The Business of Sports

Disgrace or Deserved?

2009-07-30T19:27:00.000-07:00

ESPN.com recently ran a story detailing the widespread cuts athletic programs have been forced to make in the midst of the economic recession. The high cost of maintaining a large athletic program is often a drain on universities, and many coaches at public universities have drawn outrage for their large salaries. While many people believe that these "public officials" shouldn't make more money than teachers and governors, their high salaries can be attributed to simple economics and are an indictment of not the coaches, but the economics of big time college sports.

In February of this year, Jim Calhoun drew the ire of many with his press conference in which he was confronted by a reporter who asked Calhoun if he'd be willing to take a pay cut due to Connecticut's budget shortfalls. Calhoun, the state's highest paid employee, responded that he would give "not a dime back." And why should he? He, in addition to other top sports coaches, brings in more money to the university than his salary commands. Similar to the AIG bonus controversy, coaches such as Calhoun negotiated for their contracts in a free and open market; shouldn't they be entitled to what the market commands and what they are able to negotiate? Public universities should be able to compete with private universities in sports where coaches command high salaries, such as basketball or football. Thus, don't blame the coaches for benefiting from a broken system; instead, blame the system which monetizes amateur athletics and puts the financial strain on the so-called academic institutions.

Stuck in Minnesota

2009-06-30T18:24:00.000-07:00

After attending the NBA draft on Thursday night, I was as perplexed as everyone else in the Garden as to why the Timberwolves selected a point guard for both their 5th and 6th picks (the 18th, as well, even though they agreed to trade Ty Lawson to Denver), not to mention that one of those picks was on Ricky Rubio, the Spanish sensation who wants little to do with Minnesota. The reasons for his reluctance thus far to play in the wasteland of Minnesota lie beyond his having share the background with Jonny Flynn and the chilly climate. It is of course, all about the money.

Rubio's draft experience was truly a series of unfortunate events. Rubio was seen as the best basketball prospect until Blake Griffin burst onto the scene with 30 point and 20 rebound showcases. So, going number one was no longer an option. Then, the next two teams to pick, the Grizzlies and Thunder respectively, had point guards all ready in place with the Grizzlies having Mike Conley Jr. and the Thunder Russell Westbrook, who let it be known his wish for the Thunder to pass up on Rubio. So, up comes Sacramento with the fourth pick. The Kings were the only team to workout Rubio and Sacramento would offer Rubio a chance to appeal to the California masses. But they passed on him too for Memphis guard Tyreke Evans. Rubio unexpectedly drops to the fifth pick, and is now within praying distance of the Knicks. Although it was highly unlikely for Rubio to drop to eight, the Knicks did engage in trade talks for the fifth pick. New York would have been the perfect destination for Rubio: he would have fit in perfectly with D'Antoni's international style of play and more importantly would be the face of a franchise in the world's most marketable metropolis. Instead, Rubio is, at least as of now, stuck in Minnesota, pondering whether to pull the trigger on a 7 million dollar buyout, even though his salary was under 100,000 dollars. Rubio can now only hope that the Knicks can pull off a deal; otherwise, he has to go back to Europe with that paltry salary or go to Minnesota.

NFL Rookie Salaries

2009-05-03T16:22:00.000-07:00

The first pick in this year's NFL Draft, Matthew Stafford, has signed a contract in which he makes more money than Tom Brady, arguably the game's best player. This begs the question: should the league step in and set up a rookie salary system or let the free market system of the sport run its course?

Proponents of the current free market system argue for the current system by asking: who does this policy hurt? The owners are making plenty of money and they don't need any more protection. They also argue general managers shouldn't complain because they are the ones agreeing to these contracts. The players shouldn't complain because they are the ones making all this money. But herein lies the crux of the problem; Stafford's contract is in no way representative of the experience of most rookies. The players selected after the first round don't even smell the likes of Stafford's contract. With the top ten player's selected getting so much money, there is less to go around to the lower selected players. Also, when a team makes such a large commitment to one player, they don't have the ability to spend on the rest of the team. Often such a large financial commitment to one player can set a team back five years.

