Don't Cry for Me, Jason Belzer... FCS Football Will Be OK.

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As I noted to all on Twitter (@RodneyFort), there is a growing belief out there that somehow if FBS programs decide not to schedule them anymore, it is the end of world for FCS programs.

Why?  Well, golly, if the University of Northern Iowa (UNI) gets almost $1 million in guarantees for playing Iowa and Wisconsin, and their football budget is only $3.3 million, then that's one-third of their football budget!  Nobody can take such a hit.

There are (at least) two problems with this view.  The first is identified by turning to the data on FBS-FCS match ups (as opposed to the hand-wringing of the UNI athletic director, Troy Dannen, quoted in Jason Belser's Forbes SportsMoney piece that inspired the title for this post).

There are 124 FBS programs.  81% of them (101 programs) played an FCS opponent last season.  That ends up to be 82 of the total 127 FCS programs that played in such a game (26 of these played in more than one FBS game; the whipping boy champ was Nicholls State that played in 3--Oregon State in the Pac-12, Tulsa in C-USA, and Southern Alabama in the Sun Belt).  Now, just these data make it look like quite a large proportion of FCS programs earn these whipping boy pay days.

But only a portion of these games were against FBS opponents that paid in the hundreds of thousands of dollars (I'm sure that the MAC's Kent State didn't pay much to Towson, for example).  Let's look at FCS programs that played, as did UNI, only for the type of pay day under discussion, that is, against the Big 6 (ACC, Big 12, Big Ten, Pac 12, SEC, and, well, to be more charitable than the lords of the FBS post-season, the Big East).  That would be 57 of the 127 FCS programs.  So, as I jested above, "Nobody can take such a hit" except for the 55% of FCS schools that never get this type of game in the first place!  [By the way, if you throw out the Big East, as has the now Big Five that run the FBS post-season, the number falls by 9 more FCS schools, down to 48.]

Somehow, fully 70 FCS programs seem to get along quite nicely without taking a Big Time bruising (including FCS Champion North Dakota State).  [By the way, the ACC and the SEC are the only two FBS conferences where every member played at least once against an FCS opponent; the 23 FBS programs that left the FCS off their schedule include Texas, UConn, Ohio State, Penn State, Michigan, Michigan State, Stanford, UCLA, and Southern Cal in the Big 6; but the list also includes Troy, Boise State, and Rice to name a few.]

And that brings me to the second problem with this view.  Why in the Wide World of Sports would anybody believe that these "bonus" payments go only to fund the football program?  According to the most recent OPE data (2011-12), the UNI athletic department spent $11.4 million on all of its sports operations and total athletic department spending was $14.6 million.  AD Dannen is surely on top of his game and has already set the football program to maximize revenue, allowing for the fact that these bonus days are stochastic; if he doesn't get them anymore, then he revises his athletic department budget, not his football budget only.  While $1 million out of $14.6 would be missed, 7% is a manageable reduction.  Again, 70 other FCS programs seem to operate at that level quite nicely, thank you.

If anything, the real plum for FCS ADs is the chance, albeit small, that their team upsets their FBS host.  Michigan fans still cringe at the mention of Appy State.  And, if anything, the slight reduction in the quality of just those top FCS programs that get an FBS game or two would enhance balance across the FCS.  Without that extra bonus, more of the FCS is in the market for the top FCS coaches, like FCS Coach of the Year Willie Fritz whose Sam Houston State Bearkats fell short in the FCS championship game against North Dakota State--the Bearkats played both Baylor and Texas A&M this last season.

BCS Final Standings-- Simple Statistics

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Here's something interesting that I noticed about the final BCS Standings heading into the 2013 BCS Post-Season.

First, there is an interesting issue of statistically significant differences.  Here is a table that includes the simple percentage difference from 1 to 2, 2 to 3, 3 to 4, and so on:

RK	TEAM	BCS Final Pts.	%Diff
1	Notre Dame	0.9978	0.0569
2	Alabama	0.9441	0.0509
3	Florida	0.8984	0.0421
4	Oregon	0.8621	0.0480
5	Kansas State	0.8226	0.0707
6	Stanford	0.7683	0.0132
7	Georgia	0.7583	0.0096
8	LSU	0.7511	0.1118
9	Texas A&M	0.6756	0.0230
10	South Carolina	0.6604	0.0157
11	Oklahoma	0.6502	0.2883
12	Florida State	0.5047	0.0702
13	Oregon State	0.4716	0.0049
14	Clemson	0.4693	0.4325
15	Northern Illinois	0.3276	0.0037
16	Nebraska	0.3264	0.1365
17	UCLA	0.2872	0.1320
18	Michigan	0.2537	0.0096
19	Boise State	0.2513	0.0799
20	Northwestern	0.2327	0.2871
21	Louisville	0.1808	0.0118
22	Utah State	0.1787	0.1764
23	Texas	0.1519	0.1285
24	San Jose State	0.1346	0.7435
25	Kent State	0.0772

Since we don't know the distribution of the final points assigned under the BCS formula, a "room full of reasonable people" criterion like 10% as a significant difference might fly.  I count 9 of 25 at this 10% level (we can't know about Kent State because rankings past the 25th spot aren't ever listed).  By and large, comparing team-by-team down the ranking, the BCS formula had a tough time actually telling very many teams apart.  Even at 5%, I count 14 of the 25 at this level (just over half).

