Free Ride, Take it Easy: An Empirical Analysis of Adverse Incentives Caused by Revenue Sharing

A fundamental belief in professional sport leagues is that competitive balance is needed to maximize demand and revenues; therefore, leagues have created policies attempting to attain proper competitive balance. Further, research posits that objectives of professional sport teams’ owners include some combination of winning and profit maximization. Although the pursuit of wins is a zero sum game, revenue generation and potential profit making is not. This article focuses upon the National Football League’s potential unintended consequences of creating the incentive for some teams to free ride on the rest of the league’s talent and brand. It examines whether an owner’s objectives to generate increased revenues and profits are potentially enhanced by operating as a continual low-cost provider while making money from the shared revenues and brand value of the league. The present evidence indicates that, overall, being a low-cost provider is more profitable than increasing player salaries in an attempt to win additional games.free riding; free ride; football; profit maximization; regression; owner incentives

Major League Baseball Anti-Trust Immunity: Examining the Legal and Financial Implications of Relocation Rules

Major League Baseball (MLB) rules restrict the movement of any franchise into another’s territory. These territorial rules are designed to protect each team’s potential local revenue sources as well as to provide stability throughout the league. Recently, Major League Baseball approved financial compensation for the Washington Nationals move into the Baltimore Orioles’ territory – primarily because it was in the best interest of MLB even though it hurt the Orioles. However, the Oakland Athletics were unable to even negotiate a potential compensation plan for a move into the San Francisco Giants territory, despite the apparent financial benefit the move could have provided for every other league franchise. The Athletics are already located within 15 miles of the Giants, and their potential 40 mile move to San Jose, California would not add a new team to the San Francisco Bay Area; rather, it would simply be a move of a current team to a different location within the metropolitan area. The refusal of the Giants or MLB to negotiate a potential compromise has kept the Oakland Athletics in a substandard facility and has led to their potential move to Fremont, CA – a less desirable location than San Jose. This paper investigates the legal, policy, and financial considerations concerning Major League Baseball’s territorial rules. Specifically, it addresses antitrust law as it pertains to American professional sport, relative sport franchise relocation cases, financial arguments why leagues desire to control relocation, financial components of MLB’s current Collective Bargaining Agreement, and the legal and financial impact of a challenge to MLB’s territorial rules – an option the Oakland Athletic initially investigated prior to their decision to pursue a potential move to Fremont.Antitrust law; Collective Bargaining Agreement; Franchise Relocation; Major League Baseball; Revenue Sharing; Territorial Rights

Revenue and Wealth Maximization in the National Football League: The Impact of Stadia

The opening of the Palace of Auburn Hills, the SkyDome, and Oriole Park at Camden Yards led to the beginning of a construction boom in professional sport. In the National Football League (NFL) alone, 26 stadiums have been built or renovated in the past 10 years. Due to the additional revenue generated by these facilities and the NFL’s current revenue sharing system, professional football franchises are building new stadia for economic reasons rather than to replace unusable or unsafe facilities. The purpose of this study was to determine if a significant difference in net revenue change existed for NFL teams that moved into a new facility and to determine if there was a significant change in valuation for these franchises. The findings indicated that new stadia significantly increase revenue and franchise value in the NFL; therefore, the primary goal of every firm, wealth maximization, is met for teams after opening a new facility.football; NFL; stadium; revenue; honeymoon

Major League Baseball and Globalization: The World Baseball Classic

In addition to generating initial profits, the WBC has positioned MLB to be the leader in growing the game of baseball and the commercial aspects of the sport throughout the world. As baseball grows, and more importantly as the American brand of baseball grows, it will be interesting to watch the worldwide reaction – particularly if MLB begins to generate huge profits overseas. Other prominent American brands such as Coke, Nike, Disney, and McDonalds have been both embraced and scorned as they have ventured beyond the fifty U.S. states. MLB will have unique challenges, but also tremendous opportunities as they attempt to expand their potential marketplace from 330 million consumers to the entire world. Ultimately, the long-term impact of the initial World Baseball Classic will not be known for many years, but it appears that the initial tournament met, and in some cases, exceeded expectations.World Baseball Classic; WBC; globalization

Treatment of Travel Expenses by Golf Course Patrons: Sunk or Bundled Costs and the First and Third Laws of Demand