Veterans are the ones who detest the current system the most. They see top selections come into training camp making so much money, and with so much money at stake, the coaching staff has to validate their financial commitment by starting them. A more equitable solution would be to cap first round salaries. This way, teams wouldn't be overly invested in one player who has yet to prove anything and more money can go to veterans and later draft picks. Top picks would still make a good amount of money, but if they play to their capabilities, they will get the money they deserve by the time their second contract comes along.

NFL Contracts

2009-02-28T19:07:00.000-08:00

The NFL free agency signing period started off with a bang. Players like Albert Haynesworth and Deangelo Hall signed record contracts. But, unlike in the NBA or MLB, if these players get hurt or cut, their contracts are not guaranteed in full. This policy has drawn the ire of many NFL veterans who got cut right before their roster bonuses were due, and thus won't see the remainder of their contract. Many blame the NFL Players Association for not guaranteeing contracts for NFL players. So why is the NFL different from most other professional leagues?

The biggest reason for NFL contracts not being guaranteed is the large injury risk. Football, after all, is a contact sport, where injuries occur more frequently than other sports. After years of playing in such a physical league, many players' ability declines once they hit their early thirties. Many players who get cut for financial reasons are veterans at their nadir who were signed to large contracts. Additionally, NFL rosters are comprised of 53 players, which is much larger than the MLB and NFL rosters. With such larger rosters, the teams need to have more financial flexibility.

Recently, more and more players have favored signing bonuses and a higher percentage of their contract being guaranteed to ensure financial security. It remains to be seen whether or not the next Collective Bargaining Agreement will include measures to increase guarantees in NFL contracts.

Are Super Bowl Ads Worth the Cost?

2009-01-19T17:05:00.000-08:00

Super Bowl ads: the paragon of marketing. Companies big and small shell out unspeakable sums of money for thirty seconds of face time with the American viewer. These corporate exhibitions attract over 90 million viewers and generate an intangible amount of buzz and product exposure. But the 3 million dollar question is: Are they worth it?

There are many different ways to judge the effectiveness of an ad. Ads can be judged by the buzz and interest they generate, (google hits, web traffic and blog posts) sales, and brand association (how the perception of a product is changed.) For some companies, their Super Bowl ads have achieved all of these goals and have propelled their product into the American consciousness. GoDaddy, an internet domain registrar, is one example of a company that had an enormous amount of success with their Super Bowl ad campaigns. Bob Parsons, CEO of GoDaddy commented on the rationale of airing a Super Bowl ad: "Back in 2004 [when the company launched its first Super Bowl ad], we had the very best program of everyone we were competing with, but market share just wasn't growing enough," says Go Daddy CEO Bob Parsons. "A marketing firm said, 'Nobody knows that you exist and you should consider stepping into the mainstream media.' And the Super Bowl was right around the corner." Since airing its first Super Bowl ad in 2004, GoDaddy has increased its market share from 16% to 42% in 2007. The Super Bowl is an alluring venue for small companies on the make to try and make it big, but Parsons acknowledges that spending nearly $3 million for 30 seconds of airtime can be an enormous risk for a fast-growing company. "If [anyone does] a Super Bowl ad, they should be in a financial position that if the ad didn't work, it wouldn't affect the business," Parsons says. As for larger companies, Jon Bond, co-founder of Kirshenbaum Bond + Partners, a New York-based ad agency believes that the cost of a Super Bowl ad is worth the price. You need an X-factor," he said, adding that Super Bowl commercials offer a rare opportunity for a company to separate itself from its competitors and establish brand loyalty and brand imaging.

