Rodney Fort's Sports Economics

Rodney Fort's Sports Economics

Economics of Sports Unit 6: Value of Sports Talent Business of Sports 1 Summer 2013 Table 7-1 Details of 50 Top Athletes and Earnings, 2008 Top Earner Salary/Winnings Total Earni ngs Average Earni ngs Sport # in Top 50 Golf 3 Tiger Woods $22.9 $127.9 $68.7 Basketball 26 LeBron James $12.5 $40.5 $22.5 Boxing 1 Floyd Mayweather, Jr. $20.0 $40.2 $40.2 Baseball 10 Alex Rodriguez $29.0 $35.0 $21.1 Football 7 Peyton Manning $17.5 $30.5 $20.5 Auto Racing 3 Dale Earnhardt, Jr. $5.2 $27.2 $23.9 Notes: Salary/Winnings include bonuses. Total earnings includes endorsement income. Business of Sports 2 Summer 2013 Figure 7-1 Randy Johnsons Experience-Earnings Profile Legend: Charting salary against experience for Randy Johnson (the data are in Table 7-4) generates his experience-earnings profile. It is common for all such profiles increase slowly at first, then rise quite rapidly, tailing off toward the end of a workers earning years. Business of Sports 3

Summer 2013 Table 7-2 Average and Median Salaries in Pro Sports Leagues (2009 dollars) (slide 1 of 2) Year MLB Average MLB Median NBA Average 1988 $816,419 $418,275 1989 $928,576 $640,700 1990 $1,139,051 $287,288 1991 $1,521,713 $912,563 1992 $1,833,106 $665,000 1993 $1,858,988 $669,700 1994 $1,819,792 $702,000 1995 $1,764,147 $381,500 1996 $1,740,254 $521,900 1997 $2,022,230 $673,313 1998 $2,114,003 $712,313 1999 $2,466,003 $626,667 2000 $2,770,623 $1,001,300 2001 $3,140,547 $1,305,000 $4,205,421 2002 $3,212,488 $959,438 2003 $3,291,557 2004 NBA Median NFL

Average NFL Median NHL Average NHL Median $1,298,008 $596,812 $1,799,399 $1,123,750 $2,722,800 $1,656,222 $651,944 $1,983,227 $1,192,461 $4,537,761 $2,632,518 $1,528,949 $634,621 $2,169,924 $1,219,750 $1,015,000 $4,294,075 $2,527,640 $1,738,428 $667,986 $2,239,329 $1,232,500 $3,120,707 $861,625 $4,175,492 $2,514,160 $1,843,886 $713,793 $1,625,994 $966,830 2005 $3,222,349 $844,750 $4,013,907 $2,725,000 $1,739,966 $635,530 2006 $3,309,486 $984,210 $4,283,071 $2,886,887 $2,064,772 $760,280 $1,856,956 $1,043,252 2007 $3,468,819 $1,042,875 $4,534,432 $2,732,018 $2,023,299 $793,494

$1,986,983 $1,184,500 $3,593,321 2008 Business of Sports$1,064,250 $4,749,908 $3,065,700 4 $2,183,734 $921,294 $2,211,883 $1,340,213 Summer 2013 Table 7-2 Average and Median Salaries in Pro Sports Leagues (2009 dollars) (slide 2 of 2) Growth Rate From 2000 on 2.40% 2.90% 1.80% 1.70% 6.70% 5.60% 2.60% Notes: Averages assume total payroll reports are for the 25 man MLB roster, 15 man NBA roster, 53 man NFL roster, and 23 man NHL roster. Business of Sports 5 Summer 2013 2.20% Table 7-3 Celebrity Pay, 2008 (slide 1 of 2) Name Pay ($mil) Pay Rank J.K. Rowling 300 1 Oprah Winfrey 275 2 50 Cent 150 3 Jerry Bruckheimer 145 4 Steven Spielberg 130 5 Tyler Perry 125 6 Tiger Woods 115 7 The Police 115 7 Jerry Seinfeld 85

