1. Rodney Fort's Sports Economics
Chapter 6  Sports Market Outcomes II

2. Figure 6-1 Small and Large Revenue Market Teams in a Two-Team League
Legend: The smaller market team has lower marginal revenue for all levels of winning percent than the larger market team. MRL(W) > MRS(W) for all W. An example is shown at W =

3. Sports Economy Average
Table 6-1 Gini Coefficients for Revenue Imbalance in Pro Sports Leagues (slide 1 of 3)
Year
MLB AL NL
NBA
NFL
NHL
Sports Economy Average
1930s average
0.242
0.241
0.224
1940s average
0.182
0.170
1950s average
0.210
0.217
0.180
0.214
0.151
0.155
0.190
1980s average
0.184
0.176
1990s average
0.172
0.185
0.150
0.153
0.061
0.168
0.146
Pre-strike/lockout average
0.159
0.131

4. Table 6-1 Gini Coefficients for Revenue Imbalance in Pro Sports Leagues (slide 2 of 3)
Post-strike/lockout average
0.201
0.221
0.171
0.153
2000
0.176
0.172
0.130
0.075
0.142
2001
0.166
0.136
0.119
0.070
0.160
2002
0.158
0.165
0.148
0.125
0.072
0.146
2003
0.126
0.145
0.102
2004
0.133
0.151
0.109
0.132
0.069
2005
0.107
0.131
0.081
0.098
2006
0.110
0.128
0.090
0.055
0.117
2007
0.114
0.134
0.092
0.054
2008
0.113
2000s average
0.068
0.115
Pre-lockout average
0.149
Post-lockout average

5. Table 6-1 Gini Coefficients for Revenue Imbalance in Pro Sports Leagues (slide 3 of 3)
Notes: Pre-strike/lockout and post-strike/lockout are calculated according to the following: 1990s: MLB 1994–1995; (NBA excluded since lockout only leaves one post-year); NHL 1994; 2000s: NHL 2004–2005.

6. Figure 6-2 Two-Team League Revised
Legend: This depiction of the two-team league is a useful adaptation. The larger market team is portrayed from left to right and the smaller market team is portrayed from right to left. Since the sum of winning percents in a two-team league equals one, . But at that winning percent outcome, so it cannot be an equilibrium since the large market team wishes to buy more talent and the smaller market team will sell it.

7. Sports Economy Average
Table 6-2 Gini Coefficients for Payroll Imbalance in Pro Sports Leagues (slide 1 of 2)
Year
MLB OD
MLB EOS
AL EOS
NL EOS
NBA
NFL
NHL
Sports Economy Average
1950s average
0.133
0.144
0.112
0.116
0.062
0.103
1980s average
0.153
0.158
0.119
0.078
1990s average
0.172
0.188
0.177
0.104
0.074
0.138
0.149
Pre-strike/lockout average
0.160
0.161
0.139
Post-strike/lockout average
0.206
0.225
0.241
0.199
2000
0.221
0.239
0.237
0.233
0.131
0.037
0.195
2001
0.213
0.211
0.185
0.088
0.095
0.208
2002
0.202
0.204
0.228
0.220
2003
0.212
0.238
0.171
0.134
0.059
0.197
2004
0.243
0.278
0.145
0.080

8. Table 6-2 Gini Coefficients for Payroll Imbalance in Pro Sports Leagues (slide 2 of 2)
2005
0.227
0.110
0.068
0.103
2006
0.210
0.092
0.071
0.061
2007
0.217
0.093
0.047
0.094
2008
0.226
0.081
0.079
2009
0.198
2000s average
0.223
0.238
0.192
0.154
0.138
Pre-lockout average
0.205
Post-lockout average
0.086
Notes: Pre-strike/lockout and post-strike/lockout are calculated according to the following: 1990s: MLB 1994–1995; (NBA excluded since lockout only leaves one post-year); NHL 1994; 2000s: NHL 2004–2005.EOS = end of season.OD = opening day.

9. Figure 6-3 Market Equilibrium
Legend: Since the sum of winning percents in a two-team league equals one. And this result is an equilibrium outcome. With neither team wishes to alter its talent choice. The market equilibrium price of talent.

