Hornets to Bobcats to Hornets

Today, the worst franchise in the NBA took back the former name from the team who bolted from Charlotte    to New Orleans back in 2002. With the New Orleans changing their name to the Pelicans for the 2013-2014 season, the opportunity for Charlotte to reclaim their name was right in their palms. Or wings.

Either way, Michael Jordan, majority owner of the former Bobcats, recognized an opportunity to rebrand the team and potentially ditch the negative vibes of the worst team in the league. On the other hand, the past Hornets have failed to achieve higher bragging rights over the past few years themselves. But change is good. Change cannot hurt.

The small market teams in the NBA hang tight to the revenue sharing that is mandated by the league. These teams, including Charlotte and Cleveland, have had trouble sustaining high levels of interest in their teams. For a few, winning has been a formidable solution (Memphis). These standards, do not hold up throughout the Big 4 sports (Tampa Bay Rays) and are always questions of what will draw crowds to games.

All in all, this is by far the right move for the Bobcats. The team is definitely rising (take note they are not "on the rise"), but proper rebranding may help bring national interest to a team that has been nothing but an eyesore since 2004.

MLB’s Playoff Expansion: Economically Good?

Last week, Major League Baseball agreed to add an additional wild card slot to both the American and National League, allowing for a total of 10 teams to compete in the playoffs for the World Series title. (ESPN)

What I was wondering is whether or not this move was a positive note for the league economically or not.  Or to further propose was enough change made to improve the league financially?

In 2010, Reuters reported that the MLB was making a record amount of revenue, surpassing $7 billion.  However, the fact was that attendance at games was down, and television viewship also took a toll.  The only reason revenues were up was the value that advertisement slots had on numerous companies.  Sports sponsorship and advertising is an art form in itself, but I want to focus on the longevity of the main variables in sports business success: attendance and viewship.

When we see decline in both attendance and viewship, this signals huge red flags for the league.  One of the big financial problems that other leagues, especially NASCAR, have had in the past is the lack of interest in the regular season.  NASCAR was forced to adapt a playoff series in order to gain younger viewers and attempt to rejuvenate a dying sport.  For the MLB, many concerns with younger fans are the numerous amounts of regular season games, followed by very few spots in the playoffs.  This turns away many people from the sport, and overall causes a lack of interest in the league. 

The majority of the viewship for the MLB comes during playoff times.  By increasing the number of teams, there is bound to be higher viewership if the right amount of games is adjusted.  I believe that majority of American’s utility curves towards playoff games, regardless of the sports, has a regular production curve, where diminishing returns are eventually reached.  The point where the MLB stands though, in my opinion, is very low on the utility level.  Therefore, I expect to see some growth, but far more potential growth, with the development of just two more teams in the playoffs.

At this point, the costs of including more teams in the playoffs are far below the potential benefits of more playoff teams.  Fans enjoy seeing their team winning.  With the viewship and attendance down in the MLB, it seems only logical to test the waters.  Furthermore, advertisement slots are most sold (and most expensive) during the playoff season.  By having more games, the probability that demand will still exceed the level of supply to keep prices high on advertisement slots.  I am interested to see what the MLB will plan to due in the next five years, as I see so much potential for a sport that has lost the place of America’s sport in the past decade.

References:

1. Klayman, Ben. “Analysis: No Perfect Game but MLB to Post Record Revenue”. Reuters. http://www.reuters.com/article/2010/10/25/us-baseball-economics-idUSTRE69O4GQ20101025 
2. “MLB, Union Agree to Expand Playoffs”. ESPN. http://espn.go.com/mlb/story/_/id/7638357/mlb-expand-playoffs-two-teams-10

Linsanity in China? The Plague that Could Change a Country

February 2012 may forever be known to NBA fans as the time the nation (and the world) caught the epidemic known as Linsanity.  Jeremy Lin is the perfect underdog story, to some extent: a Harvard graduate, who failed to get drafted in the NBA, was cut by 2 teams, until finally flourishing on the New York Knicks.  But what does this have to relate to economics?  The Economist blog states that the people of China, while currently rallying around Lin, may not share the same feelings from their government towards the Asian-American player.

The blog goes on to discuss the numerous reasons, but the one that stands out most is the clear cut opportunity that Lin has been given over his lifetime.  The United States system has allowed Lin to excel not only in athletics, but in academics.  His success in both fields landed him at the most prestigious university in the world, along with playing basketball at the highest level of competition.  At the current time, China doesn’t offer the ability to gain this similar experience, and it may hurt the overall perception by Chinese citizens.