9 Jay-Z 82 10 David Beckham 50 16 Phil Mickelson 45 20 Kimi Raikkonen 44 26 Kobe Bryant 39 33 LeBron James 38 33 Ronaldinho 37 36 Roger Federer 35 37 34 Summer 2013 Alex Rodriguez Business of Sports Fernando Alonso 6 33 41 42 Table 7-3 Celebrity Pay, 2008 (slide 2 of 2) Jeff Gordon 32 44 Shaquille O'Neal 32 44 Dale Earnhardt Jr. 31 48 Kevin Garnett 29 52 Maria Sharapova 26 56 Serena Williams 14 73 12.5 82 Annika Sorenstam 11 86 Lorena Ochoa

10 87 Vanessa Williams 4.5 98 Justine Henin Business of Sports 7 Summer 2013 Figure 7-3 Ticket Prices and Payrolls, Boston Red Sox (2009 dollars) Legend: Adjusted for inflation, the average salary paid by the owner of the Boston Red Sox shows two significant episodes of decline. But ticket prices increased over nearly the entire period in the figure. The idea that rising Business of Sports 8 Summer 2013 salaries can cause rising ticket prices is not supported. Table 7-4 Randy Johnsons Pay and Performance (slide 1 of 2) Year Team 1988 Wins Mon 1989 Mon/Sea 1990 Losses 3 PCT ERA Pay ($2009) 0 1.000 2.42 7 13 0.350 5.54 $70,000 ($120,400) Sea 14 11 0.560 3.65 $150,000 ($244,500) 1991 Sea 13 10 0.565 3.98 $350,000 ($549,500) 1992 Sea 12 14 0.462 3.77 $1,392,500 ($2,116,600) 1993 Sea 19

8 0.704 3.24 $2,625,000 ($3,885,000) 1994 Sea 13 6 0.684 3.19 $3,275,000 ($4,716,000) 1995 Sea 18 2 0.900 2.48 $4,425,000 ($6,195,000) 1996 Sea 5 0 1.000 3.67 $6,025,000 ($8,194,000) 1997 Sea 20 4 0.833 2.28 $6,275,000 ($8,345,750) 1998 Sea/Hou 19 11 0.633 2.80 $6,000,000 ($7,860,000) 1999 Ariz 17 9 0.654 2.48 $9,700,000 ($12,416,000) 2000 Ariz 19 7 0.731 2.64 $13,600,000 ($16,864,000) 2001 Ariz 21 6 0.778 2.49

$13,350,000 ($16,020,000) 2002 Ariz 24 5 0.828 2.32 $13,350,000 ($15,886,500) 2003 Ariz 6 8 0.429 4.26 $15,000,000 ($17,400,000) 2004 Ariz 16 14 0.533 2.60 $16,000,000 ($18,080,000) 17 8 0.680 3.79 $16,000,000 ($17,440,000) Business of Sports 2005 NYY 9 Summer 2013 Table 7-4 Randy Johnsons Pay and Performance (slide 2 of 2) 2006 2007 2008 2009 NYY 17 11 0.607 5.00 $15,661,427 ($16,601,113) 4 3 0.571 3.81 $9,100,546 ($9,373,562) 11 10 0.524 3.91 $15,100,546 ($14,949,541) Ariz Ariz SF $8,000,000 ($8,000,000) Lifetime 303 166 0.646 0.646 3.29

Notes: ERA is averaged across teams in 1989 and 1998. Lifetime includes partial 2009 performance not shown. Business of Sports 10 Summer 2013 Figure 7-4 Ticket Prices and Payrolls, Boston Celtics ($2009). Adjusted for inflation, the average salary paid by the owner of the Boston Celtics had some significant ups and downs early on. But ticket prices increased steadily over that time. The idea that rising salaries can cause rising ticket prices is not Business of Sports 11supported. Summer 2013 Notes and Sources: See Figure 7.3. Table 7-5 Major League Payrolls, 2008 ($Millions) (slide 1 of 3) MLB Payroll NYY $209.1 NY $97.1 Oak $152.4 NYR $66.1 NYM $137.8 Tor $95.4 Dal $146.4 Cal $63.1 Det $137.7 Dal $93.2 Min $133.4 Phil $60.5 Bos $133.4 Clev $90.8 Clev $131.9 Otta $59.8 ChiWS $121.2 LAL $80.7 NO $131.5 Mon $58.9 LAA $119.2 Bos $78.7