10. Table 6-3 Standard Deviation of Winning Percent Imbalance in Pro Sports Leagues (slide 1 of 3)
Year
MLB–AL
MLB–NL
NBA
NFL
NHL
Sports Economy Average
1901–1909 average
2.55
3.28
1910–1919 average
2.71
2.36
1.73
2.27
1920–1929 average
2.40
2.31
1.96
1.78
2.11
1930–1939 average
2.79
2.37
1.70
1.62
2.12
1940–1949 average
2.29
2.50
2.58
1.85
1.83
2.21
1950–1959 average
2.52
2.06
2.18
1.52
2.07
1960–1969 average
2.01
1.68
2.14
1970–1979 average
1.84
2.45
2.61
2.10
1980–1989 average
1.75
1.69
2.76
1.99
1.94
1990–1999 average
1.72
1.76
3.08
1.51
1.98
Pre-strike/lockout average
1.50
2.03

11. Table 6-3 Standard Deviation of Winning Percent Imbalance in Pro Sports Leagues (slide 2 of 3)
Post-strike/lockout average
1.83
1.79
1.74
2000
1.37
1.76
2.85
1.58
1.95
2001
2.41
1.65
2.50
1.63
1.66
2002
2.69
2.06
2.61
1.32
1.69
2003
2.48
1.78
2.46
1.54
1.73
2004
2.11
2.20
2.80
2005
2.05
1.39
2.47
1.98
2006
1.88
1.26
2.40
1.45
1.85
2007
1.71
1.24
3.06
1.19
2008
1.59
2000s average
1.68
2.64
1.56
1.93
Pre-lockout average
Post-lockout average

12. Table 6-3 Standard Deviation of Winning Percent Imbalance in Pro Sports Leagues (slide 3 of 3)
Notes: Pre-strike/lockout and post-strike/lockout are calculated according to the following: 1990s: MLB 1994–1995; (NBA excluded since lockout only leaves one post-year); NHL 1994; 2000s: NHL 2004–2005.

13. Figure 6.4 The Avalanche Leave for New Jersey: Impacts on the Nuggets$
WL = 0
WS = 1
WL = 1
WS = 0
MRL(W)
MRS(W) a b c d e
Legend: When the Avalanche leave for New Jersey, the marginal revenue function for the Nuggets shifts from to . The Nuggets owner is clearly better off (team quality is higher, , and net value from winning increases (). The larger-revenue owner is clearly worse-off (team quality falls, payroll rises since the price of talent increases in the inelastic portion of , and the net value of winning decreases by area ). Players are clearly better off since the total of league payrolls increases ().

14. Table 6-4 Years Per League or Conference Title in Pro Sports Leagues (slide 1 of 3)
MLB (11 teams)
Titles
Years
Years/ Title
NBA (14 teams)
New York Yankees 39
106
2.7
Minneapolis Lakers 6 12
2.0
New York Giants 15 57
3.8
Los Angeles Lakers 24 49
Los Angeles Dodgers 9 51
5.7
Boston Celtics 20 63
3.2
Brooklyn Robins/ Dodgers
6.3
St. Louis Hawks 4 13
3.3
St. Louis Cardinals 17
108
6.4
Chicago Stags 1
4.0
Milwaukee Braves 2
6.5
Syracuse Nationals 3 14
4.7
Florida Marlins 16
8.0
Philadelphia Warriors
5.3
Oakland Athletics 48
Chicago Bulls 43
7.2
Atlanta Braves 5
8.6
Philadelphia 76ers 46
7.7
Boston Pilgrims/ Red Sox
109
9.1
San Antonio Spurs 31
7.8
Baltimore Orioles 55
9.2
New York Knicks 8
7.9
Detroit Pistons 7 61
8.7
Rochester Royals
9.0
Washington Wizards

