What Money Can't Buy (Shouldn't Buy): Naming Rights & Moneyball
Autographs for Sale
Consider the sports memorabilia business. Baseball players have long been the object of fervent pursuit by young fans clamoring for autographs. Today, the innocent autograph scrum has been displaced by a billion-dollar memorabilia business dominated by brokers, wholesalers, and the teams themselves.
In 1980s, baseball stars began signing autographs for fees that varied with their statues. In the 1990s, brokers began paying ballplayers to sign thousands of balls, bats, jerseys, and other items. The dealers then sold the mass-produced memorabilia through catalog companies, cable television channels, and retail stores. But the greatest value attaches to objects that have been used in games.
The conversion of baseball keepsakes into commodities changed the relation of fans to the game, and to one another.
When McGwire hit his sixty-second home run that season, the one that broke the previous record, the person who retrieved the ball did not sell it but promptly gave it to McGwire. "Mr. McGwire, I think I have something that belongs to you," said Tim Forneris, presenting the ball.
Given the market value of the baseball, this act of generosity prompted a torrent of commentary, most of it praising, some critical. The 22 year-old time groundskeeper was feted at a Disney World parade, appeared on David Letterman's talk show, and was invited to the White House to meet President Clinton. He spoke in grade schools to children about doing the right thing. Despite these accolades, however, Forneris was chastised for imprudence by a personal finance columnist in time, who described his decision to hand over the ball as an example of "several personal-finance sins that we all commit." Once he "got his mitts on it, the ball was his," the columnist wrote. Giving it to McGwire exemplified a mind-set that leads many of us into grave errors in daily money matters.
Here then is another example of how markets transform norms. Once a record-setting baseball is seen as a marketable commodity, presenting it to the player who hit it is no longer a simple gesture of decency. It is either a heroic act of generosity or a foolish act of profligacy.
Three year later, Barry Bonds hit 73 home runs in a season, breaking McGwire's record. The fight for the 73 home run ball led to an ugly scene in the stands and a lengthy legal dispute. The fan who caught it was knocked to the ground by a mob of people trying to grab it. The ball slipped out of his glove and was recovered by another fan standing nearby. Each claimed that the ball was rightfully his. The dispute led to months of legal wrangling and eventually a court trial involving six laywers and a panel of court-appointed law professors asked to define what constitutes possession of a baseball. The judge ruled that the two claimants should sell the ball and share the proceeds. It sold for $450,000.
Today, the marketing of memorabilia is a routine part of the game. Even the detritus of Major League Baseball games, such as broken bats and used balls, is sold to eager buyers. To assure collectors and investors of the authenticity of game-used gear, every major League Baseball game now has at least one official "authenticator" on duty. Armed with high-tech hologram stickers, these authenticators record and certify and authenticity of the balls, bats, bases, jerseys, line-up cards, and other paraphernalia destined for the billion-dollar memorabilia market.
The Name of the Game
Most major league teams now sell stadium naming rights to the highest bidder. Banks, energy companies, airlines, and other corporations are willing to pay hefty sums for the visibility that comes from having their names adorn big-league ballparks and arenas. For 81-years, the Chicago White Sox played in Comiskey Park, named for an early owner of the team. They now play in a commodious stadium called U.S. Cellular Field, named for a mobile phone company. The San Diego Padres play in Petco Park, named for a pet supply company. Minnesota Twins, now plays at Target Field, sponsored by the Minneapolis-based retailing giant that also has its name on the nearby basketball arena (Target Center) where the Minnesota Timberwolves play. Citigroup agreed in late 2006 to pay $400 million for a 20-year right to name th eNew York Mets' new ballpark Citi Field. By 2009, when the Mets played their first game in the stadium, the financial crisis had cast a cloud over the sponsorship arrangement, which was now being subsidized, critics complained, by the taxpayer bailout of Citigroup. Football stadiums are also magnets for corporate sponsors. The New England patriots play in Gillette Stadium, the Washington Redskins in FedEx Field. Mercedes-Benz recently bought the naming rights to the Superdome in New Orleans, home of the Saints.