What type of ad to air is just as difficult of a conundrum as deciding to air one at all. Do you go the risque route like GoDaddy did, with its racy use of GoDaddy girls, sure to generate a lot of buzz, the humorous route as Anheuser-Busch and Pepsi co often do, which aim to create positive brand association, or the product persuasion route, in which a company will take a conservative approach and attempt to persuade the customer to buy its product through statistics and reviews as car companies often do. The general consensus is that the most effective use of Super Bowl commercials, for companies that are known to the American consumer, is a blend of humor and product usage, as the Tide to go screaming stain ad showed. This ad effectively got the viewer's attention and created a positive brand association through humor yet also enticed the viewer to buy the product because of its shown usage. The effectiveness of a Super Bowl ad is a combination of the company's state and the ad's ability to generate buzz and convince a consumer to purchase the product. Larger companies tend to have more success with Super Bowl ads, due to their financial capabilities, but smaller companies like GoDaddy can use this national holiday as a means to catapult its business with a memorable ad.

Bowl Bonanza

2009-01-06T17:35:00.000-08:00

As another bowl season comes to a close, so too do the sports talk show hosts and blogosphere's clamoring for a playoff system, despite College Football's unyielding reluctance to adopt one. Most college football fans want to see the National Championship game decided on the turf, instead of in a computer. But the Bowl, University and Conference commissioners want to keep the money pouring in from the Bowl Championship Series.

The prevailing reason for the BCS is its exhorbanent financial success as a billion dollar a year industry. From 2001-2005, 2005 being the most recent financial year records are available, compensation packages for bowl game executives have increased about 70 percent according to an examination of the bowls' Internal Revenue Service records by The San Diego Union-Tribune. Over this same time frame, the nineteen tax exempt bowls have enjoyed an 85 percent increase in their net assets. This increase is primarily due to a heavy increase in ticket sales and television rights fees. The bowl system itself has experienced tremendous growth, as 14 bowl games have been added in the last 12 years. University administrators also enjoy huge cash purses for participating in the bowl games. No one in College Football wants to back out of this extraordinary cash flow. "The bowls have become this big gravy train," said Murray Sperber, author of College Sports Inc. "Everybody loves this gravy train so much they don't want to get off." Although many believe that the College Football fat cats could see financial gains from a potential playoff system greater than those of March Madness, they see no reason to risk their profits. The best solution would be to create a playoff of the top eight teams, to give the fans what they crave, and have the other 56 teams play in 28 bowl games. This would keep the profitable BCS system yet also give us a National Champion truly deserving of that title.

A Third World Olympics?

2008-08-23T15:10:00.000-07:00

The 2008 Beijing Summer Olympics have shown the power of the Olympic games. These Olympics have put Beijing in the company of New York, Paris and London and have created an enormous amount of exposure for China, which believes the Olympics are serving as a springboard for its ascendance as a national superpower. Given this incredible power that the Olympics have, shouldn't we use the Olympic games to revive Third World countries?

There are many reasons why a Third World country hasn't hosted an Olympiad. The host country bears a costly investment in preparing the Olympic games, as and estimated $65 billion were spent on the Beijing Olympics. Also, many Third World countries don't have the infrastructure, transportation, security and many basic necessities that most Olympic host cities offer. If Third World countries can't offer their own citizens these things, how can they accommodate all of these needs for the Olympics? These are valid obstacles, but are they really insurmountable?

Although the financial burden of hosting the Olympics may seem daunting, as many African countries' gdp doesn't even match the cost of hosting the Beijing Olympics, there are many ways that outside sources can help fund the Olympics in a Third World Countries. The Beijing Organizing Committee for the Games says that the Olympics are on pace to bring in $1 billion in local sponsorships. NBC is also paying $1.2 billion dollars to broadcast the 2012 Summer Olympics. 2 billion out of 65 doesn't sound like much, but the Beijing Olympics have been the most lavish in history. The 2004 Olympics in Athens cost $12 billion. Also, charitable organizations such as the Gates Foundation, which is committed to global development, could be called on to pitch in. The Gates Foundation has an endowment of nearly $39 billion dollars and recently received a gift from Warren Buffet of $30 billion worth of Berkshire Hathaway stock. It may seem lofty, but the Olympics in a Third World country in Africa could really revive the continent, and provide much needed necessities to its citizens after the Olympics end.