15. Table 6-4 Years Per League or Conference Title in Pro Sports Leagues (slide 2 of 3)
NFL (18 teams)
Titles
Years
Years/ Title
NHL (17 teams)
Years+5
New York Giants 18 76
4.2
Ottawa Senators I 8
2.3
Dallas Cowboys 10 49
4.9
Montreal Canadiens 27 93
3.4
Boston Redskins 1 5
5.0
Detroit Red Wings 24 84
3.5
Cleveland Browns 11 59
5.4
Toronto Maple Leafs 22
Oakland Raiders I 2 12
6.0
Edmonton Oilers 7 31
4.4
Baltimore Colts
6.2
Montreal Maroons 3 15
Chicago Bears
6.3
Boston Bruins 17 86
5.1
Green Bay Packers
Hamilton Tigers 6
Denver Broncos 39
6.5
Philadelphia Flyers 43
6.1
New England Patriots
Carolina Hurricanes 13
St. Louis Rams 14
7.0
New Jersey Devils 4 28
Washington Redskins
7.6
Colorado Avalanche
7.5
Miami Dolphins
7.8
New York Islanders 38
Indianapolis Colts
8.0
Chicago Blackhawks
8.4
Cleveland Rams 9
9.0
New York Rangers
Minnesota Vikings 48
9.6
Dallas Stars
8.5
Buffalo Bills
9.8
Calgary Flames
9.3
Los Angeles Rams

16. Table 6-4 Years Per League or Conference Title in Pro Sports Leagues (slide 3 of 3)
Notes: Actually, it’s the Brooklyn Robins/Dodgers, Baltimore/Capital/Washington Bullets-Washington Wizards, Ft. Wayne/Detroit Pistons, Ottawa/Eagles Senators I, Detroit Cougars/Falcons/Red Wings, and Toronto Arenas/St. Patricks/Maple Leafs. All leagues are calculated relative to their 2008 regular seasons. Finally, only teams winning less than every ten years are shown.

17. Table 6-5 Correlation Coefficients and Competitive Balance in MLB
Averages
Revenue and Payroll
Revenue and Winning
Payroll and Winning
Pre-1950s
0.657
0.693
0.530
1950s
0.633
0.667
0.713
1990s
0.688
0.346
0.453
2000s
0.894
0.466
0.483
Notes: Payrolls are “end-of-season” only because that is most useful for this purpose; ends No revenue data for 1998.

18. Figure 6-5 Gate Revenue Sharing in a Two-team League
Legend: Under gate revenue sharing, if the home team keeps a share equal to a, then both MRS and MRL shift down to aMRS and aMRL. The new equilibrium occurs at the same winning percents, . But the price of talent falls from P to P’. The amount of revenue shared by the large revenue market owner is the area of the parallelogram abcd. The amount of revenue shared by the small revenue market owner is area fbcg. The difference between the two is the net gain to the smaller revenue market owner, easy to see since abcd > fbcg.

19. Table 6-6 NFL Gate Revenue Sharing Through the Years
Old 60/40 Gate Sharing
Team
Gate Revenue ($Millions)
Amount Paid ($Millions)
Amount Received ($Millions)
Net ($Millions)
High revenue
$68.3
$27.3
$11.6
–$15.7
Median revenue
$33.0
$13.2
$18.6
$5.4
Low revenue
$24.7
$9.9
$20.2
$10.3
Sums
$126.0
$50.4
$0.0
2001–present, Pooled Gate Revenue Sharing
Local Revenue ($Millions)
$16.8
–$10.5
$3.6
$6.9

20. Figure 6-6 The Impact of Luxury Taxes in a Two-team League
Legend: At the spending threshold associated with W1, a tax of t1 = 0.5 (50% on talent chosen beyond the threshold W1) is imposed. The new equilibrium choice by the large revenue owner is . Since the sum of winning percents is one, the talent choice by the smaller market owner must increase. In addition, the price of talent falls to P’.

