Pro Sports Economics

[Ogaju]

from the English Premiership Soccer League to NHL Hockey pro sports has become a mega billion dollar industry all over the world with different leagues and world events bringing in billions of dollars in the aggregate for professional sports.

The business model for sports is unique because it taps into the emotions of the consumers and benefits tremendously from man's competitive and conquering, and winning spirit. The business model also fools/tricks the consumer into a false sense of identity of ownership. Truth is fans do not own anything in this business.

It is probably the only business model were a consumer actually contributes to the production of a product/franchise that he dislikes (example would be a Boston fan paying to attend and watch the Celtics play Miami in Miami) or a Boston fan buying a LeBron James jersey for his friend or child that adores James. Such is the world of pro sports that we do end up being part of the production. When you watch a sports event on TV see how much you enjoy the game with the sound turned off and the crowd edited out.  I doubt that you get the same pleasure from that.

The biggest secret to the tremendous success of the sports business model is that we the consumers do not see ourselves as consumers but as fans. Therefore we knowingly participate in the enterprise without compensation. The games are a big production that requires players, coaches, arenas, TV crew, officials, and other entertainment. Most of the money comes from TV. For the TV production to be successful you need a participating audience -- enter the fans  in all their element from the crazy to the subdued, the camera captures those that fill the arena to complete the show -- the only problem here is every component of that show gets paid for their contribution very handsomely EXCEPT FOR THE FAN.

Not only does the fan not get paid, the fan actually PAYS for the privilege of participating. A hefty sum in some cases. Therein lies the 'scam'. Oh and there is more.

The fan also promotes the franchises by wearing their colors, and displaying there flags, names on cars and around their homes. The fan actually has to pay for the privilege of advertising the team by paying for jerseys, buying posters and flags etc.

Here is the solution -- teams should truly belong to the fans -- they should be public corporations so the fans can buy into the ownership. Teams should have to pay to use the names of Cities since the use of the name has economic value from the emotional investment it garners from the public.

An illustration into the emotional divide created by pro sports is the current Sterling/Clippers debacle where it is not clear if the players are playing for Sterling, themselves, the fans, or the City. If the players boycott are they really boycotting the errant owner or themselves and their fans? If the fans boycott are they really boycotting the owner or the players?

Truth is Sterling owns the team, the fans are just emotionally scammed by the illusion that it is the Los Angeles Clippers. I bet there would be no confusion if there were simply the Donald Sterling Clippers.

Are there any more suggestions that could help the fans/consumers a more participatory role in the mega billion industry of pro sports?

[bdm860]

I don't think the pro sports business model is as unique as you think it is. They provide entertainment that people pay to enjoy, that's not unique.

Like how people pay to go watch a movie like Star Wars, then go buy a Star Wars t-shirt and other memorabilia, then go out and buy the Blu-Ray of the movie they already paid to see, and then actually watch the movie again when it comes on TV?.  Or how many people buy an album from their favorite band, and also wear the band's t-shirt, and will go pay to see that band perform live, and then tune in when that band is performing on TV even though they already own copies of all the songs the band will be playing?

Plus outside of the entertainment business, lots of companies have fans. A lot of people will only buy Apple products or Nike athletic gear or Louis Vuitton clothes or Honda cars, etc.

And just about any product you use outside of your home, you can look at it like you're paying the company to advertise for them.  From the clothes you wear, to the car you drive, to beverage container you hold in your hand, if it has a company logo on it and you paid for that product, then you can say you're paying to advertise for them.

I don't really think the pro sports business model is as unique as you're making it out to be.

[Ogaju]

Good points, but none of the good examples you have given involve consumer participation in the end product itself.

We can agree that most of the exponential rise in profit for sports is from the advent of pay-per-view TV and TV in general.

Try watching an NBA broadcast without fan participation. Tell me how exciting or watchable that is. You did not answer this aspect of the model.

I do believe this is unique to sports.

In the movie industry they pay extras to provide background.

The other aspect you did not address is the sport franchises using the name of the City to get instant fan support. Why should that be free?

[clover]

Any time you buy a gift that's not to your taste but you know will be appreciated, you're doing the equivalent of buying an LBJ jersey.

And live theater depends upon the shared crowd experience as much as sports does.

And it's because kids get so invested in their favorite movies that so many action figures have been given away with kids' fast-food meals (in years past).

Would you likewise not allow any business to use the name of a city or town? That seems rather more undemocratic than allowing people to correctly identify their location in their business name.

Would you thus disallow two NBA teams with Los Angeles in their name?

