IJSF Issue 1:1

Contents for IJSF Issue 1:1

Value of Major League Baseball Ownership
Authors: Rodney Fort
Abstract:The unwillingness of team owners to share their data prohibits a direct assessment of the value of professional team sports ownership. But insights into that value can be gleaned from actual team sale prices. First, throughout the entire modern history of Major League Baseball (MLB), the average real growth in team sale prices is twice the usual comparison value of 3% for the economy at large. Second, aggregated at the franchise level, the average rate of growth is about 1.6 times the 3% comparison. Third, the real growth rate an owner can expect from time of purchase to time of sale over the decades has been a roller-coaster ride. Fabulous growth occurred to the 1940s, fell off dramatically to the 1970s, rebounded very strongly in the 1980s, and was essentially zero in the 1990s. In addition, there appears to be a strong relationship between risk and return, owners have learned to price expansion franchises close to discounted expected future profits, the period of ownership has shown dramatic declines at two distinct points in time, and the portion of ownership value not associated with annual operations appears to be significant. This information has implications for claims of losses by owners and for future analysis.

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The Efficiency of the UK Fixed-Odds Betting Market for Euro 2004
Authors: John Goddard, Stuart Thomas
Abstract:An assessment is made of the efficiency of four UK high street bookmakers?betting odds for the 2004 European football (soccer) championships, based on an analysis of match results data from 15 previous international tournaments. Pre-tournament probabilities for the outright winners of Euro 2004 are generated using Monte Carlo simulations. There is no evidence that the bookmakers underestimated the win probability of the pre-tournament outsiders and ultimate winners, Greece. However, the odds quoted for bets on the host nation team, Portugal, appear to understate the importance of home advantage. The bookmakers?odds for fixed-odds betting on the outcomes of individual matches appear to satisfy the criteria for betting market efficiency, although this finding is based on a very small sample.

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The Auctioning of TV-Sports Rights
Authors: Harry Arne Solberg
Abstract:This article examines the effectiveness of auctions as sale procedures of sports rights. Although recent history contains several examples of auctions that have generated substantial revenues to owners of sports rights, staging an auction is no guarantee of success. The amount that bidders are willing to pay is influenced by a number of factors. Television companies or networks do not control all of the factors that influence their income from sports broadcasting. As a result, risk-aversive companies may choose not to submit bids. Sellers should stage open-bid procedures (preferably English auction) in order to neutralize this effect. Open-bid procedures provide information that can encourage risk aversive companies to bid more aggressively. However, sellers who fear collusion among buyers should stage secret bid auctions. The production and transmission of TV programs is characterized by economies of scale advantages. High entrance costs reduce the number of companies that can afford to enter the market. On the other hand, those few that have the financial resources will strengthen their market power, at the cost of the sellers. This can reduce the level of competition and make it more difficult to uphold values on sports rights. Introducing minimum fees and royalty fees can reduce the problem, but not fully outbalance the negative effect from reduced competition. Thus, sellers of sports rights may have to accept a reversal effect on rights fees if the number of bidders is reduced.

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Developing a Profitability Model for Professional Sport Leagues: The Case of the National Hockey League
Authors: John Nadeau, Norm O’Reilly
Abstract:Escalating costs in professional sport, increased competition from entertainment alternatives, and a recent labor dispute in the National Hockey League (NHL) provide the impetus to study the underlying structure of team profitability. The current study takes advantage of this opportunity by developing and testing a profitability model for NHL teams based on the underlying premise that there are multiple determinants to franchise profitability. An extensive data set of more than 40 variables was extracted from the 2001-02, 2002-03, and 2003-04 NHL seasons to explore the complex nature of franchise profitability. The number of variables is reduced using principal components analysis and the model interactions are tested using a regression analysis. The results demonstrate that having a winning team is an important feature but it is not the only factor related to profitability. Indeed, winning is not directly related to profits but indirectly influences profits through the level of market support. The resulting model implies that profitability is directly determined by market support and player investment while a variety of other influences on profitability are enabled through the direct considerations. These indirect determinants include improved performance; team playing style; team composition; historical performance; market competition; arena location; and level of sponsorship. Regional and local television, the intent of ownership, and market characteristics are additional considerations that should not be completely dismissed from the list of profit determinants. The model has implications for both theory and practice and contributes towards the development of a profitability model for all professional sport leagues.

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Executive Interview: Mitchell H. Ziets
Authors: Daniel Rascher
Abstract:An interview with Mitchell H. Ziets, president and CEO of MZ Sports, LLC.

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Book Review: National Pastime: How Americans Play Baseball and the Rest of the World Plays Soccer
Authors: Phil Miller
Abstract:A book review of National Pastime: How Americans Play Baseball and the Rest of the World Plays Soccer, by Stefan Szymanski and Andrew Zimbalist

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