Sports franchise owners are liars

From today's Washington Times:

NFL commissioner Roger Goodell is concerned the economics of the league's collective bargaining agreement with its players association, extended just two years ago, aren't working.

"The thing we are starting to realize is that [the CBA] has swung considerably toward the players," Goodell said yesterday at the opening of the NFL's annual spring meeting. "In the economy we have now, that can really [have] a significant impact on clubs. We have rising costs. The economics of operating a team are extremely thin margins.When you shrink the margins, at some point in time the agreement becomes untenable. We have to be very cautious here, and the players need to recognize those risks and the tremendous costs."

And yesterday, from ESPN.com:

Stephen Ross was approved as the new 50 percent owner of the Miami Dolphins and Dolphin Stadium for $1.1 billion.

So let me see if I understand. The NFL's position is that its economics are untenably bad, and yet apparently only half of a franchise is worth $1.1 billion. Sure.

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Well, teams could be

Well, teams could be operating on razor thin profit margins and still have exhorbant values. Compensating differentials are the key. The typical owner is probably willing to take a loss because they just like football that much. The prices probably so high primarily because of the allure of owning a football team, not because the asset is so profitable. They are still lying, not about how bad the teams' economic situations are, but about how untenable these bad economic situations are.

Right

Just because something generates revenue doesn't mean that it's not at least in part a consumption good.

Yes, there is a consumption aspect

I don't disagree that their is a consumption aspect to owning a team, though, if I recall correctly, several baseball teams are owned by corporations (no football teams that I can think of are). But it's pretty well-settled in the sports economics literature that sports owners systematically underreport the economic benefits of ownership, such as the (insane) tax treatment of team purchases.

But Matt's right: If people are willing to pay billions to be the object of derision in the sports pages, then that's sustainable.

NFL Teams

They are not cash cows that pull in huge profits every year for the owners. In general most profits are pushed back into the team.