Owners are never the most popular sports figures in a city. When a team loses consistently, the owner is the person the fans blame; when the team wins, the owner is the person the fans want to get out of the way so that the announcer can interview the coach and star players. There is a reason that no owner has ever been pictured on a football card.

-Gene Klein, former owner of the SD Chargers.

Read Fort Chapter 4 pp. 109-127 Complete Worksheet Q’s #5

09/26/08

• The short-run and long-run decisions that confront sports team owners.

• Profit-maximization, subject to uncertainty,and the short-run and long-run decisions of owners.

• The tension created between fans, players, and owners by the owner’s financial bottom line.

• Profit variation and competitive balance.• Sports accounting versus the value of

ownership.

“The whole thing is not really an issue of big market, small market. It’s larger revenue teams, with smaller revenue teams complaining about not making as much as their bigger partners.”

- Don Fehr, MLBPA Executive Director.

Individual-Oriented (Mark Cubin)› Actual “Fantasy” Team?

Corporate› 99.9% always about the bottom line?

What factors do owners have to consider?

09/26/08

09/26/08

Remember the Product: Steak v. Sizzle

Rule #1: Give them a reason to keep you on

Rule #2: Understand the organizational structure of the organization and its relationship with the philosophy› What is the salary structure?› Benefits/perks?› Is the primary benefit for your position that

you get to work in sports?

09/26/08

Remember your economics principles

Remember your economics principlesShort-run: Some factors of production are

fixed.

Remember your economics principlesShort-run: Some factors of production are

fixed.Long-run: All factors of production are

variable, or open to alteration by the producer.

Remember your economics principlesShort-run: Some factors of production are

fixed.Long-run: All factors of production are

variable, or open to alteration by the producer.

In the long-run, owners choose quality (winning percent) to maximize profits. In the short-run, they sell attendance and broadcast rights to collect on this long-run choice.

Short-run: Some factors of production are fixed, like all contractual obligations in place at a point in time. For example…

Short-run: Some factors of production are fixed, like all contractual obligations in place at a point in time. For example…

Talent, on and off the field, typically over the course of a given season.

Short-run: Some factors of production are fixed, like all contractual obligations in place at a point in time. For example…

Talent, on and off the field, typically over the course of a given season.

The facility the team plays in, typically over its 20-30 year lifespan.

Short-run: Some factors of production are fixed, like all contractual obligations in place at a point in time. For example…

Talent, on and off the field, typically over the course of a given season.

The facility the team plays in, typically over its 20-30 year lifespan.

*Don’t confuse the short run with a short period of actual physical time. The short-run for stadiums can be decades!

What about roster alterations during the season?

What about roster alterations during the season?

If the owner is just making the changes that he/she forecast to reach long term quality, these are just short-run adjustments.

What about roster alterations during the season?

If the owner is just making the changes that he/she forecast to reach long term quality, these are just short-run adjustments.

If the owner changes his/her mind about the level of quality to put in front of fans, then we’ve left the “short-run” and it’s time to talk about the long-run.

Long-run: All factors of production are variable, or open to alteration by the producer. In the long-run…

Long-run: All factors of production are variable, or open to alteration by the producer. In the long-run…

New stadiums can be built.

Long-run: All factors of production are variable, or open to alteration by the producer. In the long-run…

New stadiums can be built.The level of roster quality can be altered.

Long-run: All factors of production are variable, or open to alteration by the producer. In the long-run…

New stadiums can be built.The level of roster quality can be altered.Managers and coaches can be replaced.

Long-run: All factors of production are variable, or open to alteration by the producer. In the long-run…

New stadiums can be built.The level of roster quality can be altered.Managers and coaches can be replaced.*Essentially, any time the owner steps back

and takes a “planning” view, long-run considerations about team quality are made.

09/26/08

09/26/08

09/26/08

• The short-run and long-run decisions that confront sports team owners.

• Profit-maximization, subject to uncertainty,and the short-run and long-run decisions of owners.

• The tension created between fans, players, and owners by the owner’s financial bottom line.

• Profit variation and competitive balance.• Sports accounting versus the value of

ownership.