Is not there always an opportunity for a competing league team, in the same sport or another, to use a location name in serving the same market? Moreover, couldn't any team in a league with bylaws that allows it offer up shares in its ownership if it so chose?

I would think as a sports fan you would appreciate the value of competition in bringing the best out of providers.

[Roy H.]

Good points, but none of the good examples you have given involve consumer participation in the end product itself.

We can agree that most of the exponential rise in profit for sports is from the advent of pay-per-view TV and TV in general.

Try watching an NBA broadcast without fan participation. Tell me how exciting or watchable that is. You did not answer this aspect of the model.

Well, sports isn't that much different than going to a concert in that regard, or an amusement part, or the theater/opera.  While the central attraction (the band, the team, the rides, the play) are the primary reason you're there, the experience of your fellow fans adds to your own level of enjoyment.  In none of these other events are the other fans paid, nor should they be.

[footey]

the consumer/fan gets exactly what he bargains for: to root for his team, players, talk to his friends, blog with folks like you on the Internet. 

I think the bigger, more important point to be made here is how a league, that, as Charles Barkley put it (correctly) is a "black league" which generates billions of revenue, is does not have in this day and age more than 1 black owner.  Just as there was a push to have more black coaches and black GMs, there should be a push to have more black owners.  Divesting Sterling for another black owner (and I don't mean a token face like Magic Johnson, but someone capable of writing the checks) could turn this debacle into a new start.

[Ogaju]

Any time you buy a gift that's not to your taste but you know will be appreciated, you're doing the equivalent of buying an LBJ jersey.

And live theater depends upon the shared crowd experience as much as sports does.

And it's because kids get so invested in their favorite movies that so many action figures have been given away with kids' fast-food meals (in years past).

Would you likewise not allow any business to use the name of a city or town? That seems rather more undemocratic than allowing people to correctly identify their location in their business name.

Would you thus disallow two NBA teams with Los Angeles in their name?

Is not there always an opportunity for a competing league team, in the same sport or another, to use a location name in serving the same market? Moreover, couldn't any team in a league with bylaws that allows it offer up shares in its ownership if it so chose?

I would think as a sports fan you would appreciate the value of competition in bringing the best out of providers.

None of you that have answered have dealt with one unrefutable point. It is only in sports that the fan participation is part of the product.

Amusement Park, Movies, Concerts -- none of these depend on fan participation to propel a totally different product which is the broadcast and that is where the vast money comes from . I am not asking anyone to agree with me. However you cannot deny the fact that a sports event without fans cannot generate the kind of money you get from broadcasts. If the fans attending the game are part of the product, it is indeed against the rules of economics to require that the fans pay for the privilege of their contribution to a money making product. This does not even consider the fact that the players feed on the fan support to heighten their performance.

Also regarding the use of the name of their location of course anyone can use the name of their City in their business but not every business thrives on the idea of actually representing that city in competition with other Cities.

Interesting thing is we all buy into this without knowing. I live in LA do you know how many times I have to answer the question why do you like the Celtics, are you from Boston? We even have Mayors making wagers against Mayors when their teams square up in finals. We buy into the fa?ade until the real owner of the team decides to move his team from LA To St Louis and the LA Rams become the St Louis Rams. That is when it hits you that you never really owned anything. The team always belonged to the people who owned it and not the City they used to make money.

The Clipper deal would be much easier to deal with if they had simply being named Donald Sterling Clippers.

There is a reason the Angels are called the Los Angeles Angels of Anaheim -- now that is a smart guy, he is actually using two Cities to make Bank.

[macbrian]

well, here are some huge numbers underlining your argumentation...

http://www.statista.com/statistics/194122/sporting-event-gate-revenue-worldwide-by-region-since-2004/

[HomerSapien]

If using city names wasn't allowed you would not be watching  the Donald Sterling Clippers. It would be the Oracle Clippers. Or the Google Clippers. Or the Apple Clippers. And they'd still play in LA, and people would still identify with them as their team.

Sport is one of the most successful forms of entertainment currently in existence, and they do a great job of turning fans into brand loyalists.

[Sixth Man]

Any time you buy a gift that's not to your taste but you know will be appreciated, you're doing the equivalent of buying an LBJ jersey.

And live theater depends upon the shared crowd experience as much as sports does.

And it's because kids get so invested in their favorite movies that so many action figures have been given away with kids' fast-food meals (in years past).

Would you likewise not allow any business to use the name of a city or town? That seems rather more undemocratic than allowing people to correctly identify their location in their business name.

Would you thus disallow two NBA teams with Los Angeles in their name?