By 2011, 22 of the 32 teams in the National Football League played in stadiums named for corporate sponsors.
The selling of stadium naming rights is now so commonplace that it's easy to forget how recently the practice came into vogue. It arose at about the same time that ballplayers began selling their autographs.
Corporate naming rights do not end with a sign on the stadium gate; increasingly, they extend to the words that broadcasters use in describing the action on the field. When a bank bought the right name the Arizona Diamondbacks' stadium Bank One Ballpark, the deal also required that the team's broadcasters call each Arizona home run a "Bank One blast." Most teams don't yet have corporate-sponsored home runs. But some have sold naming rights to pitching changes. When the manager heads to the mound to bring a new pitcher, some braodcasters are contractually oblgated to announce the move as an "AT&T call to the bullpen."
Even sliding into home is now a corporate-sponsored event. New York Life insurance company has a deal with ten major league baseball teams that triggers a promotional plug every time a player slides safely into a base. For example, when the umpire calls a runner safe at home plate, a corporate logo appears on the television screen, and the play-by-pay announcer must say, "Safe at home. Safe and secure. New York Life."
Moneyball
A further instance of market thinking in the world of sports is the recent conversion of baseball into "moneyball". The term comes from a 2003 best-selling book by Michael Lewis, who brought insights from the world of finance to bear on a baseball story. In Moneyball: The Art of Winning an Unfair Game, Lewis describes how the Oakland Athletics, a small-market team that couldn't afford expensive stars, managed to win as many games as the wealthy New York Yankees, despite having one-third the payroll.
The A's, led by general manager Billy Beane, were able to field a competitive team on the cheap by using statistical analysis to identify players with underappreciated skills and to employ strategies that were at odds with conventional baseball wisdom. For example, they discovered that a high on-base percentage matters more to winning than a high batting average or slugging percentage. So they hired players who, though less celebrated than high-priced sluggers, drew a lot of walks. And despite the traditional view that base stealing wins games, they found that steal attempts generally reduce rather than increase a team's chance of scoring. They therefore discouraged even their speediest players from trying to steal bases. Beane's strategy succeeded, at least for a time. In 2002, when Lewis followed the team, the Athletics won the western division of the American League. Although they were defeated in the playoffs, the A's story was an appealing David and Goliath tale: an underfinanced, underdog team uses its wits and the tools of modern econometrics to compete with rich, powerhouse teams like the Yankees. It was also an object lesson in how exploiting market inefficiencies can pay off for shrewd investors. Billy Beane brought to baseball what the new breed of quantitative traders brought to Wall Street -- an ability to use computer-driven analysis to gain an edge over old-timers who relied on gut instinct and personal experience.
In 2011, Moneyball was made into a Hollywood movie, with Brad Pitt playing the role of Billy Beane.
It's hard to stand up and cheer for the triumph of quantitative methods and more efficient pricing mechanism. These, more than the players, were the heroes of Moneyball.
Larry Summers finds price efficiencies inspiring. In a talk he gave in 2004 while president of Harvard, Summers cited Moneyball as illustrative of an "important intellectual revolution that has taken place in the last 30 or 40 years: the rise of social science, and especially economics, as an actual form of science. He explained how a very wise baseball general manager hired a Ph.D. in econometrics to figure out what baseball skills and strategies made for a winning team. Summers glimpsed in Beane's success a larger truth: the moneyball approach to baseball held lessons for the rest of life. What's true of baseball is actually true of a much wider range of human activity.
In the field of environmental regulation, where committed activists and attorneys were giving way to people who were skilled in performing cost-benefit analysis. In presidential campaigns, where the bright young lawyers who predominated in the past were now less needed than bright economists and bright MBAs. "And on Wall Street, where computer-savvy quantitative whizzes were displacing schmoozers and inventing complex new derivatives. In the last 30 years, the field of investment banking has been transformed from a field that was dominated by people who were good at meeting clients at the 19th hole, to people who were good at solving very difficult mathematical problems that were involved in pricing derivative securities", Summers observed.
