By Paul O'Sullivan

Watching Sky Sports News one morning recently, I briefly caught sight of a headline (accompanying SSN report is available here) that said something along the lines of ‘London Olympics gave £15bn boost to UK economy in 2013’ (the official figure is £14.2bn). My initial reaction was ‘Hmmm, that seems quite high’,especially when one considers that the direct cost of hosting the Olympics was over £9bn.
 
The figure provided by Sky came from “Inspired by 2012: The legacy from the Olympic and Paralympic Games: Second annual report”, a joint report by the UK Government and Mayor of London.  Since the London Games in 2012, people like Boris Johnson and Seb Coe have proclaimed how great, and important, such a legacy is, irrespective of (or maybe because of) how much the Olympics cost or whether people in the UK even want, or care about, such a legacy.

On page 47 of the report, the £14.2bn is broken down into three sections: (i) £5.9bn of additional sales by UK companies as a result of UKTI (UK Trade & Investment) activity; (ii) £3.58bn of Olympic-related High Value  Opportunities (HVO) won overseas; (iii) £4.72bn of additional foreign direct investment into the UK. 
 
Little evidence is provided to back up points (i) and (iii). For instance, the £4.72bn of additional foreign direct investment into the UK is described as being ‘influenced by the Games’. With regard to (ii), the report states that the UKTI has targeted ‘the hosts of future major sports events’ and ‘global infrastructure opportunities’ and outlines some successes of UK companies wining various contracts. However, the report makes no attempt to quantify how much of these success were solely, or partly, due to hosting the Olympics. The implication seems to be that none of these contracts would have been won had London not hosted the Games.  

One gets the sense from the report that any benefits to the UK economy since 2012 are being attributed to hosting the Olympics, possibly to convince the public that hosting the Games was worth the £9bn price tag. Usually, benefits are determined by comparing an outcome in 2013 to the equivalent outcome in 2012. As well as this, it does not seem to be considered that an outcome may have occurred if the Games had not taken place, i.e. the ‘counter-factual’.  
 
For example, the report states on page 54 that “London welcomed 16.8 million international visitors in 2013,....an increase of 1.3 million visitors”. An impressive achievement of 8.56% growth!  However, a look at www.visitbritain.org shows that international visitors to London grew by 3.5% in 2010, 4% in 2011 but only by 1.1% in 2012. The lower growth in 2012 may be indicative of ‘crowding out’ and‘time-switching’ effects. While it is possible that the Olympics had some effect on tourism in 2013, it is hardly likely to explain all of the growth, much as some vested interests would like that to be the case.
 
Similarly, the report states, again on p54, that “Many leading institutions, including the British Museum, Natural History Museum and National Gallery, experienced large increases in visitor numbers in 2013”. Again, the implication is that hosting the Olympics drove this change. However, according to this article, Summer 2012 was one of the worst years on record for some major visitor attractions in London. While poor weather was a factor, it is also likely that a ‘substitution effect’ was relevant as visitors simply substituted Olympic activities for ‘normal’ tourism activities. Hence, a return to ‘business as usual’ conditions would give a relatively large level of growth.
 
There are numerous examples of only looking at the 2012-2013 effect, or of failing to try to take account of a‘counter-factual’ in the drive to paint the Olympics as having massive long-term benefits. While it is likely that the Olympics had some effect, extravagant claims made by politicians should always be viewed with an appropriate level of scepticism. 

By Paul O'Sullivan

A recent report on Sky Sports News (see here) outlined a UEFA proposal that if a player must leave the pitch to receive treatment for injury as a result of foul play, then the player that committed the foul may also be required to leave the pitch until the injured player is fit to return. 
 
The rationale behind the proposal is well-intentioned. At present, if an injured player must leave the pitch, their team is temporarily at a numerical disadvantage. Hence, there may be an incentive to committing a foul that requires an opposing player to receive off-field attention. Any policy that eliminates this incentive is to be welcomed.

As ever, though, it is not sufficient to introduce a new policy to offset ‘market failure’ without taking into account how those subject to the new policy may react to it. As always, the biggest fear is that the new law will be taken advantage of in a manner that does not reflect the spirit of that new law. The main problem is that a player may ‘dive’ and/or feign injury, especially if fouled by one of the opposition’s better players. By requiring off-field treatment for an injury that does not exist, and ensuring that he opponent’s team is also down a player, the ‘fouled’ player’s team may be better off.

