Sunday, October 7, 2012

Sports Economics: Mo' Money, Mo' Problems


Home Runs. Touchdowns. Slam Dunks. Big Hits. High Scores.  What more could a sports fan ask for?  It’s all about the action, the show, the big time plays.  What are sports without the highlight reels? Those plays that you watch over and over again the following day on YouTube.  The home run launched  450 feet.  The fastball hurled at 101 miles per hour.  The safety delivering a devastating, blindside hit to a wide receiver in the open field.  Fans love these plays no matter what the cost is to the players or management.  
Over the past decade the amount of money being pumped into professional sports has been substantial to say the very least.  Players are rewarded with huge contracts based on previous performance and the ability to attract fans.  Expectations skyrocket as the combined pressure from fans and management to perform dawns on professional athletes. This pressure can cause them to turn to alternative routes to gain a competitive advantage.  While the abundance of money and investments in the world of professional sports provides obvious and easily observable benefits, there are a handful of detrimental issues stemming from financial and cultural pressures, distorting the influence of professional sports finance.  Due to the prevalence and availability of monetary incentives rewarding performance, athletes seek to maximize the profitability of their limited careers through the usage of and participation in activities that violate the rules of professional sports.  Despite taking all the blame and criticism, players are not solely to blame as they face sky-high expectations from fans and management who initially praise enhanced performance only to later condemn the methods used to achieve desired results.
Over the past decade or so in professional sports there has been a substantial increase in the multi-million dollar contracts offered to and signed by athletes.  When discussing a potential contract for a big free agent, it isn’t about whether or not he will receive a multiyear deal, but, instead, media buzzes around the issue of how many millions, or hundred millions, the contract will be worth.  While organizations do not necessarily want to pay these athletes millions of dollars each year, they have no choice—the market is set.  It’s simple: if you want the best, you must pay the most.  The Major League Baseball (MLB)contract responsible for starting this trend occurred in 2000 between shortstop Alex Rodriguez and the Texas Rangers.  Rodriguez signed with the Rangers in December of 2000 for an unheard of amount of $252 million for ten years with a “base compensation of $23 million [which] shall be increased $2 million above the highest average annual value of any other shortstop in major league baseball”  (Verducci, “Terms”).Along with a quarter of a billion dollars, the Rangers promised that Rodriguez would be the highest paid shortstop in the league, implying that making the most money among their peers is important to the player.  Along with the base salary, Rodriguez was incentivized by a list of award bonuses based on his performance.  For instance, Rodriguez would earn $500,00 to win the Most Valuable Player award, $100,000 per All-Star Game selection, $200,000 to be World Series Most Valuable Player and $1,000,000 if named Most Valuable Player a second season.  Every contract in professional sports has performance-based bonuses such as these to drive players to go above and beyond expectations.  Large monetary incentives through mega contracts and additional performance bonuses have become a staple in professional sports.
While the largest deals in professional sports are found in the MLB, due to no salary cap, the National Football League (NFL) teams pay ridiculous amounts of money to the first overall draft pick each year.  In 2009 the Detroit Lions drafted Matthew Stafford and offered him a deal worth $41.7 million guaranteed, but this contract was dwarfed the following year as the St. Louis Rams paid their top pick, Sam Bradford, $50 million guaranteed with the overall contract having a maximum value of $86 million  (Leahy).  This absurd amount of money was offered to a twenty-two year old athlete who didn’t play most of his final college season due to a shoulder injury, and before he had set foot on a professional field.  The Rams front office based this decision solely on Bradford’s potential as an elite quarterback and his ability to draw fan attention for increased ticket sales, expecting future revenues to outweigh the contract’s cost.  Despite having the lowest average salary of the four major professional sports, the National Hockey (NHL)has recently followed suit with large contracts.  This is best exemplified through the contract $110 million dollar contract highly touted defensemen Shea Weber received from the Nashville Predators to be paid over fourteen years (Proteau).  This high dollar, lengthy   contract sets the precedent for future NHL deals.  The statement has been made: these multimillion dollar deals are here to stay and will continually increase.
What does this mean for current and future professional athletes?  Sports is no longer simply a physical game, but it is now a game of numbers.  Most players only receive one major contract and this needs to last for the rest of their lives.  In one of the most famous Sports Illustrated articles, Pablo S. Torre discusses the trend of athletes going broke shortly after their departure from professional sports.  Despite the fact that salaries have risen steadily during the last three decades, Torre reports the following facts:
“By the time they have been retired for two years, 78% of former NFL players have gone bankrupt or are under financial stress because of joblessness or divorce.... Within five years of retirement, an estimated 60% of former NBA players are broke.... Numerous retired MLB players have been similarly ruined” (Torre- SI).