Here, just four years before the financial crisis, was the market triumphalist faith -- the moneyball faith -- on bold display.
As events would show, it didn't turn out well -- not for the economy and not for the Oakland Athletics. The A's last made the playoffs in 2006 and haven't had a winning season since. To be fair, this is not because moneyball failed but because it spread. Thanks in part to Lewis' book, other teams, including those with more money, learned the value of signing players with a high on-base percentage. By 2004, such players were no longer a bargain, as rich teams bid up their salaries. The salaries of players who were patient at the plate and drew a lot of walks now reflected their contribution to winning games. The market inefficiencies that Beane had exploited ceased to exist.
Moneyball, it turned out, was not a strategy for underdogs, at least not in the long run. Rich teams could hire statisticians too and outbid poor teams for the ballplayers they recommended. The Boston Red Sox, with one of baseball's biggest payrolls, won World Series championships in 2004 and 2007, under an owner and a general manager who were moneyball apostles. In the years after Lewis' book appeared, money came to matter more, not less, in determining the winning percentage of major league teams.
This is not at odds with what economic theory predicts. If baseball talent is priced efficiently, the teams with the most money to spend on player salaries can be expected to do best. But this begs a bigger question. Moneyball made baseball more efficient, in the economist's sense of the term. But did it make it better? Probably not.
Consider the changes moneyball has wrought in the way the game is played: more protracted at bats, more walks, more pitches thrown, more pitching changes, less free swinging, less daring on the base paths, fewer bunts and stolen bases. It's hard to say this counts as an improvement. A drawn-out a bat with the bases loaded and a tie game in the bottom of the ninth can be a classic baseball moment. But a game littered with long at bats and lots of walks is usually a tedious affair. Moneyball hasn't ruined baseball, but -- like other market intrusions of recent years -- it's left the game diminished.
This illustrates a point I've tried to make about various goods and activities throughout this book: making markets more efficient is no virtue in itself. The real question is whether introducing this or that market mechanism will improve or impair the good of the game. It's a question worth asking not only of baseball but also of the societies in which we live.
Consider the sports memorabilia business. Baseball players have long been the object of fervent pursuit by young fans clamoring for autographs. Today, the innocent autograph scrum has been displaced by a billion-dollar memorabilia business dominated by brokers, wholesalers, and the teams themselves.
In 1980s, baseball stars began signing autographs for fees that varied with their statues. In the 1990s, brokers began paying ballplayers to sign thousands of balls, bats, jerseys, and other items. The dealers then sold the mass-produced memorabilia through catalog companies, cable television channels, and retail stores. But the greatest value attaches to objects that have been used in games.
The conversion of baseball keepsakes into commodities changed the relation of fans to the game, and to one another.
When McGwire hit his sixty-second home run that season, the one that broke the previous record, the person who retrieved the ball did not sell it but promptly gave it to McGwire. "Mr. McGwire, I think I have something that belongs to you," said Tim Forneris, presenting the ball.
Given the market value of the baseball, this act of generosity prompted a torrent of commentary, most of it praising, some critical. The 22 year-old time groundskeeper was feted at a Disney World parade, appeared on David Letterman's talk show, and was invited to the White House to meet President Clinton. He spoke in grade schools to children about doing the right thing. Despite these accolades, however, Forneris was chastised for imprudence by a personal finance columnist in time, who described his decision to hand over the ball as an example of "several personal-finance sins that we all commit." Once he "got his mitts on it, the ball was his," the columnist wrote. Giving it to McGwire exemplified a mind-set that leads many of us into grave errors in daily money matters.
Here then is another example of how markets transform norms. Once a record-setting baseball is seen as a marketable commodity, presenting it to the player who hit it is no longer a simple gesture of decency. It is either a heroic act of generosity or a foolish act of profligacy.
