Do Sports Impact Elections?

             Most Washington Redskins fans had two reasons to be disappointed yesterday. First, the team probably played its worst game of the season during a 21-13 loss to the Carolina Panthers. Second, the Redskins’ performance seemingly all but guaranteed that Mitt Romney will win the Presidential election. You may be asking yourself how does the Redskins losing mean Romney wins and why would Redskins fans be upset about this? The Redskins performance in the game has accurately “predicted” the winner in 17 of the past 18 Presidential elections. If the Redskins win the game before the election then the incumbent party remains in the White House. If the Redskins lose that game then the incumbent party loses the election. The Redskins loss means that Romney should win the election. While which candidate will win Virginia is too close to call, both Maryland and the District of Columbia voted overwhelmingly for President Obama in 2008 and that trend should continue in tomorrow’s election. Since the team draws most of its fans from the District of Columbia, Maryland, and Virginia, many Redskins followers would be facing another tough loss tomorrow.

            Yet, you probably will not see too many Redskins fans writing off President Obama’s chances in the same way they already are writing off the team’s chances of making the playoffs this season. One logical reason would be that many political prognosticators ranging from The New York Times FiveThirtyEight blogger Nate Silver to the Center For Politics and University of Virginia Professor Larry Sabato have predicted there is a high probability of President Obama winning the Electoral College (and thus the election) after tomorrow’s vote (they also predict Obama will win the popular vote but with much less certainty). One less than logical reason is that a National League team winning the World Series usually means that the incumbent party wins the election. This has been an accurate “predictor” of which party wins in 16 out of the past 23 elections. Since the San Francisco Giants won the World Series, President Obama has a good chance of winning the election.

Relying on sports to predict the outcome of election would probably cause Vice President Joe Biden to call “malarkey”. One of the oldest mantras in the statistics is that correlation does not equal causation. While the relationship between Redskins and/or national league performance in The World Series and Presidential elections are an interesting phenomenon, in no way do the Redskins and Giants performance influence the outcome of the Presidential election. It is just lucky that it turns out that way. In fact, no sports team performance has any direct impact on elections.

            As College Gameday Host Lee Corso would say, “Not so fast my friends.” The performance of sports teams does have actually seem to have an impact on elections. A study performed by professors at Stanford Graduate School of Business and Loyola Marymount University found that “a win in the 10 days before Election Day causes the incumbent to receive an additional 1.61 percentage points of the vote in Senate, gubernatorial, and presidential elections, with the effect being larger for teams with stronger fan support.” This may seem like a small effect, but an 1.61 increase in incumbent support is a huge difference in this Presidential election. For example, Romney is ahead by 1.5 points over Obama in Florida according to the Real Clear Politics average of polls. Yet, wins by the University of Miami, Florida University, and Florida State over the past few days could have impact in helping President Obama eke out a victory in the state (although the fourth quarter loss by the Miami Dolphins did not help Obama’s efforts).

            Should the outcome of sporting events play any impact in elections? The authors of the study seem to think no. In addition to calling sports contest “irrelevant” to elections, they found that impact of sports outcomes on decision-making processes are reduced when people become more aware they are using sports to help make political decisions (they argue that the impact sports has on politics occurs at a subconscious level).

Yet, the authors’ analysis seems to be a little irrelevant in this regard. Whether or not these results in sporting events should matter in elections is not as importan as the fact that there is any impact at all. These findings provide sports organizations with tangible evidence to show how the outcomes of games really do impact the decision making process for items that seemingly have no relationship to sports. This can and should be used as a critical piece of evidence in sponsorship negotiations by sports teams and leagues to show just how pervasive the impact of sports are in other parts of life (i.e. how the outcome of sporting events can impact how people determine which products to buy).

While it is extremely unlikely that the Redskins and Giants performances will determine the outcome of the elections (the teams are based in heavily democratic states), it is possible that a combination of other teams performances over the past few days could help determine who wins tomorrow’s elections. 

Crowdsourcing Decision Making In Sports

            Most people consider the Constitution of the United States as one of the foundations of modern democracy. Yet, a document starting with “We the People…” was not actually created by a wide number or variety of people. In fact, one of the most common critiques of the Constitution is that it was drafted, debated and voted on by a relatively small number of rich white males. It would seem impossible for the Constitution to be written by such a small and non-diverse group of people it were created today.

In fact, Iceland has taken an entirely different approach with its new consitution. Iceland decided to rewrite its constitution after catastrophic results to its banking and political system during the 2008 financial and economic crisis. Rather than having a Constitutional Council write a document on solely on its own, Iceland decided to take “to the Internet to raise ideas and provisions from the public. A first draft was made available online in April 2011 and citizens could comment through a Facebook page. The council also remained open about decision-making posting status updates to Twitter and videos on YouTube.” In essence, Iceland decided to crowdsource its constitution by allowing citizens to provide feedback and comments to the document. Not only did the council obtain some good ideas for revisions to the Constitution but it also allowed the citizens to “buy-in” into the document. Half of Iceland’s citizens participated in the process and two-thirds agreed that using a “crowdsourced document as the frame for the new constitution” was a good idea.

            This is maybe an interesting case study in direct democracy, but how does it apply to sports? There are two main applications of crowdsourcing to the sports industry. Sports organizations often operate as top-down organizations. This means that senior managers make decisions often with limited input for more junior employees. Using crowdsourcing techniques like collective decision markets allows employees to propose and vote on initiatives that sports organization can pursue during the course of a season or fiscal year. Because employees have buy-in (they proposed the ideas) then they are more likely to support these initiatives and have higher job satisfaction.