Similarly, the ‘injured’ player may not have an incentive to get back to the pitch as soon as possible in order to keep the opponent off the pitch (in the case of genuine injuries, this would be welcome as the need to get back on the pitch to help the team is reduced).

Where games are particularly close or important, especially near the end, this incentive outlined above may be greater. As with any form of ‘gamesmanship’ or cynical play, facilities like retrospective action, video evidence, independent medical assessment and severe punishments can be utilised to prevent such behaviour. 

By Paul O'Sullivan

Details of the allocation of TV revenues among Premier League clubs for the 2013-2014 season just finished were released recently (see here and here) and there were some interesting outcomes. Liverpool did top this table. Despite finishing last, Cardiff earned more this season than Man Utd did as champions last year.

Of course, comparing 2013-14 to 2012-13 is not keeping ‘all else equal’. The season just finished was the first one under the new Sky-BT domestic TV rights deal which was worth far more than the previous TV deal (£3.02bn as opposed to £1.77bn.).  Consequently, the amount of money distributed within a season increased from £0.97bn to £1.56bn. In terms of how the Sky-BT money is distributed, 50% is distributed equally while 25% is allocated depending to both finishing position and the number of appearances in a live game. Overseas TV income is divided equally among the clubs. Liverpool earned almost 60% more than Cardiff.

What is interesting about the increased revenue of all clubs is how it may affect the likelihood of the relegated clubs  (Cardiff, Fulham and Norwich) being promoted back to the Premier League from next year’s Championship. While 2013’s bottom team QPR (currently awaiting the play-off final for the last promotion place) received £39.7m in TV revenue, Cardiff received a whopping £62.1m, an increase of over 56%. Similarly, Fulham and Norwich received around 58% more than Reading and Wigan did last year. This must surely put the relegated clubs at a huge advantage in terms of competing for promotion. 

This increased advantage will be exacerbated by the relegated clubs now receiving much higher ‘parachute’payments of £59m over four years (see here).  While Championship clubs receive ‘solidarity’payments from the Premier league, these are dwarfed by the former.  

The ‘yo-yo’ effect may be about to get stronger.

By Paul O'Sullivan

Perusing last Wednesday’s Irish Times, I was intrigued by an article entitled ‘IRFU address issue of number of youths dropping out of the sport’. The exit of young people from a given sport at certain life-stages has been an on-going issue for many sports, particularly team  sports. This issue was recently addressed in an ESRI paper by Pete Lunn, Elish Kelly and Nick Fitzpatrick entitled Keeping them in the Game (John Considine previously discussed aspects of this report here and here). Unfortunately, besides noting that the IRFU was engaging with the ESRI about its findings, the Irish Times article gave little indication as  to how the IRFU was going to address the problem and instead devoted much space to an overview of the findings of the ESRI report.

The ESRI report notes that the major participation drop-off points coincide with kids leaving primary school and at the ages of 18 and 21-22, which roughly coincide with leaving second and third-level education, respectively. It is the first drop-off point that I wish to address in this post.

The ESRI report gives various reasons as to why a drop-off in participation may occur at this life-stage. For example, increased time constraints as a result of entering secondary education, different friends, financial cost to parents, etc. The report notes that the drop-off is higher for team sports, both extra-curricular and extra-school, and is also larger for males. When socioeconomic factors are taken into account, the drop-off tends to be greater for lower socio-economic groups, except for extra-school team sports when the proportional drop-off is almost identical across groups.

With regard to the fall-off in team sports, one issue that may be a contributory factor is the movement to ‘competitive’ games that often occurs at age groups consistent with leaving primary school. Over the last number of years, the GAA, FAI and IRFU have modified their ‘non-competitive’ games for very young players in order to build up to ‘full’ games over a number of playing seasons. Emphasis, officially, is on enjoyment and skill-accumulation and all players must receive either equal or a minimum, and sometimes a maximum, amount of playing time. Once these sports move to ‘competitive’ level, however, many players that, up to then, were participating regularly, may now find themselves ‘on the bench’or under increasing pressure to perform to a level above their ability. Also, in many towns and villages, once games become full-sided, the local team may be in the position of having too many players for one team but not enough for two teams, or having to amalgamate age groups. When the objective of the club/manager is winning the next game, a number of players can be prevented from continuing to play regularly.

