Entertainment and Media: Markets and Economics Professor William Greene 1/37 Entertainment and Media: Markets and Economics Sports Professor W. Greene 3/37 What is the Market? Major U.S. Leagues Hockey Baseball Football Basketball Major U.S. League: NCAA Basketball and Football
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Professor William Greene
Professor W. Greene
Player salaries: Approx 60% and rising
Team/Principal Owner Value ($M) Income ($M)
New York Rangers/Cablevision Systems $263 -6.92
Dallas Stars/Thomas Hicks 254 5.63
Toronto Maple Leafs/Larry Tanenbaum 241 13.84
Philadelphia Flyers/Comcast-Spectacor 262 3.55
Detroit Red Wings/Michael Ilitch 266 -3.7
Manchester United:English Premier League Soccer: Revenue - $225million: Value - $1000m (2002)
N.Y. Yankees:Baseball/MLB: Revenue - $223million: Value - $850m (2002)
Redskins:NFL/Football: Revenue - $204million: Value - $845m (2001) Source: Washington Post, official accounts & Forbes Magazine.
And Manchester United can count a world-wide fan base of over 50 million zealots recruited to the cause.
The Manchester United Food & Beverage Group (MUFB) has opened a restaurant in the Chinese city of Chungdu. Eventual plans could see up to as many as 100 restaurants opened in the Asia market over the next ten years. MU branded football (soccer) restaurants selling shirts, posters,videos and novelty gifts - as well as food - are planned for Singapore, Malaysia, Hong Kong, Thailand, Taiwan, South Korea, the Philippines, Indonesia, Japan, India and Brunei with the stated aim of cashing in on the lucrative interest many Asian nations (estimated at 17 million fans) hold for the English game.
Player costs a % of total league revenue
New York Yankees 1996 payroll, $68M, 2004 payroll, $190M
In 2003: NHL, 75%, NFL, 65% of revenues went to players.
*Player’s strike led to cancellation of the World Series
Movie stars, shortstops, late night talk show hosts, perky morning news personalities
Marginal expense on players
Supply of players
Marginal value of players
The source of the Yankees’ $190M payroll – A-Rod Jeter, Giambi, etc.
In 2000, NFL authorized NFL Properties to solicit bids from companies who wished to obtain an exclusive headwear license
Reebok won the bid and won a 10-year exclusive license to make hats and other headwear featuring NFL team logos
Because of this exclusive license, NFLP refused to renew American Needle’s (and all other headwear vendors’) licenses
American Needle filed a lawsuit against the NFL, NFLP, the 32 NFL teams separately, and Reebok, claiming that such an exclusive license violated Section 1 of the Sherman Antitrust Act
Section 1 prohibits any “contract, combination…or conspiracy, in restraint of trade.”
NFL and other respondents argued that the NFL was immune from antitrust liability because it is a “single entity.”
Economists argue that a group of competitors (whether football teams or tennis players) can add value if they collaborate to adopt standards of play
Standardization function of NFL adds to value of products of 32 member clubs in same way that other standards organizations add to value of products that make use of them
But it would seem foolish to expose NFL team members to antitrust liability for meeting to develop playing rules or to select the date and location of the Super Bowl
Many issues argue in favor of the NFL. Others suggest the cartel can stifle competition. (Hence the appearance before the Supreme Court.)
End Class 5 – Part 5