Tagged: Hurricanes

Sports pages: Peculiar economics of losing teams and ripping off cheerleaders

Luke DeCock’s column in today’s News & Observer is a neat illustration of one of the strange, unintended consequences of North America’s model of sports ownership.

This isn’t the point DeCock intended, exactly. His column concerns what is now obvious: The Carolina Hurricanes hockey team is terrible, and it won’t get better. The team is dead-last in the Eastern Conference and a tiebreaker away from being the worst team in the league.

While the Hurricanes have kept it close lately, there just isn’t enough talent here to beat better teams – a pathetic seven goals over the past five games drives the point home nicely – and while Peters and general manager Ron Francis would never admit it publicly, because they have players to motivate and tickets to sell, the future of the Hurricanes is now better served by losing games than winning them.

What he means, of course, is that the Hurricanes should focus on coming in last place, or near to last, in order to get the top draft pick next year. While it’s debatable whether one carefully selected young player would appreciably improve the team, DeCock’s argument reveals a fundamental oddity in North American pro sports: Sometimes it’s better to lose.

As far as I know, there’s no other economic system in the world where a failing company can get better by getting worse. What distinguishes North American pro sports is that the team owners have agreed to set prices, salary caps and share revenue. This system ensures that everyone who is a member will be taken care of.

In short, it’s a cartel.

“Cartel” is a scary word, and in most contexts these arrangements are illegal. But pro sports leagues in North America have long enjoyed de jure and de facto antitrust protection.

Fifty years ago, an economist named Walter C. Neale wrote a classic account of this arrangement in a cheeky paper called “The Peculiar Economics of Professional Sports.” Writing as an unabashed supporter of antitrust exemptions for sports leagues, Neale nonetheless explained the inherent paradox: Sports teams strive to win, but they also must have viable opponents to play. In other words, unlike a real-world business environment in which successful companies chase unsuccessful ones from the market, sports teams have to all be viable and (theoretically) competitive.¹ (I’ll be studying this paper more closely as I prepare for the course I’m teaching this spring.)

So, the Carolina Hurricanes have hit the skids and the lead sports columnist for the local paper is calling for them to tank the season. But there’s little at stake, and no danger they’ll go bust: The Canes are protected by being in the fellowship of NHL owners.

Meanwhile, Hurricanes attendance is embarrassingly poor, with PNC Arena often just half-full. It’s unclear how hard the team’s office staff is trying to sell tickets. As Chip Alexander reported last month, the team has only 11 full-time sales staff, the lowest in the league (although they vowed to beef it up). No doubt other owners would be annoyed that an underperforming member of the cartel is intentionally losing games and not trying hard to sell tickets, but if it’s only a one-year slack-off, there’s probably no hard feelings.

In other sports stories, the NY Times’ Michael Powell published a fine piece about former Buffalo Bills cheerleaders filing a lawsuit alleging that they haven’t been paid for hundreds of hours of work and side commitments that often consisted of being paraded in front of wealthy men. The big point of contention in the comments section is whether the women are entitled to damages if they voluntarily entered into a position for which they would not be paid.

¹ In soccer leagues in Europe and elsewhere, there is a system of promotion and relegation between leagues. Therefore, teams would never intentionally lose games, because to finish at or near the bottom would mean being relegated into the next lower league. Imagine if the worst major league baseball team had to play the next season in Triple A. That’s what happens in soccer leagues around the world (but not in the US).