While it is not clear what the IRFU will do to address this problem, the GAA decided a number of years ago to extend its non-competitive ‘Go-Games’ format to matches up to and including under-12 level. Here, all players must play at least half of any game. The rationale was to reduce the drop-off in participation by allowing players more time to develop skills and so be more likely to continue playing when ‘competitive’ matches were introduced. As last year’s u12 cohort was the first that were subject to this new policy, it is much too early to determine the effect of this policy change.

While the GAA’s motive is laudable, it will be interesting to see if the new policy makes a difference. It is to be hoped that the new policy encourages more players to play for longer and improve their skills as a result of this change. On the other hand, while some kids may now continue playing beyond the current ‘drop-off’ point, the effect may be to simply push the problem back by two years. Kids that would previously have stopped playing soon after entering under-12 level may now postpone this decision until they reach under-14 level, as they continue to get playing time for a longer period. If the latter occurs, then the new policy may have a negative impact on ‘better’ players. For players without a major interest in a sport, and who do not engage in as much ‘effort’as other players, there is an incentive to continue playing as they are guaranteed playing time. As a consequence, more ‘advanced’ players may find themselves with less playing time, as a player with less interest in improving their talent must be allowed to
play. In this instance, the new policy may be counter-productive.

While there may be no ideal solution to this problem, it will be interesting to see how the IRFU proceeds.

By Paul O'Sullivan

In a recent post, I referred to the annual report of Central Council of the GAA. One particularly interesting issue raised by the report is the GAA’s attitude to supporting an IRFU bid to host either the 2023 or 2027 Rugby World Cup (RWC) in Ireland.

A successful bid by the IRFU would require the use of some of the major GAA venues, to which the GAA is amenable to. Many people will remember that in 2005, the GAA voted to allow Croke Park to be used to host ‘foreign’ games during the rebuilding of Lansdowne Road, despite much criticism from within, and outside of, their own organisation. This led to Croke Park hosting some of the most memorable occasions in Irish sporting history, particularly the Ireland-England Six Nations game of 2007 and the Munster-Leinster Heineken Cup semi-final in 2009. 

On page 35 of the report, GAA director general Paraic Duffy points out that in making GAA venues available for any prospective bid,  “…there was agreement that the economic benefits to the country outweighed all other considerations” [my italics].  Unfortunately, Mr. Duffy does not elaborate on what these perceived benefits are, nor on what magnitude they may be.

In terms of providing GAA grounds, Mr. Duffy notes that “…a successful bid will involve an upgrade of facilities….We have made it clear that such upgrades must be funded, in large part, by government.”  It is not specified as to what constitutes ‘in large part’. While the GAA may be admirably patriotic in making its grounds available on the basis of the benefit to the country, there is also a financial incentive for the GAA themselves.  On pages 5 and 7 of the Central Council report, the rent earned by the GAA from 2007-2010 by making Croke Park available to the IRFU and FAI is clearly seen, and was approximately €8m per year. 

One might infer from Mr. Duffy’s statement above that such upgrades would notbe undertaken if Ireland was not to  host a RWC. If the government must fund ‘a large part’ of any upgrades to ensure the RWC takes place, then should the government not be entitled to a ‘large part’ of any rent the GAA receives, as well as a ‘large part’ of any future gains accruing to the GAA as a result of such upgrades? If the GAA is to solely benefit from the RWC in terms of stadium rent earned, why should the government subsidise such upgrades, especially when any money spent on upgrading GAA facilities is money that cannot be spent on health, education, flood defences, etc.?

One might argue that the government should commit to investing in GAA grounds to ensure that a bid may be successful. In return, the government will benefit from the spending of visitors to Ireland during the RWC, as well as the intangible and symbolic benefits of hosting the tournament. While initial reports (see here and here) made reference to potential benefits of up to €800m, in another previous post, I pointed out that many economists have argued that, for various reasons, the net monetary benefits to country of hosting a major event are often found to be either negative or close to zero. On the other hand, hosting major events can make people happier, as pointed out here by Robbie Butler. Indeed, such intangible benefits seem to be a major justification for the bid. According to Minister of State Michael Ring in this article, "We all witnessed the massive boost to the national mood that was provided by the London Olympics. The Rugby World Cup,…, I would hope it would have a similar impact here. Sport is a great unifier, it brings people together and large events like this can also bring about a great sense of pride." Whether Mr Ring thinks the London Olympics’ £9bn (approx.) price tag was a price worth paying for the massive boost to the national mood is not known. Maybe he wasn’t asked.

