Determinants of Revenue in Sports Leagues: An Empirical Assessment
Economic Inquiry, 2019, 57: 121-140
Posted: 8 Nov 2016 Last revised: 6 Dec 2018
Date Written: November 7, 2016
This study investigates determinants of revenue in North America’s four major professional sports leagues. Estimates reveal that revenue is positively associated with on-field success in baseball (MLB), basketball (NBA), and hockey (NHL), but not in football (NFL). The returns to winning are not diminishing as commonly assumed, which casts doubt on the uncertainty of outcome hypothesis, and differences across leagues are consistent with revenue sharing arrangements. Estimates indicate a strong negative but diminishing relationship between stadium age and revenue, which is consistent with observed rapid replacement of sports stadiums. Teams in larger markets generate more revenue than smaller markets, but the returns to winning do not differ according to market size. The results have several important implications for economic models of sports leagues.
Keywords: sports markets, diminishing returns, increasing returns, winning, competitive balance, revenue sharing
JEL Classification: Z21
Suggested Citation: Suggested Citation