Sports Economics

The earliest professional sportsmen were probably the gladiators of the Roman era, who not only fought to save their lives, but ultimately could win their freedom and some considerable wealth and status.

In the modern era, professional sport has taken place at least since the early 17th century, most commonly in the form of horse racing, "pedestrianism," and prize fighting, often staged for the entertainment of the English and French royal courts and the benefit of widespread betting interests, with the contestants competing for prize money, or their "purse." The first horse racing meeting staged at Ascot at the command of Queen Anne, for instance, took place in 1611.

In terms of team sports, games such as association football, cricket and rugby were all codified under widely accepted rules in the 1870s, and soon developed professional leagues and teams. Matches in such professional leagues would charge ground admission for spectators, and by the start of the 20th century, Saturday football matches in England and Scotland would attract more than 300,000 paying customers.

However, professional sport had limited revenue streams, and it was not until the late 1950s and 1960s, when professional sport began to grow as a major industry, with broadcasters paying large amounts for the exclusive rights to cover competitions, and sponsors and advertisers willing to pay for their association with teams and players, and exposure on television and radio. Sports clubs no longer had to depend on the number of paying customers that they could attract through the turnstiles.

Through marketing players' personalities, sports agents such as the American, Mark McCormack, managed the careers of golfers such as Arnold Palmer and Jack Nicklaus, or tennis players including Billie Jean King and Rod Laver, to help them become multi-millionaires, with most of their income coming off the course or court. The televising of American football through the 1960s, its model largely followed in baseball, basketball and ice hockey, saw rapid growth in terms of players' salaries and the sports' financial growth.

The business of sport did not become a close interest for economists until the 1990s. According to Professor Ed Price, "We can use sports to understand things in economics, and we can also use economics to understand how the world of sports works." In the United States, the interest in sports economics was largely due to an increased involvement of the public sector in financing professional sports facilities such as stadiums.

Public funding is provided on the basis that professional teams have a significant economic impact on a city. The sports industries argue teams raise incomes and employment in host cities and that publicly funded facilities, and tax concessions, are a good investment for an urban area. Sports economist Rodney D. Fort concluded in his study into the effect of public funding teams, published in his book Sports Economics in 2006, the subsidized pro team franchise often has no discernable impact on a city's economy.

The second area of interest to sports economists is the analysis of the markets for players in U.S. team sports. For many years, teams held a monopoly in the market for players. This power came from player drafts (the selection of incoming players) and reserve clauses (the total control of a player, which did not allow him to sign with another team even when his contract expired). In Europe, soccer players' salaries were at first limited by a maximum wage, and later by contractual control by clubs over the footballers.

Leagues argued that these restrictions on player movement improved competitive balance across teams. When a Belgian player Jean Bosman challenged his club's right to retain control over his career after the expiration of his contract with them, the European Union issued the "Bosman ruling," that banned what it saw as a restraint of trade, making the transfer market for players much more open, with some transfer fees for star players reaching $150 million. In north America, players' unions have taken on the owners on behalf of their members' rights.

While player drafts still operate in U.S. sport, reserve clauses bind a player to a team for a limited number of years. As a result, salaries are much higher. Michael Leeds and Peter Von Allmen cited examples in The Economics of Sports (2005). Average annual salaries in the United States in 2002 ranged from a low of $1.3 million in the National Football League to a high of $4.5 million in the National Basketball Association.

Selected full-text books and articles on this topic

Money Games: Profiting from the Convergence of Sports and Entertainment
David M. Carter.
Stanford Business Books, 2011
Playbooks and Checkbooks: An Introduction to the Economics of Modern Sports
Stefan Szymanski.
Princeton University Press, 2009
The Economics of Sports
William S. Kern.
W.E. Upjohn Institute for Employment Research, 2000
Economics of Sport and Recreation
Chris Gratton; Peter Taylor.
E & FN Spon, 2000
The Economics and Politics of Sports Facilities
Wilbur C. Rich.
Quorum Books, 2000
Relocating Teams and Expanding Leagues in Professional Sports: How the Major Leagues Respond to Market Conditions
Frank P. Jozsa Jr.; John J. GuthrieJr.
Quorum Books, 1999
Major League Losers: The Real Cost of Sports and Who's Paying for It
Mark S. Rosentraub.
Basic Books, 1999 (Revised edition)
Who Benefits from the Presence of Professional Sports Teams? the Implications for Public Funding of Stadiums and Arenas
Swindell, David; Rosentraub, Mark S.
Public Administration Review, Vol. 58, No. 1, January-February 1998
Peer-reviewed publications on Questia are publications containing articles which were subject to evaluation for accuracy and substance by professional peers of the article's author(s).
Sports Economics: Current Research
John Fizel; Elizabeth Gustafson; Lawrence Hadley.
Praeger Publishers, 1999
The Economics of Football
Stephen Dobson; John Goddard.
Cambridge University Press, 2001
Librarian’s tip: This book is about soccer
The Economics of Professional Team Sports
Paul Downward; Alistair Dawson.
Routledge, 2000
American Sports Empire: How the Leagues Breed Success
Frank P. Jozsa Jr.
Praeger, 2003
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