Economics of Sports

Economics of Sports Unit 4: Team /School Financials

Table 4-1Operating Expenses for the Seattle Mariners 1993 to 1998 ($Thousands) (slide 1 of 2)

Table 4-1Operating Expenses for the Seattle Mariners 1993 to 1998 ($Thousands) (slide 2 of 2) *One-time settlement in a political agreement between the team and King County. **The so-called “luxury tax” that shares revenues among MLB owners ***Only reported for 1997 and 1998.

Table 4-2Fixed and Variable Costs for the Seattle Mariners 1993 to 1998 ($Thousands) (slide 1 of 2)

Table 4-2Fixed and Variable Costs for the Seattle Mariners 1993 to 1998 ($Thousands) (slide 2 of 2) *Pooled sharing began in 1996. **Only reported in 1997 and 1998. Source: Adapted from Table 4-1

Figure 4-2Hypothetical Winning Percent Production Function MLB in the 1990s Legend: Star players are added to a standard lineup in order to increase winning percent in the long run. The relationship between the number of stars and winning percent, deduced from real-world data on stars and winning over time, is the winning percent production function. For example, adding the first star increases winning percent by .009 (from Table 4-6). Its shape cannot be dictated by diminishing returns since winning percent is a long run choice and all inputs are variable. Limits to managing more and more stars must be the explanation.

Figure 4-3Hypothetical Long-Run Cost of Winning for MLB in 2008 Legend: Star players are added to a standard lineup in order to increase winning percent in the long run. If the price of stars is known, then the long-run cost of winning percent is also known. For example, buying enough star talent to play 0.429 costs $35 million, and so on (from Table 4.7). The shape of the curve where the total cost of winning percent rises at a decreasing rate at first, but eventually rises at an increasing rate. follows from the same limit to managing more stars that characterized the winning percent production function in Figure 4.2.

Table 4-6A Hypothetical Production Schedule of Winning PercentMLB in the 1990s

Table 4-7Hypothetical Total Cost of Winning for MLB

Table 4-8Seattle Supersonics Annual Operations Statements, 2000-01 through 2004-05 ($2009) (slide 1 of 3)

Table 4-8Seattle Supersonics Annual Operations Statements, 2000-01 through 2004-05 ($2009) (slide 2 of 3)

Table 4-8Seattle Supersonics Annual Operations Statements, 2000-01 through 2004-05 ($2009) (slide 3 of 3) Notes: Schultz took formal financial control of the team on December 15, 2000. The purchase price as $200 million. The team fiscal year reportedly ended on September 30.

College Sports • 2011 College Athletic Depts P&L

Figure 13-1Demand Functions for Men’s and Women’s Basketball Season Tickets(Typical class size = 100) Legend: (From Chapter 2) A simple classroom experiment chooses a subset of the class and asks, “How many season tickets to men’s or women’s basketball would you buy at various prices?” Plotting price against their response gives two different demand functions for the two sports. For example, 70 students are willing to buy a men’s ticket at a price of $20. But the price would have to fall to $10 before 70 students would buy a women’s ticket.

Table 13-1Revenues and Expenses of FBS Athletic Departments (2009 dollars) (slide 1 of 2)

Table 13-1Revenues and Expenses of FBS Athletic Departments (2009 dollars) (slide 2 of 2) AAverages were reported to 2001. After that medians were reported. BTotal Revenue Ratio = Maximum Total Revenue/Average Total Revenue. CTotal Expenditures Ratio = Maximum Total Expenditures/Average Total Expenditures. Note: The source lists data for 2006 that are not shown here due a suspected error in the report.Source: Author’s calculations from tables in Fulks (2003, 2008).

Table 13.2 Revenue and Expenses of Men’s and Women’s Programs in FBS Athletic Departments ($2009)(slide 1 of 2)

Table 13.2 Revenue and Expenses of Men’s and Women’s Programs in FBS Athletic Departments ($2009) (slide 2 of 2) Note: Averages were reported prior to 2004; medians after that. Only years from 1993 on are used because the data are consistent with respect to values specific to men’s and women’s programs. The data include institutional support directly from the university to its athletic department, if any.

Figure 13.2Non-BCS and BCS Average Payouts, 1981-82 to 2008-09 (2009 dollars). Legend: At the average, BCS bowl payouts have always dwarfed non-BCS bowl payouts. In addition, while non-BCS average payouts have been steady over time, average BCS bowl payouts have grown in leaps and bounds, although they have fallen a bit in the last few years.

Table 13-32006 Revenue and Expenditure Distribution Percentages by Sport for FBS College Athletics Notes: The data are for generated revenues and expenses, that is, earned by the athletic department and do not include allocated revenues (e.g., institutional support directly from the university to its athletic department, if any).

Figure 13-3The University and the Athletic Department Legend: All major elements of the university, inside the triangle, produce outputs (Research, Teaching and Service) that generate money and political support for the university. The university supports those elements best that provide money and political support the best.

Table 13-4Naming Rights in College Sports

Figure 13-4The Athletic Department Org Chart Legend: At the bottom, individual team coaches are responsible to their Athletic Director (the equivalent of the Dean for academic departments). The line of responsibility and oversight moves upward through the President (typically, not the Provost as in academic departments), the Board of Regents and, ultimately, to the Governor.

Table 13-5Annual Values of College Football TV Contracts (slide 1 of 3)

Table 13-5Annual Values of College Football TV Contracts (slide 2 of 3)

Table 13-5Annual Values of College Football TV Contracts (slide 3 of 3) *6 home games per year. **The newest Pac 10 contract values have not been reported. Not available is denoted “n/a.”

Table 13-62008-09 Bowl Sponsors and Payouts to Teams(slide 1 of 3)

Table 13-62008-09 Bowl Sponsors and Payouts to Teams(slide 2 of 3)

Table 13-62008-09 Bowl Sponsors and Payouts to Teams(slide 3 of 3) Notes: When a second team from a conference, in addition to the conference champion, appears in a BCS game, the payout falls to $4.5 million for that second team. Utah 's appearance in the Sugar Bowl generated nearly $18 million to be split among their own Mountain West Conference, but also with C-USA , the MAC, Sun Belt Conference, and the WAC.

Table 13-72007-2008 FBS Conference TV and Postseason Revenues Notes: Annual conference TV values and bowl payouts by conference all calculated by Fort

Table 13-8Budgets at Washington State University (slide 1 of 2)

Table 13-8Budgets at Washington State University (slide 2 of 2)

Table 13-9Operating Revenues and Expenses, Washington State University and the University of Washington, 2003-2004 (slide 1 of 2)

Table 13-9Operating Revenues and Expenses, Washington State University and the University of Washington, 2003-2004 (slide 2 of 2)

Table 13-10College Games and Rights Fees

Economics of Sports