Filling the Stands

Filling the Stands Factors Determining NBA and WNBA Attendance Margaret Cronin Advisor: Dr. Vladamir Kontorovich Senior Thesis Economics Department Haverford College April 2011 Abstract This study identifies differences between the market characteristics, relative performance, characteristics of play, and substitutes for the NBA and WNBA and, specifically, how those differences impact attendance for these leagues and the teams within them. It does so by examining the statistical and economic significance of factors driving attendance at professional basketball games. An OLS model, censored normal model, and fixed effects model estimate the magnitude of these factors’ impacts on attendance for different teams and leagues. In so doing I open the door to expand the current sports economics literature, specifically pertaining to attendance at professional sporting events, to include women’s sports beyond their current role: an assumed extension of their male counterparts’ findings. 2 Acknowledgements I would like to thank my advisor, Professor Vladamir Kontorovich for all of his helpful guidance, feedback, and suggestions during this project. I would also like to thank the entire Haverford College Economics Department for all they taught me over the past four years. I’d also like to thank my friends and teammates for all they did to make sure I kept my spirits up in the process, without which I would never have succeeded in getting this far. Finally, I would like to thank my family for their love and support and especially my parents, who gave me every opportunity to learn. Without them I wouldn’t understand economics or basketball and this project wouldn’t have stood a chance. 3 Table of Contents I. Introduction ........................................................................5 II. Literature Review..............................................................7 III. Methods ...........................................................................11 IV. Data..................................................................................16 V. Results...............................................................................19 Combined................................................................................................ 19 Chow Test...............................................................................................21 NBA Results...........................................................................................23 WNBA Results .......................................................................................25 VI. Implications, Conclusions, and Future Research.............26 VII. References ......................................................................28 VIII. Appendix.......................................................................30 4 I. Introduction The 2010 NBA (National Basketball Association) Championship winning Los Angeles Lakers had an average per game attendance of 18,997 while the WNBA (Women’s National Basketball Association) champions in the same year, the Seattle Storm, averaged a mere 8,322 fans at each of their games. Often it is assumed that attendance at professional sporting events is directly related to a team’s success on the court or field. However, both of these teams achieved (approximately) the same amount of success in the same season at the same sport. Yet, the Lakers averaged over 10,000 more fans per game than the Storm. This paper examines the factors that impact attendance in professional basketball. By identifying differences between teams in the NBA and WNBA I will uncover why some teams have greater attendance than others and, ultimately, why the NBA has greater attendance than the WNBA. Lower attendance (combined with lower ticket prices) in the WNBA results in less revenue for these teams than their male counterparts. Aside from the direct effect on revenue, attendance is also indicative of a team’s fan base and demand for that team in general, both of which are positively related to revenues. Why should anyone, aside from basketball fans, care about increasing the WNBA’s revenue? While higher revenues may allow for higher quality facilities and players; improving the quality of the product overall, this doesn’t seem like an important economic goal in itself. Professional sports, however, are big businesses with major impacts on their communities. Teams touch many different parts of the economy, by charging admission, advertising in stadiums, and seeking government subsidies for stadiums and events (Fort 2006 pp.2-4). Cities subsidize stadiums and the stadium neighbors face the costs that come with externalities associated with professional sporting events; the costs associated with increased security, 5 parking, and transportation required as a result of that stadium. Thus, the importance of finding out what value comes from a professional sports team is paramount, not only for the team and its enthusiasts, but also for anyone in a community that has, or is considering having, a team. In addition to the business end of sports economics, there also seems to be an obvious link to gender discrimination in the labor market. If consumers are choosing NBA games over WNBA games merely because WNBA games are played by women, this is an obvious case of discrimination. This raises certain ethical and, thanks to laws like the Title IX, legal questions. However, in an economic sense, these differences are merely differences in preferences. Economic theory can often be used to identify discrimination, but typically only in situations where a disparity in pay coincides with equal production. In the case of the NBA and WNBA this kind of discrimination cannot be determined. Since players of different genders do not play against each other their production cannot be compared. Just as a consumer may, for unknown reasons, prefer red cars to blue cars a consumer may prefer men’s basketball to women’s basketball. This preference may or may not be justified, but economically that justification is irrelevant. Just because discrimination cannot be proven through economic analysis does not mean it doesn’t exist. For now, however, the legal, ethical, social, and moral implications of sexist preferences will be ignored for the sake of focusing on the economic implications of NBA and WNBA attendance. 6 II. Literature Review Although the National Basketball Association (NBA) and Women’s National Basketball Association (WNBA) both play professional basketball some argue that these two sports are the same in name only. As Jonathan V. Last writes: Most sports are defined by a unique physical parameter. In baseball, for example, it's the ninety feet between bases. In basketball, it's the ten-foot rim. Within these confines, people play different species of a sport. A bunch of 5'10" men--or women--don't play a lower quality of basketball than the men in the NBA, they play an entirely different game. (Last) Last represents popular opinion based on casual observation. Women, he and many others note, play a different version of basketball than men and the men’s version is simply more entertaining. KimMarie McGoldrick and Lisa Voeks take a more analytic approach to find these differences in their 2005 paper, “’We Got Game!’: An Analysis of Win/Loss Probability and Efficiency Differences Between the NBA and WNBA.” In their paper McGoldrick and Voeks describe how the two leagues differ by the characteristics of their play (what kind of shots they are making and taking, number of fouls, steals, turnovers, and points) as well as how different characteristics impact game outcomes for the two leagues. They also note a number of less quantifiable differences, such as the length of the shot clock and game. Some differences, such as length of game and season, they incorporate into their data for more accurate comparison (this proved equally helpful in my study). Finally, they use a stochastic frontier model to predict the maximum potential performance of teams in the league. By comparing actual performance to this predicted performance they uncover how efficient teams are. Teams that perform closer to predicted performance are more efficient. They conclude that, in addition to differences in the type of game they play (the men’s game is generally more aggressive) WNBA teams are less efficient than NBA teams. They note this may be due to the fact that the WNBA, and thus all of 7 its teams, is newer than the NBA and its teams, so its teams have not yet been able to build team chemistry which improves efficiency. These differences do not alone explain attendance differences, but they do raise the idea that there may be differences between the two leagues (besides the gender of the players) that draw more fans to NBA games than WNBA games. If Last, McGoldrick, and Voeks are correct than there are some important implications for WNBA teams trying to improve their attendance. If men’s basketball and women’s basketball are such different games, then one of two scenarios is occurring: the WNBA and NBA are different goods and their demands are modeled by completely different information or women’s and men’s teams are different but demand for both is determined by the same model and, thus, WNBA teams that more closely resemble NBA teams will face greater demand than those that are less similar to NBA teams. These models are based off of those in the previous literature that examine the factors impacting attendance at sporting events. Simon Rottenberg in his 1956 article, “The Baseball

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