Robbie Butler

In early December I addressed the current title race in the Premier League and the remarkable pace being set by both Liverpool and Manchester City. As the league enters February it appears that the title will end up in either Anfield or the Eithad come May, unless one of the chasing pack can put a remarkable run of results together.

Whilst this is the normal course of events for Man City in recent years - the club have won 3 Premier League title since May 2013 - this is not so for Liverpool. Older fans of the Reds will recall the 1989/90 season with fondest, but the title has not returned to Liverpool since then. There have been a couple of near misses since.

Gerard Houllier's treble-wining squad of 2001 ran an excellent Arsenal close the following season. Rafa Benetiz managed to put Manchester United under pressure during the 2008/09 season without ever really looking like winning the title. The closest since 1990 is surely Brendan Roger's squad which came unstuck in the final 3 games during April/May 2013, having had the title destiny in their own hand.

So what might be different this time around? Like most things in football, the answer can be explained by money. Most that watch the Premier League would agree Virgil van Dijk and Alisson, both signed since January 2018 have transformed Liverpool's defence. Jurgen Klopp's acquisitions appear to be reaping their rewards. Since his arrival in October 2015, the German has added 16 "senior" players to his squad. A further 27 have left permanently.. In that time Klopp's net spend has been €128.23 million. 

Liverpool's improvement this season, when compared to Klopp's previous years coincides with a big increase in net spending. The graphic below illustrates this for Klopp's time in charge.

In total the club has spent €437.13 million on player purchases since the winter transfer window, during the 2015/16 season.

Klopp's spending effectively remained neutral until the summer of 2018. During that time the German added Sadio Mane, Georginio Wijnaldum, Virgil van Dijk, Alex Oxlade-Chamberlain, Andy Robertson and Mohamed Salah to the squad! 

These signings were financed by the sale of the likes of Christian Benteke, Jordon Ibe, Joe Allen, Philippe Coutinho and Mamadou Sakho. In fact, Benteke, Ibe, Allen and Sakho fetched €92.9 miilion. Salah, Mane and Robertson cost €92.2 million; a profit of €700,000. Coutinho sale for €135 meant the combined cost of van Dijk and Alisson stands at just €6.3 million. 

The improvement this season may be explained by a net spend of €134.7 million. This has been driven by the additions of Alisson, Naby Keïta, Fabinho and Xherdan Shaqiri. Only time will tell if this is enough to bring the league title back to Anfield.

If it is it, Liverpool fans will unanimously agree it was the best €134.7 million the club ever spent.  

By John Considine

An official makes a bad call on the sports field and someone from the sideline roars "Are you blind, referee?"  The official is unimpressed.  He takes out his black book and makes his way to the sideline.  When he arrives at the sideline he asks the offending party "What did you say?"  The offending party replies "Are you deaf too?"

I heard the above story four decades ago.  In the meantime, I have observed an increase in the willingness to question officials (and a decrease in the acceptability of telling the above story).  I have also noted that one company (Specsavers) uses similar humour to the benefit of themselves and the sports entities they sponsor.

The use of technology by officials in sport gets plenty of attention.  When should it be used?  How is it used?  How is it changing the game?  The last couple of weeks have produced a few examples.  New Orleans Saints might be heading to the Super Bowl if the rules allowed technology to be used to review a late game collision in their game against the Rams.  It is suggested that the NFL are now considering using video evidence for pass interference calls (see a report here).  The debates surrounding the FA Cup fourth round and the Carabao Cup semi-final between Chelsea and Spurs should caution against expecting technology to solve all potential issues.

The managers of Chelsea and Spurs raised a few interesting points (read a report here).  Mauricio Pochettino (Spurs) suggested he is in favour of goal line technology but not Video Assessed Refereeing (VAR).  One of his complaints was about the time wasted waiting for a decision.  In the case of goal line technology the referee knows the computer based decision in a matter of seconds.  Maurizio Sarri (Chelsea) had two complaints.  First, he produced video evidence to suggest that the Spurs goal was offside.  Maybe this complaint is that the technology was not good enough.  Second, he said the officials are not able to use it.  Specifically, one official raised his flag and, in doing so, gave an incorrect signal to the players.

Pochettino's reason for supporting goal line technology is undermined somewhat in the context of gaelic games.  Decisions could be made as quickly as in Premier League game but the Gaelic Athletic Association (GAA) actually slows down the relaying of the decision.  Some say it builds excitement.  Some say it is to allows Specsavers to advertise.  Most agree with the introduction of the system and the improved decision making (although "human error" can still occur as discussed here).  There is greater disagreement on whether the time delay is worth the sponsorship money.

