Analysis of Balance and Possible Causes of Imbalance

 Competitive balance is an important concept for sports leagues  Uncertainty of Outcome Hypothesis- states that as uncertainty of outcome increases, fan interest rises  Teams who seek a monopoly on wins, ultimately hurts itself ◦ Fans become less interested when teams dominate the league  Teams may feel pressure to use resources to improve their team’s competitiveness

 NCAA has made it a priority to promote competitive balance ◦ Principle 2.10  States the NCAA’s intention to promote balance  Several measures in place to promote balance ◦ Scholarship limits  Hockey is an equivalency sport  Each team limited to equivalent of 18 scholarships ◦ Restrictions of official visits ◦ Restrictions benefits to athletes

 Most athletic departments show annual losses ◦ Only a handful of schools post positive net revenue ◦ Majority of revenue comes from football and basketball  Monies from these programs are used to subsidize non-revenue generating sports  If athletics are consistently a financial loss, what incentive is there for schools to have athletic programs? ◦ Athletic programs can actually generate enormous revenues for schools

 NCAA as a cartel ◦ NCAA limits money players are able to “earn” ◦ Limits the number of games schools are able to schedule  Cartel-like behavior reinforces the desire to earn profits ◦ NCAA depresses wages but has no standardized accounting practices  Allows schools to manipulate revenue

 Two studies of athletic department finances reveal hidden revenue ◦ Goff, Borland, and Pulsinelli (1992)- Western Kentucky ◦ Skousen and Condie (1988)- Utah State  Schools may use accounting techniques to shift revenue from athletic department to other non- athletic areas ◦ Not attributing merchandise sales to athletic department ◦ Moving revenue to general fund or other areas  Indications that schools are severely under- reporting their athletic related revenue ◦ Conservative estimate of roughly additional $800,000

 Can hockey be a revenue generating sport? ◦ Of the 513 team years observed, 234 or 45.6% correlated to an operating profit  How much are hockey players worth to a university? ◦ the MRP of an elite college hockey player to be in the range of approximately $131,000 to $165,000  Do successful athletic programs increase student attendance at schools? ◦ Goff notes that increased athletic success increases gifts to the university as well as increased prospective student interest

 Brad Humphreys- Alternative Measures of Competitive Balance in Sports Leagues ◦ Standard Deviation of Win Percentages  League vs. Individual Teams  P. Dorian Owen, Michael Ryan, Clayton R. Weatherston- Measuring Competitive Balance in Professional Team Sports Using the Herfindahl-Hirschman Index ◦ HHI  Concentration of League and National Championships

 Use of standard deviation of league win percentages ◦ Measures the distribution of win percentages within a season for a given league  Compared to an “idealized” standard deviation ◦ “idealized” for a league in which each team has a.500 winning percentage ◦ This ratio shows the extent of imbalance within a league  Limitation is standard deviation ignores turnover in league standings

 Use of standard deviation of individual team winning percentages ◦ Measures each team’s variation in win percentage between seasons ◦ Allows accurate estimates of where teams will finish in the conference standings  The lower the standard deviation of each team, the lower the turnover in regular season conference standings ◦ If turnover is low, there is some imbalance in the league over time

 Herfindahl-Hirschman Index (HHI)  HHI varies between a minimum and 1 ◦ Minimum indicates completely equitable distribution of championships  HHI min = 1/n, n= number of teams in league  HHI exp. =1/y, y= number of years observed  If number of years observed is less than the number of teams in the league ◦ Used to measure concentration of championships  Conference regular season, conference tournament, and national championships

CCHAHockey EastWCHA SeasonActualIdealizedRActualIdealizedRActualIdealizedR

 CCHA had lower idealized ratio six times when compared to WCHA and seven times compared to Hockey East  No clear difference between conferences who have national championships and those who don’t  No distinct pattern on ratio increases or decreases between conferences ◦ Each conference seemingly independent of the others

 No clear distinction between conferences  Each conference suffers from some level of imbalance  Demonstrates the relative quality of conferences Conf.Avg. R CHA1.519 ECAC1.402 AHA1.754 CCHA1.599 HEA1.687 WCHA1.650  This shows that while each conference is imbalanced, talented teams tend to be concentrated among three conferences

 HHI- Conference Championships  Min. indicates the minimum HHI for each conference HHI Conf.Reg. SeasonTournamentMin. CCHA ECAC HEA WCHA AHA

 Each conference has a higher HHI than a completely balanced league  Each league tends to have similar HHI between regular season and tournament championships ◦ Only the AHA has a significant disparity between regular season championships and conference championships  Of the ten years observed Air Force won five AHA tournament championships

 Each team’s individual standard deviation over time shows how conference standings may turn over from year to year. Conference Average Standard Deviation ECAC0.144 CCHA0.199 HEA0.111 WCHA0.097  Each team’s individual standard deviation over time shows how conference standings may turn over from year to year.  Looking at the conference average standard deviations gives a general idea of turnover in the conference overall

 In the past ten years, fourteen different teams have competed for national championships  Seven different teams have won, four from the WCHA, one from the CCHA, two from Hockey East ◦ Boston College has won three of the past five championships  HHI of national championships =.180 ◦ Minimum=.017

 What these results tell us: ◦ NCAA conferences are imbalanced ◦ No distinct difference in balance between conferences with national championships and those without  Shows that conferences are balanced on a national talent level ◦ Teams that finish in the top of their conference have better chances to win ◦ Low turnover in conferences may impact this

 Reputation ◦ Winning programs attract players who want to win  Revenue sharing ◦ No available information on revenue sharing within a hockey conference ◦ Teams in Big Ten Football conference share revenue  More revenue means larger athletic budgets for schools to attract high level talent  Athletic Scholarships ◦ ECAC does not offer athletic scholarships

 Athletic Spending ◦ Teams with higher winning percentages and more championships may outspend other programs ◦ Conferences with national champions outspend other conferences Conf. Men's Student Aid Op. Exp. per Player Team Op. Exp.Expenses Avg. Coach Salary Recruiting Exp AHA ECAC CCHA HEA WCHA

 Athletic Spending Continued ◦ Teams that win their conferences tend to outspend other schools  Michigan outspends all schools in CCHA except in recruiting and student aid  Won four conference championships  Notre Dame outspends other schools in these categories  Boston College outspends all schools in HEA  Won six tournament championships  North Dakota finished in top third in recruitment spending in WCHA  Won four conference championships

 Teams that want to make the move to a more successful national conference should look to increase recruitment spending ◦ Seems to be a correlation between recruitment spending and conference championships  While NCAA limits scholarship allowances, does not limit team operating expenses or recruiting expenses on the school’s end ◦ Teams in WCHA, CCHA, HEA spent over $10,000 in operating expenses per player

 More extensive statistical analysis of imbalance ◦ Determine if athletic spending can impact success in a meaningful way  Can a school improve simply by spending more?  Is targeted spending a smart strategy? ◦ Determine ways to improve balance both nationally and within conferences  New NCAA regulations regarding spending in order to even out the playing field  Scholarship limits do not seem to improve balance nationally