The Corporate Olympics

2008-08-07T18:23:00.000-07:00

As the Summer Olympics in Beijing draw near, television viewers are accustomed to seeing those five interlocked rings on the advertisements of the multinational corporations McDonald's, Coca-Cola, and Visa. These companies are willing to pay tens of millions of dollars just to put those five rings next to their brand names. But in exchange for all that money, these corporations have a huge influence in how the Olympics operate.

Montreal hosted the 1976 Summer Olympics and spent so much money as the host city that it almost went bankrupt. After news of how much of a financial hit Montreal took from hosting the Olympics, few cities wanted to host the 1984 Olympic games. Cities were fearful of severely mortgaging their economic future just to host the Olympics. But the Los Angeles Olympic Organizing Committee had a very interesting idea on how to profit off of the Olympic games: sell sponsorships. Los Angeles needed to build Olympic venues, so they turned to 7-Eleven and McDonald's to fund the Olympic Velodrome and the Olympic Swim Stadium respectively. Through their reliance on sponsorships for funding, Los Angeles was able to generate over $200 million in revenue from the Olympic games. Other host cities realized that the only way to generate a profit from hosting the Olympic games was through sponsorships. But these new sponsorships had an undesired effect on the Olympic games.

With the birth of Olympic sponsorships, the International Olympic Committee realized that they had to put better athletes in the Olympics to increase sponsorship funding. This notion led to the allowing of professional athletes in certain sports of the 1988 Olympic games. Many people had a bad feeling about this: don't the Olympics represent amateurism and aren't they supposed to be free of corporate influences? Americans loved watching the college kids on the 1980 U.S. Hockey slay the dreaded and amateur only in name Soviet squad. But these same viewers loved watching the 1992 Dream Team run away with the gold in basketball and the professional era in the Olympics was born.

Corporations also have influence in which sports are picked as Olympic sports. The Olympic sponsors want to pay for only the most viewer friendly sports. No wonder Beach Volleyball became an Olympic sport in 1996, only one Summer Olympics after the full-fledged professionalism in Olympic games. What can be better than watching Misty May in a bikini with "I'm Lovin' It" in the background? And sorry to Softball, which the IOC decided to drop as an official Olympic sport for the 2012 Summer Olympics. Guess who had a say in those decisions.

Money Madness

2008-03-21T13:59:00.000-07:00

The NCAA Men's Division I Basketball Championship, aka March Madness, is one of the greatest sporting events of the year; it gives student-athletes their "one shining moment" and gives them a lifetime's worth of memories. Its popularity has infiltrated the workspace, where office pools dominate the water cooler discussions. This popularity has made March Madness one of the largest revenue producing events in all of sports. The advertising revenue for March Madness which goes to CBS is expected to exceed $545 million this year, according to a new report from TNS Media Intelligence. Last year's tournament was the largest revenue producing post-season sporting event, pro or college. March Madness also brings in a large amount of revenue through television contracts. In 2003, CBS signed a $6 billion dollar contract that goes through 2014 for the television rights of March Madness. Where does all of this CBS television contract revenue go to?

Roughly one-sixth of that television contract goes to all Division I colleges and universities, with the individual allotment dependent on how many varsity sports are offered by the college or university. Roughly one-third of the revenue is allotted to each Division I institution, with the individual allotment dependent on the amount of athletic scholarships the institution distributes. The other half of the revenue goes to the conferences based on how well they did in the six previous men's basketball tournaments (counting each year separately, one "share" for each team getting in, and one share for each win except in the Play-in game and the Final Four).

How do the athletic conferences allocate the money they receive to their constituent colleges? See here for a searchable database of athletic conferences statements of revenue and expenses.