If Chinese people rally around Jeremy Lin, a man who was able to accomplish to very different trades, and see the lack of opportunity in their own country, what incentive does this show to future generations when the youth attempt to pursue their dreams?  I believe that it is essential to have exposure to an array of skills, whether it is sports, academics, or music.  The feeling of becoming pigeon-holed because the opportunities are not available is something that I cannot imagine and would not hope for anyone to experience.  In fact, I could see the consequences building up beyond the individual sunk potential.  The lack of exposure could cause less economic growth and development due to losses in critical thought and interpersonal connections via cross-cultures. 

I may be going out on a limb with this thought, but the matter is that one person can truly make an impression on youth.  In America, many will see Lin and be inspired to not only become a great athlete, but to succeed in the classroom.  In China, the opportunity to reap the benefits from being successful at both of these trades may not be there due to the current position in the Chinese system.  I am highly interested to see how China as a whole reacts to the Linsanity and what effect he may have on the country in the future.

References:

1. “Stop the Linsanity?”. The Economist. http://www.economist.com/blogs/banyan/2012/02/chinas-new-sports-problem

  

Don't Run Out of the Tunnel Yet...It's Still Halftime

Super Bowl Sunday is a holiday in America, and with that, comes tons of presents thrown our way: new commercials!  While many of the commercials were silly, or played off the most recent trends in pop culture to date, other commercials attempted a more serious edge.  The one that caught America’s and my own eyes in particular was the Chrysler “It’s Halftime America”, featuring Clint Eastwood.  The commercial is commentated by Eastwood to tell the same tale of Detroit’s struggles through the Great Recession, and how Detroit along with all of America is ready to push forward and “play the second half” (a.k.a. bring the economy back to what it should be).  Check it out:  

As I watched this commercial, I believed the greatness of the marketing that Chrysler has managed to capture in recent years during Super Bowls, but as a budding economist, I am skeptical of the tale Eastwood speaks.

Let’s first look applaud the tremendous decrease in the unemployment rate in the Detroit Region.  As you can see below, the unemployment rate once reached as high as 16.6% in July 2009, and now stands around 9.6% (Bloomberg).  The numbers are truly incredible, and for that, I will state I never imagined Detroit would return to a level hovering around the average national unemployment rate.

                            

All seems to be heading in the right direction, but could the drop in the unemployment rate in Detroit and surrounding areas be too good to be true?

But a bigger question needs to be asked: what caused the improvement in the Detroit economy?  Well, surely we can look at whom else but Chrysler, the company responsible for such a powerful ad at America’s largest sporting event.  What the commercial proclaims is that Detroit is now up and running thanks to the power of manufacturing in the Motor City.  After looking at the statistics over recent months, I was hardly impressed by the standards being set by the large corporation.

The manufacturing employment has certainly gone up in the past year, but the growth rate just doesn’t seem to reach the acclaimed values Chrysler holds for the Motor City.  

While we can see from FRED that the manufacturing employment in the Detroit area has increased since the plummet over the past decade, the growth level is nowhere near what it should be to see a significant effect that could turn Detroit into the once booming metropolis.  In fact, I would argue that Detroit will never get to this point again.   

What I mainly want to point out was the data found in the US Census Bureau last March.  Over the past decade, 25% of Detroit’s population left the Motor City.  At 713,777, the population was the lowest since the 1910 census (CNN).  As stated above, the peak of unemployment in Detroit occurred around July 2009.  Since then, there has been a consistent drop in the unemployment rate. 

After seeing the marginal growth in manufacturing employment, I believe the main cause for the drop in unemployment is heavily skewed by people moving away from Detroit, especially in the last couple years, and a high amount of people who dropped out of the unemployment rate candidacy. 

The city of Detroit has been in an uphill battle for over a decade.  Due to poor job growth, the dying manufacturing industry, and many poor policy decisions (that can be discussed on another day), Detroit is still beaten up and bruised far beyond a multi-million commercial can explain. 

Perhaps Clint Eastwood has me pinned.  I haven’t seen the Motor City that he knows and sees.  But the truth is that the growth just isn’t there for Detroit and the manufacturing industry in America.  The bounce back, while noticeable, isn’t showing signs to bring the once flourishing economy back to the Motor City. 