21. Table 6-7 MLB Gate and Local Revenue Sharing Through the Years (slide 1 of 2)
80/20 Equal-Proportion Gate Sharing
Team
Gate Revenue ($Millions)
Amount Paid ($Millions)
Amount Received ($Millions)
Net ($Millions)
High revenue
$88.1
$17.7
$6.4
-$11.2
Median revenue
$48.6
$9.7
$10.4
$0.7
Low revenue
$15.7
$3.1
$13.7
$10.5
Sums
$152.4
$30.5
$0.0
1996–2001, Split-Pool Sharing
Local Revenue ($Millions)
Net ($Millions)
$184.7
$31.4
$13.1
-$18.3
$94.6
$16.1
-$3.0
$29.3
$5.0
$26.2
$21.3
$308.6
$52.5
$0.0</TB>

22. Table 6-7 MLB Gate and Local Revenue Sharing Through the Years (slide 2 of 2)
2002–present, Straight-Pool Sharing
Team
Local Revenue ($Millions)
Amount Paid ($Millions)
Amount Received ($Millions)
Net ($Millions)
High revenue
$184.7
$62.8
$35.0
-$27.8
Median revenue
$94.6
$32.2
$2.8
Low revenue
$29.3
$10.0
$25.0
Sums
$308.6
$104.9
$0.0</TB>

23. Figure 6-7 The Impact of a Salary Cap in a Two-team League
Legend: A cap on the price per unit spent on talent of C, along with the imposition of equal spending, has the following impacts. First, the price of talent falls and payments to talent are reduced by the shaded rectangle, P*-C. At equal spending, and spending by each team is equal at 0.500*C. However, since MRL>MRS on all units between and , both teams have an incentive to violate the cap.

24. Table 6-8 Standard Deviation Ratios and MLB Pooled Revenue Sharing
Years AL NL
1991
1.54
1.56
1992
1.61
1.68
1993
1.39
2.37
1994
1.78
1995
2.04
1.47
average
1.65
1.77
1996
1.42
1997
1.58
1.49
1998
2.06
2.24
1999
1.93
2.01
2000
1.37
1.76
average
1.74
1.79
2001
2.41
average
1.87
1.83
2002
2.69
2003
2.48
2004
2.11
2.20
2005
2.05
2006
1.88
1.27
average

25. Table 6.9 MLB Revenue Sharing Comparisons, Split-Pool and Straight-Pool ($Millions) (slide 1 of 3)
Team
2001 Net
2001Payroll Change
2002 Net
2002 Payroll Change
2003 Net
2003 Payroll Change
2005 Net
2005 Payroll Change
Anaheim
$9.6
-$6.3
-$1.3
$13.7
$1.9
$18.3
-$11.0
-$17.9
Arizona
-$4.4
$7.4
-$3.3
$18.2
$1.5
-$19.1
$13.0
-$6.1
Atlanta
-$10.6
$10.5
-$9.8
-$4.6
-$11.3
$4.5
-$10.0
$7.0
Baltimore
-$6.8
$7.7
-$5.3
-$16.6
$0.3
$11.6
$2.0
$17.1
Boston
-$16.4
$38.6
-$5.7
-$38.7
$0.0
-$52.0
-$6.9
Chicago Cubs
-$6.6
$19.5
-$8.3
-$16.7
$8.4
-$32.0
-$13.6
Chicago White Sox
-$4.2
$25.2
-$3.8
-$4.8
$6.2
-$18.0
$10.6
Cincinnati
$13.4
$0.2
$9.8
$2.6
$6.5
$5.6
$16.0
$15.6
Cleveland
-$13.3
$15.3
-$14.8
-$25.4
$6.0
-$1.1
Colorado
-$6.0
-$2.8
-$5.1
-$4.3
$2.5
$10.0
-$21.3
Detroit
$5.1
-$8.0
$8.3
$16.7
$0.4
$25.0
$10.3
Florida
$18.6
$16.2
$20.9
$3.6
$21.0
$13.9
$31.0
$10.1
Houston
-$5.2
$22.4
-$9.1
$1.2
$9.4
Kansas City
$8.5
$16.6
$12.9
$19.0
-$1.8
$30.0
-$7.8
Los Angeles
$31.2
-$9.3
-$25.3
-$9.5
$18.4
-$20.0
-$18.6
Milwaukee
$1.7
$3.2
$24.0
Minnesota
$19.1
$14.7
$8.8
$17.2
$16.8
$22.0
$1.4

