scholarly journals Free Agent Auctions and Revenue Sharing: A Simple Exposition

2009 ◽  
Vol 23 (1) ◽  
pp. 87-98 ◽  
Author(s):  
Duane Rockerbie
Keyword(s):  
Professional Sports ◽  
Revenue Sharing ◽  
Simple Approach ◽  
Free Agent ◽  
Ability To Pay ◽  
Model Predictions ◽  
Sports Leagues ◽  
Simple Exposition ◽  
Professional Sports Leagues

This article uses a simple approach to address the issue of how revenue sharing in professional sports leagues can affect the allocation of free agent players to teams. To affect the allocation of free agents, the imposition of revenue sharing must alter the ranking of bidding teams in terms of maximum salary offers. Two types of revenue sharing systems are considered: traditional gate revenue sharing and pooled revenue sharing. The article suggests that team rankings for ability to pay are not affected by pooled revenue sharing, however the distribution of player salaries will be affected asymmetrically. Traditional gate revenue sharing can alter the ability to pay rankings for teams, depending upon playing schedules and the closeness of revenues between closely ranked teams. Revenue data for two professional sports leagues provide evidence in favor of the model predictions.

scholarly journals Revenue Sharing in Major League Baseball: The Moments That Meant so Much

2018 ◽  
Vol 6 (3) ◽  
pp. 71 ◽  
Author(s):  
Duane Rockerbie ◽  
Stephen Easton
Keyword(s):  
Major League Baseball ◽  
Professional Sports ◽  
Revenue Sharing ◽  
Higher Order ◽  
Risk Averse ◽  
Positive Effects ◽  
Small Market ◽  
Major League ◽  
Sports Leagues ◽  
Professional Sports Leagues

Revenue sharing is a common league policy in professional sports leagues. Several motivations for revenue sharing have been explored in the literature, including supporting small market teams, affecting league parity, suppressing player salaries, and improving team profitability. We investigate a different motivation. Risk-averse team owners, through their commissioner, are able to increase their utility by using revenue sharing to affect higher order moments of the revenue distribution. In particular, it may reduce the variance and kurtosis, as well as affecting the skewness of the league distribution of team local revenues. We first determine the extent to which revenue sharing affects these moments in theory, then we quantify the effects on utility for Major League Baseball over the period 2002–2013. Our results suggest that revenue sharing produced significant utility gains at little cost, which enhanced the positive effects noted by other studies.

A Look Back at the Hearings

2017 ◽  
Author(s):  
David George Surdam
Keyword(s):  
Professional Sports ◽  
Revenue Sharing ◽  
Financial Data ◽  
Free Agency ◽  
Congressional Hearings ◽  
Look Back ◽  
Sports Leagues ◽  
Territorial Rights ◽  
Shed Light ◽  
Professional Sports Leagues

This conclusion discusses the aftermath of the Congressional hearings. During the hearings, the owners' general prerogatives survived essentially intact, although free agency of some sort was imminent in all sports by 1976. Legislators did not repudiate the reserve clause, the reverse-order draft, or territorial rights, despite their qualms regarding these institutions. The legislators and their aides missed some opportunities to subject the team financial data from the 1950s to analysis, which could have shed light on such questions as the effects of revenue sharing. Some fans gained when their hometown landed an expansion or existing franchise, while other fans lost when legislators did not prevent franchise relocation. Congress has held several hearings in the intervening decades since 1989. The professional sports leagues have also evolved. Technology has altered the landscape.

NFL team revenue distribution and revenue sharing: a median voter theorem

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Justin Ehrlich ◽  
Shankar Ghimire ◽  
Shane Sanders
Keyword(s):  
Design Methodology ◽  
Median Voter ◽  
National Football League ◽  
Professional Sports ◽  
Revenue Sharing ◽  
Content Type ◽  
Median Voter Theorem ◽  
Sports Leagues ◽  
Average Revenue ◽  
Professional Sports Leagues

