Sportsgeekonomics

Musings on Sports Economics

Because I can’t help myself, 4 years worth of BCS attendance figures

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I saw a discussion among Stewart Mandel, Andy Staples, and Dan Wetzel about BCS attendance being up 3%.  Mandel clarified that it was calculated as year-over-year growth, except for the National Championship game (which moves around among stadiums of different capacity), where they compared 2014 to 2010, to get a Rose Bowl-to-Rose Bowl comparison.

Anyway, I was curious what it would look like w/o the national championship, so I grabbed data from here http://www.bcsfootball.org/news/story?id=4809856 and then looked up the 2014 games attendance individually.

The answer?  A fairer press release would have said “Rebound from last year’s poorly attended Sugar Bowl more than compensated for large drop in Fiesta Bowl attendance, with the rest of the games more or less even.”

The main reason 2014 is up so much is that the 2013 Sugar Bowl was pretty bad.  Sugar Bowl attendance in 2014 was up 30.1% because the 2013 game between Louisville and Florida drew only 54,178 to the Superdome.  The Fiesta Bowl was down 7.2%.  The Rose Bowl was up 1.9% and the Orange Bowl was basically unchanged (7 more people, 72,080 rather than 72,073).  The National Championship was up as well, 17.6%, but as mentioned above that’s a trick of the venue.  Compared against 2010, the current championship was slightly down by 0.7%.

So it wasn’t false when they said the aggregate was up.  But, just to be clear, if you take out the Sugar Bowl from the total, this is the historical trend:

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In other words, given that the National Championship itself was slightly down, the real answer is that the Sugar Bowl was so poorly attended in 2013, it’s rebound back to normal made up for the poor attendance at the Fiesta Bowl.  The rest is pretty much just noise, a slightly more popular Rose Bowl, slightly less popular National Championship and an even Orange Bowl. 

Posted by
Andy Schwarz

Price vs. Cost as a measure of Value

So you drive into a town, looking for a hotel room.  You see, I don’t know, maybe 350 hotels in this town.  Each one offers you a room (and board, and some educational opportunities as well, maybe a book on tape) for the same price — $10,000 a night.  Whoa, you say, that seems pretty steep!  Well, says each of the hotel owners, we’ve gotten together to set a common price to make sure you don’t make your selection based on money issues, but rather on which hotel and which book-on-tape best fit your accomodation-and-education needs.

Oh, and by the way, at $10,000, staying in our hotel is a great value.  after all, if you were to try to build yourself a little house for the night, the cost of construction workers, materials, building permits, etc., would cost way more than $10,000.  That’s how you should value the room.

Then a guy in a furry alpine cap he inherited from his grandfather steps in and says, actually, these hotels compete for other guests all the time and they charge between $99 and $199 per night.  A better measure of the value of a good or service is the market price b/w willing buyers and willing sellers, in the absence of collusion, not the cost of a non-participant in the market of replicating the services in an inefficient way. 

The guy in the alpine hat then he adds that if price were equal to the cost of self-assembly, then rides in airplanes would be extraordinarily expensive, cars would costs far more then they do now, when you include what it would cost to hire a skilled craftsman to make a one-shot engine, etc.  That indeed, the theory that value is measured by the cost of self-provision is more or less anathema to modern economics.

But the hotels keep the price up. They point to Forbes magazine, where an economist  who doesn’t have a problem with the self-manufacture theory of value writes: http://www.forbes.com/sites/jeffreydorfman/2013/08/29/pay-college-athletes-theyre-already-paid-up-to-125000year/

Which do you think is the right way to measure value?

Posted by
Andy Schwarz

Think of a partial scholarship as a coupon

In 2011, I analyzed the decision on Nebraska-Omaha to cut wrestling  and decided that one huge flaw in the accounting of schools for minor sports is that they missed the fact that partial scholarships are more like coupons than actual expenses, at least at school that are trying to grow their enrollment:

However, in addition to determining the true costs, it is also critical to determine whether there are any revenues left off of the athletic department’s books that stem from the granting of a GIA.  At some level, this would seem impossible – how could giving a scholarship result in revenues, above and beyond the sports-related revenues already recognized on the athletic departments P&L?[9]  But the critical thing to remember is that the UNO, like most schools, grants most of their scholarships (across all sports) in the form of partial GIAs.  UNO differs from major programs in that it uses partial scholarships for football as well as the Olympic sports, such as wrestling, where the practice is fairly universal.

As any product manager will tell you, if giving a discount can increase total purchases, what looks like an expense (e.g., a 10%-off coupon) is really revenue (the 90% of the price that the consumer paid, but would have spent elsewhere without the coupon).  But nothing in the NCAA accounting on which the UNO relies credits the athletic department for any of that revenue.  Thus it is critical to properly calculate not just out-of-pocket costs, but also any inflows of cash directly related to the granting of GIAs to football players and wrestlers.

