The Coase theorem suggests that under certain conditions, the distribution of player talent should be similar before and after free agency. Previous attempts to test the theory's applicability to major league baseball were either examinations of win-loss distributions or comparisons of player movements before and after free agency. These approaches have significant drawbacks. Did the same teams sport winning records over an extended period before and after free agency? Franchise relocations and implementation of a draft of amateur players should have also affected player movement patterns and distributions of win-loss records. American League teams had changes in their win-loss records that do not fully correspond to the theory's predictions, raising questions of what transaction costs might have impeded transferring players. Teams in smaller towns tended to lose talent to teams in larger cities; the flow of talent was roughly similar between periods.
Students in sports economics courses might better learn the basic concepts by running their own franchise. A simple game, based on the card game War, is easy and inexpensive to implement. Students quickly grasp the importance of weighing marginal benefits, both in terms of team record and marginal revenue, against the costs of improving their team. In addition, students learn that even the best-laid plans can, under some circumstances, result in disappointment. Extensions of the basic game help teach students the dynamics of revenue sharing, television contracts, salary caps, and other concepts.
Today's National Basketball Association commands millions of spectators worldwide, and its many franchises are worth hundreds of millions of dollars. But the league wasn't always so successful or glamorous: in the 1940s and 1950s, the NBA and its predecessor, the Basketball Association of America, were scrambling to attract fans. Teams frequently played in dingy gymnasiums, players traveled as best they could, and their paychecks could bounce higher than a basketball. How did the NBA evolve from an obscure organization facing financial losses to a successful fledgling sports enterprise by 1960? Drawing on information from numerous archives, newspaper and periodical articles, and Congressional hearings, this book chronicles the league's growing pains from 1946 to 1961. The book describes how a handful of ambitious ice hockey arena owners created the league as a way to increase the use of their facilities, growing the organization by fits and starts. Rigorously analyzing financial data and league records, the book points to the innovations that helped the NBA thrive: regular experiments with rules changes to make the game more attractive to fans, and the emergence of televised sports coverage as a way of capturing a larger audience. Notably, the NBA integrated in 1950, opening the game to players who would dominate the game by the end of the decade: Bill Russell, Elgin Baylor, Wilt Chamberlain, and Oscar Robertson. Long a game that players loved to play, basketball became a professional sport well supported by community leaders, business vendors, and an ever-growing number of fans.
This chapter focuses on the Congressional hearings of 1989 that addressed the issue of cable television's sports telecasts. For many years, Congress aided and abetted over-the-air television's dominance via antisiphoning regulations that restricted cable and pay-television access to many sporting events that were being telecast over-the-air for free. The intent of the regulations was to prevent programs from switching from free over-the-air to pay-television delivery. Home Box Office (HBO) filed suit over the antisiphoning rules and eventually won in court, thereby ending the antisiphoning regulation. The courts found that there was no evidence to suggest that cable television companies were going to usurp free television. With these developments, cable television was ready to compete with the networks and independent television stations. This chapter examines the 1989 hearings that revolved primarily around the New York Yankees' deal with the Madison Square Garden Network to show all the team's games on the cable channel. It also discusses the legal and economic aspects of whether cable telecasts of sporting events violated antitrust law.
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