Business of Sports Exam 2

What is a CBA?

Collective bargaining agreements are legally binding contracts between the league and its players’ association outlining the rights and obligations for each side

What are some things commonly discussed in CBAs?

Player salaries, benefits, working conditions, roster sizes, revenue sharing, free agency, salary caps, luxury taxes

What was the significance of Marvin Miller?

Marvin Miller fundamentally changed the economics of professional sports, especially baseball. He was responsible for:

1. Ending the Reserve Clause and establishing free agency

2. Raising player salaries and benefits

3. Unionization and the power of collective bargaining

Why do CBAs differ across leagues?

Each league has its particular demands regarding topics mentioned in CBAs (roster size, salaries, free agency, etc.)

What are the current issues over the WNBA’s newest CBA?

WNBA players and the league have struggled over the next CBA due to players demanding better salaries, criticizing the commissioner for not prioritizing player safety and questionable officiating, and seeking better accountability and sustainability from the league in the next CBA. 

What are some of the concerns for the MLB’s future CBA?

Lack of a salary cap causes big market teams to spend far more on the best players than smaller teams can, causes inequity

What occurred in 1994?

The MLB baseball strike occurred, ending the season before the playoffs. Owners wanted to implement a salary cap to keep player salaries down, but players went on strike. 

Why would players strike at the end of the season?

At that point, they’ve received most of their income and they can prevent owners from making post-season revenue

What is free agency?

Free agency is when players reach the end of their contracts with a team and are allowed to join another team. It balances team control over developing players with the players’ ability to negotiate freely once they’ve accumulated the experience or reached a certain age/milestones. 

What is the difference between restricted and unrestricted free agency?

Restricted free agency allows former teams to match any offer sheet the player signs with another team. Unrestricted allows players to go wherever

Why do leagues have salary caps?

Salary caps help teams build a roster and a central core of players while also preventing big market teams from spending more on the best players. Promotes competitive balance. 

Why do minimum payrolls exist?

They prevent small-market teams from pocketing the national revenue share by forcing them to spend a set amount

Why does competitive balance matter?

It increases fan engagement, financial strength of the league, and long-term growth of the league

How has free agency impacted player salaries?

Free agency has driven player salaries up by allowing teams to bid on players and more fairly reward their talents.

Which league is the most competitively balanced?

The NFL because of its hard salary cap, revenue sharing system, and the draft and scheduling

Which leagues have the least competitive balance?

NBA and MLB, due to their lack of a hard salary cap. The NBA specifically enables star players/duos/trios to have a greater impact on their team and stay at the top. MLB teams with higher payrolls perform better without the salary cap. 

Why have revenue sharing in leagues?

Revenue sharing splits national and local revenues across all teams to increase parity, improve sustainability of smaller teams, and prevent financial collapse. 

What was the MLB collusion era?

In the 1980s, MLB owners colluded to not sign free agents for the appropriate prices to limit player salaries and suppress free agent power. They coordinated to not sign them above a set amount. 

What are luxury taxes and “repeater rates”?

Luxury taxes are fees imposed on teams that exceed the salary cap. There are different tiers that penalize heavy spenders the higher they exceed the salary cap. Teams that repeatedly exceed the payroll pay higher tax fees through the repeater rate.

What are some challenges and criticisms of revenue sharing?

Inequality in spending: teams with large local revenues still have a huge advantage in payroll spending

Effectiveness: Revenue-sharing model does not sufficiently distribute the wealth in some leagues

Why does the NBA use a draft lottery system?

The draft lottery prevents teams from tanking and guaranteeing the worst team to get the best player

Why does the NBA use a soft salary cap?

It provides teams with greater flexibility in roster construction

What is the difference between a lock-out and a strike?

Lock-outs are initiated by owners and occur before the season, strikes are initiated by players and often occur mid/end season

Why do CBAs include “opt out” clauses?

Allows for flexibility for changing conditions protection against long-term uncertainties

What is a franchise tag?

NFL teams can franchise tag a player to a one year deal, at the average of the top 5 salaries at that position for the last 5 years, or 120% of their prior salary

Exclusive: binds them to that team

Non-exclusive: allows player to receive an offer from another team, but the first team can match or receive 2 first round picks for compensation

Why is the wide receiver franchise tag so much more than runningbacks?

Receivers have a longer average tenure than runningbacks, and are more valuable to teams because offenses are more air-raid focused

What is the rookie wage scale and why is it in effect?

Rookies sign a 4-year deal with a present salary and signing bonus based on draft position. This more fairly pays rookies rather than giving them huge contracts like Sam Bradford. 

