11/09/2015

Why do the Philadelphia 76ers consistently suck?

The 2015-2016 NBA basketball season has barely started.  However, looking at the standings, we find something familiar.  The Philadelphia 76ers are in second to last place. At the end of the 2014-2015 season, the 76ers finished in second to last place. At the end of the 2013-2014 season, the 76ers finished in second to last place. I think we see a pattern here. The question is “why?”

Why don’t the 76ers improve? You could blame it on the players, you could blame it on bad coaches, you could blame it on the management of the team, or, maybe, you could even blame it on Philadelphia. Really who wants to live in Philly?  What are they famous for anyway? Their claim to fame is a sandwich with cheese whiz and a cracked bell. I state the above with a modicum of sarcasm, but the fact of the matter is that the Philadelphia 76ers are a consistently bad team.

As David Berri points out in “NBA Owners Do Not Understand Competitive Balance,” the problem is with competitive balance. That is the reason why year after year we see the same teams in relatively the same positions. Can that problem be fixed? Berri suggests in his article, that competitive balance is a problem that probably cannot be easily fixed.

One of the things this NBA case study illustrates for us is the consequences of a monopoly. In North America, our sports systems are set up under a monopoly structure.  As the systems currently stand, there is no driving force to fix that structure. Monopolies can lead to economies of scale and scope, or, when regulated, they can result in a lack of desire to fix faulty performance, as seen in the Latin America energy monopolies. However, within the power of the monopoly, high prices can still be charged; and the output can be reduced to drive those high prices (i.e. the reason why NBA arenas have relatively small capacity). These problems can be removed in a perfect competitive setting or what Berri calls competitive balance.

There is more to the NBA problem, as well as other issues relating to monopolies. However, in regards to the Philadelphia 76ers, if I were a betting man, I would put big money on that team finishing in second to last place at the end of this season.

5 comments:

Dr. Tufte said...

John Smith: 100/100

John's right, the NBA is the least balanced of the major sports leagues. Here's a test: can you name most of the NBA champions of the last 30 years? Even non-NBA fans will start out with the Lakers, Bulls, and Spurs ... and get almost 2/3 of the list right there. Add Detroit, Boston, Houston and Miami ... and you get almost the whole list. It's even worse before that: the Celtics and Lakers dominated from the late 50's through the early 70's.

I don't think this is an amazing ManEc post, but it does get at an idea that's hard to get across from what you see in texts. Consider looking at a car: it looks different from the side, the front, or the top. What we're doing is looking at the car along different dimensions. We don't do enough of that when thinking about businesses and their industrial organization (sometimes called market structure).

In the case of basketball, the NBA has a monopoly across the country. Individuals clubs have monopolies in their local regions. But small groups of clubs act like perfect competitors (note that while that sounds similar, it's very different from competitive balance).

In maintaining its monopoly, the NBA is reducing quantity to increase prices (and maximize profits). Without that monopoly, we'd have more teams, and more games, at lower prices. Going along with this, the NBA seems to have decided that competitive balance is not something that helps their bottom line. Individual clubs may go along with this because they are making monopoly profits in their own region. Why rock the boat, right? And collectively, all the also-rans can't do much about the situation because they don't hold any market power as a group.

Brigham Kindell said...

I find this article really interesting. One thought I had was the fact that the better organizations pull the poor ones along because of the ownership agreements. A bad team like Philly will still get a chunk of the TV deal money and merchandise sales even if they don't really help with the revenue creation. It is almost like giving a kid a participation medal. There really isn't any incentive to try to be mediocre for them.

What they will try to do is find someone they can build a team around and hopefully draw talent for the next year.

Dr. Tufte said...

Brigham Kindell: 50/50

The NBA is an interesting case for this.

MLB actually has an antitrust exemption that makes it legal for them to act like a cartel. The NFL has something similar, although it's position is legally weaker. To my knowledge, the NBA does not have that sort of protection. But I think it could argue, if it was ever sued, that it should be treated the same way.

Part of the motivation for saying that those leagues can form cartels legally that other industries can't is that you need a certain number of competitive teams to have a viable league. Given that, there is a sense in which the weaker teams are economically "carried" by the financially stronger ones. Outside of sports, that's generally illegal.

Jordan Johnson said...

The 76ers are terrible. I think most people would be like Josh and bet on the 76ers ending in last place. They are not good. The moves they have made over the last few years are atrocious. Their payroll is not much higher than the minimum that is required. I do not see them getting better anytime soon, because they are being rewarded for their poor performance. They cut their costs and still make more revenue off of ticket sales and TV money with the rest of the NBA. They also get rewarded for their poor performance, because they will likely end up with the number one pick. They have had top picks the past few years and have continued to be awful. Is there a better way to restore competitive balance? Teams that have been good continue to be good, but teams that have been bad have continued to be bad.

Dave Tufte said...

Jordan Johnson: 50/50

I think we have Moneyball and the experience of the Pittsburgh Pirates (through the 90's and 00's) to thank for this. Both showed that success, in the form of wins or losses, could both lead to profits.

I think that a lot of leagues have experimented with different ways of addressing these issues, some more seriously than others. I hate to admit it, but maybe the NBA is just the one with the least interest in spreading around the good teams.