welfare. The purpose of the league is to make money. And in economic theory, the major problem about a monopoly league is that it often advances its own interests at the expense of what's best for society and in this case, what's best for Canadian hockey fans.''

    Vrooman admires Balsillie's business acumen, but feels he bit off a bit more than he could chew in his bid to relocate the Coyotes.

    "I just think he's just a good Canadian and he loves hockey, that's just the way he it is,'' Vrooman concluded, "but I think that what he needs to realize is that the National Hockey League is a very proud and very conservative group and they're not going to be bullied and once you try to bully them and turn them against you, hell hath no fury - particularly when you're tugging on Superman's cape and in this case, Superman is Toronto, that's the gem, that's Hockey Heaven, the centre of the universe, the Dallas Cowboys and the New York Yankees together.

    "Once you start messing with them, which is what putting a team in (the Toronto region) is going to do, then you're tugging on Superman's cape and I think that's what he's done.''


  • Coyotes to stay put; Canadian's bid tossed- Oct. 1, 2009

    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.

    Although a deal hasn't been clinched, the ruling looks like a win for Coyotes fans, as it nixed any immediate move to Canada, and for Glendale, which fought to keep the team at Jobing.com Arena, where the city invested millions of dollars.

    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.

  • Callous NFL Sticks it to Main Street, AOL Fanhouse September 10, 2009

    The league's refusal to suspend its blackout rule this season...

    "This seems rather inappropriate in the current economy in that almost every stadium design in the last 20 years has sought to eliminate the everyday fan and charge half as many people [corporate clients] twice as much," Vanderbilt economics professor and former Kansas State football player John Vrooman told me Thursday evening. ...

    "If the teams are so eager to raise ticket prices after good seasons and willing to replace regular hard-core fans with corporate clients in club seats and fancy luxury boxes, then why don't they cut ticket prices in a recession?" Vrooman wondered.

  • Front page NHL, owner to face off in court over Coyotes relocation, Arizona Republic Jun. 9, 2009 - [Cached Version]

    "You can really see an interesting case developing here," said John Vrooman, a sports economist at Vanderbilt University. "All leagues have a vested interest in this decision."...

  • The NHL bounced back last season after a yearlong lockout, but what's next? Pittsburgh Post-Gazette October 04, 2006 - [Cached Version]

    "The national revenue outlook [for the future] is not good," said John Vrooman, an economics professor at Vanderbilt University who closely follows sports economics. "There's not much room for the NHL teams beyond luxury seat money,concessions and advertising from new arenas.

    "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: When the Preds win we all win July 1, 2007

    by JOHN VROOMAN

    The Predators reaction to my Tennessean op-ed originally entitled “This deal ain’t over until it’s over” reveals how defensive this Predators lame-duck ownership has become. Most of us have nothing to gain or lose in this circus, but this is our town and this is still our team.

    The Predators personal attack on their own fan-base is self-defeating. The original argument is still valid—the Nashville Predators are not going anywhere, regardless of their ownership.
    ...

    Hockey is unique because it is a self-policing game. Sooner or later all problems are handled internally by the players on the ice. There is something very Southern about that self-reliance. Southerners haven’t grown up skating on frozen ponds, but we have grown up taking care of our own business—right down to local ownership. Hello Nashville, lace up your skates—this is our team. This deal still ain't over 'til it's over.


  • Op-ed: Nashville Market Right for Big Leagues, Tennessean 7/22/07

    by JOHN VROOMAN

    As it seems, Nashville's shining star in big-time sports may have been tarnished by recent events. Our proud Predators have been left in limbo, abandoned by lame-duck ownership. The Sounds ballpark deal imploded from internal squabbling between owner and developer. Fortunately, everything is not as it seems. Music City is still a big-time player in the pro sports game...

  • 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 business world, Chamber of Commerce economists, who directly benefit from local growth, always claim a public subsidy will yield a big bang for the public buck and that short-run tax rebates will result in a larger tax base in the long run. In this win-win, positive-sum deal, the public recovers its investment and everyone is magically better off...

    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, CBS SportsLine.com - [Cached Version]

    "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, Tennessean, June 12, 2008

    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? CBS SportsLine.com

    "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.

  • NFL makes recession official The Denver Post Posted: 12/12/2008 - [Cached Version]

    ...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.

