Blog Entry

I hate to burst your bubble, but ...

Posted on: March 7, 2011 2:17 pm
Insult is no longer allowed to be added to injury.  Greed needs a boundary.  The dot.sports bubble is about to burst.

Billionaire NFL owners and millionaire players insult our common sense as they cut up a 10 billion dollar revenue pie paid for by foreclosed fans.  Squeezing literal blood from a stone, owners have extracted huge TV prepayments, sent layoff notices to staff and invented "personal seat licenses" (the infamous mortgage derivative of sports) this year.  Help me understand:  I pay for my seats, I pay shipping and handling and parking and overpriced concessions and logo'd merchandise and, in addition, I have to buy the right to be reamed for a price *larger* than my actual tickets?

Why?  To pad the vault before a pending lockout designed to prevent the players from cutting a bigger slice of the pie - despite overwhelming evidence of the premature deaths and shortened life expectancy of players.  Hello, injury... meet insult.  Football may be the most obvious right now, but baseball and other pro sports share the vastly inflated economic disparity vs. the fans.  Bread and circuses?

Not that the players are underpaid (well, the Pittsburgh Pirates, maybe) - rather, undertaxed. Due to tax breaks for new construction, some players in new top condos in NY pay *one fifth* as much tax as a couple in Queens pays.  Hello, insult?  We forget that players work half a year, not fulltime.  And many duck local taxes in the "home" towns of their ballparks through high-priced advisors. 

And the owners are rigging the game.  Consider this:  DirectTV would have actually paid the owners *more* if there were a lockout than if games were played.  Apart from the TV deals and away gate ticket sales the league divides, owners collect from their stadium (gate) receipts for home games, naming rights, sponsorships, luxury suite revenue, concessions and local broadcast rights.  In addition, your own stadium brings in extra money for concerts, events, a pro shop, and $12 hot dogs. And the trend has clearly been for private stadium ownership.

When owners saw the market trend move from individual fans to corporate buyers a few years back, they raised prices, expanded luxury boxes, and brought in arugula (the aromatic salad green).  Let companys treat clients and vendors from their subscription, right?  And serve wine and brie, right?  Nevermind that the crowd sounds different and TV shots are filled with empty seats, right? 

Wrong.  As the economic bubble burst, companies can't afford overpriced seats and those that still might are *embarassed* to be seen as spending frivolously.  The warning signs are visible during many baseball telecasts.  The bubble burst.  Then the housing bubble.  Then the mortgage derivative bubble.  Then the Madoff bubble (can you say Wilpon?). Then the jobs bubble.  Soon the public pension bubble.  And state budgets.  Is DoubleBubble next?

New Rule:  Team owners want a hefty percent of everything?  Ok, the pain too.
1)  Since each concussion costs 2 years lifespan, here's the fair way: Team owners must experience exactly the same concussion in their luxury boxes that any player sustains on the field.  Use automated hydraulic helmets or retired players with ball-peen hammers to invoke the "neuron-for-a-neuron" clause of the new collective bargaining agreement.  Have owners and players share the same health plan (like maybe senators and citizens should?). 

2)  Since PSL's are basically a real estate transaction, shouldn't owners pay a tax like we do?  Like a developer selling condo units.  Sales and capital gain per every PSL.  40,000 seats @$10k PSL per = $400 million revenue... what's the fair local tax on that?  25% = $100 million.

In the last few years, most people have seen their pensions and long-term benefits disappear - most corporate workers large and small, as well as teachers, firemen, policemen in the public sector  - the promises were unrealistic and impossible to sustain.  Players may be "entertainers" and push for whatever contracts the market will bear. But the money eventually comes from or is passed on to the public - a broke public, and a market that can't bear it anymore.

At what point is economic disparity so extreme that stadiums are empty... or better - they will look like the streets of Cairo?  Can you say Twitter?


Since: Aug 14, 2009
Posted on: March 25, 2011 11:43 am

I hate to burst your bubble, but ...

Before the deluge, the generated $40 million to shared revenue.  Now?  One bubble has burst - who's next?  How will the pending salary dump attract season tickets, luxury box buyers and fans?  How will "rebuilding" sell in metro New York?  With a Cleveland Browns fan suing the NFL over the PSL issue, is that a sign of things to come?


Report: Mets lost $50M in 2010; 2011 may be same wire reports    March 25, 2011    Link ->
NEW YORK -- The New York Mets lost nearly $50 million in 2010, the New York Times reported on its website late Thursday night.