At best, the BCS formula picked up differences at obvious, discrete intervals.  FSU fell far below Oklahoma at the 12th spot, Northern Illinois fell far below Clemson at the 15th spot, Louisville fell far below Northwestern at the 21st spot, and SJSU falls off the earth at the 24th spot.  The BCS formula appears to be a very coarse instrument at best.

Second, the BCS formula produces relative strength of teams in individual bowls quit at odds with betting lines.  If both teams in a bowl game were ranked in the BCS 25, the ratio of the BCS Final Points is a relative strength index.  For example, the Florida/Louisville ratio for the Sugar Bowl was 4.9690.  The opening betting lines could also be found; for the Sugar Bowl it was Florida by 14.5 points.  Here's a table:

Bowl	Higher BCS Rank/Opponent	BCS Ratio	Opening Line
Sugar Bowl	Florida/Louisville	4.9690	14.5
Orange Bowl	Florida State/Northern Illinois	1.5406	13.5
Capital One	Georgia/Nebraska	2.3232	8.5
Fiesta Bowl	Oregon/Kanssas State	1.0480	8
Outback Bowl	South Carolina/Michigan	2.6031	4.5
Chick-fil-A	LSU/Clemson	1.6005	3
Cotton Bowl	Texas A&M/Oklahoma	1.0391	3
Alamo Bowl	Oregon State/Texas	3.1047	1
BCS Championship	Notre Dame/Alabama	1.0569	-8

Almost by inspection, the BCS Ratio (Higher BCS Rank/Opponent) and the opening line don't match up very well.  The simple correlation between the two is a meager 0.456 and if you throw out the only real discrepancy with Notre Dame, the correlation falls to 0.350!  One could argue that opening lines evolve, but they were at least simultaneous to the final BCS points announcement.  I wanted to check into this for other years, but I can't find opening lines by season.

In our upcoming book (Sports Myths, Stanford University Press), Jason Winfree and I also poke other fun at the "tournament" that is to replace the BCS next year.  Almost makes one yearn for the good old days when the pairings were just left up to bowl committees and polls determined the final rankings after the bowl games were played.

The Expired NHL CBA and Competitive Balance

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Leading up to its lockout of the players, the NHL (Mr. Bettman) stated repeatedly that the payroll cap has enhanced competitive balance in the league.  While the bulk of the attention to the lockout has been about negotiating additional concessions by players, this post is about the balance claim.

The expired CBA lasted 7 years, 2005-06 to 2011-12.  Let's divide the 14 years prior to that into 2 more 7-year periods:  1989-90 to 1996-97 and 1997-98 to 2003-04 (doesn't exactly match up with the duration of even earlier CBAs, but nice equal comparison periods).  I'll call them Period 1, Period 2, and Period 3.  Period 3 is the entire period of the expired CBA.

What evidence is there of improved balance?  I offer four takes:  The "old reliable" Noll-Scully RSD measure that is about the closeness of division races, a few measures of playoff access, a couple of steps forward to Conference Finals access, and Stanley Cup access.

RSD:  Average RSD  across the three periods fell from 1.9 to 1.8 (6.8%) and then from 1.8 to 1.6 (10.2%).  Now, since RSD was falling anyway, perhaps only the additional 3.2% can be attributed to the expired CBA.  A room full of reasonable people might disagree over the statistical significance of this possible contribution by the expired CBA.

Playoff Access:  I have repeatedly seen it touted that the expired CBA saw 28 different teams in the playoffs.  All well-and-good but there were 29 in Period 1 and 27, only one less, in Period 2 just prior to the expired CBA.  So the expired CBA didn't really change the number of different teams that made it to the playoffs.  But there are other ways to look at it, for example, how many new teams appeared each year that did not appear the year before; a sort of annual turnover measure of access.  Period 1 saw an average turnover of 3.8 different teams year-to-year.  The turnover was 3.9 teams per year in Period 2 but then 4.4 in Period 3. This is a 14.8% jump during the expired CBA and supports the claim.  One last turn through playoff accessibility involves a sort of concentration measure.  Each 7-year period has 112 possible playoff slots.  What percent of the total slots were taken by teams that appears more than 5 times in each 7-year period (that is, 5, 6, or 7 times)?  The data show that these playoff standbys occupied 65.2% of the 112 slots in Period 1, 62.5% of the slots in Period 2, and 66.1% of the slots in Period 3; hardly a ringing endorsement for the just expired CBA.