By Paul O'Sullivan

On page 36 of his recent report to the GAA’s Annual Congress, GAA director general, Paraic Duffy outlines what he believes is an imperfect system of financial re-distribution from the GAA’s Central Council. Mr Duffy is quoted in this
Irish Times article as saying that “We treat all of our counties exactly the same. We give Leitrim the same direct financial support as we give any of the large-population counties. I think there’s an issue of fairness here.” 

Duffy’s argument is that the ‘weaker’ counties, with lower population and funding resources, must incur similar levels of
expenditure to ‘stronger’ counties in terms of travel, meal and medical costs, as well as having to fund players’ expenses for travelling to training from large population areas. Consequently, Duffy would like to see “a county like Leitrim or Longford…… getting more money from us. Some of the bigger counties……could do with less from us”.
 
With the current redistribution system, ‘stronger’ counties are already subsidising the ‘weaker’ counties as most  Central Council gate revenue is generated by the former, yet distributed equally among all counties. In economics jargon, weaker counties are net beneficiaries from the revenue pool.

This idea of re-distribution is usually justified in terms of ‘promoting competitive balance’. Many sports have some form of revenue-sharing mechanism or constraints on talent accumulation, e.g. salary caps and player drafts, that seek to minimise the gap between the large/rich and small/poor clubs in order to‘level the playing field’ and maintain fan interest. 

If such a proposal were to be implemented, would it be successful in improving the outcomes, in terms of playing success, of weaker counties? One of the biggest problems for many GAA counties is that their talent pool is restricted by geographic location and there is no transfer market as in professional sports. Given these constraints, providing more financial resources may not translate into much greater playing success, however ‘success’ is defined. 
 
While Duffy talks in general terms about amending the re-distribution mechanism, and rightly foresees complaints from those that would have their funding cut, he offers little indication as to what criteria might be used to assess whether one county receives more than another. While the report makes reference to differences in population size, the number of clubs in the county and what division of the National League a county is in, what other criteria might be used? Previous spending? Average attendance at home games? The number of championship games won over a given time period? As well as this, if counties are to receive different allocations, how much different will these  allocations be? Whatever criteria are used, the GAA will need to ensure that there are no perverse incentives whereby a county may find it in its interests not to exert maximum ‘effort’ on the field in order to benefit financially. 
  
As Gaelic football and hurling are amateur games for players, the GAA cannot impose a salary cap to control spending on talent.  Instead, Duffy talks about regulating spending on county teams. As it is likely that the interests of Central Council will be in direct conflict with those of many county boards, it will be interesting to see how successful the GAA would be in effectively tracking all spending on teams and what penalties would apply to those counties that break any spending regulations. 

By Paul O'Sullivan

Next Friday will see the opening of the 2014 Winter Olympics in the southern Russian city of Sochi. While much popular  discussion surrounding this event has centred on how recent homophobic laws passed by the Russian state may affect athletes, it seems that less attention has been given to the enormous cost of staging the Games. Most estimates put a lower bound of £30bn (approx. $50bn) in public expenditure, well in excess of the previous highest spend (see here). In line with many major sporting events, large sums of money have been spent on measures that are indirectly related to the sporting events themselves, particularly infrastructure that may be of limited post-Games benefit.

With huge amounts of public money being spent, it is not surprising that allegations of widespread corruption are common. A recent article in Vanity Fair gives an excellent overview of how the Sochi games are effectively the sporting face of a political project, as well as where much of the money has been spent.  

Another major event that has found itself under the spotlight is the 2022 World Cup in Qatar. Again, huge sums of money, some estimates suggest $200bn, will be spent on constructing new stadia and infrastructure. As of now, the event is due to take place in the summer in temperatures of up to 50 degrees celsius, though noises have been made about switching it to winter which, if it happens, will have a severely disruptive impact on European football leagues. Again, hosting the World Cup seems to be part of a political project to boost Qatar’s global image (see here).