Three year later, Barry Bonds hit 73 home runs in a season, breaking McGwire's record. The fight for the 73 home run ball led to an ugly scene in the stands and a lengthy legal dispute. The fan who caught it was knocked to the ground by a mob of people trying to grab it. The ball slipped out of his glove and was recovered by another fan standing nearby. Each claimed that the ball was rightfully his. The dispute led to months of legal wrangling and eventually a court trial involving six laywers and a panel of court-appointed law professors asked to define what constitutes possession of a baseball. The judge ruled that the two claimants should sell the ball and share the proceeds. It sold for $450,000.
Today, the marketing of memorabilia is a routine part of the game. Even the detritus of Major League Baseball games, such as broken bats and used balls, is sold to eager buyers. To assure collectors and investors of the authenticity of game-used gear, every major League Baseball game now has at least one official "authenticator" on duty. Armed with high-tech hologram stickers, these authenticators record and certify and authenticity of the balls, bats, bases, jerseys, line-up cards, and other paraphernalia destined for the billion-dollar memorabilia market.
The Name of the Game
Most major league teams now sell stadium naming rights to the highest bidder. Banks, energy companies, airlines, and other corporations are willing to pay hefty sums for the visibility that comes from having their names adorn big-league ballparks and arenas. For 81-years, the Chicago White Sox played in Comiskey Park, named for an early owner of the team. They now play in a commodious stadium called U.S. Cellular Field, named for a mobile phone company. The San Diego Padres play in Petco Park, named for a pet supply company. Minnesota Twins, now plays at Target Field, sponsored by the Minneapolis-based retailing giant that also has its name on the nearby basketball arena (Target Center) where the Minnesota Timberwolves play. Citigroup agreed in late 2006 to pay $400 million for a 20-year right to name th eNew York Mets' new ballpark Citi Field. By 2009, when the Mets played their first game in the stadium, the financial crisis had cast a cloud over the sponsorship arrangement, which was now being subsidized, critics complained, by the taxpayer bailout of Citigroup. Football stadiums are also magnets for corporate sponsors. The New England patriots play in Gillette Stadium, the Washington Redskins in FedEx Field. Mercedes-Benz recently bought the naming rights to the Superdome in New Orleans, home of the Saints.
By 2011, 22 of the 32 teams in the National Football League played in stadiums named for corporate sponsors.
The selling of stadium naming rights is now so commonplace that it's easy to forget how recently the practice came into vogue. It arose at about the same time that ballplayers began selling their autographs.
Corporate naming rights do not end with a sign on the stadium gate; increasingly, they extend to the words that broadcasters use in describing the action on the field. When a bank bought the right name the Arizona Diamondbacks' stadium Bank One Ballpark, the deal also required that the team's broadcasters call each Arizona home run a "Bank One blast." Most teams don't yet have corporate-sponsored home runs. But some have sold naming rights to pitching changes. When the manager heads to the mound to bring a new pitcher, some braodcasters are contractually oblgated to announce the move as an "AT&T call to the bullpen."
Even sliding into home is now a corporate-sponsored event. New York Life insurance company has a deal with ten major league baseball teams that triggers a promotional plug every time a player slides safely into a base. For example, when the umpire calls a runner safe at home plate, a corporate logo appears on the television screen, and the play-by-pay announcer must say, "Safe at home. Safe and secure. New York Life."
Moneyball
A further instance of market thinking in the world of sports is the recent conversion of baseball into "moneyball". The term comes from a 2003 best-selling book by Michael Lewis, who brought insights from the world of finance to bear on a baseball story. In Moneyball: The Art of Winning an Unfair Game, Lewis describes how the Oakland Athletics, a small-market team that couldn't afford expensive stars, managed to win as many games as the wealthy New York Yankees, despite having one-third the payroll.