Conference Finals:  In Period 1, 17 different teams appeared in the Conference Finals, matched in Period 2, but rose to 19 in Period 3.  That this 11.8% increase is statistically significant would cause less disagreement in my room full of reasonable people and supports the claim.  Period 2 saw turnover of 9 teams that did not appear in Period 1, but the number fell to 8 in Period 3.  In Period 1, 2 of the teams that appeared in the Conference Finals did not appear in either of the other two periods.  The number rose to 5 for Period 2 but then fell to 1 for Period 3.  There was a barely perceptible decline in the number of 2 and 3 time appearances in Period 3, down from 2 to 1 for those that appeared twice and down from 1 to 0 for those that appeared 3 times.

Stanley Cup Playoffs:  In Period 1, 13 different teams appeared in the Stanley Cup Playoffs, down to 10 in Period 2, and back up again to 12 in Period 3.  It's tough to argue that a 20.0% increase isn't statistically significant and supports the claim.  Turnover was identical at 8 in both Periods 2 and 3.  In Period 1, 4 of the teams that chased the cup did not appear in either of the other two periods.  The number rose to 5 for Period 2 but then fell to 1 for Period 3.  No team appeared 3 times in any period, but the number of 2-time appearances fell from 2 in Period 2 to 0 in Period 3.

It appears there is only minimal support for the NHL claims concerning competitive balance:

• The 14.8% increase in annual turnover in playoff access.
• The 11.8% increase in the number of different teams that made it to the Conference Finals.
• The increase in the number of different teams that appeared in the Stanley Cup Playoffs.
• The fall from 2 to 0 interms of 2-time appearances in the Stanley Cup.

But the bulk of the comparison paints no clear picture in support of the NHL claims.  Indeed, by a few of the comparisons, balance worsened in the expired CBA.

An Easy One for My SM 331 Students

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Here is a really easy one for my Sports Economics (SM 331) students.

Tom Van Riper at Forbes SportsMoney lists a bunch of (according to him) overpaid NFL players. Van Riper looks at their performance over the past few seasons and subjectively compares salaries.

What is the more insightful way to assess overpayment? [Hint: It is NOT Van Riper's method.]

I'll buy a latte for the first SM 331 student with the right answer.

Daily Double (Just This Once)

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Look Where It Isn't, and You Probably Won't Find It

[It's a bit like looking for the invisible man and, not finding him, claiming he isn't there!]

Brad Wolverton and Andrea Fuller at  The Chronicle of Higher Education analyzed the contracts of the Presidents of the top 25 football Universities.  Nowhere do they find explicit language that puts Presidents in charge of intercollegiate athletics.  [Wolverton repeats the gist of the article at his Chronicle of Higher Ed blog, Players.]

Their conclusion is actually the caption on the Chronicle cover photo (Baylor President Ken Starr--Yes, that Ken Starr-- leads students onto the field),  "College presidents are among the most public supporters of their sports programs, but many lack clear authority over athletics on their campuses."  In other words, EEEEK!  Who's running this outfit?

At least one respondent, Roger Pielke, Jr., at his Least Thing blog notes that there is specific wording at the University of Colorado system for Chancellors and athletics.

But I'm surprised even that is true.  This is just principal-agent oversight as it should be--everybody knows what the job entails!  There probably isn't any explicit wording in any of the contracts analyzed by The Chronicle of Higher Education that puts Presidents in charge of almost anything.

There are countless examples of Presidents directing intercollegiate athletics, from budget cuts during tough times, to firing the football coach, to canceling football altogether.  And all Presidents in the Big Ten, for example, meet regularly with the President of the conference.

Actually, even Wolverton and Fuller don't believe their own story.  At his blog, touting his own other article with Fuller, Wolverton says, "Campus chiefs are held accountable for sports in various ways, including through individual performance reviews or their institutions' accreditation processes."

Ya think?  This sounds just like what a good principal-agent relationship should do, right?  And surely nobody can seriously claim that if a President screws up fundamentally with their sports program that said President can simply shrug it off because it's not in their job description.

Be Careful, You Just Might Get What You Wish For

Much is being made about controlling the social media statements of college athletes as a possible First Amendment violation (e.g., Alicia Jessop, at her Business of College Sports blog, has this to say on the First).

But I see something that should be terrifying to the members that sometimes call themselves the NCAA.  By issuing rules on personal behavior beyond the usual adherence to the law, seems to me that Athletic Directors are defining conditions of work, a workplace environment if you will, with these rules.