  • Boots’ Bad Business New York Times June 16, 2008

    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.

  • Predators don't let drama die Tennessean 6/16/2008.

    Vanderbilt economist John Vrooman, who specializes in the business of sports, said the NHL is "behind the other leagues" when it comes to checking the backgrounds and financial status of its owners.

    Why? Because there is limited revenue sharing within the league, Vrooman said. "If you share so much money like the NFL does, you want to know everything about the owner," he 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. "Having a highly leveraged deal is not necessarily a bad thing," Vrooman said. "If you're playing with borrowed money, the owner can be more aggressive."

  • A brief history of relocation fees
  • Preds filing claims Del Biaggio cost them millions Tennessean 10/6/2008

    John Vrooman, a Vanderbilt University sports economist who reviewed the federal claim, took issue with some assertions in the filing. For example, he questions the claim that Del Biaggio's problems have or will cost the team $5 million to $10 million a year in lost revenue in sponsorships, ticket sales or other revenue streams.

    "It's impossible for a franchise to be traded at 193 (million dollars) and the team be losing money," Vrooman said. "That's probably not happening."

    He also said it's difficult to blame Del Biaggio for any lagging ticket sales. The average fan cares about watching a good hockey team, he said. "That section I would have trouble with," he said. ...

    Vrooman said the team's lease with the city was very good before the more favorable changes this year. He said that Vanderbilt University Medical Center just announced a sponsorship deal with the team, and that he helped advise the university on the deal.

    Vrooman also said creditors may be seeing the team as an increased risk, driving up its costs to borrow money and placing more concentrated risks on the remaining owners. Those could be real pressures that could affect the franchise or its value.

    "Almost every team claims financial loss, particularly sports teams that are involved in a public-private partnership or quasi public-private partnership," he said. "They rarely open their books and they'll claim loss. … Any good accountant can turn any gain to any loss."

  • Fleeing teams create a dent in city's image Tennessean 8/19/2008.

    John Vrooman, an economist at Vanderbilt, believes there are "non-monetary benefits such as big-city pride" that are attached to pro sports teams and sporting events. For example, individuals and companies may choose to relocate to a city because of, in part, the presence of sports teams and/or sporting events.

    "A major league sports team or a big sporting event reflects a level of economic sophistication," Vrooman said. "You may not like the NFL or the NHL or Indy Racing League, but you probably think they are good for the image of the city."...

    "When you're talking sports in this country, the NFL dominates everything else," Vrooman said.

  • Money Isn't Everything: Liepold may sell Preds to second bidder--for $30 million less, Sports Illustrated.com, June 28, 2007

    Balsillie's actions shortly after the nonbinding purchase agreement was announced in May could have contributed to Leipold's decision to walk away, said John Vrooman, a sports economics expert at Vanderbilt University.

    Balsillie started a process to move the Predators to Hamilton, Ontario, if low ticket sales allowed the Predators out of their lease with the arena in Nashville after the sale's completion.

    That caught the current owner by surprise," Vrooman said Thursday. "He wants to sell, but I think he wants to keep the team in nashville if he can."

  • Del Biaggio close to buying Predators CanWest News Service, June 28, 2007

    ...“These two competing suitors have left a trail of in-an-out, bob-and-weave offers stretched from Pittsburgh to (Kansas City) with Nashville caught in the middle,” Vanderbilt University professor John Vrooman said in an e-mail to CanWest News Service.

    Vrooman, who specializes in sports management, doesn’t believe the pending sale means the death of the Predators in Nashville.

    “With the exception of a slightly newer area in K.C., it would economically be a sideways move especially given the favourable arrangement for the Preds at the Sommet Center,” he said...

    Another reason Vrooman believes the Predators won’t move is a deal Leipold has with the city of Nashville to pay some of the team’s operating losses. The Sommet Center is managed by one of Leipold’s companies, Powers Management. But unlike in other cities where the management company is on the hook for any arena losses, in Nashville the city is responsible.

    According to a 2003 audit, the City of Nashville subsidized Powers to the tune of $14.1 million US between 1999-2002. That number has increased since then, including a $4 million payment in 2006.

    “The good news and the bad news are the same for Nashville,” Vrooman said. “The bad news is the sweetheart deal for the club and the ongoing subsidy for the city. Once the deal was done, the good news is that the lease makes Nashville very attractive, especially among all the mid-sized markets still in the hunt for an NHL/NBA franchise.”

