Sportsgeekonomics

Musings on Sports Economics

Competition in Action: A Tasty Case Study

Among the jokes told about economists is that we are excellent at predicting the past but a lot iffier on predicting the future. So it’s nice to see plain vanilla economics, the same used by the O’Bannon experts, yield an accurate prediction of competitive behavior, and to predict it *before* it happened.

If you followed the O’Bannon case, you know that a centerpiece of the economic arguments of the Plaintiffs’ argument was that if competition for players’ pay is stifled by competition, non-price competition by other means increases.  Hence, argued Roger Noll and my business partner (and occasional Sportsgeekonomics contributor) Dan Rascher, we see excessive spending on coaches and on facilities because every dollar spent there provides a second-rate way to attract talent, better than doing nothing, but less good than direct compensation.

Anyway, as you may know, the NCAA was recently shamed (or, in some versions of the story, utterly coincidentally decided on its own) to allow unlimited food to athletes, after Shabazz Napier famously told the press during the lead-up to  Final Four that he went to bed hungry some nights.

As economics predicts,once that little opportunity to compete was opened, we should expect to see the process of competition begin to work its magic.  As exhibit A, I give you the new Auburn food-hall-as-recruiting-tool video:

https://www.youtube.com/embed/L97MRSxqbLc

That is just yummy inefficient substitution in action!


And where there’s competition in the NCAA, you can expect collusion in an effort to stop it to follow close behind:

It’s nice to see theory borne our in practice. It’s less nice to see an industry so accustomed to treat the competitive process as a bug to be squashed rather than a feature to be celebrated.

Posted by
Andy Schwarz

Some data for Tim D.

Schools in EADA 2012-13 data listed as D1: 344

  • Schools with fewer than 13 participants: 10
  • Schools with 13-14 participants: 91
  • Schools with 15-17 participants: 210
  • Schools with more than 17 participants: 33

Posted by
Andy Schwarz

By Their Budgets Shall Ye Know Them

My latest deadspin piece is now out: http://regressing.deadspin.com/whats-karl-marx-doing-in-these-arguments-against-colleg-1608863934

It deals with the hypocrisy of a man earning $1.8 million (and more than double anyone in his organization) decrying the capitalist process of assigning pay based on market value, instead of paying solely based on effort.

As a tease, it struck me that embedded in Bowlsby’s predictions are the following two mutually inconsistent statements:

  • The world of college sports highly values the contributions to the campus of the men who play sports that don’t generate TV money, and it believes that if they are no longer part of the community, the community will suffer.
  • If rules prohibiting Football/Basketball athletes from getting pay are loosened, the first thing the world of college sports will do is stop funding the (already partial) scholarships of the men who play those non-money sports.

Those are not rational, consistent statements.  It’s easy to say you really love something someone else is paying for. What you pay for shows what your priorities are.  If you don’t value them enough to fund them with your own money, you don’t value them very much at all. 

If you don’t believe me,try explaining to your significant other/spouse why you very much value her/his [whatever], but not enough to pay for it with your own money.  Especially if you’re pulling a cool $1.8 mill out yourself.   See how that flies.

Posted by
Andy Schwarz

Another silly excuse

There is zero reason why, in the event that the power conferences decide to form their own (a) set of rules within FBS, (b) distinct subdivision within D1, (c) their own division within the NCAA’s auspices, or (d) a new, fully distinct governing body that the basketball tournament in March needs to change.

Imagine the most extreme scenario, (d), where literally the five power conferences flat out leave the NCAA and form, say, the Power Conference Athletic Association (PCAA — conveniently could also be the Professional Collegiate Athletic Association if the show started fitting).  We know they would be able to command a hefty licensing fee to broadcast an end-of-year tournament with the better half of the schools.   But it might not command as much as the current march Madness that includes another 30-40 schools out of the 290 or so schools that comprise the rest of D1. 

On the other hand, with the P5 gone, the remaining 27 D1 conference would certainly not be able to command as much money as the NCAA currently does for march madness, since virtually every winner (other than schools that would be left behind and scrambling to join the P5, primarily UConn) would have left. 

Indeed, it’s arguable that that the sum of the two separate licensing fees would be worth less than the current joint product.

And therein lies the source of the ridiculousness of the claim that the current configuration would die.

Imagine this.  The P5 face a choice.  Stay exclusive and keep 100% of a smaller pie for the PCAA Exclusive Tourney.  Or, host the PCAA Invitation, an annual challenge between the best of the PCAA and a select set of NCAA teams.  Set up a PCAA committee that invites, oh, say, 10 good teams from the rest of D1 (i.e, from the NCAA) and then also the conference winner of each small conference tournament whether they are good or not.  Offer to pay them enough money for an appearance (and more for a win) that it makes saying yes more lucrative than staying behind in what’s left of the NCAA tournament.

The pie grows.  Each invited non-PCAA school may get less money than they would if the NCAA never divided, but that world is gone (in my hypothetical).  They are getting far more than if they refuse an invitation.  So to say no, they would have to choose the less profitable, less fan-friendly option. 

For the PCAA members themselves, they would make more money because even after paying the invited non-PCAA teams, the surplus is all theirs.  Why assume a surplus?  Well, if not, then the whole idea that the Cinderellas are what make March Madness valuable to CBS is false.   If viewership is really enhanced by the mix of big and small schools, the PCAA will have enough to invite the small and pocket the surplus.  And so then for them,also, not inviting the small schools would be a choice for a less profitable, less fan-friendly option. 