Various economists have produced an extensive literature showing how investing in such mega-events is almost always loss-making in monetary terms, as the expected benefits are usually over-estimated and the costs under-estimated, often deliberately so. Event proponents often fail to account for things like the substitution effect, crowding out, etc. and focus on gross, rather than net, effects. As well as this, the opportunity costs of spending public money are either ignored or under-stated. On the other hand, hosting events does tend to make the host population happier, as pointed out here by Robbie Butler. 

Both Russia and Qatar have been criticised for the huge sums spent, while the deaths of migrant workers while constructing stadia in Qatar have also been well publicised (see here). In addition, some of this criticism has spilled over to the IOC and FIFA for having awarded the events to these countries in the first place. Even the normally infallible Sepp Blatter has conceded that awarding the World Cup to Qatar may have been a mistake, though not surprisingly, he shifts the blame to European governments’ desire to open up trade and investment links with resource rich Qatar (see here again).

Will the controversies over Sochi and Qatar (and similar issues in Brazil regarding this year’s World Cup) lead to a shake-up of how the IOC and FIFA decide who to award such events to? It is impossible to know for sure at this stage, but if changes are to occur, it is likely that a combination of money, ego and people power will be the driving forces. Even powerful political institutions like the IOC and FIFA know when too much negative publicity is detrimental to sport and, possibly, to their officials’ positions. Cycling chiefs learned this the hard way. If upcoming mega-events, which have incurred major public expenditure costs, suffer from reduced interest and lower TV audiences, possibly as a form of protest, then it is possible that future awarding of mega-events will be subject to a ‘ready to host’ criterion.  If this happens, future mega-events will be awarded to countries that already have the capacity to host such events and will not requiring a major public investment that adversely impacts the rest of society.

By Paul O'Sullivan

In a recent post, Robbie Butler referred to how brilliant two-mile hurdler Hurricane Fly won his 19th grade one race in Leopardstown last weekend. For racing fans, another major event last weekend was the return to action of three-mile hurdler Big Buck’s at Cheltenham after a lay-off of over 400 days. Prior to his injury, Big Buck’s had won his previous 18 races, while his starting odds in his previous 15 races had never been greater than 5/6 and was often heavily odds-on. It was not to be a dream comeback, however, as Big Buck’s, who went off as 6/5 favourite, was narrowly beaten into third place by two horses that he would surely have beaten prior to his injury.

Much effort went into analysing the horse’s performance. Some blamed his new jockey, Sam Twiston-Davies, for taking the lead too soon. Others blamed the heavy ground combined with the long lay-off for Big Buck’s not storming up the Cheltenham hill in his usual style. Whatever the reason, the effect has been to see his odds for the World Hurdle in Cheltenham in March, a race he has previously won four times, be as high as 9/4 with Paddy Power, while he is trading at 3.15 (equivalent to just under 11/5) on Betfair.

So, should I lump on Big Buck’s given his relatively high odds, or are the odds an accurate reflection of his chances? While I am a follower of national hunt racing, no one will, or should, ever mistake me for an expert on the sport.

I guess it comes down to how one reads his performance last Saturday. To me, it depends on what was the objective of his trainer, Paul Nicholls. If the objective was to win the race, the easiest thing would have been to sit behind the leader and then strike for home when turning into the straight. This may have led to a different result. However, by doing just enough to win the race, Nicholls may not have learned as much about the true condition of the horse. Winning may have suggested that all was well, which may have affected Nicholls’ training plans, and the horse’s true condition may not have been discovered until March, at which point it may have been too late.

On the other hand, Nicholls may have wanted to give Big Buck’s as stern a test as possible, and was prepared to risk losing the race in order to get a better picture of how fit his horse was. Nicholls’ statements after the race (see here) would, on the face of it, seem to back this up. Given his performance, it is to be expected that Big Buck’s will improve for the run and will be in much better condition with another six weeks of preparation. Having said that, if he has no race prior to Cheltenham, fans will be wary of the dreaded ‘bounce’, where a horse returning after a long lay-off
produces a poor second effort following a promising return.

Given how well he travelled for the vast majority of the race, I think odds of 11/5 and 9/4 are very attractive for a horse of Big Buck’s class. An ante-post bet is very likely.