26. Table 6.9 MLB Revenue Sharing Comparisons, Split-Pool and Straight-Pool ($Millions) (slide 2 of 3)
Montreal
$28.5
$3.3
$8.1
$29.5
$8.6
N.Y. Mets
-$15.7
$5.1
-$17.4
$7.2
-$21.5
$18.2
-$24.0
-$1.9
N.Y. Yankees
-$26.5
$25.6
-$26.6
-$52.7
$43.7
-$76.0
$20.4
Oakland
$10.5
$10.9
$9.2
-$1.6
$11.8
$11.7
$19.0
-$4.9
Philadelphia
$3.7
$9.8
$9.0
$13.6
$5.8
Pittsburgh
$1.8
$8.0
$6.4
$0.7
$13.3
$25.0
$5.6
San Diego
$8.7
-$19.6
$6.3
$6.7
$9.5
$5.7
-$2.6
San Francisco
-$6.3
$24.5
-$9.6
-$13.0
-$14.0
$7.8
Seattle
-$18.8
$19.1
-$19.9
$1.4
-$31.0
$15.4
-$25.0
$5.9
St. Louis
-$8.2
$1.5
-$8.4
$3.5
-$9.2
-$19.0
-$0.7
Tampa Bay
$12.4
-$23.1
$14.7
-$3.8
$20.5
-$6.9
$33.0
$5.3
Texas
-$8.7
$22.6
$24.8
-$7.2
-$2.0
$0.0
-$23.4
Toronto
$18.4
$13.7
-$14.1
$18.7
$31.0

27. Table 6.9 MLB Revenue Sharing Comparisons, Split-Pool and Straight-Pool ($Millions) (slide 3 of 3)
League Transfer
$167.0
$169.1
$220.4
$304.5
Net Contributors 16 17 12
Average Payroll Change Net > 0
$2.6
$3.4
$5.8
$0.1
Average Payroll Change Net < 0
$17.1
-$0.6
$9.8
-$1.1
# Increasing Payroll Net > 0 10 13 8
# Reducing Payroll Net < 0 1 9 2 7
Notes: If Net < 0, then that is the team’s net contribution to the pool after deducting their share. If Net > 0, it is the team’s net receipt from the pool after deducting their contribution to the pool. League transfer is the sum to the net gainers (from the net contributors) . Average contribution equals league transfer divided by number of net contributors. Montreal moved to Washington so there is a payroll discontinuity that doesn’t allow either to be included in 2005.

28. Table 6-10 The Draft and Competitive Balance in MLB and the NFL
League
Period 1
% Change
Period 2
Period 3
Ave. % Change
MLB-AL
2.38
–2.1%
2.33
–18.9%
1.89
–10.5%
MLB-NL
2.43
–9.5%
2.20
–14.5%
1.88
–12.0%
NFL
2.03
–18.2%
1.66
7.2%
1.78
–5.5%
Notes: MLB periods are 12 years long; draft in place beginning Period 3, NFL periods are 6 years long; draft in place beginning Period 3, 1936.
Source: See Table 6.3.

29. Table 6-11 Salary Caps in the NBA, NFL, and NBA ($Millions) (slide 1 of 2)
NHL
Year
Cap
Ave. Team Payroll
1984
$3.6
1985
$4.2
$4.6
1986
$4.9
$5.7
1987
$6.2
$6.0
1988
$7.2
$6.8
1989
$9.8
$11.3
1990
$11.9
$13.7
1991
$12.5
$15.8
1992
$14.0
$18.5
1993
$15.2
$22.2
1994
$16.0
$25.0
$34.6
$36.6
1995
$23.0
$28.5
$37.1
$42.6
1996
$24.4
$32.7
$40.8
$45.7
1997
$26.9
$38.1
$41.5
$43.6
1998
$30.0
$45.1
$52.4
$61.4
1999
$34.0
$51.6
$58.4
$66.1
2000
$35.5
$53.3
$62.2
$68.1
2001
$42.5
$57.3
$67.4
$70.8
2002
$40.3
$57.2
$71.1
$66.0
2003
$43.8
$56.0
$75.0
$76.9
2004
$43.9
$55.4
$80.5
$83.8