The Times cited two people briefed on the team's finances. The team's losses are projected to hit another $50 million or more this season based on several factors, including advance ticket sales.  Two years ago, the Mets contributed more than $40 million to baseball's revenue-sharing pool.

In 2009, the Mets opened Citi Field and the club had revenue of more than $350 million. Still, the franchise has lost close to $10 million, according to The Times.  The team struggled again in 2010, and attendance dropped with almost 600,000 fewer fans.

According to the Times, overall revenue slid by more than $60 million, and net losses, after interest, totaled roughly $50 million.

Since: Aug 14, 2009
Posted on: March 19, 2011 3:08 pm

I hate to burst your bubble, but ...

Here is the best article I've seen explaining league revenue sharing in sports and the pitfalls - very clear and compelling:

NFL Lockout 2011: Revenue Sharing Is The Elephant In The Room Nobody Wants To Talk About 
(part 1)
Feb 18, 2011      in Dallas Cowboys General     Link ->

NFL Lockout 2011: The NFL's Revenue Gap Problem    (part 2)
Feb 21, 2011      in Dallas Cowboys General     Link ->
A good read.  And it shows why and how economic bubbles in sports burst.

Since: Aug 14, 2009
Posted on: March 18, 2011 10:47 am

I hate to burst your bubble, but ...

Are the owners trying for air supremacy?

MiG-29 gives NFL owners a fighting chance     By Mike Sando   March 18, 2011    Link ->

With tensions escalating between the NFL and its locked out players, news comes that one team owner has purchased a Russian fighter jet.  Hey, if football Armageddon truly is upon the league, ownership might as well be ready.

According to the Everett Herald, Paul Allen has been collecting vintage aircraft since 1998, almost as long as he has owned the Seattle . And while his recent purchase of a restored MiG-29 fighter jet had nothing to do with the NFL's labor mess, the gap between the league's austerity drive and one owner's ability to assemble his own air force must be wider than the labor impasse itself.

Of course, Allen isn't the typical NFL owner in terms of resources or even personal hobbies.  As the Herald reported, Allen's purchasing group, Vulcan Warbirds, has been "interested in a MiG-29 for a long time."


"Piece of candy, go for a ride little girl?"

Since: Aug 14, 2009
Posted on: March 16, 2011 10:53 am

I hate to burst your bubble, but ...

Jerry Jones banging his fist?

Here's the backstory:  Blame Jerry Jones and small market owners:

1)  The owners saw the future, especially the forecast of expanding revenue from several new streams and the ominous flattening of old ones:
- The fight over new outlets like games on your IPad and other mobile streams
- New sponsoring, merchandise and secondary sources
- Ticket price and TV revenue growth forecast to slow and flatten out
- Looming concern about health care costs, shortened player life spans and recognizing concussion risk
They realized that the current dollar level they share with players would also expand as a percent well beyond what they had originally intended.  The seed of the idea was planted to try to reset the split *now* before the alternate income streams expand and costs as well.

2)  Next, negotiations among the owners about the sharing of NFL Properties gets testy .  Jones doesn't like the fact that the Cowboy take from fans is a bigger contribution to this pool than say the and unlike Wellington Mara who when faced with the same issue on TV revenues smartly recognized the value of *sharing* the windfall among all teams, Jerry isn't so generous or far-sighted or smart.   He pulls out of the pool to go his own way and keep all of the money. Especially once he sees the future growth and small market demands.  So... future money is going to be huge, but NFL properties isn't going to be shared with all owners like the TV share. 

3)  Small market owners revolt .  They don't have the alternate revenue streams that Jerry does.  There is no luxury tax, as in baseball.  And with more and more of total revenue coming from non-shared sources in big markets, their piece of pie looks small and shrinking.  And the players will slice off some of that future revenue expansion and maybe add costs.  So they decide they need to get their piece from the only place they can:  A bigger pie by taking double off the top, 2 billion vs. one, or a bigger slice by taking some of the players slice, making it smaller.  After all, shouldn't the players be happy as the future revenue grows?  Just that theirs shouldn't grow as fast as ours.

4)  Owners begin an attempt to reset the money off the top and the split .  Players ask to see the books.  Owners say ok, 5 years (past) average of all teams. What's wrong with that?  It hides the looming Jerry Jones windfall.  The average blends all teams thereby masking the astounding cash stream advantage in big markets as well as looking backward so as not to alert players to a future tsunami of new streams.  Pay no attention to the man (cornucopia) behind the curtain.

