Thin Ice Case

Topics: National Hockey League, World Hockey Association, 2004–05 NHL lockout Pages: 32 (10325 words) Published: April 19, 2013
The economics of sport is a rather wide field. It spreads across analyses of the demand for sport, cost-benefit analyses of sporting events and sporting venues, the local public finance implications of these same events and venues, sporting governance (meaning labor-management relations, organizational models of team or individual sports events as well as professional leagues), the business and finance of professional leagues, wage determination, labour market discrimination, trade in the sporting goods industry, media coverage, sponsoring, endorsements, and numerous related issues such as the economics of performance inhencing drugs. Broadly speaking these themes have developped from two traditions in sports economics, a Continental European one and a North American one, although there is now a trend for both traditions to merge. North Americans and their colleagues from Britain and Australia have applied the standard tools of supply and demand analysis to model the behaviour of the various participants to the world of sport. They have focused most of their attention to professional sport, more specifically men’s team sports, using advanced statistical methods such as regression analysis. On the other hand Continental European sports economics is more of the Institutionalist sort, relying more on descriptive statistics, with tables of numbers and the computation of various ratios, while sometimes applying economic theories alternative to the standard supply and demand analysis. Continental Europeans are also concerned with professional teams, but they devote more attention to the sporting goods industry (manufacturing and world trade patterns) and to the economics of amateur and recreational sport, in particular the Olympic Games.

An attempt to deal with all these issues within a single chapter would yield a rather superficial analysis. The agenda of this chapter is driven by the fact that most of the academic research on the economics of sport in North America, both at the theoretical level and in data gathering, actually deals with team sports, in large part precisely because of data availability. Within the Canadian context, it seems best to focus on one sport, ice hockey, more specifically the economics of the National Hockey League. As much as we would like to deal with other Canadian sporting traditions – the Canadian Football League, lacrosse indoor leagues or all sorts of minor leagues – very little can be said, due to an absence of data. As to Olympic sports, while the funding of amateur athletes raises important questions of public policy, these are not questions that readily lend themselves to economic analysis. The Olympic Games today clearly involve big money and invite questions about the costs and benefits of staging them, but estimates related to their net economic impact are mired in fantasies and hard to assess. The interested reader is referred to an easy-to-read introduction to the economic issues arising from holding the Vancouver 2010 Winter Olympics, such as transportation costs, speculation in the real estate market and the impact on low-income housing, high-skill labour demand and possible inflationary repercussions, and the possible cost underestimation and net impact overestimation (Fromm 2005); all these topics are examined in more detail by Preuss (2004), for all the Olympic Games staged since 1972.

The substantial transformation of the (team) sports business over the last decades is most obvious in the way sports news are being reported since the early 1990s. In the past, sports reporters and columnists were primarily concerned with players’ performances, statistics, team gossip and human interest stories. Today, good sports journalists need to understand the economics of professional sports as a business. If they are to explain to their readers the intricacies of trades and the manager’s likely motivations, reporters must have knowledge of team budgets, the length and structure of...
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