Technology and other changes have implications for the way we govern sport in the same way that they have implications for how we govern society.  Even economists have known this for centuries.  When Adam Smith wrote Book III in The Wealth of Nations he drew attention to the impact of change on the efficiency of rules and institutions (the Book that probably most directly deals with the overall title of his work).  Smith highlighted the fact that the progress of some countries was hindered by rules that had become outdated by changes elsewhere.  For Smith, the requirement to pass landed estates to the eldest son, with restrictions on how it could be disposed, hindered the movement of that same property to hands that might better develop it.  For Sarri, the official running the line was effectively a relic of the pre-VAR days.  The on-field official was not needed.  Worse, they caused confusion.  They need to be removed or their roles redefined.

Technology is changing the way sport in governed and the rate of change is increasing.

By Stephen Brosnan

In economics, the principal-agent problem occurs when one person (the “agent”) is able to make decisions and/or take actions on behalf of another person (the “principal”). The problem arises where the two parties have different interests and asymmetric information, such that the principal cannot directly ensure that the agent is always acting in their (the principal's) best interest.

Previous work by Purcell (2009) examined the presence of the principal-agent problem in professional basketball. The findings of the study suggest that imperfect competition between managers and players, coupled with long-term highly lucrative contracts, altered player’s effort over the course of their contract. Specifically, player effort is reduced the year after signing a long-term contract. This post examines whether similar effects may be evident in college basketball.

In recent years, few college basketball players have generated as much interest and excitement as Duke University’s Zion Williamson. The 6’7, 285 pound forward is widely considered a lock for the number one overall pick in the 2019 NBA Draft with comparisons being drawn to NBA greats Lebron James, Shawn Kemp and ‘Sir’ Charles Barkley.

Before the beginning of the 2019 college season, Williamson was projected to be a top 5 NBA Draft pick. However, there were worries over his weight and how this would impact his ability to get up and down the court and avoid injuries. Furthermore, many commentators suggested that he wasn’t even the best player on his team, with that honour going to RJ Barrett. This provided an incentive for Williamson to maximise his effort, learn from legendary Duke coach Mike Krzyzewski (‘Coach K’) and improve his performance in order to climb up the rankings, thus maximising the interest of both Coach K (principle) and Williamson (agent).

However, now that he is the consensus number one overall pick, which is rewarded with lucrative long-term contracts and sponsorship deals, there may be an incentive for Williamson to rest up in order to avoid injury and protect his future earnings. Six-time NBA champion Scotty Pippen said recently on ESPN “I think he’s locked up the biggest shoe deal, I think he’s definitely going to be the No. 1 pick, I think he’s done enough for college basketball, that it’s more about him personally” Pippen went on “I would shut it down. I would stop playing because I feel he could risk a major injury that could really hurt his career”.

These interests will obviously not be shared by his coach who needs Williamson to play in order maximise his chances of winning his sixth NCAA Championship. Thus, according to the principal-agent problem, Coach K needs to incentivise Williamson in order to align the interest of the agent with those of the principle. However, judging by recent comments this may have already happened with Williamson stating “I can't just stop playing. I'd be letting my teammates down, I'd be letting Coach K down, I'd be letting a lot of people down. If I wanted to sit out, I wouldn't have went to college. I came to Duke to play."

By Robbie Butler

This week the GAA announced that ticket prices would increase for the 2019 season following ratification of this by the organisation's Central Council. The move will see price hikes in both the National League and Championship matches. As one might expect, the reaction to this decision amongst supporters has been mixed. 

To understand the motivation behind this decision, economic theory can help. 

A standard sports economics textbook will address the demand function for sport (normally match tickets) at an early stage. Teams, or in this case the organisation running Gaelic Games, will set prices based on the typical fan’s willingness to pay. This prices is related to consumer surplus: the difference between what one is willing to pay and what one actually pays.

It is intuitive to reason that as prices go up, demand falls. Raising the price of a ticket will invariably reduce the number of fans willing to spend money to attend matches. This is offset by the increase in price. Whether the increase in ticket prices is worth the cost (loss of some fans) depends on the price elasticity of demand for match tickets. And herein lies the key.