Big Time College Sports, Big Time Problems

2008-03-02T12:01:00.000-08:00

Big time college sports; a flawed institution in which universities lower their academic standards for athletes, where college coaches engage in impermissible actions in recruiting and where the major sports like basketball and football reap the benefits over the smaller scale sports. Schools that are known as traditional sports juggernauts draw the envy of less successful sports universities. It is the counterproductive competitive drive of schools with traditional excellence in academics but not sports, as well as the schools with less funding, that ruins college sports.

Harvard is the quintessential Ivy League university. It has a long standing tradition of academic supremacy, but not a reputation as an athletic powerhouse. As with all Ivy League universities, Harvard is not allowed to offer scholarships to student-athletes. Despite all this, new coach Tommy Amaker, a former Duke basketball standout, is compiling one of the best recruiting classes in the nation. It may be due to Amaker's experience at power conference schools such as Seton Hall and Michigan, or maybe because Harvard is willing to look at players with worse GPA's and test scores than previous coaches said they were allowed to. Harvard has also adopted aggressive recruiting tactics that border on or, in some cases, may even violate NCAA rules. Harvard’s efforts in basketball emphasize the increasing role that success in high-profile sports plays at even the most elite universities. In the race to become competitive in basketball with the big boys, Harvard’s new approach could sully the university’s pristine reputation. Harvard and Amaker's driving ambition to make Harvard a basketball power has not come without shady recruiting practices and lower academic standards. And if Harvard does reach the standard of basketball excellence it desires, the university may take a hit.
Take Rutgers for instance. For the past three years, Rutgers has been basking in the college football spotlight. Having gone to only one bowl game in its first 136 years of football and having never previously winning one, Rutgers has made it to three consecutive bowl games, winning the last two, been ranked in the top 10 and has garnered significant national media attention. But all of this success comes with a price. In order for the university to handle the economics of big time college football, coaching salaries and athletic facilities, it had to cut six sports, leaving many student-athletes deprived of an important reason they came to Rutgers. The university also was forced to lay off 180 employees and last fall canceled more than 450 class sections in order to financially maintain its success in football. Big time college sports create many problems at the universities, and take away from the other things the university needs to concentrate on.

Revenue Sharing and Team Valuations

2008-02-19T15:26:00.000-08:00

In a previous article of mine, I explored how the NFL's revenue sharing system allows small market teams to have success on the field. But the NFL's revenue sharing does more than create a level playing field, it fills the pockets of its owners. It has been well documented that NFL is the richest league, having the highest average valuation of the league's franchises, but it also has the highest ratio of revenue to worth and is the most profitable league. Take the Dallas Cowboys for example, the highest valued team in the NFL. They had a 2007 revenue of $242 million. Take the New York Knicks, the highest valued team in the NBA. They had a 2007 revenue of $196 million. But due to revenue sharing, the Dallas Cowboys valuation is a whopping $1.5 billion dollars compared to the Knicks' $608 million. The New York Yankees, the highest valued team in the MLB had a 2007 revenue of $302 million and a valuation of $1.3 billion. Despite the Yankees having a higher revenue than the Cowboys, the Cowboys are still valued $300,000 more. but why is it that revenue sharing causes NFL franchises to be worth more than NBA and NFL franchises?

The main source of revenue that NFL franchises take in is through the revenue shared from national TV contracts. The NFL revenue sharing system takes national TV contracts from CBS, for AFC games, FOX, for NFC games, NBC for Sunday Night Football games and ESPN for Monday Night Football games. These contracts are then divided equally and given to each team. The percentage of the value of these estimations derived from shared revenue for the Dallas Cowboys is 53%. On the other hand, the percentage of the value of the estimations derived from shared revenue of the New York Yankees is 13%. The percentage of value contributed by revenue sharing in football as compared to baseball is over a 4:1 ratio. The major source of value in major league baseball is from regional markets. The percentage of value of the estimations derived from local markets for the New York Yankees is 51%, compared to the Dallas Cowboy's 19%, a 5:2 ratio. The huge differences in value between the shared revenue from national TV contracts in the NFL and the local markets of the MLB is what causes the big difference in team valuations, despite comparable revenues.