  • Economist says Brewers doing it right, Milwaukee Journal-Sentinel May 30, 2008

    John Vrooman is a sports economist at Vanderbilt University. He's also a baseball fan who says the Milwaukee Brewers have been able to avoid information asymmetry by staying on the right internalization track.

    Got it?

    Vrooman has put together a set of numbers which might reassure jittery Brewers fans that the franchise is on the right path.

    Going back to 1995, Vrooman took a look at the Brewers' payroll compared with the average payroll of the rest of Major League Baseball. And then he took the Brewers' winning percentage in each of those years compared with a winning percentage of .500.

    Based on his analysis, the payroll bumps in the early part of this decade did not yield the desired effect on the field.

    In other words, the Brewers spent more but didn't win much.

    "This is especially true for the 2002 Brewers," he said in describing that horrendous 56-106 team. "The worst team in Brewers history. The pre-2002 clubs have left a footprint of maximum inefficiency and the 2002 club killed the buzz from new Miller Park after one season."

    But it wasn't all bad.

    Vrooman believes the hiring of Doug Melvin as general manager after 2002 was a good move, even as the team, led by the ownership group led by Bud Selig, began slashing the payroll.

    "Two things were happening: Melvin was building the team internally and the Seligs were cutting costs because the club was being put on the market," Vrooman said. "Most MLB clubs are operated way past the point of maximum profit because the owners want to win. But when the team is up for sale the payroll is cut to the minimum to maximize team value."

    "The Seligs were trying to win, but they did it the wrong way," Vrooman said.

    In Vrooman's view, the franchise began to turn around with Melvin working to beef up the farm system. That was followed by the purchase of the team in January 2005 by Mark Attanasio.

    "The key to the internalization strategy is not only to grow talent from inside but also to keep players as they mature and work their way up the seniority ladder," Vrooman said.

    As that occurred, Attanasio began raising the payroll dramatically. This year it stands at $82 million.

    Last week, the Brewers took the dramatic step of signing leftfielder Ryan Braun to a long-term deal. It was a huge step for the franchise, Vrooman said.

    "I think Braun signing fits right in with what I'm saying," he said. "This is exactly what they should be doing."

    Vrooman also notes that the Brewers have been able to benefit from revenue sharing. The amount of revenue sharing in MLB has increased from $166 million in 2001 to $342 million in 2007. "The bad news is that the better the Crew performs at the box office (like last season) the lower the transfer payment," Vrooman said. "The good news is that MLB only requires that any transfer payments be spent 'to improve on-field performance,' which includes player development expenses as well as big-league payroll. So the answer is, of course, they can, as long as the money is spent on talent development."

    Current struggles aside, Vrooman said the Brewers seemed to be following in the footsteps of the Cleveland Indians in the 1990s.

    "They had an incredible team of homegrown players who went through the system. That's why they had that great run in the 90s," Vrooman said.

  • How much is CC Sabathia worth? Milwaukee Journal-Sentinel, Nov, 10, 2008

    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? Wall Street Journal, February 19, 2008

    ...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, Wall Street Journal, June 16, 2009

    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.

  • Making mint on Super Bowl tickets: Is it their right or simply not right? Chicago Tribune, February 4 2007

    ...Behind the ticket scramble is the NFL's desire to make the Super Bowl an intense commodity, said John Vrooman who teaches sports economics at Vanderbilt University.

    "The NFL could care less about maximizing gate revenue, and so they set ythe $600 price way below the fundamental or "true" equilibrium price, he said in an email. "Let's face it--the Super Bowl is a post season blowout for the NFL family--its not really for either Bears or Colts fans," Vrooman said.

  • Ticket holders' dilemma: Motown or the money? Seattle Times, January 24, 2006. [Cached Version]

    "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 Forbes, 11.11.06

    "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.

  • Are Sports Fans Recession Proof? National Public Radio October 21, 2008

    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.

  • Kick-starting NFL dreams in the U.K. , National Public Radio Marketplace, October 23, 2007

    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.

    ...This is the particular challenge of a small municipality, says sports economist John Vrooman, a senior lecturer at Vanderbilt University in Nashville, Tenn.

    "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."