• If one increases the price of a good or service, demand falls (as expected) yet total revenue (PxQd) goes UP then the decision was correct, from a revenue-raising perspective. 
• If one increases the price of a good or service, demand falls (as expected) and total revenue (PxQd) goes DOWN then the decision was incorrect, from a revenue-raising perspective, and prices should revert to their original level. 

Most research examining ticket prices and attendance find inelastic ticket pricing. In other words, teams and organisations could increase the price and in doing so increase total revenue.

So why don't they? Various reasons are proposed such as empathy with supporters, a desire to maximise attendance or the “fan experience, due to pressure exerted by supporter interest groups to keep prices down, maximising non-gate revenue, etc. It might even be the case that increases in ticket prices have no effect on quantity demand; none that is visible anyway. e.g. a stadium continues to sell out.

The GAA implicitly believe this to be the case anyway. The organisation as gone to great lengths to explain that this is their first major pricing increase since 2011. A statement released by the GAA ensured supporters that the additional revenue that is expected to be generated will be ring-fenced and benefit all counties as:
                    “A national pool will ensure that counties in lower tiers with smaller crowds are accommodated via the                            national pool. Additional revenue from these Championship ticket changes will be ring-fenced to fund an                        increase in grants to club facility redevelopments to a new high of €3 million, fund additional grant aid to                        overseas units and the staging of the GAA World Games in July, and make increases in capital grants                            and funding to county boards.”

The key words in this statement are at the start of the second sentence. "Additional revenue". In other words the Association is implicitly stating that they believe they are currently undercharging, if the objective is to maximise total revenue. 

At a practical level here are two of the changes:

1. All-Ireland senior final stand tickets go to €90 from €80 while a Hill 16 ticket will now cost €45, as opposed to €40 previously.
2. Rounds 1 to 3 of the All-Ireland Senior Football Championship Qualifiers tickets will rise from €15 to €20.

Attendance (quantity demanded) for point 1. above will remain unchanged (sold-out) hence total revenue will rise.

In the case of point 2. a 25% increase in price would need to result in a 25% drop in attendance in order to this decision to backfire. If 40,000 fans attended at Round 3 qualifier last year when the price was €15 will this drop, ceteris paribus, to 30,000?

​I think not. Demand is inelastic.  

By David Butler

Last September HBO announced that it was ending their 45-year relationship with Boxing broadcasting. The executive vice president claimed that boxing was not in the consumer’s mind when subscribing for the channel. The development is interesting and maybe it says more about HBO and the economics of the entertainment industry rather than the sport.

Below is the average HBO viewership for a fight from 2014 to 2018. The higher average in 2015 is partly explained by the Mayweather-Pacquiao bout that attracted  an estimated 4.6 million PPV buys. Over the last 3 years the average fight has attracted just over 600,000 viewers.

There seems to be multiple forces at play here. Firstly, there is the disruption associated with a variety of different digital platforms boxing can be watched on and HBO seem to be suffering from more intense competition from ESPN, Fox Sports and a range of streaming services.

Secondly, there has been a notable rise in popularity for close substitutes (MMA). While it may be premature to think that boxing viewership has dramatically declined, is the sport becoming even more niche?

Thirdly, the decline in boxing viewership over the years means that primetime slots on HBO might be best served with a different form of entertainment. For instances Game of Thrones attracts millions of viewers to HBO. Perhaps the company are making a wise strategic decision by considering substitutes that would not initially be thought of as ‘close’ – why leave the drama to be created by boxers that vary in quality over time when you can create and control your own superstars? More certainty on viewership figures is surely an attractive proposition. Perhaps it doesn't bother viewers if the drama is scripted or not?

By John Considine

In 2018, Dustin Johnson finished 3rd in the US Open and 27th in the PGA.  Zack Johnson finished 12th and 19th in the same tournaments.  Who performed better across these two tournaments?  Adding the rankings we might make a case for either.  However, the distribution of prize money in these tournaments meant that Dustin's bank account increasing by a greater amount.  Dustin took home a combined total that was twice as much as Zack's.  It makes one wonder if prize money is a good measure of sporting performance.

Another illustration is the gap in prize money accumulated by Tiger Woods and Justin Rose in these two majors.  Tiger Woods missed the cut in the US Open and finished second in the PGA.  His second place was worth $1.188m.  Justin Rose collected about one-third of that for finishing 10th and 19th.  Sporting performance translates into prize money in a non-linear fashion as the picture below illustrates.

