David Swank-Determining the Value of Sports Franchises
How we determine an Athlete’s Money Tree
Main Idea: Factors determining the maximum length and value of an athlete's contract.
When we watch these fantastic Athletes perform, whether it is a prime time NFL football game on Sunday Night, or just an evening MLB baseball game, these players are really something else, expressing their talents to their sport. As Republican Candidates spend millions of dollars expanding their campaign to the public, Sports Franchises spend millions of dollars on their players and coaches in order to build the best possible team they have. In order to fulfill those limits to the best of the Sports Franchise’s capability, many factors go into determining an athlete’s contract length and value.
The article “Wage determination in professional sports” by Sports and Public Policy discusses how an athlete’s value is recognized through what it must cost a team to pay an athlete compared to what the athlete is contributing to the team. This value is know as the product of marginal product and marginal revenue, or “MRP”. MRP represents the athletes value as a whole and is split up between MR and MP. MP, or marginal product, is the measure of how productive a worker is in terms of his or her output. MR, or marginal revenue, is a measure of additional revenue generated by each new unit of output. According to the article “An athlete’s value, or MRP, can be thought of as the number of wins that he or she generates for his team multiplied by the value of each victory”. Many athletes have different strengths and weaknesses that might dictate their chances of making the maximum amount of money they would demand from the team. In a perfectly competitive market where an athlete’s wages, or income through their contract, are equal to their marginal revenue products, there are only two factors that decipher increasing a player’s salary: either in an increase in marginal product or an increase in marginal revenue. A player that is able to improve over the course of a season and has a large contribution has a very good chance of receiving a larger contract worth more money when it comes time to renew his or her contract. Also, the willingness for fans to pay for ticket depending on the team’s success, networks like Fox or NBC to pay for broadcasting rights, and advertising through commercials all determine the team’s net worth and capability to pay players large amounts of money. For example, Josh McCown, who was a backup quarterback for the Chicago Bears from 2011 to 2013, finally got a chance to play in the regular season in 2013, when starting quarterback Jay Cutler went out due to injury. Josh McCown played in 8 games, starting in 5 of them for the Bears. He put up impressive numbers, tallying up 1,829 yards passing, averaging 228.6 yards per game with 13 touchdowns and only 1 interception with a 66.5% completion rating. Along with his flawless performance, he showed great leadership to his teammates and coaches, making him a valuable player in the locker room. At the end of the year, Josh McCown’s contract with the Chicago Bears ended, and the Chicago Bears were interested in re-signing the 13 year veteran as a possible starting quarterback. Unfortunately for the Bears, due to his wonderful success, McCown had 4 other teams looking to sign him for even larger amounts of money and benefits. Josh McCown ended up turning the Chicago Bears down and signed a 2-year, 10 million dollar contract with the Tampa Bay Buccaneers, with 6.5 million dollars guaranteed, and more money due to incentives.
It does not all rely on what a player does on game day to determine the millions of dollars he or she makes. It seems as though some aspects of marginal revenue are difficult to picture having an impact on a player’s contract, a team’s success within their franchise depend the sources it attains as well as the athletes it has. The Chicago Cubs have been able to have had a very successful season, not just because of the roster of talent they have, but also revenue the cubs have, being one of Chicago’s most popular teams and advertising the team all throughout the nation through WGN News. With the author discussing the extent value of an athlete’s contract, it seems there is more than what meets the eye when determining and evaluation a player to play on a team for the next couple of years.
Future Research: Are Some Franchises Worth More than others due to size, popularity, and location?
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