  • The 49ers themselves are not in the strongest position. They have been on a losing streak this year on the field, and Forbes team valuation lists them as 30th out of 32 teams. Forbes values the team at $799 million. The Dallas Cowboys, by contrast, is valued at $1.5 billion and is at the top of the list.

    The biggest reason for the low valuation is the stadium, the oldest in the NFL, says Vrooman.

    The team says the stadium lacks the luxury boxes and club seating that can provide additional revenue but it won't comment on the Forbes list.

    The 49ers are not playing San Francisco against Santa Clara, says Lisa Lang, the 49ers vice president for communications, but she says she hopes that San Francisco can become a true alternative.

    Jed York, a 49ers owner, says he is not playing one city against the other....

    But Vrooman sees it differently. He calls it a form of extortion.

    "The 49ers are playing both ends against the middle," he says. "Every sports team is doing it."

  • Looking for 49ers retail kick San Jose Business Journal, 1/25/2008

    Despite the enthusiasm in Minneapolis and Arlington for retail, some question the advisability of combining sports and goods. Sports economist John Vrooman, a senior lecturer at Vanderbilt University in Nashville, Tenn., says football stadiums are not a good anchor for shopping.

    "These guys are all looking for synergies," he says. "But you'd have to be a magician to make it work around an NFL stadium."

  • Economists find fault with 49ers' offer to city San Jose Mercury News 11/18/2007

    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."

  • Ice Age for American Hockey (Sweden) Istid för amerikansk hockey Veckans Affärer 2007-10-05

    ”Nio nya lag kräver spelare.
    Det finns inte obegränsat med hockeytalang. Lagen konkurrerade med varandra och ligan kannibaliserade på sig själv. Lönerna steg till nivåer där hela ligan höll på att gå under”, säger John Vrooman, professor i sportekonomi på Vanderbiltuniversitetet i Nashville.
    Före lockouten 2003 blödde 20 av 30 lag. Spelarlönerna hade stigit till 76 procent av omsättningen i NHL, vilket är mycket högre än i för baseboll, basket och amerikansk fotboll. ...

    ...John Vrooman anser att sydstrategin har misslyckats. Hockeyn har inte slagit, åtminstone inte brett nationellt, vilket var målsättningen. John Vrooman har funderat hela sommaren på hur lagen kan vara värda så mycket när kurvorna pekar åt fel håll.

    ”Det kraftigt ökade värdet på lagen kan inte förklaras med omsättningen. En viktig del är inkomsterna från arenan. 23 av 30 lag kontrollerar sin egen arena, antingen genom att äga den eller genom att leasa den. De får alla inkomster från kaféer, öl, popcorn, parkering och andra evenemang.”

    Vrooman utesluter inte att passionen för spelet driver upp priset. Många smågrabbar drömmer om att bli proffsspelare i NHL. När ödet vill annorlunda och i stället gör dem till miljardärer i näringslivet förverkligar de drömmen genom att köpa ett eget lag....

    Lönetaket från 2005 säger att inget lag får betala en sammanlagd lönesumma per år som överstiger 57 procent av ligans omsättning. Enskilda spelare kan få högre lön, bara totalsumman håller sig inom gränsen. John Vrooman säger att ett lönetak i någon form var nödvändigt för NHL. Basket har ett mjukt tak som betyder att ett lag får överskrida taket om de skriver nytt kontrakt med en spelare som redan finns i laget. NHL:s lönetak däremot är desto hårdare. John Vrooman tror att det kommer att betyda att lag med talangfulla spelare med automatik bryts upp. När spelarna utvecklas har laget inte råd att behålla alla. Ur marknadföringssynpunkt kan det här slå negativt mot hockeyn.

    ”Fansen identifierar sig med spelarna. Det är en viktig del av lojaliteten. Med ett hårt lönetak försvinner kontinuiteten i lagen”, säger Vrooman.

    Han tror att inte att Pittsburg Penguins kommer att kunna behålla ett spelargeni som Sidney Crosby. Peter Forsberg stod i september utan kontrakt och sa att han har annat att tänka på än hockey.

    ”Även om Peter Forsberg skulle vilja spela en säsong till så är det bara ett fåtal lag som kan pressa in honom under sitt lönetak.” ....

    ”Vi har inte växt upp och åkt skridskor, här fryser inte dammarna, och vi är inte som andra hockeyfans. Vi gillar laget bara när de vinner”, säger John Vrooman och tillägger att logiken ger att alla lag inte alltid kan vinna.