Is not there always an opportunity for a competing league team, in the same sport or another, to use a location name in serving the same market? Moreover, couldn't any team in a league with bylaws that allows it offer up shares in its ownership if it so chose?

I would think as a sports fan you would appreciate the value of competition in bringing the best out of providers.

None of you that have answered have dealt with one unrefutable point. It is only in sports that the fan participation is part of the product.

Amusement Park, Movies, Concerts -- none of these depend on fan participation to propel a totally different product which is the broadcast and that is where the vast money comes from . I am not asking anyone to agree with me. However you cannot deny the fact that a sports event without fans cannot generate the kind of money you get from broadcasts. If the fans attending the game are part of the product, it is indeed against the rules of economics to require that the fans pay for the privilege of their contribution to a money making product. This does not even consider the fact that the players feed on the fan support to heighten their performance.

Also regarding the use of the name of their location of course anyone can use the name of their City in their business but not every business thrives on the idea of actually representing that city in competition with other Cities.

Interesting thing is we all buy into this without knowing. I live in LA do you know how many times I have to answer the question why do you like the Celtics, are you from Boston? We even have Mayors making wagers against Mayors when their teams square up in finals. We buy into the fa?ade until the real owner of the team decides to move his team from LA To St Louis and the LA Rams become the St Louis Rams. That is when it hits you that you never really owned anything. The team always belonged to the people who owned it and not the City they used to make money.

The Clipper deal would be much easier to deal with if they had simply being named Donald Sterling Clippers.

There is a reason the Angels are called the Los Angeles Angels of Anaheim -- now that is a smart guy, he is actually using two Cities to make Bank.

Fans are not 'participants' by any definition.  They are consumers of entertainment product.  It is no different than folks sitting in a theater viewing a move, or fans in attendance at a concert. 

What will you claim next - that participants in Fantasy Sports leagues should receive compensation from players/teams/leagues?!!

[D.o.s.]

What will you claim next - that participants in Fantasy Sports leagues should receive compensation from players/teams/leagues?!!

I'm all in on this idea.

[jaketwice]

Any time you buy a gift that's not to your taste but you know will be appreciated, you're doing the equivalent of buying an LBJ jersey.

And live theater depends upon the shared crowd experience as much as sports does.

And it's because kids get so invested in their favorite movies that so many action figures have been given away with kids' fast-food meals (in years past).

Would you likewise not allow any business to use the name of a city or town? That seems rather more undemocratic than allowing people to correctly identify their location in their business name.

Would you thus disallow two NBA teams with Los Angeles in their name?

Is not there always an opportunity for a competing league team, in the same sport or another, to use a location name in serving the same market? Moreover, couldn't any team in a league with bylaws that allows it offer up shares in its ownership if it so chose?

I would think as a sports fan you would appreciate the value of competition in bringing the best out of providers.

None of you that have answered have dealt with one unrefutable point. It is only in sports that the fan participation is part of the product.

Amusement Park, Movies, Concerts -- none of these depend on fan participation to propel a totally different product which is the broadcast and that is where the vast money comes from . I am not asking anyone to agree with me. However you cannot deny the fact that a sports event without fans cannot generate the kind of money you get from broadcasts. If the fans attending the game are part of the product, it is indeed against the rules of economics to require that the fans pay for the privilege of their contribution to a money making product. This does not even consider the fact that the players feed on the fan support to heighten their performance.

Also regarding the use of the name of their location of course anyone can use the name of their City in their business but not every business thrives on the idea of actually representing that city in competition with other Cities.

Interesting thing is we all buy into this without knowing. I live in LA do you know how many times I have to answer the question why do you like the Celtics, are you from Boston? We even have Mayors making wagers against Mayors when their teams square up in finals. We buy into the fa?ade until the real owner of the team decides to move his team from LA To St Louis and the LA Rams become the St Louis Rams. That is when it hits you that you never really owned anything. The team always belonged to the people who owned it and not the City they used to make money.

The Clipper deal would be much easier to deal with if they had simply being named Donald Sterling Clippers.

There is a reason the Angels are called the Los Angeles Angels of Anaheim -- now that is a smart guy, he is actually using two Cities to make Bank.

I would favor having the cities own the teams, and able to use them as sources of additional revenue. It would make the playoffs VERY high stakes. ...but I think there is a core truth in what you suggest above: not only are we rooting for the laundry - it is someone else's laundry. I really feel bad for the Clippers fans who have suffered for years (way more than we have suffered) only to have Sterling happen just when the team is getting good.

It's a situation that is totally unfair to real fans of the Clippers.