What is hockey’s long term injury exception?

NHL’s LTIR allows teams to place players who will miss at least 10 games and 24 days due to injury on this list. It allows them to replace them with an additional player, temporarily exceeding the NHL’s salary cap and roster size. 

Why do deferred payments in baseball exist?

Deferred payments allow MLB teams to stretch player salaries over a long time to lower the annual cap hit and better navigate the luxury tax.

What are the NBA’s salary cap loopholes?

The NBA has various loopholes that allow teams to exceed the soft salary cap to give them the financial and roster flexibility to more easily retain “home-grown” players and more easily fill out the roster.

What are NBA’s max and supermax contracts?

These are the highest salaries teams can offer players based on league rules and the players’ years of experience. Supermax contracts can only be awarded to players who achieve certain accolades. 

What are the NBA’s aprons?

The NBA’s aprons are hard caps for teams using salary exceptions. They penalize teams in the form of roster-building restrictions for exceeding the salary cap. 

Why are mixed use development projects becoming a big part of sports team ownership?

Mixed use development projects generate revenue outside of the sporting events through concerts, other forms of entertainment, food, etc. 

What are some of the key elements of sports facility strategic planning? 

1. Building a size that’s right for your market/sport

2. Roadway infrastructure and parking availability

3. Hospitality for various levels of ticket holders

4. Available utilities

5. Considerations for broader development/opportunities for mixed-use

6. Financial considerations and funding strategies

What are some of the most critical facility attributes that shape fans’ impressions?

1. Ingress and egress

2. Access to amenities

3. Concourse design

4. Variety of concessions

5. Sponsorship and hospitality areas

What are some unique challenges when working on university projects?

You need input from a greater number of sources - donors, Board of Trustees, AD, dean, etc. You must also abide by strict RFPs.

What are key design features for contemporary venues?

1. Integrated technology

2. Specificity and flexibility (use facility for multiple things)

3. Something for everyone

How can architects contribute to Fan Engagement?

1. Is it Instagram-able?

2. What can you only get here?

3. What makes it worth getting off the couch?

What are some examples of strategic locational and architecturally designed communities?

District Detroit, LA Live, Fiserv Forum, Sacramento’s Downtown Commons, Chase Center

What are some attributes of “smart venues”, venues that use tech and data analytics?

1. Improve event operations (cut costs and consumption, improve crowd flow)

2. Fan Experience (personalized fan engagement, revenue generation)

3. Athlete Performances (individual nutrition, biomechanical analysis)

Reduce costs, increase revenues, and increase performances

What is the “less-is-more” phenomenon?

New stadiums are decreasing seat count to allocate more space to standing room/roaming patrons and focus more on suites and premium seating

What are some attributes of modern venues?

New options for wandering fans: standing room only spaces for socializing, drink rails, and party decks. Reduced seating, enhanced facility aesthetics through art and ties to the community

What is CGI?

Contractually Guaranteed Income is a promised form of payment for a certain period of time. CGI comes in the form of suite sales, sponsorships, and premium product revenue

Why do stadiums receive so much public funding?

There are more cities than teams available, so team scarcity causes cities to bid for the team through agreeing to finance the stadium publically

Why do cities increase hotel taxes?

Increasing hotel taxes shifts the costs of financing stadiums to those who directly benefit; away fans

Why was Walter O’Malley the most hated man in Brooklyn?

He moved the Dodgers to LA overnight for an even bigger market

What are some methods of publicly financing facilities? 

Bonds, general sales tax, hotel taxes, sin taxes, tax increment financing, person seal licenses (PSLs)

How does public funding compare nowadays to the 70s and 80s?

Most sports venue projects receive less public funding now than the 70s and 80s because the cost of public investments were not generating enough return to justify those investments

Experts say that these publicly funded investments into sports venues aren’t good investments, why?

Lots of fans are from the community, meaning their spending doesn’t affect economic impact as they aren’t increasing money into the city, but recirculating. Athletes, fans, and other take and spend their money outside the market out of season. These investments create non-sustainable, season jobs. 

How do teams benefit from new stadiums?

1. More CGI opportunities

2. Increased ticket revenue

3. Latest and greatest performance facilities

4. host other events

5. Increased franchise value

How can teams serve as a “public good”?

Public goods are non-excludable and non-rivalrous, meaning supporting a team doesn’t infringe on someone else’s ability to support.

What are some positive and negative externalities associated with a new stadium?

Positive: Area rises in value over time because of the stadium and mixed-use developments, pride

Negative: Traffic, congestion, noise