Keeping Score: The Economics of Big-time Sports [Paperback]

Richard Sheehan (Author)

Book Description

Publication Date: November 1, 1996

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Product Details

• Paperback: 352 pages
• Publisher: Taylor Trade Publishing (November 1, 1996)
• Language: English
• ISBN-10: 0912083964
• ISBN-13: 978-0912083964
• Product Dimensions: 8.9 x 5.9 x 0.9 inches
• Shipping Weight: 1.2 pounds
• Average Customer Review: 3.8 out of 5 stars  See all reviews (5 customer reviews)
• Amazon Best Sellers Rank: #1,208,382 in Books (See Top 100 in Books)

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4 of 4 people found the following review helpful:

5.0 out of 5 stars An excellent survey of sports economics in the 1990s, February 21, 2001

By 

James Armstrong - See all my reviews

This review is from: Keeping Score: The Economics of Big-time Sports (Paperback)

I had previously read books on the subject by other economists, but I had not heard as much about Sheehan's book as his works aren't cited nearly as often. So I was unsure whether it would offer any insight not covered elsewhere, but I was pleasantly surprised to discover that Sheehan examines the financial numbers in many clever ways that I had not seen before.

Keeping Score takes a much more empirical look at the economics of sports than other books. There is very little economic theory discussed. Unfortunately, because data is not always publicly available, Sheehan is often forced to make estimates. This makes some of his conclusions a little less convincing than they could be. However, perhaps partly because I had done other reading, I do believe that most of Sheehan's conclusions are economically sound.

Sheehan begins by examining the financial health of each of the four major US sports leagues based on available numbers from 1990-1994. He finds that, while there are some franchises in trouble, in general an investment in a pro sports franchise in any sport is significantly better than investing in small company stocks.

Sheehan next discusses the issue of "competitive balance". While other authors have measured competitive balance by calculating the spread of win/loss records and concentration of league championships, Sheehan takes a different approach. He attempts to determine correlation and causation relationships between win/loss percentages, city market size, payrolls, and revenue. His strongest conclusion is that winning increases a team's revenue. Sheehan also discusses league-imposed player restrictions such as the reserve clause and salary caps, concluding that these have little effect on competitive balance but instead greatly increase the owners' profits.

Perhaps the most novel ideas in the book deal with revenue sharing. The typical owner's conflict of winning vs. profits is discussed, including its effect on league competitiveness. Sheehan advocates a two-part proposal to revenue sharing: 1) excess revenues of the most financially successful teams are taxed and redistributed to needy teams, and 2) to prevent the owners of lower-tier teams from simply pocketing their subsidies, a tax is placed on excessive losing, thereby adding financial incentive to attempt to field a winning team. The exact levels of these taxes are explained in great detail.

Keeping Score concludes with a brief look at big-time college football and basketball programs and examines possible financial implications of paying student-athletes. Sheehan finds that while many college programs are quite profitable, the majority of them would not likely be able to pay competitive salaries to student-athletes. His recommendation is that athletic scholarships be tied to graduations rates, thus giving athletic directors and coaches real incentives to see that their students are successful in the classroom as well as on the playing field.

Overall, Keeping Score is a fascinating empirical look at the economics of sports in the early 1990s. Because there is relatively little discussion of economic theory or historical events, this makes it a much easier read than the more comprehensive Pay Dirt, the so-called "bible of sports economics" by Quirk and Fort. Keeping Score often reads more like an essay than a text book. Yet Sheehan arrives at many of the same conclusions that Quirk and Fort do, even though they take somewhat different approaches to get there. I highly recommend both Keeping Score and Pay Dirt, as they complement each other well.

