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The nature of sports
business
Cracking big money insanity
11/14/04 - by Fred Begin
The Big Fix
Assuming we can look at the broad-brush income and expense, and realize that
there is a wide variance from sport to sport and franchise to franchise, what
next? Let's agree that we want sports entertainment. Let's agree that we want
sports entertainment in the cities that currently have the teams. Let's agree
that if things make sense, we want to allow for expansion to share our pleasure
with new and growing markets. Let's agree that the owners are entitled a
profit. Let's agree that the players are entitled some form of exorbitant pay.
What is the right formula? I think we should look at a graduated flat salary,
with incentives and premiums. What does this mean . . . please bear with me.
I think all sports should have a flat salary guaranteed, based upon
time of service. The leagues and unions can figure out their scale. Base it
upon games played, years in service, add in some compensator for minor league
shuttle players. Make no adjustment for the position, as that is handled below.
Make no allowance for signing bonuses. I think it is ridiculous to pay millions
to someone who has never touched a pro ball in play. Set a scale, $100,000 per
year, $50,000 for every 20 games, some sort of progressive format, fitting the
sport and giving credit for experience.
I can't begin to guess at the
right amount because I do not know enough of the internal economics by sport.
We are simply looking at time served with step-ups. Some sports have longevity
and other don't. 164 games in baseball or 16 in football, but a general formula
could be reached. Perhaps the steps begin to decrease after a period to time
and level off. This might force some to retire early, if they have diminishing
returns.
If we can agree to a simple step format for the base sports,
then all contracts should be loaded with incentives. It is impossible to
compare the home run king with the rookie shortstop. How do we measure a goalie
against a shooting wing, shooting guard against defensive center or hot dog
wide out against a nose tackle? Simple.
Level 1 Incentives -
Individual Achievement. $5,000 for each homer. $5,000 for each sack. $1,000 for
each 3 point conversion. How about $1,000 for each strike out. Make a save have
value or runners stranded on base. $1,000 for every one in a double play. $500
for each shot on goal and $1,000 for each goal scored. Conversely, $500 for
each blocked shot. Every sport has its special stats. Let's actually use them.
However, we want to balance them out. We don't want every weenie short stop
swinging for the cove. We get to balance performance against actuarial
expectation. You knew stats would lead to bean counters, right? Statistically,
we could figure out how many events are expected in a season and budget
backwards.
Level 2 Incentives - Defensive Bonus and
Failure Penalties. If you have some sport with defensive specialists, then if
you figure out how to bonus them, then you can also figure out penalties for
failure. Example, if you have a catcher who can't hit over the Mendoza, but you
want him cause he calls a good game, controls a pitching staff or has a cannon
for an arm, so be it. Bonus the catcher for the strike outs too, add in the
throw outs. But ding him for successful steals, or pass balls. How about that
huge center who couldn't sink a 3 point shot if it were a technical, but gets
20 blocked shots and 20 rebounds a game. This is not a necessary level, as you
could blend them into Level 1, but it represents other levels of thought.
Level 3 Incentive - Team Incentives. Sports are filled with
enough prima donnas. You want to encourage team play and success. If their
individual efforts contribute to team success, then everyone profits. You can't
say that they don't want to win. How often do we hear about players looking for
a trade, even for a "lesser" contract in order to get the ring or kiss the cup?
Bonus the whole team for every win over a certain threshold. Bonus the team for
play off wins. Bonus the team for championship wins. Some of this is done now,
but there is room for restructure. Since we are always comparing media market
size and share, this team level bonus would be a prime way to redistribute
revenues to the smaller media markets. In these play off games, I would imagine
TV revenues increase as well, so there is your primary source.
Level 4 Incentives - Draft Bonus. A personal favorite of mine. We hear
about rivalry in sports. From lower grades to the pros. Why not foster more of
that. For every sport, we know how many players are typically drafted each
season. Figure out some flat value per player in the draft. Owners pay in to a
draft fund some amount, even per franchise. Ownership has some sense of
territory or region. For every local player drafted, if a local franchise
drafts the local player, they get a draw from the draft account. You can have
two amounts, a larger amount for the local boy at the local school or a lesser
amount for the local boy coming home for the pro sport.
Obviously, for
hockey this would be really difficult as there isn't a lot of winter ice in
Phoenix or Dallas. But for most other pro sports, we can draw from the local
colleges. If you do, you deepen rivalry and probably broaden fan base. That
bonus can be split between the franchise, the player or even the school. This
could eliminate or balance the signing bonus. It also will tighten the
relationships between local schools and the local pros.
I haven't done
the math. I think these are some interesting of not good ideas. It could
balance the playing field in so many different dimensions that I think we would
all benefit. As it is no one benefits from sport on strike or lock out. So,
take these ideas for what they're worth. If you like them, then pick up my next
hot dog and beer for me. See you at the park, stadium, coliseum or field.
Contact Fred at fbegun@yahoo.com
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