Pit $128.8 Wash $58.5 LAD $118.6 Det $77.0 Ten $126.0 Pit $56.6 ChiC $118.3 Mem $75.8 Ariz $122.1 Det $56.4 Sea $117.7 Phoe $75.4 Jax $122.1 SJ $55.8 Orl $74.9 Chi $120.1 NJ $55.7 Summer 2013 $102.4 Business of Sports Atl NBA Payroll NFL 12 Payroll NHL Payroll Table 7-5 Major League Payrolls, 2008 ($Millions) (slide 2 of 3) StL $99.6 Phil $74.4 SF $118.8 Dal $55.6 Phil $98.3 Sac $71.5 NYJ

$116.9 Edmon $54.1 Tor $97.8 Chi $71.5 StL $116.7 Van $53.1 Hou $88.9 Wash $70.6 NYG $115.8 Min $52.9 Mil $80.9 Mil $70.2 Miam $114.6 Colum $52.3 Clev $79.0 Ind $69.6 Buf $113.4 Buf $52.2 SF $76.6 Hou $68.8 Carol $112.1 Colo $51.9 Cin $74.1 SA $68.4 Wash $112.0 Chi $51.5 SD $73.7 Atl $68.2 SD $111.8 Bos $51.5

Colo $68.7 Char $68.0 Cin $109.7 Flor $51.4 Den $67.1 Phil $109.6 AnaSummer Business of Sports Tex $67.7 13 2013 $49.8 Table 7-5 Major League Payrolls, 2008 ($Millions) (slide 3 of 3) Bal $67.2 NO $67.0 Hou $108.4 Carol $49.1 Ariz $66.2 Utah $66.3 TB $104.3 Tor $48.8 KC $58.2 Min $63.5 Sea $103.0 StL $45.5 Min $56.9 GS $63.3 Atl $96.4 Nash $44.2 Wash $55.0 NJ $62.0 Det $95.8 TB

$43.5 Pit $48.7 LAC $61.9 Den $95.6 Phoe $39.1 Oak $48.0 OKC $61.5 GB $94.0 LA $36.1 TB $43.8 Port $56.2 Ind $93.4 Atl $34.3 Flor $21.8 Miam $50.0 NE $92.7 NYI $33.3 Bal $90.7 KC $83.6 Max/Min 9.6 1.9 1.8 2.0 Max/Median 2.6 1.4 1.4 1.3 Business of Sports 14 Summer 2013 Figure 7-5 Ticket Prices and Payrolls, New England Patriots ($2009). Adjusted for inflation, the average salary paid by the owner of the New England Patriots showed a number of periods of decline. But during those, there always was at least one significant increase in ticket prices. The idea that rising salaries can cause rising ticket prices is not supported. and Sources: See Figure 7.3 . Business of Notes Sports 15 Summer 2013 Figure 7-6 Ticket Prices and Payrolls, Boston Bruins ($2009).

Adjusted for inflation, the average salary paid by the owner of the Boston Bruins almost continually increased over time. But ticket prices did not. The idea that rising salaries can cause rising ticket prices is not supported. Business of Sports 16 Summer 2013 Table 7-6 Compensation Packages for First-Round NFL Draft Picks, 2009 (slide 1 of 2) Pick Player Position Team Years Ave. Salary (millions) 1 Matthew Stafford QB Detroit 6 $12 2 Jason Smith OT St. Louis 5 $12 3 Tyson Jackson DE Kansas City 5 $11 4 Aaron Curry LB Seattle 6 $10 5 Mark Sanchez QB N.Y. Jets 5 $12 6 Andre Smith OT Cincinnati 4 $7 7 Darrius Heyward-Bey WR Oakland 5 $8 8 Eugene Monroe OT Jacksonville

5 $7 9 B.J. Raji DT Green Bay 5 $6 10 Michael Crabtree WR San Francisco 11 Aaron Maybin DE Buffalo 5 $5 12 Knowshon Moreno RB Denver 5 $5 13 Brian Orakpo DE Washington 5 $4 14 Malcolm Jenkins CB New Orleans 5 $4 15 Brian Cushing LB Houston 5 $4 16 Larry English DE San Diego 5 $4 Business of Sports 17 (unsigned at press) Summer 2013 Table 7-6 Compensation Packages for First-Round NFL Draft Picks, 2009 (slide 2 of 2) 17 Josh Freeman QB Tampa Bay 5

