The NFL Commissioner, Roger Goodell, stated on April 26, 2007 that the NFL has been thinking about adding a 17th game to the regular season. He said that if this idea goes through, they would probably drop a pre-season game. This option sounds like a good idea, but is it from an economic viewpoint?
There are many factors that will determine if an additional game will be a good idea or not. For instance, an increase in regular season games might only increase games in foreign countries. If this happens it will add profit to the NFL, but not to the individual teams and fans. If the extra game is played in the states, the fans will benefit by being able to watch another game, the players will benefit by getting a much higher salary in a regular game compared to a pre-season game, and the franchises will benefit by making a better game-day profit. The only problem is if the players’ salary increase were to be higher than the game-day profit. If this would happen, everyone would still profit except for the franchises. This probably will not happen because the demand for football is so high, that only one more game will still have the same demand as having a 16 regular season schedule.
So, should there be an additional regular season game? I say yes, but make it be in the United States, so we all can benefit from it.
Monday, September 24, 2007
Tribe Competes for Best Record in A.L. with One of the Smallest Payrolls
This past weekend the Cleveland Indians clinched the central division title for the first time since 2001. Now they are playing for home field advantage in the playoffs, were the team stands to make more money on gate, merchandise, and concession revenue while still paying much less salary to their players compared to Boston, New York and Los Angeles. http://sports.espn.go.com/mlb/teams/salaries?team=cle ranks the teams in MLB by salary this year and the Indians are 23rd out of 30 teams. Only San Diego (24th) is contending for the playoffs with a lower payroll. However, it has been 5 years without a playoff appearance for the Indians while the teams with the highest payrolls such as the Yankees, Mets, Dodgers, and Red Sox seem to always be in the race for a Pennant. There even seems to be a correlation with playoff appearances by teams and their salary. Yankees pay almost 4 times more then small market teams like Cleveland and San Diego, but as a result make the playoffs four times as much? Can a small market team compete year in and year out, or do they need to rebuild after a good run of 5 years or so? I think it would be better for MLB if every team made the playoffs equally to create excitement in these smaller markets and to stop “evil empires” from monopolizing the playoffs.
The Fed Rate Cut vs. Inflation Fear
The Federal Reserve cut the target on a key short-term interest rate by half of a percentage point to 4.75% last Tuesday. On the same day, the Fed also cut its discount rate by another half of a point to 5.25% after the surprise cut on 8/17/07. It is clear that the Fed is willing to take any moves necessary to ensure that the US economy is not derailed by problems in the subprime mortgage market. The federal funds rate is an overnight lending rate that banks charge each other. The rate cut is a very important tool because this funds rate influences the amount of interest consumers must pay for various types of debt, such as credit cards, home equity lines of credit and auto loans. The Fed is “intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.”
Stocks surge after the Fed announcement of rate cut. The risk of potential inflation starts to catch people’s attention. Inflation could come from the still-booming global economy and from the lower rates, which push more money into the economy, making it easier to raise prices. In the statement, the Fed indicated that more rate cuts could be on the way. Do you think the Fed might cut rates too much? Are we expecting inflation now? I remember that the Fed had to raise rates in 1999 after cutting them during the 1998 financial crisis and the economy ended up in a recession in 2001. Do you think the same thing is happening now?
GM Walkout: Union Fringe Advantage?
United Auto Workers (UAW) walked out across the US in the first strike at General Motors (GM) since 1998. The two major issued as the two sides negotiate a new national contract: whether the UAW, having made big concessions on health care, should get some kind of jobs guarantee from GM. The GM management and UAW leaders held several bargaining sessions, trying to come out with a deal that would set up a huge, union-led health-care trust to assume retiree medical benefits and address a slew of other economic issues. Apparently, the two sides did not come to an agreement.
As we notice, the union wage advantage is an estimated 13 percent over their nonunion counterparts. This advantage rises by 2 to 3 percentage points when fringe benefits are considered. Here comes the question: why do union workers enjoy a greater variety and higher overall level of fringe benefits than nonunion workers?
First, union fringes may be higher because the union is able to deprive management of its workforce and the employer is willing to pay both higher wages and larger fringe benefits to avoid the costs of a strike. Second, union workers, by virtue of their higher earnings, may simply choose to “buy” more fringes than lower-income nonunion workers. Third as a collective-voice institution, a union may formulate fringe benefit proposals, inform its constituents of the details of such proposals, and crystallize worker preference. Fourth, older workers are usually more active in the internal politics of a union and therefore more influential in determining union goals.
What do you think about unions? Do you think unions are a positive or a negative force insofar as economic efficiency and productivity are concerned?Seattle Supersonics; An Attempt to Trump Local Government
Seattle officials filed a lawsuit against the SuperSonics to prevent them from leaving town this Monday. The franchise has claimed arbitrary losses since the 1990's, and the losses of the 2007 fiscal year will exceed seventeen million. However, the Sonics had previously agreed to a fifteen year lease to play the rest of their games at the KeyArena, the smallest venue in the league, which will be up in Sept. 2007.
The Sonics are trying to exploit their losses in revenue to the media, and use it to their advantage in an attempt to have a pricey new $500 million stadium built in Seattle. The franchise is claiming they have to pay unfair amounts of the revenue they are generating to the city. The team is trying to buy up the remainder of the lease in order to get out of their agreement and move out of the city. This would hurt the overall fan base for the Sonics, which is relatively small compared to other franchises because of the poor quality over numerous years in the league.
The franchise is trying to present an ultimatum to the city of Seattle. If they do not get a new stadium, they are threatening a move out of the city, causing a loss of revenue for the city as a whole. This would interfere with the markets of other regions in the country if a move was made. However, the local government is stepping up, and putting pressure on the franchise to remain loyal to their lease for the small amount of time they have left to fulfill it.