  • World's largest newspaper (Tokyo) Decreasing advertising revenue increasing difference between Major League Teams Yomiuri Shimbun

    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."

  • World's largest newspaper (Tokyo) 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."

  • Old rivals Bayor Rice find ways to play on. Houston Chronicle, 9/5/2007

    • ..."There is an advantage to playing in a big conference, and Baylor has that advantage," said John Vrooman, a sports economics professor at Vanderbilt University. "Get your foot in the door, get the money and you can build a pretty good program. It starts to feed itself." ...

      "Nashville may fashion itself as Music City, Nash-Vegas or the Wall Street of the South, but it is still not Houston or Dallas, and this small town by NFL standards is a good place for Vince to get his down-home image together," Vrooman said. "He is unique, and his potential marketability is remarkable..."

    • An Arena Without a Team, KCB Magazine July 2007

      To woo a team Kansas City has entered an expensive cutthroat competition of creative financing and open extortion, joining Anaheim, Oklahoima City, Las Vegas, Tampa Bay, Houston and a half-dozen other cities eager to lure franchises. After a decade-long builkding frenzy, the country is awash in new stadiums. There are simply more arenas than teams. "The venue revolution is almost over," says Vanderbilt University economics ptrofessor John Vrooman, who tracks the sports business. "Its getting late and KC doesn't have a date to the big dance."...

      ..With so much upfront money committed to AEG, it may limit what the city can use to seduce teams. "No big league club is coiming to the Sprint Center with this payout that is all AEG," says Vrooman the Vanderbilt economist, who reviewed the management agreement at KCB's request. "By the time the cash flow is cut and sliced there is nothing left for the NHL or NBA club..."

    • NHL forced into new reality, National Post 5/13/2009 - [Cached Version]

      "It's sort of a reverse sunbelt move," said John Vrooman, a senior sports economics lecturer at the University of Vanderbilt...

    • Is smart money on CC? Jacksonville Gazette, - [Cached Version] Published on: 11/12/2008

      John Vrooman, a sports economist at Vanderbilt University in Nashville, Tenn., believes Milwaukee Brewers' pitcher CC Sabathia will get a five-year deal worth $20 million to $25 million a year.

      But Vrooman isn't so sure the Brewers would be wise to spend money like that.

      At the request of the Milwaukee Journal Sentinel, Vrooman was asked to assess Sabathia, who compiled an 11-2 record with the Brewers after he was traded from Cleveland.

      Vrooman used a metric called marginal revenue product, a calculation based on attendance and a revenue multiple per fan based on the size of the Milwaukee media market.

      Vrooman estimated that the Brewers generated an additional $5.2 million in revenue because of Sabathia, which includes an additional 130,000 fans.
      ...
      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."

      And what about 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.

      He said Sabathia was probably worth $11.5 million to the Brewers in 2008.

    • Super Bowl Impact, Indianapolis Star April 9 2008 [Cached Version]

      John Vrooman, a Vanderbilt University professor who teaches a class on sports economics, said he has reason to doubt the cause-effect relationship in such predictions.

      "Those estimates are pretty rosy because it's like trying to measure the impact of a pint of water in the ocean," he said. "it's almost impossible to attribute a bump to one event."

    • Indy's Bid for a Super Bowl: Enough bucks for the bang? Indianapolis Star Febraury 1, 2007

      John Vrooman a professor at Vanderbilt who also teaches a class in sports economics, also thinks the effect will be less than touted and he said rewards go to select few businesses.

      On the other hand he said, there are other benefits that are not so easily measured. "Think about the incredible price of a Super Bowl ad," he said. "Here you are on national television, and Lucas Oil getting a ton of free publicity and so is Indianapolis...If I was on the side of it I would say, 'Let's look at how valuable it is as a commercial.'" ...

    • D.C. takes the fast track to getting a new stadium Minneapolis Star-Tribune, April 10 2006

      Some experts think Washington, which ended up vying with Portland for a major league franchise, simply wanted baseball too much.

      "This is a classic case of 'winner's curse' where the winner in a monopoly auction always pays for more than they get," said John Vrooman, a Vanderbilt University economist who has studied stadium deals across the nation...