$7 18 Robert Ayers LB Denver 5 $3 19 Jeremy Maclin WR Philadelphia 5 $3 20 Brandon Pettigrew TE Detroit 5 $3 21 Alex Mack C Cleveland 5 $3 22 Percy Harvin WR Minnesota 5 $3 23 Michael Oher OT Baltimore 5 $3 24 Peria Jerry DT Atlanta 5 $3 25 Vontae Davis CB Miami 5 $3 26 Clay Matthews LB Green Bay 5 $3 27 Donald Brown RB

Indianapolis 5 $3 28 Eric Wood C Buffalo 5 $3 29 Hakeem Nicks WR N.Y. Giants 5 $3 30 Kenny Britt WR Tennessee 5 $2 31 Chris Wells RB Arizona 5 $2 32 Evander Hood DT Pittsburgh 5 $2 Notes: ofIncludes Business Sports total package signing 18 bonuses. Summer 2013 Table 7.7 Matthew Stafford Contract Details Guaranteed Bonuses Year Discounted No Option Discounted Option Discounted 2009 $0 $0 $3,100,000 $2,924,528 $3,100,000 $2,924,528 2010 $3,480,000 $3,097,188 $3,875,000 $3,448,736 $9,500,000 $8,454,966

2011 $3,480,000 $2,921,875 $4,650,000 $3,904,230 $9,000,000 $7,556,574 2012 $3,480,000 $2,756,486 $5,425,000 $4,297,108 $10,500,000 $8,316,983 2013 $3,480,000 $2,600,458 $6,200,000 $4,633,001 $11,500,000 $8,593,469 2014 $3,480,000 $2,453,263 $0 $0 $11,000,000 $7,754,566 $17,400,000 $13,829,270 $23,250,000 $19,207,603 $54,600,000 $43,601,086 Totals Notes: The option bonus must be paid in any event. If Stafford fails to take 35 percent of the snaps in 2009, the No Option case holds. If he does, the Option case represents the highest pay to Stafford. Business of Sports 19 Summer 2013 Table 7-8 Purses and Shares in Tennis and Golf Majors Men's Purse Men's Winner's Share Women's Purse Women's Winner's Share Australian Open $19.0 million $924,480 $19.0 million $924,480 French Open $8.3 million $1.04 million $7.56 million $1.02 million Wimbledon $9.9 million

$1.10 million $7.82 million $1.02 million U.S. Open $17.8 million $1 million $17.8 million $1 million Masters $6 million $1.08 million $2.1 million $320,000 U.S. Open $6 million $1.08 million $3.1 million $560,000 British Open $6.2 million $1.1 million $1.6million $240,000 PGA $6 million $1.08 million $1.6mi1 $240,000 Tennis 2004 Golf 2003 Notes: Tennis purses for U.S. Open and Australian Open are the total for both men and women; separate amounts not reported. The French Openofpurses per diem. Business Sportsdo not include mixed20doubles, men's seniors, orSummer 2013 Total: $17.6 million. Currency converted at current rates. Table 8-1 Salary History of Willie Mays Year Team Salary $1998 1951 NYG $5,000 $35,541 1952 NYG $7,500 $52,324 1953 NYG $12,500 $85,561 1954 NYG $12,500 $83,915 1955 NYG

$30,000 $197,447 1958 SFG $100,000 $607,054 1959 SFG $80,000 $482,305 1971 SFG $180,000 $779,727 1972 SFG $180,000 $755,477 1972 NYM $170,000 $713,506 1973 NYM $170,000 $671,724 Business of Sports 21 Summer 2013 Table 8-2 MLBs First Crop of Free Agents Player 1975 Salary 1976 Salary 1977 Salary %Change* Hitters Reggie Jackson $135,000 $185,000 $400,000 196.3% $50,000 $67,200 $200,000 300.0% Gary Matthews $42,000 $100,000 138.1% Don Baylor $40,000 $170,000 325.0% Bobby Grich $46,000 $65,000 $190,000

