1. Home Games What’s in it for the teams?

2. Why I hate the Dodgers Not first team to move Left Brooklyn after 1957 season Braves, Browns, & A’s moved earlier Ended “Golden Era” of baseball 1903-53: Absolute stability Dodgers different Most profitable team in MLB Alone accounted for 47% of NL’s profits

3. Key Lesson of Dodgers’ Move No city “safe” Starts involvement of cities Before 1950 – only 1 stadium publicly built By 1980 – almost all were Some cities now say “no” Newark Some still say “yes!” Memphis Some say “no – I mean, yes!” Charlotte

4. What Power do Teams Have? Three factors play in teams’ favor Monopoly Power All-or-Nothing Demand Curve Winner’s Curse Will examine each in turn

5. Monopoly Power: Limit Output Leagues slow to expand By 1953: U.S. demographics had changed Los Angeles had no baseball teams – St. Louis had 2 Baseball & Football moved rather than expand NFL did absorb 5 teams from rival leagues Browns, Colts, 49ers, and Cardinals remain MLB expanded (1961-62) Prevent new league (NY, Houston) Avert Congressional intervention (Senators) NFL expansion tied to AFL First expanded (1960) to try to kill it Next expanded (1966) to merge with it

6. All-or-Nothing Demand Can’t get.8 of Mets Why sell foot-long hot dogs? At P e Consumers buy Q e Get Consumer Surplus Surplus P Q D PePe

7. All-or-Nothing Demand Team can grab surplus Too much beats nothing Gives seller leverage Forces Q off demand curve Extracts consumer surplus How far can Q A go? Surplus Loss P Q D QAQA

8. Case in Point: The Olympics 1976: Montreal Summer Olympics Spends C$1.6 Billion; Debt ~C$1.0 Billion Stakes raised after 1984 LA Olympics Only city to bid on 1984 Summer Olympics Proved profitable 2004: Athens Spends almost $10 Billion 2008 Beijing Spending about $35 Billion

9. Winner’s Curse Buyer pays more than product is worth The setting: auction with an uncertain payoff Who wins? Winner expects greatest payoff – could be: Best suited to exploit opportunity Most optimistic Most intent on winning per se Olympic “competition” for host site

10. What’s in a Name? What is true about each facility in Era #1 In Era #2? In Era #3 Era #1Era #2Era #3 Forbes FieldCleveland Municipal Stadium Network Associates Field Wrigley FieldAtlanta-Fulton County Stadium Continental Airlines Arena Shibe ParkMilwaukee County Stadium Ericsson Stadium Crosley FieldTampa StadiumMinute Maid Field Ebbets FieldOakland- Alameda County Stadium US Cellular Field

11. Era #1 All have “Park” or “Field” in name Cites origin of baseball Trivia: What was first “stadium”? All have name of builder/team owner Exception – sort of – Wrigley Field Originally “Weeghman” Field (Federal League) Team and stadium later bought by Wrigley All are OLD Most not there any more

12. Era #2 4 of 5 built after 1950 Lone exception: Municipal Stadium Built to attract Olympics to Cleveland 3 of 5 built after 1960 Exception built to lure Braves to Milwaukee Name reflects change of funding source Municipally built Leased to teams

13. Era #3 “Naming rights” sold by team Typically ~$2 Million/year Not necessarily privately built Most have extensive public funding What do firms get from naming rights? Is it worth it? PSINet & Enron in Chapter 11 ProPlayer no longer exists 3Com stopping rights deal The embarrassment of corporate mergers The Core States/First Union/Wachovia Center

14. Size Matters Saw that baseball teams seldom sell out Best: Giants, Red Sox & Cubs Have new – or very old – ballparks Why? Optimal size for baseball stadium 30-40,000 Why was Veterans Stadium 60,000+? Football has larger optimal size Used to rent space from baseball teams in off-season Took baseball names too NY Giants; Chicago Bears; Detroit Lions Municipal stadia built when football took off

15. Shape Matters, Too Municipal “Cookie Cutters” Designed by committee No one happy Lose unique shapes Shibe Park built to fit in city grid Polo Grounds built to fit between tracks & lot 250’ shot heard round the world 450’ fly out

16. Location, Location, Location: The Urban Ballpark New breed of ballparks Retro look Retro location? Municipal stadia often not even in home city Irving Cowboys vs East Rutherford Giants Left decaying stadia in decaying neighborhoods Old ballparks not built downtown Yankee Stadium built in “Goatville” Shibe Park on site of hospital for Contagious Diseases

17. Location, Location, Location: Cars and Costs Fans have moved to suburbs Urban neighborhoods decay Need place to leave cars Result: “a sea of asphalt” Stadium is “space intensive” Creates problems for a downtown location Space costs money

18. The Cost of Space: The Rent Gradient Center City v. Outskirts Why are NY hotels taller than in Crookston, MN? Cost of land falls as move from center of town Height of buildings mimics cost curve Cost of land Distance from city center

19. Reason for Rent Gradient A Linear City Why is central business district central? Hotelling Location Theory City along Main Street People evenly spread Competing stores at A & B Identical except for location What does A do? How does B respond? What is equilibrium location? A B

20. Reason for Rent Gradient A Circular City People evenly spread Identical stores on diameter What do A & B do? Again move to center Central business district Implication for housing prices? A B

21. The Shifting Bottom Line: Stadia and Team Values Problems in stadiums built since 1993 10 of 12 teams drew less in ‘03 than last year in old park Some as much as 20% less Giants drew more – in wake of World Series Reds drew more – but lowest total for new park since 1989 Brewers, Pirates, and Reds all cutting salary 4 most valuable teams in 2002 (Yanks, Red Sox, Mets, Dodgers) all in pre-1965 facilities New facilities still seem lucrative in NFL 8 of 10 most valuable teams in new facilities Cowboys - & luxury boxes – one of exceptions