Sports economists have refined their view of the relationship between sporting performance in golf and financial rewards.  A good summary can be found in Super Golfonomics.  In the book, Stephen Shmanske presents a model linking skills to performance, and then performance to earnings.  Shmanske makes a statement in the book, supported by statistical evidence, that seems obvious on the surface.  Talking about skewness and variance in golfing scores, he says "this random variation is also rewarded generously by the nonlinearity of the tournament payouts".  Even a quick look at the picture above might suggest that it is better to have four consecutive low scoring rounds followed by four high scoring rounds than have eight average rounds.  And, the literature suggests that this can be a matter of luck

All this suggests that there is a need to be careful about the use of financial rewards as a measure of golfing ability.  This is particularly so for short periods of time.  However, over longer periods of time there should be a better relationship.

By Robbie Butler

Nearly two years ago RTE's Conor McMorrow wrote a piece entitled "Unease in Irish racing industry over Brexit hurdle". The story ended with Irish trainer Dermot Weld saying:

                 "When we had the original old border, there was always the danger when you brought horses to the North                        that they could be held up for a while. That's a long time ago. We don't need that again. We need free                            borders." Those comments sum up the views of an entire industry, if not an entire country".

Last night, following a Commons defeat on the Withdrawal Agreement, the United Kingdom government is no closer to securing a deal with the European Union once the country leave the trading bloc on the 29th of March this year.

To say this is a problem for the horse racing industry, indeed almost every business on the island of Ireland, would be an understatement. As of today, the use of World Trade Organisation (WTO) rules or a hard BREXIT, seems to be the most likely outcome, something that would not have been expected in June 2016.

This week, well-known Irish trainer Ted Walsh added to the debate and said on BREXIT that:
              "We rely on them (the UK). They have been good neighbours but we rely on them for most of our exports, a                   lot of imports and a lot of jobs for people".

There is probably not a sport on this island that is as connected as horse racing when it comes to the relationship between Ireland and the UK. As Walsh says, Ireland exports a large volume of product to the UK. The breeding industry is largely dependent upon UK customers. The reverse is also true; buyers in the UK depend on Ireland to breed horses. Ireland also exports labour to the UK in the form of jockeys, trainers, stable staff, etc. 

The relationship is further underlined by Horse Racing Ireland's (HRI) governance of both Down Royal and Down Patrick, two races courses located in Northern Ireland that are managed and partially funded by the Irish semi-state HRI.

And on a practical level consider this. The 2019 Cheltenham Festival starts on the 12th of March this year. One of the great aspects of the event in the past decade or so has been the English vs Irish dynamic to the races. The crowd is also littered with sports tourists from this island and the term "Irish invasion" is often used to describe the volume of Irish that attend the Cotswolds. People and horses will travel freely again this year.

Less than 4 weeks later, the Grand National Festival will start. Last year the first 4 horses in the race were Irish trained. Will this be the case this year in a post-EU Britain? Hardly if things keep going they way they are. 

Cheltenham will be the same this year. Aintree might not be. Everyone will lose if this is the case. 

By Ed Valentine

This simulation was run on the 29th of December 2018.

Where do you start to pick the highlights of the season so far? A rather unexpected title race has been jet propelled recently as Manchester City fell to unlikely defeats against Crystal Palace and Leicester. The tables looked to have turned in Liverpool’s favour with Origi’s 96th minute winner in the Merseyside Derby in early December, with many after the game comparing it to an Alex Fergusonesque title bearing result. Given the closeness of the contest I decided to run a simulation on the remainder of the season to gain an insight into how the Premier League table could pan out.
 
Methodology – The simulation was run using data from the 2018/19 season so far. The simulation model ran 200,000 times with the post sim averages for each attribute being captured and presented below. With 19 games remaining (at the time of writing) and all playing all once it seemed an interesting experiment to run.
 
Liverpool fans would have good reason to believe they will win their first Premier League era title and simulations back this up. The results demonstrate that the Merseysiders will lift the trophy in May, with Spurs finishing 2nd. Surprisingly, Man City are on a trajectory to finish 3rd. The recent defeats to Palace and Leicester have adjusted the model with extra weighting given they were consecutive and recent.

There are limitations of course. The model was run before City's win over Liverpool. Transfer activity in January, and managerial sackings with lower placed clubs, will also have a bearing which cannot be accurately captured in the model. It is unlikely Man City will lose 2 on the bounce again to significantly weaker opposition. 

There are 6 clubs predicted to finish the season under 40 points – this has never happened in the Premier League era. It is expected that these will shift after a secondary simulation after 26 matches.