To attract golf patrons, sport managers must understand consumption patterns of the golfer. Importantly, the treatment of travel costs must be understood. According to the Alchian-Allen (1964) theorem, golfers treat travel costs as bundled costs (third law of economic demand) whereas classical consumer theory indicates that golfers treat travel costs as sunk costs (first law of economic demand). The purpose of this study was to determine if golf patrons treated travel costs as sunk costs or if they treated travel costs as a bundled cost. Data from a survey of course patrons in Ohio support the treatment of travel costs as bundled costs by golf course patrons, especially those classified as tourists. Managers should utilize geographic segmentation in choosing whom to market their course based upon their product’s price compared to area competitors, as shown by the strong, positive correlation found between distance traveled and cost of green fees.Alchian-Allen Theorem; Third Law of Demand; Golf Tourism; Bundling

Analysis of adhesive and repulsive functions of FLRT proteins in central nervous system development

Fibronectin-leucine-rich-repeat-transmembrane proteins (FLRTs) are a family of three single pass transmembrane proteins with extracellular leucine rich repeats and a short intracellular domain of largely unknown function. They are broadly expressed in the developing and adult nervous system as well as in other tissues. FLRTs have been implicated in a variety of different developmental processes mainly via two functions: as homophilic cell adhesion molecules, and as repulsive ligands for Unc5-positive cells. Furthermore, they can regulate cell adhesion via control of surface expression of C Cadherin and are involved in FGF signaling. Previously we found that all FLRTs are localized to synapses in the mouse brain and thus investigated a potential involvement of FLRTs in synapse formation. However, using different in vitro and in vivo approaches ranging from HEK293 cell-neuron coculture assays to ultrastructural analysis of synapse density in FLRT3 knock-out mouse brains, I did not find any evidence for an involvement of FLRTs in synapse development. This is in contrast to published results but can be explained by differences in the experimental approaches and timing of the experiments. In collaboration with structural biologists we solved the crystal structure of the FLRT and Unc5 extracellular domains and a complex of both, to gain insight into the structural basis of the adhesive and repulsive functions of FLRTs. We found that homophilic FLRT FLRT and heterophilic FLRT-Unc5 interactions both occur via the FLRT LRR domain but at distinct structural surfaces. Thus, the interactions can be uncoupled. Based on the structural results we developed FLRT and Unc5 glycosylation mutants that specifically inhibit FLRT-FLRT or FLRT-Unc5 interaction and validated them in vitro. I then used these mutants in in utero electroporation experiments to prove that the repulsive effect of Unc5D overexpression in radially migrating neurons that was discovered previously is indeed, at least partially, mediated by FLRT2. Furthermore I found that overexpression of FLRTs inhibits radial migration of cortical pyramidal neurons and this effect is dependent on FLRT-FLRT homophilic interaction and the FLRT intracellular domain but independent of FLRT-Unc5 binding. In summary, the work presented here provides new insights into adhesive and repulsive functions of the FLRT family of proteins in the regulation of cell migration during cortical development

Variable Ticket Pricing in Major League Baseball

Sport teams have historically been reluctant to change ticket prices during the season. Recently, however, numerous sport organizations have implemented variable ticket pricing in an effort to maximize revenues. In Major League Baseball, variable pricing results in ticket price increases or decreases depending on factors such as quality of the opponent, day of the week, month of the year, and for special events such as opening day, Memorial Day and Independence Day (July 4). Using censored regression and elasticity analysis, this paper demonstrates that variable pricing would have yielded approximately $590,000 per year in additional ticket revenue for each Major League team in 1996, ceteris paribus. Accounting for capacity constraints, this amounts to only about a 2.8$1.4 million in revenue. The largest percentage revenue gain would have been the San Francisco Giants. The Giants would have seen an estimated 6.7% increase in revenue had they used optimal variable pricing.baseball; variable pricing; dynamic pricing; regression; censored regression

Where did National Hockey League Fans go During the 2004-2005 Lockout?: An Analysis of Economic Competition Between Leagues

Identifying and evaluating competitors is a critical aspect of operating a sport organisation. However, North American sports franchises have a limited understanding of competitors in their geographic market – particularly when calculating the degree of competition from other sport teams. Increasing the understanding of local sport competitors, whether in the same or different professional leagues, is critical not only to future franchise operations, but also for potential litigation concerning relevant product markets. This article utilises a natural experiment involving the National Hockey League’s (NHL) 2004-2005 lockout to assess the competitiveness of the NHL with the National Basketball Association (NBA) and four minor hockey leagues. On average, the five potential competitor leagues attained a 2% increase in demand, all else equal, during the lockout period. For the NBA this translates into more than US$1 million per team in increased incremental ticket revenue.relevant market; competition; demand; National Hockey League; regression