    • The Futures Game: Net Profits, Chicago Cubs Vine Line Magazine

      Baseball's recent revenue surge--from $3.18 billion in 2000 to $4.73 billion in 2005--is deceptive. Teams like the Yankees and Red Sox have benefitted more than say the Royals and Pirates, said John Vrooman a Vanderbilt University sports economist.

      "It appears that everything is growing, but growing for the Yankees, Red Sox Dodgers, etc.," Vrooman said. "You start getting down to the middle of the pack and those teams are not necessarily enjoying the growth. And when you get down to the bottom, those teams are suffering stagnation..."

      "You definitely have a polarized league, more so than any other league in pro sports," Vrooman said.

      Baseball's revenue rose about 30 percent compared to 2002 levels, while team payrolls increased less than 10 percent during the same period, Vrooman estimated. Salaries are now less than half of revenue, down from about 57 percent in 2002 and a similar proportion to the NFL. This no doubt has the attenytion of Donald Fehr and the players union he represents, Vrooman said.

      The current CBA expires Dec. 19. Avoiding another work stoppage is critical for baseball's growth. "The underlying tension among large revenue owners, small-revenue owners and the player creates an unstable triangle that could precipitate a stalemate," Vrooman warned.

    • Titans, Predators and Grizzlies, Oh My!, Tennessee Business February 2008 - [Cached Version]

      How economically vital they are to those communities is debatable, but Vanderbilt University's John Vrooman believes the answer is somewhere between the proponents' and detractors' polarized stances.

      "The indirect social overhead benefits of big-league sports in attracting more economically integrated businesses that may indeed have tangible economic effects cannot be denied," says the senior economics lecturer. "There is also evidence that sports teams and their venues can have some important economic impacts if they are integrated as anchors of larger development projects like we are seeing downtown Memphis and Nashville."

      King of the Mountain The professional team with the best financial outlook is easily the Titans, Vrooman says.

      "The National Football League shares a full two-thirds of revenue among clubs," he explains.
      ...
      Vrooman says the league is partially to blame.

      "The NFL is the perfectly diversified portfolio," he says. "Meanwhile the NBA Grizzlies and the NHL Predators, playing in leagues that do not share revenue, take the risk of going it alone. This is why the value of the Titans is fast approaching $1 billion (almost five times revenues) while the Grizzlies are valued at about a third of that (three times revenues or about $330 million) and the Preds are over-valued at their recent sale price $190 million (twice revenues)."

      Nashville enjoys a healthier corporate community, which facilitates luxury-suite sales at Titans games, but all is not sonorous in Music City. The Titans and LP Field, according to Vrooman, probably have the highest payoff to the team and owner Bud Adams, while having the lowest payoff to metro Nashville.
      ...
      "Teams and venues only pay the public if they are linked to the local economy," Vrooman says. "While the Titans are connected to our hearts, they are disconnected from the local economy."

      He added that, like the FedExForum, the totally subsidized Sommet Center where the Predators play, is probably over-subsidized because of the leverage of the [league] on the metro government. A good example of a stadium benefiting a community, he says, is AutoZone Park, where the minor-league Memphis Redbirds play. He predicts a similar downtown stadium would also make "social economic sense" for the Nashville Sounds.

    • Minor-league parks lure fans looking for a cheaper getaway. Baltimore Business Journal, August 8, 2008

      "This is a great alternative," said John Vrooman, a sports economist at Vanderbilt University in Tennessee. "You can spend the night in your own house."

    • Market ripe for Ripken, Baltimore Business Journal 7/27/2007 - [Cached Version]

      Comcast, Ironclad Authentics LLC., Leffler Agency Inc., Vanderbilt University, WBAL, Steve Davis, Cal Ripken Jr., Ray Schulte, Bob Leffler, Mark Teixeira, Joe Mauer, John Vrooman,
      ...
      "There's very few players that have the marketability where they become larger than the game itself," said John Vrooman, a sports economist and professor at Vanderbilt University in Nashville, Tenn. "He's a rare athlete that gives more than he takes.

    • Bid to save Preds emerges. Tennessean 6/16/2007.- [Cached Version]

      But even if Balsillie's deal with Leipold falls apart, the local ownership group would face competition to buy the Predators, according to John Vrooman, a sports economist at Vanderbilt University.