College Recruiting Gone Wrong

2008-02-10T17:14:00.001-08:00

Earlier this week, the sports world set its sights on college football's national signing day, the first day high school seniors can officially choose what college they are going to play football at. This event has created a media spectacle, with ESPN even offering full coverage on ESPNU, which is an ESPN network dedicated to college sports. "This not too long ago was still very much a niche thing, but it's absolutely exploded into this huge, celebratory day," said Patrick Stiegman, ESPN.com vice president. "But the mainstream fan has really come to understand that recruiting is the lifeblood of any college program. Other than the occasional transfer, a school's success and coaching careers everywhere are made and broken on signing day. So, as we've gone well beyond that niche audience, it's become a huge content play for us." Rivals.com, a college recruiting web site now owned by Yahoo!, last year generated 75 million page views for national signing day, numbers that could be as much as doubled this year, according to internal projections. All of this outlandish and unwarranted media attention directed at 17 and 18 year olds has led to broken dreams and ruined lives.

Kevin Hart wanted to play Division I football more than anything in the world. When Hart, a 6-5 290 pound offensive linemen from Nevada, realized his dream was becoming a fantasy, he tried to make fantasy a reality. Hart faked his own recruiting process and told his high school paper that he had received a scholarship to play at Washington and Oregon, and eventually California. During a full house assembly at Hart's high school, Hart had two hats, sitting at a table: California and Oregon. Just as many of the top high school football seniors were doing on national signing day, Hart would choose the hat of the school he was going to play football at, only it was all a lie. "Didn't talk to the kid one time, never recruited him," said California's coach Jed Tedford after Hart "chose" to play at California. "He was in our camp," Oregon coach Mike Bellotti said Thursday. "We evaluated him. We did not recruit him." No one did. But this is the outcome that we get when we have kids not even old enough to drink making choices that are being broadcast on national television. Hart was overwhelmed by his fixation on playing big-time football, on being wanted, on the need to replicate what he had seen done by actual blue-chip players on national signing day: the insanity of high school seniors announcing their college decisions on local and even national television outlets, including ESPNU and the media bonanza made Kevin Hart feel the need to create such an elaborate tale. This is what happens when media and national attention is so keenly focused on kids who should be more focused on calculus and physics than X's and O's.

The Super Bowl Indicator

2008-02-02T17:50:00.000-08:00

The Super Bowl. A national holiday in which tens of millions of Americans, interested in football or not, gather around the television accompanied by chips and other snacks to watch the championship game of the most popular sport in America. Some watch to see the two best teams in the NFL duel it out, others for the comedic commercials and still others as a social gathering at a Super Bowl party. One thing is sure though: The Super Bowl has affected many things that don't have to do with sports at all.

There are many superstitions that investors believe in to try and figure out whether to buy or sell stocks, such as The October Effect, which says that October is usually a bear market and the Presidential Election Year cycles, which says that the third and fourth years of a president's term are better than the first and second. But one stands out as the craziest: The Super Bowl Indicator. This market superstition states that if the team in the Super Bowl from the old AFL wins, it will be a bear market, but if the team from the old NFL wins, it will be a bull market. In the last forty years, this indicator has been 80% right, 32 out of 40 times, and from 1967-1997, it was right 90% of the time, 28 out of 31 times. But maybe the SBI isn't the craziest market coincidence correlation: studies show that the statistic with the highest degree of correlation with the S&P 500 is butter production in Bangladesh.
Although sports and business have an obvious connection, I struggle to find any sort of logic behind the SBI. It will be interesting to see if in the future this trend continues. Just because something worked in the past doesn't mean it will continue to work in the future (I will be sure to keep a close eye on butter production in Bangladesh). Nonetheless I, along with many Wall Street investors with no interest in the Super Bowl, am rooting for the New York football Giants.

Salary Increase in Baseball and Free Agency

2008-01-28T13:09:00.000-08:00

In 1976, the average salary in Major League Baseball was $51,000. Now in 2008, the average baseball salary is $2.82 million, roughly 55 times more than in 1976. The reason for such a dramatic salary increase?