(full article here: http://sportsgeekonomics.tumblr.com/post/45761374835/making-riches-look-like-rags)

(See also this Paula Lavigne ESPN piece: http://sports.espn.go.com/espn/otl/news/story?id=6488960)

Anyway, I’ve made this same case when I talk to people about why I think the recent decision by Temple to cut some sports may be more about, say, real-estate usage (e.g., boat house on prime riverfront location) than actual reduction of expenses.  And now, I see the coach of the men’s gymnastics teams is making the coupon argument too.  It’s always interesting to see the people affected by bad accounting try to convince the rest of the world that the economics and the accounting are telling different stories:

Turoff has four scholarships at his disposal to apportion among the 19 gymnasts on the men’s team. He slices off a half-scholarship here and a quarter-scholarship there, but that leaves the equivalent of 15 full-tuition students who are at Temple solely because of the gymnastics team. That tuition by itself offsets the approximately $300,000 annual budget of men’s gymnastics, which is about what the football team spends on chin straps every year. Turoff also does his own fund-raising to meet a required annual goal of $29,000. For the 2012-13 year, he raised $59,000.

Posted by
Andy Schwarz

Dan Wetzel on the Principal/Agent problem underlying the BCS

http://sports.yahoo.com/news/chuck-the-bcs-175022477.html

Wetzel (and co-authors Josh Peter & Jeff Passan) were most insightful when they asked the WHY question — why does something so unpopular persist.  The answer they gave was bascially what economists call a Principal/Agent problem, namely that the people who had been delegated decision making were acting in their own private interest rather than in the interest of their employers:

The truth we tried to elucidate was a story as American as it comes: Men in power refusing to give up what they believed was theirs because they told themselves that lie so many times it became their truth.

A survivalist through and through, Junker threw an opulent multiday party every year in Scottsdale – The Fiesta Frolic – for all the important decision-makers in college sports, picking up travel costs, meals, drinks, golf, everything. ADs and commissioners came with hands out, bellies ready to be filled and swings grooved.

And so the BCS stayed as the ice slowly melted in single malts on the veranda.

Junker was just one of many. The Orange Bowl doled out free Caribbean cruises. The Sugar Bowl had a “subcommittee” on golf. Every bowl director walked around flashing plastic, buying favor with anyone and everyone. The BCS was an exercise in cronyism and hypocritical corruption. The same people with their palms out – college sports leadership – wrote and enforced rules that would excommunicate any of their athletes that took even a fraction of what they did.

When the outside pressure for a better system came, the bowl industry tried to wage a PR campaign, hiring lobbyists, media spokesmen and even Ari Fleischer, the former White House spokesman for President George W. Bush.

The PR assault was a disaster, of course, because not even the most brilliant spinmeister could squeeze such a heaping lump of coal into a diamond. Fans grew to hate the BCS even more with each laughable justification. By the end it wasn’t the crime, it was the comedy.

Eventually, no one wanted the BCS around except the people paid directly by the BCS. Fear of being left behind drove unnecessary conference realignment. Everyone got tired of it. The new generation of college athletic directors make a lot of money, so complimentary rounds of golf don’t hold the same allure they did for the old guard.

Read it all here: http://sports.yahoo.com/news/chuck-the-bcs-175022477.html

Posted by
Andy Schwarz

Just read your post on the Colleges losing money from bowl games and other myths, and it sparked a question or two. So, how does the net revenue break down for teams within the conference top to bottom. Wake Forest gets the same check from the conference that VT gets from bowl payouts. If VT exceeds the "expenses" allotment then they would net less than Wake. In that analysis it is more profitable to stay home.

Asked by
medley32

maybe in the very short-run, and from a pure accounting perspective, yes, but that misses all of the off-the-expense-sheet benefits of attending a bow: boosted donations, higher attendance, etc.  I think if Wake were consistently more profitable than Virginia Tech, we’d see more schools imitating Wake.  I am a big believer in what economists call “revealed preference,” meaning that when you see an economic actor choose b/w two options, you can infer it preferred the option it chose.  Everytime you see a coach get a raise to stay at his current program, it’s telling you that school thinks winning is worth spending more, not less, on.

