Does a Sports Franchise with a bigger market have an advantage over one with a smaller market?
Main Factors: Sports franchise with larger markets having possible advantages over franchises with smaller markets.
Every Sunday Night during football season, football fans from all across the nation get to witness some of the brightest NFL stars on the biggest stage in Sunday Night Football. People are always used to watching big name teams like the New York Giants, Dallas Cowboys, and the Seattle Seahawks. Whenever people turn on their tv’s to watch baseball, it always seems to be the New York Yankees or the Boston Red Sox on national television. Although all three of these teams are usually post-season contenders, they always seem to be played on national television. A large part of the reason why certain Sports teams are advertized more than others is because of the size of the market they attain.
In the article “Valuing Professional Sports Franchises: An Econometric Approach”, Kelly Smith uses econometric analysis to model team values. Kelly smith states that “the value of any business is based on its potential for future earnings”. “First is the cost or asset-based approach, centering on the principle that an investor will be unwilling to pay more for an asset that produce the same future during cash flow”. Based off of potential earnings, sports franchises are able to maximize in size and worth. For example, the New York Giants NFL football team is located in the biggest city in the United States. Though they share the city with another NFL team, the New York Jets, they still remain the cities most popular NFL Team. Since they are the most popular NFL team in the largest city, their potential income is through the roof, renovating millions of dollars with merchandise, season ticket holding, and broadcasting rights for people to watch the game. Kelly Smith also states that “The market/sales comparison uses principles of competition in a free market and relies on the assumption that, in an equilibrium, the price of an investment will apply to similiar investments, with some modifications”. Looking at the data certain transactions like sales, it seems as though an anylist is able to make comparisons by distinguishing the difference between the franchise that is set to be valued and other recent traded franchises. It is also very important to take into consideration the market size, location, and local television agreements when comparing sales transactions. For example, most NFL primetime game are in big cities with big name teams like the Chicago Bears or the Dallas Cowboys. We usually don’t see the Jacksonville Jaguars in night games because they are a smaller city with a smaller team. The Dallas Cowboys on the other hand are a big city with a lot more fans. When they nationally broadcast a football game, there is more in revenue and profit that the team makes as well as the NFL due to the fact that the size of their franchise in their city is large with a large amount of fans, increasing their value. A team with a larger value will increase net-worth and profit, making their team a popular choice for a free-agent player to sign with.
Many sport’s leagues all spend a lot of money on their organization with players, stadiums, ect. to take the best possible franchise they can. Although the margins are slim in professional sport’s, it is shown that a team with a big market has an advantage from a team with a small market due to populatity, size and marketing tactics.
Future Research: Does a Professional Sport’s team’s success rely on media contibutions?
http://economics.about.com/library/weekly/aa043004g.htm
http://economics.about.com/library/weekly/aa043004g.htm
David, your charisma and intensity towards this topic is clear, and I agree with many of the opinions that you raise. However, there are still plenty of smaller franchise teams that thrive in their leagues that you failed to mention. The Oklahoma City Thunder, for example, practices in a converted roller skate rink, yet they still drew in two top picks in the NBA and made it to the finals recently. Apples and Oranges Dave, apples and oranges.
ReplyDeleteIt is like comparing an injured Jay Cutler to Derrick Rose in the finals game, it just doesn't add up.
DeleteNic, the Oklahoma city thunder were able to draft good players through the NBA lottery draft, which is a lottery through the 14 NBA teams that did not make the playoffs. Along with Oklahoma city having a quality scouting report on players in the draft classes, they were rewarded the position through being one of the 14 worst teams in the NBA the previous season. So by that being said, not matter how large your franchise is, you still get a draft pick, which unless you trade the pick for free agent players or team deals. The draft happens every year and for the worst teams to be able to draft the Oklahoma City thunder is only from them being one of the worst teams. The jacksonville Jagaurs, who are the NFL's smaller market team, have had a top 5 pick in the last 6 draft classes and are still the worst team in the nfl. For you to make a stance of small market teams being able to draft very good players is irrelevant and does not help your stance against my post
ReplyDeleteDavid, here's what we're going to do. We're going to send you to sports remedial school. You're going to go away for a while and learn some things. Then, you can come back.
DeleteThank you, very much
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