313.0% Gene Tenace $45,000 $40,800 $155,000 244.4% $105,000 $200,000 90.5% $100,000 $80,000 $250,000 150.0% $72,000 $190,000 163.9% Wayne Garland $23,000 $215,000 834.8% Don Gullett $58,400 $150,000 156.8% Rollie Fingers $65,000 $71,200 $200,000 207.7% Bill Campbell $22,000 $160,000 627.3% Doyle Alexander $28,400 $150,000 428.2% Joe Rudi Norm Cash Sal Bando Bert Campaneris Pitchers *The percentage change was for 1975 and 1977, unless player had no observed salary in which case the percentage Business1975 of Sports 22change was for 1976 and 1977.Summer 2013 Table 8-3 Average Salaries in Pro Sports Centered around Free Agency (All values in 2009 dollars) Year MLB NBA Year NFL NHL 1971

$179,106 1988 1972 $187,559 1989 $546,213 $380,120 1973 $189,389 1990 $593,410 $471,598 1974 $190,498 1991 $665,139 $598,968 1975 $190,964 1992 $746,212 $607,307 1976 $208,145 $488,152 1993 $980,325 $802,935 1977 $288,655 $490,079 1994 $903,948 $807,353 1978 $352,270 $484,996 1995 $1,020,635 $1,060,799 1979 $359,702 $500,306 1996 $1,096,219 $1,225,786 1980 $401,200 $443,397 1997 $981,108 $1,429,288 1981 $498,306 1998 1982 $551,310 1983

$589,926 1984 $668,332 1985 $744,634 $339,545 $1,236,084 1986 1987 Immediate % Change 9.0% 12.4% -7.8% 32.2% Growth Before 1.6% -2.4% 15.7% 15.6% 17.8% 2310.6% Growth After Business of Sports 8.1% Summer 15.5% 2013 Table 8-4 A-Rods Contract Year Salary ($Millions) Deferred Pay ($Millions) (w/o 3% Interest) 2001 $16 $5 $2 2002 $17 $4 $2 2003 $18 $3 $2 2004 $18 $3 $2 2005 $21 $4 $2 2006 $21 $4 2007 $23 $4 2008 $24

$3 2009 $24 $3 2010 $24 $3 Business of Sports 24 Signing Bonus ($Millions) Summer 2013 Table 8-5 Standard Deviation of Winning Percent Imbalance, Pre- and Post-draft (slide 1 of 2) NFL Year Predraft Year Postdraft 1930 1.68 1936 1.81 1931 1.75 1937 1.70 1932 1.83 1938 1.42 1933 1.45 1939 2.10 1934 1.79 1940 1.65 1935 1.49 1941 1.99 Average 1.67 Average 1.78 Business of Sports 25 Summer 2013 Table 8-5 Standard Deviation of Winning Percent Imbalance, Pre- and Post-draft (slide 2 of 2) MLB Predraft Postdraft Year AL NL Year AL

NL 1953 2.82 2.78 1965 2.30 2.31 1954 3.65 2.40 1966 1.39 1.91 1955 2.75 1.86 1967 1.57 1.84 1956 2.49 2.12 1968 1.88 1.19 1957 2.30 1.92 1969 2.26 2.54 1958 1.41 1.27 1970 2.40 1.56 1959 1.69 1.25 1971 2.12 1.62 1960 2.11 2.17 1972 1.73 2.08 1961 2.51 2.42 1973 1.71 1.62 1962 1.59 3.16

1974 1.14 1.96 1963 2.16 2.20 1975 1.87 1.88 1964 2.29 2.06 1976 1.57 2.19 Average 2.34 2.13 Average 1.83 1.89 Business Sportscalculations. Note: of Authors 26 Summer 2013 Table 8-6 Competitive Balance and the Reserve Clause Before and After Free Agency in MLB (Adjusted for Expansion) Reserve Clause Free Agency Year NL AL Year NL AL 1966 .064 .051 1976 .086 .062 1967 .071 .059 1977 .081 .099 1968 .058 .069 1978 .063 .087 1969 .092 .083 1979 .072 .091

1970 .049 .088 1980 .062 .080 1971 .060 .080 1981 .085 .076 1972 .078 .067 1982 .062 .069 1973 .062 .067 1983 .045 .073 1974 .075 .042 1984 .054 .058 1975 .067 .072 1985 .074 .055 Average .068 .068 Average .068 .075 Business of Sports 27 Summer 2013

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