Posted by
Andy Schwarz

FBS Entry and Exit since 1984

FBS Football Entry Since 1984

Year School

  1. 1987 Akron
  2. 1989 Louisiana Tech
  3. 1992 Arkansas State
  4. 1992 Nevada
  5. 1994 Louisiana-Monroe
  6. 1995 North Texas
  7. 1996 Boise State
  8. 1996 UAB
  9. 1996 UCF
  10. 1997 Idaho
  11. 1997 Marshall
  12. 1999 Buffalo
  13. 1999 Middle Tennessee
  14. 2000 Connecticut
  15. 2001 South Florida
  16. 2002 Troy
  17. 2005 Florida Atlantic
  18. 2005 FIU
  19. 2009 Western Kentucky
  20. 2012 Massachusetts
  21. 2012 Texas State
  22. 2012 UTSA
  23. 2013 UNC Charlotte
  24. 2013 Old Dominion
  25. 2013 Georgia State
  26. 2013 Georgia Southern


FBS Football Exit Since 1984 
Year Schools

  1. 1986 Texas-Arlington
  2. 1987 SMU (resumed 1989)
  3. 1987 Wichita St.
  4. 1990 Lamar (resumed as FCS in 2010)
  5. 1992 Long Beach St.
  6. 1993 Cal St. Fullerton
  7. 1996 Pacific

Posted by
Andy Schwarz

The Brave New World of Journalism

So, no sooner did I publish something with a broad audience than I discovered one of the perils of having people actually read my work.  I made a mistake.  Not a huge one, but one I want to correct and explain.  I got a very nice email from Brent Schrotenboer, the reporter who wrote the USA Today article on Florida State’s complaints about having to pay full-price for tickets that had to compete with other tickets sold at a discount through Groupon.

I was focused on the article’s explanation that having to pay for Orange Bowl tickets caused Florida State a “exceed its expense allowance by $1.4 million” because:

"FSU sold a small portion of that allotment and needed help from the Atlantic Coast Conference to pay $2.1 million for unsold tickets. The loss caused FSU to exceed its expense allowance by $1.4 million"

After that, I threw in a paragraph saying that Schrotenboer had added “a caveat that if you take the money the ACC teams get from other bowls, Florida State came out ahead.”

I narrowly focused on this sentence: “The bowls are profitable overall for the major football conferences when the revenue and expenses for all games are combined.”

But Brent very politely pointed out to me that’s not what he was saying, as I would have seen if I’d read a bit more carefully: “Last year, the conferences collected a record $210 million profit from the bowls. But that profit was largely driven by the five games that constitute the Bowl Championship Series: $202 million from the Rose, Sugar, Orange and Fiesta Bowls plus the national championship game.”

So that’s my bad, and I apologize to Brent.

But fascinatingly, in Brent’s email, he also told me that UConn insists it lost money on the Fiesta Bowl, which he attributed to a narrow focus on a single-year’s worth of revenue-sharing agreements and accounting.  So, without saying that Brent Schrotenboer believes this (b/c I don’t think he does), this actually gets right at the heart of my point, which is that bad accounting can fool some people (including UConn itself) into thinking the Fiesta Bowl is a money-loser, when in reality it’s the nature of a conference agreement that causes the paper losses.  If accounting has any purpose at all, it should be to inform businesses to make smart financial decisions, but UConn appears to have been fooled by its own accounting.

And so it is my small hope that by pointing out the difference between solid economic analysis and an expense report, I can help people sort out the difference between a school exceeding its conference reimbursement amount and actually losing money.

Posted by
Andy Schwarz

Accounting for Profit, BCS Style

Have you ever wondered why college football programs seem to throw so much time, money and effort into reaching a bowl game when their accounting statements show losses when they play in the post-season?  The answer is that the accounting is masking the truth — Bowl Games, especially the biggest ones, are very profitable.

Turns out it’s a combination of factors that creates the illusion.  The biggest and most shocking is that those accounting statement everyone focuses on sometimes zero out the Bowl payout before starting — not hard to lose money if you assume the revenue is zero!  The rest, though, is a complex economic engineering effort, balancing each conference’s long-term desire to maximize total revenue potential, with the very real short-term incentive to minimize costs competing amongst itself for an already-guaranteed BCS slot.  AQ Conferences don’t want to outright kill their schools’  incentive to win, but they do want to tame it a little.  Maybe even more than a little.

Think of it as the college football version of Odysseus lashing himself to the mast to avoid the siren’s call of “overspending” on football.

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 Want to read more?  Check out my inaugural post for Deadspin’s “Regressing” website, a reprint of the final Sportsgeekonomics post of 2013.  Read it all here at http://regressing.deadspin.com/teams-in-the-orange-bowl-dont-make-any-money-and-othe-1494130032.

Posted by
Andy Schwarz

Regressing

I am honored to have been asked to write for Deadspin’s  “Regressing” section on sports analysis: 

http://regressing.deadspin.com/ 

Although my wife the psychologist will happily remind us all that in her discipline, the term Regressing is not exactly complimentary, for me it is a chance to reach a slightly wider audience and also earn vast numbers of pennies.  Not sure exactly what I’ll mean for this blog, but for now I am going to see how it goes (i suspect I’ll have things to say that they won’t have any interest in, so this site won’t go dark!).  As a first step, Deadspin is going to re-print my Orange Bowl analysis from earlier this week, and so I will be modifying that post to direct y’all there. 

Here’s to more thoughtful thought in 2014!

Posted by
Andy Schwarz