The A's, led by general manager Billy Beane, were able to field a competitive team on the cheap by using statistical analysis to identify players with underappreciated skills and to employ strategies that were at odds with conventional baseball wisdom. For example, they discovered that a high on-base percentage matters more to winning than a high batting average or slugging percentage. So they hired players who, though less celebrated than high-priced sluggers, drew a lot of walks. And despite the traditional view that base stealing wins games, they found that steal attempts generally reduce rather than increase a team's chance of scoring. They therefore discouraged even their speediest players from trying to steal bases. Beane's strategy succeeded, at least for a time. In 2002, when Lewis followed the team, the Athletics won the western division of the American League. Although they were defeated in the playoffs, the A's story was an appealing David and Goliath tale: an underfinanced, underdog team uses its wits and the tools of modern econometrics to compete with rich, powerhouse teams like the Yankees. It was also an object lesson in how exploiting market inefficiencies can pay off for shrewd investors. Billy Beane brought to baseball what the new breed of quantitative traders brought to Wall Street -- an ability to use computer-driven analysis to gain an edge over old-timers who relied on gut instinct and personal experience.
In 2011, Moneyball was made into a Hollywood movie, with Brad Pitt playing the role of Billy Beane.
It's hard to stand up and cheer for the triumph of quantitative methods and more efficient pricing mechanism. These, more than the players, were the heroes of Moneyball.
Larry Summers finds price efficiencies inspiring. In a talk he gave in 2004 while president of Harvard, Summers cited Moneyball as illustrative of an "important intellectual revolution that has taken place in the last 30 or 40 years: the rise of social science, and especially economics, as an actual form of science. He explained how a very wise baseball general manager hired a Ph.D. in econometrics to figure out what baseball skills and strategies made for a winning team. Summers glimpsed in Beane's success a larger truth: the moneyball approach to baseball held lessons for the rest of life. What's true of baseball is actually true of a much wider range of human activity.
In the field of environmental regulation, where committed activists and attorneys were giving way to people who were skilled in performing cost-benefit analysis. In presidential campaigns, where the bright young lawyers who predominated in the past were now less needed than bright economists and bright MBAs. "And on Wall Street, where computer-savvy quantitative whizzes were displacing schmoozers and inventing complex new derivatives. In the last 30 years, the field of investment banking has been transformed from a field that was dominated by people who were good at meeting clients at the 19th hole, to people who were good at solving very difficult mathematical problems that were involved in pricing derivative securities", Summers observed.
Here, just four years before the financial crisis, was the market triumphalist faith -- the moneyball faith -- on bold display.
As events would show, it didn't turn out well -- not for the economy and not for the Oakland Athletics. The A's last made the playoffs in 2006 and haven't had a winning season since. To be fair, this is not because moneyball failed but because it spread. Thanks in part to Lewis' book, other teams, including those with more money, learned the value of signing players with a high on-base percentage. By 2004, such players were no longer a bargain, as rich teams bid up their salaries. The salaries of players who were patient at the plate and drew a lot of walks now reflected their contribution to winning games. The market inefficiencies that Beane had exploited ceased to exist.
Moneyball, it turned out, was not a strategy for underdogs, at least not in the long run. Rich teams could hire statisticians too and outbid poor teams for the ballplayers they recommended. The Boston Red Sox, with one of baseball's biggest payrolls, won World Series championships in 2004 and 2007, under an owner and a general manager who were moneyball apostles. In the years after Lewis' book appeared, money came to matter more, not less, in determining the winning percentage of major league teams.
This is not at odds with what economic theory predicts. If baseball talent is priced efficiently, the teams with the most money to spend on player salaries can be expected to do best. But this begs a bigger question. Moneyball made baseball more efficient, in the economist's sense of the term. But did it make it better? Probably not.
Consider the changes moneyball has wrought in the way the game is played: more protracted at bats, more walks, more pitches thrown, more pitching changes, less free swinging, less daring on the base paths, fewer bunts and stolen bases. It's hard to say this counts as an improvement. A drawn-out a bat with the bases loaded and a tie game in the bottom of the ninth can be a classic baseball moment. But a game littered with long at bats and lots of walks is usually a tedious affair. Moneyball hasn't ruined baseball, but -- like other market intrusions of recent years -- it's left the game diminished.
This illustrates a point I've tried to make about various goods and activities throughout this book: making markets more efficient is no virtue in itself. The real question is whether introducing this or that market mechanism will improve or impair the good of the game. It's a question worth asking not only of baseball but also of the societies in which we live.
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