It is obvious that athletes have not made smart financial decisions with these large contracts in the past and athletes today do not want to follow suit.  Unlike a typical, steady career for most of society, professional athletes have a very short window of opportunity to make enough money for themselves and their families for the future.  As reported by RAM Financial Group, the average careers of NFL, NBA, MLB and NHL athletes are 3.5, 4.8, 5.6 and 5.5 years respectively (RAM Financial Group).  Given this extremely short period of time to become financially set for the future, professional athletes have an incentive to maximize the profitability of their careers at all costs.
            If the burden of becoming financially secure for life within a very short time frame isn’t enough, sports fans put additional pressure on athletes to perform.  Athletes who sign huge contracts are expected to come in and win right away, not just have a winning record but make it to the playoffs and win a championship.  Take NBA superstar LeBron James for example.  Two seasons ago he signed with the Miami Heat and expectations for the upcoming season were championship or bust.  Miami lost in the finals and the entire blame was put on James as he did not live up to expectations.  Following up that disappointment with an NBA Championship this past season, the future expectations are even higher as fans expect him to lead the team to win it all for years to come.  While this trend may never end, fans must allow players to adjust to new surroundings before demanding the world from them.
            How do players cope with and live up to these ridiculous expectations?  The combination of monetary incentives, a small window to make a lifetimes worth of money and pressure from the fans often lead professional athletes to abuse performance-enhancing drugs, such as anabolic steroids.  For the past decade, steroids have dominated sports media as big name athletes continue to test positive for these illegal substances.  Is it really the players’ fault? It takes an incredible human being to handle of the pressure placed on superstar athletes.  After testing positive for using performance-enhancing drugs, Alex Rodriguez made the following statement:
“When I arrived in Texas in 2001, I felt an enormous amount of pressure, felt all the weight of the world on top of me to perform and perform at a high level every day. Back then, it was a different culture. It was very loose. I was young, I was stupid, I was naive and I wanted to prove to everyone that I was worth, you know, being one of the greatest players of all time. And I did take a banned substance.” (“Rodriguez Admits”)
As one of the hottest young players ever, Rodriguez was bombarded with not only the largest contract in professional sports history but with the weight of an entire community on his back to turn around the then struggling Texas Rangers.  This was all at the age of twenty-six.  Now that’s a lot of pressure for young man to handle all at once.  Rodriguez turned to performance enhancing drugs to try and live up to these expectations, and they worked.  During his four seasons with the Rangers, Rodriguez put up phenomenal stats and won the Most Valuable Player award in 2003.  Not until Major League Baseball began testing athletes for steroids in 2003 did anyone believe that steroids were aiding to his success.
            While the majority of cases and media coverage of steroids revolves around baseball, a wide range of athletes have tested positive for performance enhancing drugs.  Recently Lance Armstrong was found guilty of doping during his stretch as the world’s number one ranked cyclists- winning seven Tour de France contests.  Female track star and Olympic medalists, Marion Jones tested positive for using steroids and was stripped of her medals.  In the National Football League star linebackers Bill Romanowski and Shawne Merriman have both admitted to using steroids.  As discussed in his book, Jose Canseco explains how numerous minor league baseball players see no hope to make the major league on their own unless they separate themselves from their peers. (Canseco)  With a stagnant career in the minor leagues the usage of steroids seems like the last option before giving up the game completely.  For example, the Twins drafted Dan Naulty in 1992 as a tall, skinny pitcher who didn’t throw the ball very hard but had a lot of potential upside due to his height.  Naulty was one of four right-handed pitchers fighting for a single open roster spot for the Minnesota Twins major league team.  Winning the spot through an unexpected increase in velocity and physique, Naulty made the major leagues due the fact that, “Naulty used steroids to transform himself from a fringe minor leaguer into a massive big leaguer throwing 96 mph.” (Verducci- “To cheat”)  Every aspiring athlete dreams to become a professional athlete for the fame, the experience and for the money.  Driven by this desire for more, Naulty did what he had to in order to fulfill his dream.