30. Table 6-11 Salary Caps in the NBA, NFL, and NBA ($Millions) (slide 2 of 2)
2005
$49.5
$55.1
$85.5
$82.0
$39.0
$34.3
2006
$53.1
$60.6
$102.5
$100.0
$44.0
$40.3
2007
$55.6
$66.0
$109.0
$100.9
$50.6
$44.4
2008
$58.7
$72.0
$116.0
$113.3
$56.7
$51.4
2009
$123.0
$56.8

31. Table 6-12 Caps and Actual 2008 Payrolls in the NBA and NFL (slide 1 of 3)
NBA ( Season)
Cap = $58.7 million
NFL (2008 Season)
Cap = $113.0 million
NHL ( Season)
Cap = $56.7 million
Team
Payroll
New York
$97,085,751
Oakland
$152,389,371
NY Rangers
$66,064,200
Toronto
$95,358,923
Dallas
$146,401,600
Calgary
$63,100,000
$93,215,017
Minnesota
$133,354,045
Philadelphia
$60,472,500
Cleveland
$90,794,387
$131,916,300
Ottawa
$59,778,117
LA Lakers
$80,745,793
New Orleans
$131,531,820
Montreal
$58,908,000
Boston
$78,738,973
Pittsburgh
$128,815,061
Washington
$58,522,500
Detroit
$77,046,985
Tennessee
$126,017,443
$56,589,460
Memphis
$75,819,691
Arizona
$122,110,110
$56,400,000
Phoenix
$75,449,279
Jacksonville
$122,109,207
San Jose
$55,811,667

32. Table 6-12 Caps and Actual 2008 Payrolls in the NBA and NFL (slide 2 of 3)
Orlando
$74,863,198
Chicago
$120,065,819
New Jersey
$55,654,200
Philadelphia
$74,434,445
San Francisco
$118,766,239
Dallas93-4
$55,625,000
Sacramento
$71,517,217
New York Jets
$116,910,097
Edmonton
$54,067,381
$71,487,984
St. Louis
$116,677,660
Vancouver
$53,144,000
Washington
$70,558,149
New York Giants
$115,816,180
Minnesota
$52,861,000
Milwaukee
$70,220,238
Miami
$114,649,660
Columbus
$52,342,500
Indiana
$69,623,798
Buffalo
$113,364,927
$52,225,700
Houston
$68,761,285
Carolina
$112,114,711
Colorado95-6
$51,940,000
San Antonio
$68,403,480
$111,963,684
$51,548,557
Atlanta
$68,165,839
San Diego
$111,813,340
Boston
$51,535,000
Charlotte
$68,004,277
Cincinnati
$109,727,880
Florida
$51,392,500

33. Table 6-12 Caps and Actual 2008 Payrolls in the NBA and NFL (slide 3 of 3)
Denver
$67,068,631
Philadelphia
$109,557,398
Anaheim
$49,838,000
New Orleans
$67,017,804
Houston
$108,445,418
Carolina97-8
$49,075,000
Utah
$66,266,407
Tampa Bay
$104,329,311
Toronto
$48,835,000
Minnesota
$63,527,135
Seattle
$102,985,710
St.Louis
$45,483,333
Golden State
$63,287,110
Atlanta
$96,391,525
Nashville
$44,155,000
New Jersey
$61,983,445
Detroit
$95,827,117
$43,501,666
LA Clippers
$61,883,344
$95,599,778
Phoenix96-7
$39,102,500
Oklahoma City
$61,534,722
Green Bay
$94,018,300
Los Angeles
$36,112,500
Portland
$56,154,803
Indianapolis
$93,373,915
$34,262,500
Miami
$50,031,123
New England
$92,734,120
NY Islanders
$33,267,500
Baltimore
$90,713,965
Kansas City
$83,623,776
Average
$71,968,308
$113,253,609
$51,387,176
% Teams Over Cap
93%
50%
20%