      William DiBiaggio, a Silicon Valley venture capitalist, has an agreement with AEG, an arena management company, to move whatever hockey cteam he buys to the AEG controlled Sprint Center in Kansas city," Vrooman said.

    • Loss of Preds could negatively impact downtown businesses. Nashville City Paper, May 30, 2007 - [Cached Version]

      Despite these seemingly clear benefits, sports economist John Vrooman of Vanderbilt University said most academicians in his field consider sports franchises to have a "zero-sum impact" on any given city.In other words, business generated by franchises doesn't create any new money for a city because it's usually cash that would have been spent on entertainment elsewhere in town.

      "The impact studies are very, very questionable," he said. For example, "If downtown is cooking, that just means that West End is not."

    • Balsillie reaches deal with Ontario city. Nashville City Paper , June 1, 2007.

      Vanderbilt University sports economist John Vrooman said Thursday that he doubts the Predators will move to Hamilton. The NHL probably wouldn't approve locating a team the Detroit Red Wings and Toronto Maple Leaf markets (Buffalo is also nearby). Also, franchise's contract with Nashville can likely only be broken if average attendance next season falls below 14,000.

      Vrooman believes the purchase price for the Predators suggests that the franchise is more profitable than current owner Craig Leipold has suggested. The proposed price of $225 million is well over the $175 million Balsillie offered last year for the Pittsburgh Penguins and the Predators's deal with Nasshville is much "sweeter" than most arrangement, said Vrooman.

      "The Predators are selling at a premium," Vrooman said. "They're not doing as badly as people think. We need to be a little more confident about this."

    • Leipold cashes in: owner stands to make a windfall on Predators' sale. Tennessean 10/21/2007

      "The profit scenario is not uncommon in the sports world," said John Vrooman a Vanderbilt University economics professor and expert on sports finances. "An owners profit generally comes form the franchises increase in value."

      "It's kind of like you buy a growth stock and the stock doesn't pay any dividends," Vrooman said "But the company is putting all of its retained earnings back in the company. So the value of the stock grows. When you sell the stock, then you get your rate of return."
      ...

      WHO BOUGHT THE PREDATORS
      Gaylord Entertainment
      $12.8 million
      Craig Leipold and family
      $9.6 million
      Bankloan
      $40.0 million
      Metro Government
      $20.0 million
      Total purchase price
      $82.4 million
       
      WHERE SALE MONEY WOULD GO
      Estimated sales price
      $193.0 million
      Cover Leipolds losses
      -$70.0 million
      Cover team start-up costs
      -$40.0 million
      Pay off bank loan
      -$30.0 million
      Cover buyout payment to Gaylord
      -$13.0 million
      Cover Leipold's initial investment
      -$9.6 million
      Leipold's profit
      $30.0 million


      In calculating the amount of money Leipold could wallk away with, The tennessean took the proposed $193 million sale price and subtracted $70 million in losses, an estimated $40 million for team start-up costs, and estimated $30 million payoff of the initial loan and an estimated $12.8 million payment ot Gaylord. The analysis also substracted Leipold's initial $9.6 million investment."

    • Californian on board aids group's finances, Tennessean 8/2/2007

      Last fall a rankinhg by Forbes magazine put the Predators' debt ratio at 28 percent compared to the 46.3 percent average for NHL teams, including some that finance their own stadiums. ...

      "It gives the team alot of operating room," said John Vrooman, a Vanderbilt University sports economist. "They can put the money on the ice instead of paying off debt."

      Though Del Biaggio's involvement raises the prospect that the team could leave if it isn't financially successful here, that chance is lessened because he only has a minority stake, Vrooman said. "As long as the majority owners are from Nashville, this team is pretty secure."

    • Predators' exit could tarnish Nashville's big-league luster. Tennessean 5/27/2007  - [Cached Version]

      "It's not necessarily what they add, but what they take away," said John Vrooman, a sports economist at Vanderbilt University.
      ...
      Since fall 1999, the Titans have come to dominate the sports landscape in Nashville, Vrooman said.

      "There are only so many luxury-suite sales out there," he said.
      ...
      It also could have a tough time persuading another team to move to the city in the future, said Vrooman.He cited the example of Kansas City, which has lost both an NHL and an NBA team, and is having a difficult time persuading either league to give it another shot, despite a population of nearly 2 million.