By Paul O'Sullivan

An article in Friday’s New York Times outlines the financing of Met Life Stadium in New Jersey, home of the NFL’s Giants and Jets from New York. While the stadium itself may not have been directly paid for with public money, the teams were granted state-owned land in return for a relatively small annual payment as well as other benefits that had previously gone into state coffers.  Also, the state spent over $250 million on infrastructure projects that may not have occurred in the absence of the new stadium. Any money that is transferred from public to private bodies is effectively a subsidy, while there is also the opportunity cost as the money could have been spent on something else.

One of the arguments for building the stadium was that it would be able to host a Superbowl, which it will do on February 2nd, and that this will have spillover benefits for the state, particularly in terms of an influx of fans and media from outside the NY/NJ area. Economists are generally sceptical about the extent of such spillovers, and many studies have shown that such spillovers are almost always much lower than promised.

Proponents of using public money to host major sporting events usually base their support on a commissioned report that predicts massive economic benefits to the local area. In the case of the NY/NJ Superbowl, the host committee has refused to publish the economic impact report.  If past experience of such reports is anything to go by, the expected benefits are likely to be over-stated while the expected costs will be under-stated. The use of terms like ‘economic impact’ and ‘generate economic activity’ usually give the game away as to the true impact of hosting such large events like the Superbowl, Olympics and World Cup. In terms of investing public money, what really matters is the net effect of hosting an event, not the gross effect. 
 
It would be terrible for anybody to think that Irish politicians and vested sporting and business interests would ever engage in this type of behaviour in order to attract a major sporting event to this country.

By Paul O'Sullivan

Much has been made recently in Ireland and the UK of the technical deficiencies of their current international footballers.  Ireland’s performances during and since Euro 2012 have shown up the limitations of indigenous Irish talent relative to those from top nations such as Spain, Germany and Italy. England increasingly goes through the same process every two years after exiting a major tournament. Traditionally, such failure had been blamed on terrible luck/manager/referee/penalties, Man Utd players, cheating foreigners, etc. 

A recent report on Sky Sports News (on Sept 16) and various articles (see here and here), have highlighted the differences in numbers acquiring top level coaching qualifications in England, Germany and Spain. In terms of possession of a UEFA Pro Licence (the highest available qualification), Spain has 2,140, Germany has over 1,000 while England has just 203. With regard to the ‘A’ licence (the second-highest qualification), Spain is again top with 12,720 coaches, Germany has 5,500 while England has just 1,161.

In per capita terms, England (one Pro licence per 263,515 pop. and one A licence per 46,000 pop.) does even worse against Spain (one Pro licence per 21,824 pop. and one A licence per 3,670 pop.) due to its higher population, but slightly better against Germany (one Pro licence per 80,523 pop. (at worst) and one A licence per 14,640 pop.).

Ireland is a relative newcomer to the international stage. Since 2007, the FAI has awarded 45 Pro licences (one per  100,000 pop. (approx.)). In 2010, there were 183 A licence holders and 488 holding the B licence.

Why is there such a large difference between the countries? One explanation could be the differences in cost of attaining such qualifications. The standard cost of the UEFA ‘A’ licence is €530 in Germany, €1,200 in Spain, €2,350 in Ireland and £4,390 in England. Attaining the ‘Pro’ licence can cost €7,550 in Ireland and £7,595 in England (figures should be treated with caution as they vary across sources). Also, the courses are relatively time consuming. Under the FAI’s programme, the Pro licence requires 250 contact hours over two years, while the A licence requires 270 contact hours. As well as this, lower coaching licences are pre-requisites for higher licences, so attaining a Pro licence can require a significant time and money outlay.

This leaves the question as to why Spain does so much better in terms of qualification attainment, even though attaining a Pro licence in Spain requires much more contact hours, 750 according to this article.  Information is not readily available so I don’t have a definitive answer. Maybe costs are subsidised by local football clubs or local
authorities.

Is there a market failure in the top-level coaching market? This depends on the objective of the national football  association and supporters. If it is qualification for the next major tournament, maybe this explains why managers get short-term contracts with relatively high salaries while youth coaching suffers. On the other hand, if the objective is the long-term success of the national team, then football associations may be better served by allocating a greater share of their revenue towards subsidising attainment of coaching qualifications. If they don’t, then like former baseball great Yogi Berra once said, it may be deja-vu all over again!