Sports Economics Uncut
196 pages, hardcover.
Cheltenham, Glos: Edward Elgar 2018 (New Horizons in the Economics of Sport)
ISBN 978-1-78811-872-9
The first sentence in Brian Goff’s Sports Economics Uncut, the Mandela quote “Sport has the power to change the world”, indicates a kind of direction for the book, i.e., that the social significance of sport is too great to be measured in a way that does it justice. The topic is elaborated in the introductory chapter which discusses the peculiarities of sports that make it receive so much attention, compared to other activities, including business undertakings. The strong identification many fans have with their favorite teams; pride in the fact that national athletes assert themselves in international championships; that sports topics often become a topic of conversation when people meet; political prestige related to achievements and hosting events; these are some examples. The two sporting events that get the most attention, the Olympic Games and the FIFA World Cup, are televised and seen by about half of the world’s population. These factors illustrate that the importance of sport cannot be measured meaningfully, for instance as a share of GDP. Although the best athletes earn huge amounts of money, the overall market value of sporting activities is very modest compared to traditional industries.
Goff’s book also provides insight into the role that socially relevant topics have played in sports. A current example is racial discrimination. The theme, which is well known in North American sports, is dealt with in three chapters. Goff offers an overview of the historical development from the time when black practitioners were almost absent, until today.When World War II ended, there were no black players in the professional leagues of American football, baseball, and basketball. The NFL got its first black player in 1946. In the early years, the black players were mocked and insulted by fans and other players. When traveling, they were treated worse than white players.
Since then, conditions have changed. In 2015, the proportion of black players had increased to 74% in the NBA and 68% in the NFL in 2015, while MLB (basketball) was still dominated by whites, with only 8% black players. However, the trend towards equal treatment has taken time and contains many controversial events. One of the most famous happened during the 1968 Olympics, where the two American sprinters Tommy Smith and John Carlos were sent home after using the 200-meter award ceremony to protest discrimination against people of color in the United States.
The equalization has also not taken place in all areas, for example in the roles of coaches and managers. In the NBA and NFL, the proportion of black coaches is 33% and 24% respectively, i.e., less than half of the proportion of players. In this respect, it is interesting that research has shown that the coaches have given more playing time to players of their own race. The same applies to referees, who have favored players of the same race as themselves. Similar preferences among spectators have had commercial effects in that TV matches with black players achieved lower ratings than those with only white players. In recent years, these conditions have changed, which has meant that inequalities in the salaries of players have almost disappeared.
However, the author helps to nuance the picture of whether racial preferences automatically mean discrimination. An example is the discussion related to the fact that the proportion of black quarterbacks in the NFL (which is the most important player in American football) is lower than the total proportion of black players would indicate. Here, it is considered that the reason may be that black players are preferably utilized where they have comparative advantages, for example in positions where speed is particularly important. The quarterback is relatively stationary in game situations, where getting a good overview of teammates quickly is more important than running fast. This is supported by the fact that the majority of the best sprinters in the world are black and either live in or have roots in West Africa. Therefore, it may be rational to use black players in positions where they have comparative advantages, i.e., where it is important to run fast.
Another North American topic that is gaining considerable attention is phenomena related to college sports. Lucrative media deals, combined with high attendance, mean that several of the universities have annual revenues of around 100 million dollars. In 1980, the media company NBC paid $9 million a year for the rights to show college basketball. In 2015, the value of the corresponding agreement had risen to $770 million. In the period from 2000 to 2015, the television rights for the ten highest earning universities in college football totaled $900 million. The most popular college teams draw 100,000 spectators at home games.
At the same time, regulations mean that those who create the value, i.e., the players, are underpaid in relation to value creation. For them, the carrot is that they do not have to pay tuition fees, as ordinary students must. This gives college sports a taste of being an amateur sport, which does not go unnoticed with gross revenues of several hundred million dollars. Wage regulations mean that a large part of the income can be used for other activities, including other sports.
A peculiarity of sports competitions as a commercial product is that the spectators expect that there will be a certain degree of uncertainty about the outcome of the competitions.
An underlying reason for the large incomes is that the number of teams in the professional leagues is very low in relation to the population. All four major leagues have just over 30 teams, which is small in a country with 320 million inhabitants. This means that many large cities do not have teams in the professional leagues. Therefore, the college teams fill gaps caused by the professional leagues. Unlike in Europe, the American professional leagues do not have lower divisions where teams can move up or down. Therefore, the role of the college leagues is comparable to the second highest divisions in European team sports. According to the author, the large revenues and their distribution have brought about a number of issues worthy of criticism, but which no one is “willing to touch”, probably for fear of being affected by it. There are many who reap the benefits of the large incomes that college football and basketball in particular generate.A somewhat strange example is that the coaches of the university teams are paid far higher to their bosses, for example the presidents of the universities.
Another issue that is being addressed is the challenges that some teams may become too dominant, a phenomenon that is relevant in both North America and Europe. A peculiarity of sports competitions as a commercial product is that the spectators expect that there will be a certain degree of uncertainty about the outcome of the competitions. The topic, which is suitably referred to as “uncertainty of outcome”, has received a lot of attention in the sports economics literature.Nevertheless, empirical data suggest that its significance is less important than attention would suggest. Therefore, it is valuable that the author takes into account that it will be normal with a certain unevenness. He also discusses what the optimal level would be.
One of the chapters compares the strategies of the NFL and MLB when the TV channels began to show interest in broadcasting the matches. During this period, many feared that TV matches would reduce the number of spectators in the stands. Here, the two sports chose different strategies. While the NFL was positive about the opportunities created by television, MLB feared that the substitution effect would reduce the number of spectators in the arenas, and therefore they chose a more defensive strategy of letting go of television. In retrospect, the NFL’s strategy has been highly successful. In the current period, the NFL’s annual media revenue is $7.75 billion, while the MLB earns $ 345 billion.
A peculiarity in sports governance is that the players that influence the decisions may have different motives and interests.In team sports, athletic leaders tend to prefer athletic progress, while administrative leaders place more emphasis on having a healthy economy. The latter will also apply to the owners of the teams if the goal is to maximize the financial return. In such situations, the distribution of information can affect the outcome, so that the dissemination can attain the character of manipulation. Situations such as these, which are thoroughly dealt with in the principal-agent theory, are frequent in sports and are dealt with in one of the chapters. Other topics that are addressed, but in a more superficial way, include the distribution of power and gender inequalities in pay.
In summary, the book presents some interesting information and perspectives. Unsurprisingly, the presentation is characterized by the author residing in the United States. Most examples and empirical data are taken from there. Inseveral cases, historical events are presented as if the readers are familiar with them and will remember all the details only if they are given a little reminder of them. This contrasts with events from other continents which are described in more detail. This form of US-centrism is quite common among North American scholars. When the analyses assume that the reader has knowledge of details from historical matches in the NFL, or other internal American conditions, many readers from other continents will probably fall off. This will undoubtedly limit the interest in the book among readers outside the US, unless you are particularly interested in the North American sports.
Copyright @ Harry Arne Solberg 2021