No I am not saying that hard heads and irrationality might not rule the day.  The NCAA currently has a rule preventing teams from playing non-NCAA oppoonents.  That would have to change.  if the scenario outlined above occurs, not changing that rule would be a form of seppuku.  But don’t put it past an organization built on platitudes and monopoly rent dissipation to make an irrational decision not to evolve.  I’m just saying that to the extent a solution is sought, it is right there for everyone to see, and just up to the business people to make happen.

Now before you start to say that it is impossible for schools with different sets of rules on number of scholarships or the maximum value of a scholarship to play each other, please remember that currently:

  • FCS football teams play against FBS football teams despite different numbers of scholarships and despite the fact that most FCS athletes get less than a full scholarship.
  • The Ivy League does not give any athletic scholarships, but participates in the FCS playoffs and in March Madness.
  • The whole idea of a Cinderella in basketball is that we know the players at Kansas get far more in all sorts of ways than the players at Bucknell, and even though Kansas’s self-reported basketball revenue from 2013 ($16,412,415) is more than 8 times larger than Bucknell’s ($2,025,127), and their expenditures are more than 5 times as large.

In golf and tennis we have zero problem with the idea of an “open” tournament, featuring pros and amateurs.  We usually cheer on the amateur even though we know it’s unlikely he’ll win it all.  Just beating a few of the pros is victory enough.  Same too with the Cinderellas in a basketball tournament.   Knowing Mercer didn’t ultimately win it all didn’t make their victory over Duke less fun. 

The PCAA Invitational would be a popular, successful open tournament featuring the best of the PCAA and the NCAA.  There would be upsets.  Dominant teams from the power conferences would almost win.  Just like today’s March Madness.

And just as it could work with a full on divorce between the PCAA and NCAA, so too it would be even easier to manage under any of the less extreme scenarios.  it comes down to the fact that if cooperation makes the pie larger, then the rest is just fighting over who gets the biggest slice.  Which is what is really going  on now.

Posted by
Andy Schwarz

More truth telling about Title IX, this time from schools themselves

Despite the frequently voiced (albeit breathless) claim that Title IX funding might be hurt by increasing compensation to male football and basketball athletes, I’ve frequently tried to explain that’s not how Title IX would work.  For example, see:

http://www.slate.com/articles/sports/sports_nut/2014/01/paying_college_athletes_a_point_by_point_evisceration_of_the_ridiculous.3.html

http://sportsgeekonomics.tumblr.com/post/73016394625/title-ix-in-its-own-words

http://sportsgeekonomics.tumblr.com/post/82682936330/a-simple-generic-example-of-how-title-ix-might-work-in

Myth 6: We can’t pay them or else we’d violate Title IX

More here: http://sportsgeekonomics.tumblr.com/title9

Anyway, since I know none of you believe me without confirmation (as is your right!), here’s what a recently field amicus brief by Baylor, Rice, SMU, Stanford, Tulane, USC (west), Vanderbilt, and Wake Forest (available here: http://mynlrb.nlrb.gov/link/document.aspx/09031d45817cd706 )says about this issue:

If scholarship football student-athletes are determined to be employees for purposes of the Act, and through collective bargaining receive greater benefits for themselves, the proportionality mandate of Title IX will require that colleges either increase the benefits to female student-athletes proportionately, or decrease the benefits provided to male student-athletes in other sports. Depending on the extent of the additional benefits obtained by the unionized football student-athlete “employees,” universities may be required to do both: decrease the number of scholarships in other male sports and increase the benefits provided to female student-athletes.  (page 12)

In other words, the schools are complaining that Title IX is going to make them spend MORE on women’s sports and/or less on men’s sports, not that it will make them spend less on women’s sports. 

In other words, I told you so.

Posted by
Andy Schwarz

Three Pages of Briefs and Amicus Briefs now available at NLRB website

The full NLRB docket re the NW/CAPA case is available at http://www.nlrb.gov/case/13-RC-121359

Below are the July 3rd filings:

Northwestern’s Brief: http://mynlrb.nlrb.gov/link/document.aspx/09031d45817ccaf8

CAPA’s Brief: http://mynlrb.nlrb.gov/link/document.aspx/09031d45817cc70a

The Amicus Briefs are as follows:

Posted by
Andy Schwarz

Presented without comment (from NCAA’s NLRB filing)

"When parents take the long, quiet ride home after saying goodbye the first semester, they want to feel confident that the college or university is working diligently to create the most rewarding educational experience possible.  This feeling is as true for the parents of a student-athlete as parents of any other student.  University leaders have determined that converting student-athletes into paid professionals — injecting a different structure and a different set of motivations for attending college — would destroy their ability to provide a rewarding educational experience for these students and their classmates."  — Brief of Amicus Curiae National Collegiate Athletic Association in Support of Northwestern University, page 18.

Read as much as you care to read here: http://www.ncaa.org/sites/default/files/Brief%20of%20Amicus.pdf

You can read a more fact-driven amicus brief that I participated in here:

http://mynlrb.nlrb.gov/link/document.aspx/09031d45817cccda

Posted by
Andy Schwarz