      "We may get branded as the city that lost the team," said Vrooman.

    • Smith was always a commodity first, Dallas News, 3/1/2003 - [Cached Version]

      "We glorify athletes, but they are meat," said Vanderbilt University economist John Vrooman, who studies sports as a business."They're a commodity."
      ...
      "You have all sorts of arbitrary labor market rules in all team sports," Mr. Vrooman said.

      The NFL's salary cap, the most restrictive in sports, limits the ability of teams to find ways to keep all the players they want.The challenge for management lies in deciding what players to keep at what price to maximize wins.It helps that teams can walk away from contracts when they feel somebody else can do the job better or cheaper.

    • DallasNews.com | Dallas-Fort Worth | Business:... - [Cached Version]
      Published on: 2/15/2003    Last Visited: 2/15/2003  

      Vanderbilt University economist John Vrooman, who studies baseball as a business, isn't surprised to see the new labor deal working a lot like the old one.The market, he said, is still stacked in favor of the players.

      "The free-agent market is set up against the team," he said."The problem is there aren't enough free agents.There are one or two sluggers, one or two quality pitchers.A lot of times, they're being paid more than they're worth."

      With spring training starting this week, the sport is closing out its first off-season negotiating contracts under the labor deal signed last August.

      ...
      When all the deals are done, Vanderbilt's Mr. Vrooman expects baseball's average salary - $2.3 million in 2002 - to increase this season, as it has in just about every other year.

      Why hasn't the new labor deal brought more dramatic results?

      Some teams feel they can afford to spend more.

    • The revolving door of team ownership Dallas News, 11/3/2002 - [Cached Version]

      "Most sports teams are not operated at their maximum value because the owner is also trying to win," said Vanderbilt University economist John Vrooman, a sports business expert."This artificially cranks up costs for all other owners in the league and diminishes their net cash flow.

      "As soon as the ego satisfaction wears off, the sports franchise often becomes a relatively bad investment compared with other options.Then when the owner decides to sell, he typically slashes payroll to take the club's value back to its maximum right before he unloads it."

      The turnover rates for the last decade stand at 50 percent or above in baseball, basketball and hockey.
      ...
      Vrooman figures the buying and selling will continue.

      "The profit in the contemporary sports franchise ownership is not in the net cash flow after interest," he said."It lies in the appreciation of franchise value.So when the new breed loses interest in building a winner, or they find that building a winner is not as easy as it seemed, the only way to disgorge equity is to bail out and sell the team."

    • California Schemin' Independent Sources 5/28/2006 -[Cached Version]

      John Vrooman, a sports economist at Vanderbilt University points out that the league (the NFL - ed.) 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.

    • Is deal good for teams? taxpayers? fans? Kansas City Star 3/05/2006 - [Cached Version]

      The Kansas City Star compiled its list of stadium funding packages by relying on studies done by Marquette University's National Sports Law Institute and Vanderbilt University economics professor John Vrooman, plus consulting reports prepared for the San Jose Sports Facility Task Force and Minnesota's Stadium Steering Committee.
      ...
      "Unfortunately, the private share varies directly with home-market size," said John Vrooman, a former Kansas State University football player who is an economics professor at Vanderbilt University and has studied stadium deals across the country.
      ...
      But seat licenses and naming rights will together generate almost $100 million, according to figures compiled by Vanderbilt's Vrooman, and it's likely that other new revenues from the stadium will cover the team's remaining commitment.

      For the Chiefs.
      ...
      "This proposal is completely upside down," said Vanderbilt's John Vrooman.

    • The NFL -- the ideal business model, Sports Business News 5/7/2006- [Cached Version]

      "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.
      ...
      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.

    • HOW MUCH IS A COACH WORTH? Business Week, October 27, 1997

      According to economist John Vrooman of Rice University, the financial incentives to win are five to six times greater in the NBA than the NFL. In the National Football League, he notes, two-thirds of total league revenue is shared equally among all teams, compared with only a third in the National Basketball Assn.

      Thus, the average NBA coach earns about $2 million a year, twice as much as the average NFL coach. And the Celtics were willing to splurge on Rick Pitino because he will generate tremendous profits for them if he produces a winning team. By contrast, although the Patriots made the Super Bowl last year, their total 1996 revenue rose just $19 million, only modestly more than the average $16 million gain posted by NFL teams.
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