For those ready to see some touchdowns scored in the second half of the game this year, please don’t be too disappointed, Madonna and Cee-Lo are still lip-synching on stage.

References:

1. “Chrysler Super Bowl Commercial”. http://www.youtube.com/watch?v=tFAiqxm1FDA
2. “Detroit Loses a Staggering 25% of its Population in a Decade”. CNN. http://articles.cnn.com/2011-03-22/us/michigan.detroit.population_1_census-figures-mayor-dave-bing-undercounting?_s=PM:US
3. “Eastwood Heralds Detroit’s Revival in Chrysler Super Bowl Ad”. Bloomberg. http://www.businessweek.com/news/2012-02-06/eastwood-heralds-detroit-s-revival-in-chrysler-super-bowl-ad.html
4. Manufacturing Employment in Detoit-Warren-Livonia, MI. FRED. http://research.stlouisfed.org/fred2/series/DETR826MFGN
5. Unemployment Rate in Detroit-Warren-Livonia, MI. FRED. http://research.stlouisfed.org/fred2/series/DETR826URN

Should the City of Indianapolis Keep Peyton Manning?

The Indianapolis Colts organization forever changed in the 1998 NFL draft when the team selected Peyton Manning as the number 1 overall pick.  The organization, though, wouldn’t be the only party affected by Manning.  The city of Indianapolis would experience a huge boost in their economy and the overall perception of the city itself. 

As of today, the GM Jim Irsay has strongly hinted towards not resigning the Hall of Famer due to age and injuries over the past 2 years.  While this may seem like the wise decision for the team’s win percentage, what will occur to the economy that has built up since the success of the colts as an organization?

Bloomberg Sports has reported the current status of the Manning-Irsay conflict, and that nothing is set in stone with where Manning will be playing next time in September.  But what’s most interesting to look at is the effect that a football organization can have on a city in the United States.  The primary key to this organization over the past decade has been Peyton Manning.  Manning, who brought a Super Bowl championship to Indianapolis in 2008.  This influenced the NFL to host the 2012 Super Bowl in Indianapolis thanks to the mass consumer interest developed in the surrounding region.

Below is a table that can support the influence of the success that Peyton Manning has brought the Colts organization.  Because of the success, NFL officials chose Indianapolis as a location unique to many of the previous locations.  Over the past 20 years, there has been a trend to locate the Super Bowl in a desirable place to not only play football, but to vacation.  Only 2 (including 2 coming in the future) locations have been located in the Northern portion of the United States.  Why may this be?  Weather certainly has a great deal in choosing the playing field; but the real key is the fact that the NFL wants the Super Bowl to be at a location where anybody, regardless of team loyalty, would want to visit to have a great time.  Indianapolis breaks the traditional mold.  While the venue is located in a dome, the city is about to experience great revenue for the desired interest in fans who are willing to make a trip to not only the Super Bowl, but for the aesthetics of Indianapolis itself.

 

What effects does hosting a Super Bowl have on a city? College of the Holy Cross did research on the topic, and were able to find that the economic impact created by the Super Bowl has minor positive effects, if not affected.  However, there is no proof against the Super Bowl creating economic shrinkage.  In my opinion, this backs my sports marketing background, in which the NFL in itself is less successful than many think.  But the implications of bringing in approximately $500 million of revenues into the city thanks to the Super Bowl are a good short term exposure. 

I would say that the chances that the Super Bowl comes back to Indianapolis will be far in the future.  The organization is going to undergo a complete overhaul if they get rid of Manning.  My belief is to stick by their quarterback through and through, the one who brought the team to glory.  The one who brought economic value to the organization, and partial responsibility for the current state of Indianapolis.

References:

1. "List of Super Bowl Champions". Wikipedia.  http://en.wikipedia.org/wiki/List_of_Super_Bowl_champions
2. Levinson, Mason. "Peyton Manning's Neck Surgeon Clears NFL Return as Colts Say Not So Fast". Bloomberg.  http://www.bloomberg.com/news/2012-02-03/peyton-manning-s-neck-surgeon-clears-nfl-return-as-colts-say-not-so-fast.html
3. Matheson, Victor A. "Economics of the Super Bowl". College of the Holy Cross.  http://college.holycross.edu/RePEc/hcx/Matheson_SuperBowl09.pdf