Free Agency.

Free agency allows players whose contracts run out with their current team to offer their services to the highest bidder. This system has led teams to compete in bidding wars in order to improve their teams, without giving up players via trade. Large market teams such as the New York Yankees and Boston Red Sox have the resources to spend exorbitant amounts of money on free agents. Once they or other large market teams sign a player to a large deal, that contract will set the bar for other comparable players, allowing them to have a claim to get such exorbitant contracts. Also the advent of super agents, such as Scott Boras, who are able to negotiate hefty contracts for their players set a high bar for player salaries. In 2000, Scott Boras signed Alex Rodriguez to a $252 million deal. Position players who were of a super star status such as Rodriguez now had the ability to claim sizable contracts. Similarly, when Boras signed Barry Zito, a solid but not superstar pitcher, to a $126 million contract, a snowball effect ensued in which aces expected contracts comparable to or larger than Zito's. In order for the escalating salaries of Major League Baseball players to stop before it becomes ridiculous, large market teams must stop overspending on free agents, and all teams must try to improve through the minor leagues, where the players are younger and therefore cheaper.

NFL's Revenue Sharing Gives it Parity, and Unrivaled Success

2008-01-23T12:10:00.000-08:00

Last night, the Green Bay Packers destroyed the Seattle Seahawks by a score of 42-20 to reach the NFC conference championship game. In what many think is Brett Favre's last hurrah, the gunslinging quarterback revived a franchise that is just two years removed from a 4-12 season. No other professional sports league exhibits parity like the NFL, where it is commonplace for a team to have a successful year not long after a very disappointing one. This parity, and the NFL's unrivaled financial success, is due to revenue sharing.

First introduced by former NFL Commissioner Pete Rozelle in the early sixties, the NFL revenue sharing system allows small market teams, such as the Green Bay Packers, to compete with larger market teams, such as the Dallas Cowboys. The NFL's revenue sharing system works like this: roughly 2/3 of the NFL's revenue comes from lucrative TV and radio broadcasting deals. The salary cap, the maximum money that goes to the players, utilizes about 2/3 of the teams revenue, so basically, the TV and radio broadcasting deals pay for the players' salaries. Each team has the same salary cap and each team has the same TV deal, which is why small market teams can field a competitive team. Other sources of revenue, such as NFL licensed products, are also shared equally. The other 1/3 of the league's generated revenue is derived from stadium sales, such as corporate boxes, seat sales and $8 hot dogs. This revenue sharing system gives teams, big or small market, a level, competitive playing field, while still giving entrepreneurial owners the ability to make substantial additional money through stadium income.

The NFL owes its financial success to revenue sharing. Unlike the MLB and NBA, sports traditionally dominated by large market teams such as the New York Yankees and LA Lakers, the NFL has thrived on the "any given Sunday" phenomenon. It is this parity that keeps viewers on the edge of their seats every game, generating advertising sales, and gives fans, at the beginning of each year, the hope and belief that their teams have a realistic chance to make the Super Bowl. By giving the exclusive broadcasting rights of each conference to just one distribution channel, FOX for the NFC and CBS for the AFC, the NFL creates a bidding war for the right to televise its games, and gets a lucrative contract. The brilliance of this system gives the NFL its unrivaled financial success and devoted weekly audience.

ESPN Needs a Competitor In Order to Stop the Gossip

2008-01-23T12:04:00.000-08:00

Da-da-da, da-da-da. The familiar jingle of ESPN's "SportsCenter" is a trademark of the sports entertainment monopoly. ESPN's dominance over the televised sports industry leaves the audience with one-sided opinions, a lack of multiple perspectives and inaccurate reporting. ESPN's constant obsession to be the first sports outlet to report a story leads it to make journalistic mistakes. ESPN needs a competitor for it to elevate its game.