5)  Owners prepare before hand by tilting the TV contracts to pad the vault if a lockout occurs.  A judge rules later this a violation, after getting up off the floor laughing hysterically.  Teams hawk PSL's vigorously, ask fans to pay up early and plan staff layoffs to cover the dry spell.  If fans can't resell their PSL's and decide not to renew tickets, the PSL reverts back to the team who can then double dip or more reselling the very same PSL again.

The improbable odd couple of small market owners and Jones is Jerry-rigged. But the new JonesTown cult has forgotten the sad koolaid ending.

Since: Aug 14, 2009
Posted on: March 15, 2011 10:31 am

I hate to burst your bubble, but ...

More insight into owners minds:

NY hawk PSL's/Tickets at $27,000 a (non)season facing lockout
    (  Brad Biggs   -  National Football Post    -    March 4, 2011    Link ->    )
Implication:  Owners building a war chest at the fan's expense?

No interest now in PSL resale but if/when they revert back, the team can resell them at full price
Implication:  Owners can double dip or more on unpopular and pricey PSL's (it may be like a taxi medallion, but *we* can sell the same one several times)

The Knicks and decide to raise ticket prices almost 50% - the largest single-season jump in recorded history.
    ( Mike Haas  -  Bleacher Report  -  March 11, 2011     Link ->    )
Implication:  Some Owners think fans will pay much more in current economy - a trend?

Fans forced to pay for tickets earlier;  teams hold money longer
Implication:  Owners take advantage of leverage with fans, despite uncertainty and economy

Corporate buyers inflate prices and push out fans due to tax deductions for skyboxes and suites.
    ( Richard Schmalbeck, Jay Soled   -   New York Times   -   Link ->    )
" These deductions have led to higher ticket prices in two ways. On the demand side, they have fueled competition for scarce seats, with business taxpayers bidding in part with dollars they save through the deductions.  On the supply side, the large number of businesses bidding for expensive seats has driven the expansion of luxury skyboxes and a reduction in overall seats in new ballparks."
Implication:  For Owners, money trumps fans - screw 'em on seats AND taxes

Since: Aug 14, 2009
Posted on: March 15, 2011 10:29 am

I hate to burst your bubble, but ...

How will the NFL mess be felt across the economy and what ripples can we watch for?  The baseball owners and the Federal Reserve are certainly watching.

"The first to feel the effects would be those most closely involved with the game. Players would lose millions of dollars in salary, free agents would be unable to search for new homes, draft picks would be unsure whether to sign contracts and injured veterans would be forced to seek treatment from their own physicians rather than team doctors. On the other side, coaches and general managers would be unable to construct their 2011 rosters or teach new plays at off-season camps."

( Childs Walker, Candus Thomson, Kevin Van Valkenburg  - Baltimore Sun   Link ->  )

Spreading financial strain will ripple outward from the epicenter:
  • Players (and their spending), Agents (finally!), the Cities and towns (taxes and revenue), training camps, local bars and merchants.
  • Owners spending (refunds, season ticket issues, PSL payments), team staffing, stadium staffing, roadies (equipment moving), local merchants.
  • Television (ad revenue, staffing, layoffs), Airlines, transportation,
  • Fans
  • Media (staffing), paid fantasy industry
  • Las Vegas
  • Slowdown in the recovery?
"The gambling industry is also bracing for a painful hit, according to Chris David, sports editorial director at “The NFL is king,” he said. “It’s probably 25 to 30 percent of your handle [wages taken]. If you take that away, it’s going to hurt."

  ( Mark Maske, Amy Shipley, Friday, March 11, 2011  -  Washington Post      Link ->     )

If it's not settled fast enough to keep most or all of the schedule, expect the whole economy to notice the impact.

Since: Aug 14, 2009
Posted on: March 7, 2011 3:42 pm

I hate to burst your bubble, but ...

For further evidence, click a few of these from various sports:

Sports Salaries Show What We Really Value   -   Wall Street Journal

Tickets to Champions League Finals Price Out Most Fans   -   NY Times

Baseball fans feel priced out at ballpark

Sports bubble watch: Fans priced out by PSLs say they won't be back

< bruised bank account bump, too serious bump, head-in-the-sand bump, let-them-eat-cake bump >

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