5.0 out of 5 stars A Useful Study of Economics in Major Sports Franchises in America, December 28, 2010

By 

Roger D. Launius "Historian" (Washington, D.C., United States) - See all my reviews
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This review is from: Keeping Score: The Economics of Big-time Sports (Paperback)

Although it is now about 15 years old and sports have changed significantly since the mid-1990s, there are several important insights in this book about the economics of sport in America. At the time this was written the author, Richard G. Sheehan, was a professor of finance and business economics at the University of Notre Dame, and his knowledge of statistical analysis and economics proved invaluable in writing this book. He leads with individual chapters on the major team sports in the United States--Major League Baseball, the NBA, the NFL, college football, and the NHL--tracing their individual situations and economic circumstances. In essence, MLB is largely capitalistic and everyone for themselves while the NFL is a socialistic system in which revenue sharing dominates everything. Both extremes, and everything in between have their pros and cons, which Sheehan lays out.

Sheehan also lays out the manner in which salary caps, revenue sharing, salaries and arbitration and free agency, and competitive balance work. In the case of MLB, my specific area of interest, he recommends against a salary cap as being counterproductive but come down in favor of greater revenue sharing. That approach has worked well in the NFL, allowing teams in such small markets as Green Bay to be successful. He finds that one of the greatest problems of all professional sports is that owners have divergent priorities. He boils this down to a scale in which there are two different extremes, winning games and championships on one end and maximizing profits on the other. Sheehan asserts that almost all sports teams make money, some make an ungodly amount of money, but a few, a very few, lose money. If as an owner you want to win championships then you must spend more on the franchise, which cuts into your profits. If you are willing to forego championships, you can use the team as a cash cow. There are examples of owners that do one or the other. Most want both; most can't have both all the time.

There are four conclusions that Sheehan reaches about sports in America. As he writes: "First, all four leagues on average have been and remain very profitable. The average return to major league professional franchises has been greater than the average return on stocks. Second, profits not evenly distributed. In each league, some franchises barely break even or lose money....Third owners have different motives for buying and owning a professional sports franchise. Some are in it primarily for the money while others are in it primarily for wins or ego or civic pride. And fourth, not all franchises are competently managed" (pp. 155-56). No kidding.

Sheehan also pooh-poohs arguments about small market about large market teams and their inability to compete with each other. This seems to have taken hold in MLB largely because of the dominance of the New York Yankees. But the other large market teams have failed to be nearly as successful. If this was really the determining factor the Yankees, the New York Mets, the Chicago Cubs, the Chicago White Sox, the Los Angeles Dodgers, and the Los Angeles Angels of Anaheim would dominate the championships every year. They don't. The Dodgers and Angels have fielded some very good teams and won some championships, as did the White Sox in 2005, but they have hardly been dominant. As Sheehan writes, "Market size may play a small role, but it is a long way from the whole explanation of profits, wins or anything else. Whether a team wins and whether it is well run both contribute more to financial success" (p. 161). That helps explain the success of the St. Louis Cardinals over the years, a team that has enjoyed great success through the years.

When it comes to labor relations, stadium deals, and the like Sheehan has some very pointed comments about the ridiculous position of owners: "Putting it most baldly, restricting free agency only restricts the players from selling themselves; it does not restrict owners from selling them. It should not be surprising that owners like that policy. However, it has no economic justification. The owners can only be viewed as a gaggle of greedy hypocrites as long as they simultaneously play one city against another or one TV station against another to wring the best contract possible, and yet say that players should be denied the unfettered ability to pit owner against owner to wrest the best possible contract" (p. 186).

Richard Sheehan's "Keeping Score: The Economics of Big-Time Sports" is a thoughtful and useful book about the economics of sport. He has one final comment that I found particularly apropos: owners should stop belly-aching about their bottom line and how they are losing money, etc., etc., etc., until they open their books and allow audits. In other words, prove it. Virtually none do so. Failure to take this action, Sheehan believes, should result in government at all levels "pull[ing] the plug on all subsidies. In a nutshell: no information--no tax breaks, no anti-trust exemption and no municipal subsidies" (p. 327).

1 of 2 people found the following review helpful:

3.0 out of 5 stars For student use, August 23, 1998

By 

[e-mail] (Ann Arbor, Michigan) - See all my reviews

This review is from: Keeping Score: The Economics of Big-time Sports (Paperback)

This book was part of my reading for a class called "The Financial Aspects of Sport Business." The book was very useful for the class, but it's a tough read. A lot of great examples, but not for everyone.