An example of ESPN's jumping the gun to report a story was when ESPN incorrectly reported: "Sources have told ESPN's Kirk Herbstreit that, barring unforeseen circumstances, Michigan will announce early next week it has reached an agreement with LSU coach Les Miles to be its next head football coach." As Herbstreit's later remarks would make clear, that information did not come from "sources," but from a single misled, uncorroborated individual. This incorrect report drew the ire of Miles and the LSU athletic administration. Since ESPN is the only major sports television outlet, there is no one else to report the truth or an alternative opinion.

Another example of ESPN's reliance upon rumor instead of fact was when, in the wake of the tragic death of Redskins safety Sean Taylor, ESPN Radio's Collin Cowherd inexplicably assumed that Taylor's, "history of really, really bad judgement, really really bad judgement" had caught up with him, and even if the emerging reports that Taylor had "cleaned up his act" were true, "Well, yeah," Cowherd replied, "just because you clean the rug doesn't mean you got everything out. Sometimes you've got stains, stuff so deep it never ever leaves." Taylor's really bad judgement that Cowherd is referring to are his 2004 DUI arrest, which resulted in an acquittal, and a 2005 armed assault charge, which was later dropped as part of a plea agreement. It is wrong and inexplicable to blame someone for their own death without any sort of evidence. As it turned out, Taylor's death was due to an isolated burglary attempt gone wrong.

Dan Le Batard, columnist for the Miami Herald and ESPN The Magazine, voiced his disgust at what happens when the media is faced with, "a lot of airtime and few facts," as is the case with Cowherd's comments. Le Batard continued by saying, "We end up cloaking gossip in journalism. We get up on our soapbox and say we're doing journalism. Oh no, we're not. We're speculating...its not fair."

Should College Athletes be Paid?

2008-01-06T17:38:00.000-08:00

It is the eve of the BCS National Championship game in college football, which marks the end of the college football season. It is during this time that college football players are making tons of money for their universities, which benefit from television contracts, corporate sponsorships and lucrative bowl game purses. They see their jerseys in campus bookstores and their coaches having multi-million dollar salaries, yet the student athletes don't get a cent of the profit. Athletic scholarships arose as a competitive recruitment tool in the days before multi-million dollar television contracts and booster programs. Shouldn't the current athlete be paid today for more than just showing up and be compensated for the exorbitant amount of revenue that universities benefit from their athletic participation?

College basketball players feel the same way during their season in which their universities also profit financially without sharing the wealth with the players. Those college basketball athletes who are financially insecure are often left with no other option but to mortgage their future and enter the NBA draft. These athletes will have left college before they have earned a degree, and since a majority of them aren't prepared for the NBA, they are left with no job and no college degree when their professional basketball career fails. The time has come to establish a way for college athletes to be financially compensated for the revenue that they provide the universities and a security blanket in case a professional athletic career doesn't pan out, since most college athletes spend the majority of their time practicing for their teams and not studying or preparing for their future.

The following case illustrates the magnitude of this issue: in the 2004-2005 college sports season, The Ohio State University made a profit from football and mens college basketball totaling over $33 million. Despite this enormous profit, Ohio State spent only $2.3 million in student aid to the student athletes involved, mainly in the form of scholarships (according to the NCAA Financial Reports Database published by the Indianapolis Star). The problem with paying directly these student-athletes is that by being paid, they would no longer be amateur athletes. That is why there is a dire need to establish a trust fund for student-athletes. These trust funds would be financed by the universities out of their sports program profits, and be distributed to the student-athletes based on their income level and amount of revenue their respective sports bring in. Trust fund payment would also put an end to many of the "under-the-table" activities associated with big time college sports. The trust funds would be accessible to student athletes once they graduate, or if they turn pro, they would get 3/4 of the trust fund if they left after their junior year and 1/2 of the trust fund if they leave after their sophmore year, and so on. This trust fund would provide financial security to many low-income college athletes and give them compensation for the revenue their sport brings to their universities, while permitting them and college sports both to maintain their amateur status.