The Estimated Rents of a Top-Flight Men's College Hockey Player

By Kahane, Leo H. | International Journal of Sport Finance, February 2012 | Go to article overview

The Estimated Rents of a Top-Flight Men's College Hockey Player


Kahane, Leo H., International Journal of Sport Finance


Abstract

We employed a methodology similar to Brown (1993, 1994) to estimate the marginal revenue generated by a top-flight NCAA Division I college hockey player. We added to the extant literature in two ways. First, the previous research focused on college basketball and football players. This is the first attempt to consider the case of college hockey players. Second, previous research has been conducted using relatively small, cross-sections of data. We employed a larger, panel dataset. Empirical results showed that top-flight college hockey players generate between $131,000 and $165,000 in added revenues to schools. According to the NCAA, the average value of an athletic scholarship is between $14,000 for in-state public schools to $32,000 in private schools in 2008. This implied that a premium college hockey player generates rents in excess of $100,000 per year for the typical institution.

Keywords: marginal revenue product, college hockey, NCAA

Introduction

It is no secret that college athletics has become big business. A simple look at recent financial data illustrates this point. For example, data collected by the U.S. Department of Education's Office of Postsecondary Education, under the Equity in Athletics Disclosure Act (EADA), shows that 2008 athletics revenues from the National Collegiate Athletic Association (NCAA) Division I schools was approximately $4.4 billion, more than half of which came from football (see Table 1). For the period from 2004 to 2008, the real growth in revenues amounted to 30.6%, while growth in expenditures was 27.6%. The NCAA itself has become a sizeable economic entity. The 2008-2009 annual report of the NCAA reported a total operation revenue of $661 million. The late NCAA President Myles Brand earned $1.72 million a year in salary and benefits during 2008 (Perry, 2010). Adding to this is the spiraling salaries paid to coaches at top NCAA schools. According to data reported by USA Today (2010), of the 110 Football Bowl Subdivision (FBS) coaches for which data were available, 56 had total salaries (excluding bonuses) of $1 million or more in 2009 compared to just five coaches in 1999. Pete Carroll of the University of Southern California had a reported total salary of approximately $4.4 million. The average total salary for all 110 coaches was approximately $1.3 million (USA Today, 2010). As for college hockey coach salaries, data were not readily available, but the University of New Hampshire's men's hockey coach, Dick Umile, was reported to have earned $382,000 in salary and deferred income in 2008, making him the highest paid state worker that year (The Associated Press, 2009).

The business of college sports, however, would not exist without one key component: the student-athlete. Yet because of NCAA eligibility rules, student-athletes are not allowed to be compensated for their athletic skills beyond a possible athletic scholarship (plus minor expenses). The NCAA also restricts the ability of students to move between colleges. These restrictions imposed by the NCAA have led economists to describe the institution as being a classic example of a cartel. For example, Fleisher, Goff, and Tollison (1992) wrote, "...economists generally view the NCAA as a cartel. They hold this view because the NCAA has historically devised rules to restrict output (the number of games played), and to restrict competition for inputs (student-athletes)" (p. 5). This characterization of the NCAA implies that student-athletes generate economic rents that are eventually distributed to various stake holders, including coaches, athletic directors, other college administrators, and the NCAA itself.1 A question that arises is just how much revenue does a top college athlete generate? Several studies, which we discuss in detail below, have attempted to answer this question for college basketball and football. This paper adds to the extant literature in two ways. First, it considers the marginal revenue product (MRP) of top men's college ice hockey players, a sport yet to be analyzed. …

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