PurposeRevenue sharing is ubiquitous among North American professional sports leagues. Under pool revenue sharing, above-average revenue teams of a league effectively transfer revenues to below-average revenue teams. Herein, the authors find and prove that a league will vote into policy a pool revenue sharing arrangement if and only if mean team revenue is greater than presharing median revenue, where this condition is equivalent to the presence of positive nonparametric skewness in a league’s distribution of team revenues. This represents a median voter theorem for league revenue sharing.Design/methodology/approachThe authors consider the case of revenue sharing for the National Football League (NFL), a league that pools and equally shares national revenues among member teams.FindingsThe authors find evidence of positive and significant nonparametric skewness in NFL team revenue distributions for the 2004–2016 seasons. This distribution is observed amid annual majority rule votes of League owners in favor of maintaining the incumbent pool revenue sharing model (as opposed to no team revenue sharing). Distribution of revenues – namely the existence of outlying large market NFL teams – appears to consistently explain the historical popularity of NFL revenue sharing.Originality/valueThe median voter theorem uncovered in the case of NFL applies to all professional sports leagues and can be used predictively as well as descriptively.

Player Mobility and Competitive Balance Regulation in Professional Sports Leagues

2021 ◽  
pp. 152700252110595
Author(s):  
Marco Runkel
Keyword(s):  
North American ◽  
Professional Sports ◽  
Revenue Sharing ◽  
Competitive Balance ◽  
Extended Version ◽  
Sports Leagues ◽  
The Difference ◽  
Salary Caps ◽  
Professional Sports Leagues

Competitive balance regulation is more widespread in North American than in Europan sports leagues. The present paper addresses the question whether this observation can be explained with the help of differences in the degree of player mobility. Using an extended version of the workhorse contest model of sports leagues, the paper shows that the answer depends on the kind of competitive balance regulation. While player mobility may help to explain the difference with respect to salary regulation (e.g., salary caps), the choice of revenue sharing schemes turns out to be independent of player mobility.

Revenue Sharing and Agency Problems in Professional Team Sport: The Case of the National Football League

1997 ◽  
Vol 11 (3) ◽  
pp. 203-222 ◽  
Author(s):  
Daniel S. Mason
Keyword(s):  
Agency Theory ◽  
National Football League ◽  
Professional Sports ◽  
Revenue Sharing ◽  
Team Sport ◽  
Opportunistic Behavior ◽  
The Past ◽  
Sports Leagues ◽  
Business Entities ◽  
Professional Sports Leagues

Although initially developed as cartels of independently owned and operated clubs joining to produce a sports product for spectator consumption, professional sports leagues have emerged as monopolies wielding significant economic power. By increasing revenue-sharing practices, and thus attempting to align owner interests, leagues have become single-business entities that maximize wealth for the league as a whole. Over the past four decades, the National Football League has implemented such practices to become the most popular team sport in North America. Using agency theory, this paper examines how the NFL's former commissioner, Pete Rozelle, and the League Executive Committee used these practices in order to increase League revenues and decrease opportunistic behavior by team owners. However, certain owners continue to act entrepreneurially, to the detriment of the League as a whole. This behavior is congruent with the tenets of agency theory, which contend that interests will diverge within a principal-agent relationship (e.g., the NFL— NFL teams). Until such time that team owners realize that the welfare of the other League clubs, along with their competitive equality, is paramount in retaining interest in and producing the League product, professional sports leagues will continue to be plagued with problems such as unnecessary franchise relocations and other acts of maverick owners.

Economics of Antitrust

2017 ◽  
Author(s):  
David George Surdam
Keyword(s):  
Team Sports ◽  
Professional Sports ◽  
Revenue Sharing ◽  
Antitrust Law ◽  
Competitive Balance ◽  
Sports Teams ◽  
Sherman Act ◽  
Professional Team Sports ◽  
Sports Leagues ◽  
Professional Sports Leagues

This chapter examines the economics of antitrust, with particular emphasis on how antitrust law affects professional team sports. In the late 1800s, Americans worried about the growing concentration of power in the hands of a few producers such as Standard Oil, American Tobacco, and other large firms that consolidated their holds over industries by merging and acquiring other companies. Other industrial leaders sought to fix prices above those obtained under competition. The Sherman Antitrust Act, enacted in 1890, contains provisions addressing “contract,” “conspiracy,” and “trade and commerce.” This chapter first considers how courts applied the Sherman Act to cases involving professional team sports before discussing the characteristics of professional sports leagues, how owners of professional sports teams reported profits and losses, the issue of player salaries and exploitation, and competitive balance and revenue sharing in professional leagues. It also describes franchise relocation and expansion and how television created demand in sports.

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