In reality, everyone in our today’s society searches for enhanced performance in most areas of life.  As Paul Finkelman explains, “In our bottom-line, performance-based culture, we rarely ask how the performance is achieved as long as we like the outcome.” (Finkelman)  Investors research past performance of stocks and bonds in order to predict future performance in order to improve portfolios.  Television advertisements promise Viagra users enhanced performance in sexual activity.  Famous musicians such as the Rolling Stones and Bob Marley were know for using illegal drugs which in turn enhanced their performance.  No one called them out for this act because it entertained the audience.  In a sense, professional athletes are entertainers as well; putting on a show for fans as the troubles and stress of real life are momentarily put on hold.  If that is the case, then why are professional athletes given so much grief for using steroids in order to hit more home runs or throw one hundred mile per hour fastballs? 
The answer is simple- doping in professional sports is against the rules and viewed as cheating.  The term “cheater” has negative connotations attached to it that alters the view of the public.  No matter the achievements or success of a professional athlete, once testing positive for performance enhancing drugs, the player’s fan-favorite status is thrown out the window.  Those players once idolized by fans and media for success are now the same people condemning the player for steroid usage.  Take the career of all-time home run king Barry Bonds for example.  No body questioned the fact that in the twilight of his career he added increased muscle mass and added an inch to his head size because he was hitting home runs and the fans loved him.  Once news broke of his history of steroid use, he was seen as a cheater and the sports world did a complete one-eighty as Bonds was criticized and condemned by previous fans.  What provoked Barry Bonds to use these substances?  Bonds knew that extending his career would be extremely profitable.  Examining Bonds’ salary per season, his four highest salaries happened to be the final four seasons of his career.  From 2004 to 2007, Bonds made annual salaries of roughly $18 million, $22 million, $19million and $15.5 million respectively. (“USA Today - Salaries”)  Performance enhancing drugs allowed Bonds to increase the window of opportunity to earn large sums of money to guarantee financial security for the future.  Everything ties back to monetary incentives rationalizing the choice to violate league rules through usage of steroids.
While steroids are obviously illegal and dangerous to the health of athletes, the results often outweigh the risks as money is earned for increased performance and career longevity.  The fans and the general public must understand the situation of professional athletes and the combined pressures they must endure.  If the general public were informed that partaking in activity ‘x’ would increase their salary and reduce external pressures, the majority would take that offer in a heartbeat.  It is unfortunate that professional athletes are idealized to the point where once they are revealed for breaking the rules, the scrutiny is much worse then the praise for their performance and success.  Everything they accomplished in response of seeking more money and appeasing the fans was for nothing.  Is there a solution to this devastating cycle of steroid abuse in professional sports?  The only way to prevent the continued use of steroids is through monetary rewards and fines.  A Freakonomics article titled “Hitting Sports Cheats in Their Wallets” discusses the following plan:
“Remove 10 percent of an athlete’s salary and place it in an interest-bearing escrow account. If the athlete tests positive for steroids during his career, he loses out on all money paid into that account during his playing days. He would involuntarily make a large anonymous donation to a youth anti-steroid program. If he stays clean, or doesn’t get caught, he gets a large lump-sum payment when he retires — exactly the time when he is most likely thinking about long-term financial security.” (“Freakonomics”)
While there is no evidence that this plan will actually be implemented, the effectiveness is obvious as there is now a monetary incentive to stay clear of rather than use steroids.  The issue of steroids in professional sports may never be completely controlled, but the blame is not solely on the players as they continue to search for methods to meet expectations and maximize the profitability of their career.
            In addition to the massive concern of performance enhancing drugs, financial incentives are increasing the dangers of professional sports.  Recently the New Orleans Saints football organization was under investigation for a bounty scandal.  Eventually the truth was released about a program where the coaching staff of the Saints was rewarding players with monetary bonuses, or bounties, to injure opposing players.  As disturbing as this may sound, it might spread beyond the Saints organization.  In an interview with Sports Illustrated’s Peter King, defensive players on the Saints were offered close to $10,000 to knock out the opposing quarterback in order to increase chances to win.  (King) Players in the NFL are so blindsided by dollar signs that they are willing to purposely injure an opposing player to earn some extra change.  The act of purposely injuring another player goes against an unspoken bond that all members of the NFL share, but when money is involved, players forget this bond.  One of the greatest linebackers of all-time, Junior Seau, had the following reaction, “"When you say bounty and you talk about intentionally taking someone out, in essence you're talking about affecting his livelihood... That's not football." (Trotter)  While the players responsible for actually attempting to injure opponents should be punished, the greatest fault should be placed on the coaches running the system.  These coaches realized that players in today’s game are overly interested in the financial benefits of professional sports.  With this in mind, coaches took advantage of the players by offering monetary rewards.  While this issue is now under control by the NFL, the detrimental effect of money in professional sports is easily observed through the bounty case.