And that is an extremely dangerous position to take for those running college sports if they care about, oh, I don't know, the MONEY.  After all, if they are creating a workplace environment, then aren't they sort of defining college athletes as workers and dictating their workplace behavior as employees?

The members acting through the NCAA have always rejected defining players as employees.  One of the reasons surely is that if they are employees, then they can organize under labor law.  Yes, as in UNION organize.  And that should be sending a collective shiver down the spine of the members of the NCAA.

The relationship between the athletic department and athletes already is characterized by a number of IRS guidelines that define an employer-employee relationship.  Defining the workplace environment just adds to the list.  An enterprising labor lawyer might just find this enough to move on.

Stock "Flops" and Underlying Fundamental Value

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"Manchester United Latest Sports Stock Flop?" from Chris Preston at Wyatt Investment Research is getting picked up around the sports business sites.

The line?  The ManU stock offering was initially expected at $16-$20 per share, but it opened a few weeks ago at $14 and has fallen 5% since then.  [That's all the way down to $13.30.]  According to Preston, the drop in price is "not a good sign".  In fact, he lumps it together with the Cleveland Indians (MLB) and the Florida Panthers (NHL) earlier offerings as "fails":

"Manchester United wouldn't be the first sports stock to fail, should things continue this way.  The two most recent sports franchises to go public on a U.S. market also failed."

Perhaps Preston is just trying to warn traders in this stock about a likely outcome.  On the other hand...

No pro sports team stock in the U.S. has ever been a true equity offering; there were never any control rights that went along with any of these offerings.  This makes each stock certificate simply "suitable for framing" memorabilia of the first order and that is surely how all buyers treated them.  And the same is true of the ManU offering.  None of these offerings is like any other stock offering, generating information about the underlying "fundamental value" of the firm (discounted present value, for example).

While souvenir store prices would probably put the certificates in the $30 region (and more than that "authenticated" and framed), all the ManU owners did was bypass that middle man and sell the souvenirs directly to the public.  Owners reap the value of the initial offering sale at zero risk.  I read in another article at the Huffington Post that 16.7 million shares went at the original $14 per.  Let's see.  No control rights are offered, there is zero risk to the owners, and 14 x 16.7 million = $234 million is generated on a souvenir sale.

Reading on in the Preston article, his portrait of "failure" of the Indians and Panthers stock actually was a failure to keep pace with a hot stock market.  The Indians stock only rose 50% in two years but in a 123% market increase and the Panthers stock only tripled in two months with positive growth for five years.

But it seems to me the relevant comparison is to memorabilia prices, not to stock market indexes; again, these sports team "stock" offerings have nothing to do with the underlying fundamental value of these teams.  The price of memorabilia has nothing to do with the value of the team itself.

My favorite example is a recent Green Bay Packers "stock offering".  The Packers, of course, are already completely publicly owned and their operations are defined under that original agreement.  No power over the Packers can be included in the definition of the stock, so an additional offering is again just a memorabilia sale.  The Packers also made millions on theirs.  Interestingly, I can get a GIF of the stock certificate for free.

Preston closes with, "It's too early to bury MANU stock just yet... But it's off to a rather ominous start."

Fair warning to memorabilia traders.  But I'm sure that ManU owners are quite happy with the piles of easy cash they just generated in a matter of weeks.

NPR's Dianne Rehm Show Segment on the Olympics

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Just listened to the Diane Rehm Show.  You can listen here:  Hosting the Olympics.

Synopsis from the link:  Officials in London hope the Olympics will be an economic boon for the city, but prior hosts have found that's not always the case.  Diane and guests discuss the economics of hosting the Olympics.

Guests:  Andrew Zimbalist (Smith College), Tom Rhoads (Towson University), Lisa Delpy Nelrotti (George Washington University), Mark Spiegel (San Francisco Fed), and Stephen Wilson (AP).

Interesting discussion.  As I listened, it seemed to boil down to the economic position versus the marketing/tourism/development position, with only a bit of discussion (mostly by Andy) on the politics involved.

I'm a bit put off by the contentiousness of these types of discussions.  Here's why.

Economist:  No net economic increases anywhere to be found in all but a very few, very special cases.

Marketing/Tourism/Development:  Things are revitalized and look at the "city brand" and so on.

Both, of course, can be right.  Areas can be revitalized and "city brand" thrust out there for the next corporate relocation or whatever.  And the result can be zero economic impact if all of it is either 1) no new net economic activity, just redirected spending and/or 2) the "city brand" pursuit is a zero sum game funded wholly out of public dollars (Andy's truly winning point).

One other observation.  It's the London Olympics, as in London England, in Europe.  The sports economics community knows there are many who are much closer to the actual work that has been done than the selected panel.  Some of them are even in the U.S. so that time differences really don't matter (e.g., my colleague, Stef Szymanski at Michigan).  Be nice to get that up close and personal perspective (in my humble opinion).