            A final issue of professional sports caused by the increased presences of money is the reoccurrence of lockouts cancelling or postponing seasons.  The most recent lockouts for the big four sports have occurred within the past twenty years.   There was no Major League Baseball season in 1994.  The National Football League faced a shortened season last year and currently the National Hockey League is experiencing a lockout.  All of these situations came down to one thing: money.   The owners and players both want higher percentages of revenues, known as revenue sharing.  The current method of approaching a professional sport season is reversed.  Only once the financial issues are settled can the actual sporting events begin.  Both parties involved have become way too greedy and distracted by dollar signs.  This causes unrest among the fans as they begin to disrespect the players and owners for their greediness.  Let the sporting events happen and settle the monetary issues at a later date.
             The increased emphasis on finance of professional sports has led to detrimental issues such as steroid usage, bounty scandals and increased lockouts as all parties involved seek to maximize personal wealth through any means necessary.  While professional athletes are responsible for their actions, the combination of pressures and expectations placed on them can be overwhelming leading them to participate in rule-violating activities.  Fueled by the desire to experience their team winning a championship, fans drive the decisions made by the players and management.  Management must pay big bucks in order to sign high profile athletes who will in turn put fans in the stands, boosting revenues.  What the fans do not realize is the amount of power in which they hold in the world of professional sports.  Fans buy tickets for entertainment.  Will fans still be entertained without the big hits, crushed home runs or blazing fastballs?  As long as money dominates the world of professional sports, we may never find out.


Works Cited
"Athlete Services." RAM Financial Group. Web. 3 Oct 2012. <http://www.ramfg.com/RAM-Financial-Group-Solutions-Professional-Athletes-Athletes-Services>.
Canseco, Jose. Juiced: Wild Times, Rampant 'roids, Smash Hits, and How Baseball Got Big. New York: Regan Books, 2005. Print.
Finkelman, Paul. ""Performance-Enhancing Drugs" in a Peformance Based Society: Reflections on the Mitchell Report." Huffington Post 29 12 2007, n. pag. Web. 4 Oct. 2012.
"Hitting Sports Cheats in Their Wallets." Freakonomics. N.p., 26 08 2009. Web. 2 Oct 2012. <http://www.freakonomics.com/2009/08/26/hitting-sports-cheats-in-their-wallets/>.
King, Peter, dir. What Bounty System Scandal Means for NFL's Future. PBS NewsHour, 2012. Film. 3 Oct 2012. <http://video.pbs.org/video/2206940368/>.
Leahy, Sean. "Rams agree with No. 1 overall pick Sam Bradford on record contract with $50 million guaranteed." USA Today 30 07 2010, n. pag. Web. 4 Oct. 2012. <http://content.usatoday.com/communities/thehuddle/post/2010/07/rams-agree-with-no-1-overall-pick-sam-bradford-on-record-contract-with-50-million-guaranteed/1
"MLB Player Salaries - Barry Bonds." USA Today-Salaries . N.p., n.d. Web. 3 Oct 2012. <http://content.usatoday.com/sportsdata/baseball/mlb/salaries/player/Barry-Bonds>.
Proteau , Adam. "Shea Weber contract magnifies disparity in NHL markets." Hockey News. (2012): n. page. Web. 4 Oct. 2012. <http://www.thehockeynews.com/articles/48092-Shea-Weber-contract-magnifies-disparity-in-NHL-markets.html>.
"Rodriguez Admits to Using Steroids." Sports Illustrated. 09 02 2009: n. page. Web. 4 Oct. 2012. <http://sportsillustrated.cnn.com/2009/baseball/mlb/02/09/arod.admits/>.
Torre, Pablo S. "How (and Why) Athletes Go Broke." Sports Illustrated. 23 03 2009: n. page. Web. 4 Oct. 2012. <http://sportsillustrated.cnn.com/vault/article/magazine/MAG1153364/1/index.htm>.
Trotter, Jim. "The Conscience Of The Locker Room." Sports Illustrated 116.11 (2012): 36-37. SPORTDiscus with Full Text. Web. 4 Oct. 2012.
Verducci, Tom. "Terms Of Endearment." Sports Illustrated. 18 12 2000: n. page. Web. 4 Oct. 2012. <http://sportsillustrated.cnn.com/vault/article/magazine/MAG1021378/index.htm>.
Verducci, Tom. "To Cheat or Not to Cheat." Sports Illustrated. 04 06 2012: n. page. Web. 4 Oct. 2012. <http://sportsillustrated.cnn.com/vault/article/magazine/MAG1199041/3/index.htm>.



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