            Crowdsourcing and collective decision making does not have to stop for strategic initiatives typically found on the business side of a sports organization. The ultimate application of crowdsourcing concepts in sports would be to allow an organization’s different audiences (such as fans, media, sponsors, and employees) to vote on certain types of front office, coaching, and player personnel decisions. In particular, crowdsourcing can be used as component for decisions that come with predictions of future performance (such as draft picks or free agent signings).

This may seem like a completely farfetched idea. Why would any team allow people with varying degrees of expertise in sports to have input on these types of decisions? One only has to listen to a local radio sports show or read some Tweets or Facebook posts to see how bizarre some recommendations may be. In addition, organizations pay millions of dollars to general managers, coaches, scouts, and recruiters to identify and evaluate the best talent for their teams.

Yet, books like The Wisdom of Crowds by James Surowiecki and The Signal and the Noise: Why So Many Predictions Fail-but Some Don't by Nate Silver highlight scientific studies that show how using the average predictions of groups of people making independent forecasts are better predictors future performance than those of individual experts in areas ranging from economics to guessing the weight of an ox. Both Surowiecki and Silver identify two main causes of error in experts’ predictions. The first is that experts are overconfident in their predicative abilities and often overfit their models to a particular data set or not account for how new information can impact their predictions. Second, experts in fields often follow localized “herd” mentality. Rather than making independent predictions, managers will follow other managers’ behavior because it is harder to be blamed or lose your job if you are following industry standards. The book and movie Moneyball showed how difficult it was for Billy Beane to think differently. He used certain types of quantitative analyses to evaluate players that clearly would improve the Oakland A’s chances of winning games but was originally considered a pariah in Major League Baseball because no else was employing these techniques.

            This does not mean the scouting and background knowledge are not critical to the evaluation process. Silver points out that Beane has actually spent more money on scouting since Moneyball was published. It is absolutely critical to obtain as much information as possible to make informed decisions. Yet, the evidence supports that a sports organization could be better served to follow a process similar to what the Icelandic government did with its constitution. It could provide its fans, media, sponsors, and employees with opportunities to evaluate players using its information generated by the organization and allow people to vote on whom the organization should select, sign, or draft. Using this approach could allow sports organizations to avoid the two most common errors that can cause inaccurate forecasting.

            How a team uses this crowdsourcing information would have to be determined by the individual sports organization (i.e. a team would not have to sign a player because the collective decision market says this is what is should do). Yet, it would be difficult to argue that an organization’s core audiences would not be more invested in a team if it had some real or perceived ability to influence a team’s decision making process. By having this buy-in, it would make it more likely that these audience members would buy more products and service offerings like tickets, merchandise, and sponsorship because they are a part of the process. If crowdsourcing could work for something as important as writing a constitution then it could be successful for something only a little less important – deciding which general manager, coaches, and players one’s favorite team signs or hires. 

Royals Reserve Taxpayer Money for The Monarchy

           One of the biggest problems for sports organizations at all levels is the declining amount of public support for athletics from state, county, city, and local governments. Huge deficits and laws requiring balanced budgets make funding of athletic programs or organizations an easy target for budget cuts. This has caused colleges, high schools, and professional organizations to scale back or eliminate entire programs.

            In this tough economic environment, it would appear that sports organizations would be grateful to receive any type of public funding or subsidies. Certainly no sports organization would seemingly misappropriate funds or do something like using taxpayer funds to help pay their own taxes, right?

            Unfortunately, Sports Radio 810 WHB and the non-profit ThinkProgress organization are reporting that the Kansas City Royals are stealing from the poor to give to the rich – in a manner of speaking. According to Kevin Kietzman at 810 WHB, “The Royals have received at least $12.7 million from taxpayers that was approved by the Jackson County Sports Complex Authority as part of the RMMO provision of the team's lease with the county… By using the money for payroll taxes, the team literally collected taxpayer money to pay their own taxes.”

            The Royals have done nothing illegal in this situation. The team’s deal with Jackson County requires “reasonable written approval” by the Sports Complex Authority, which the team has secured before distributing its funds. Yet, the original intent of receiving this money starting in 2006 was to make improvements to Kaufman Stadium – particularly in the case of using the All-Star Game as showcase for the city and county in 2012. Yet, the team has only used 9% of the funds it has received on stadium improvements. The rest of the money has gone to pay for salaries, telephones, and taxes.

            In this blog, we have often argued that sports organizations should take steps necessary to enhance cash flow in non-traditional ways. This is one instance, however, where taking a different approach could be “penny wise and pound foolish.” Economic decisions cannot be made in a vacuum where sports decision makers only look at the best financial interest of their organization. By using taxpayer money in efforts to pay down the team’s tax obligations, the Royals have certainly engendered ill will from one of their target demographics – fans who live in Jackson County. More importantly, this type of action will certainly jeopardize the team’s ability to receive any type of public funding in the future, eliminating a source of cash flow critical to the organization.   

            Taking a more macro perspective, the Royals decision will likely jeopardize many other sports organizations’ chances for public funding. The team’s actions provide tangible evidence for what critics of public financing of sports organizations have argued for years is the main problem with this type of spending. The Royals actions show that at least some sports teams and owners have no interest in their communities or making improvements to infrastructure / stadiums that would benefit the public good. Rather, sports owners and teams are only looking after their own best interests in their bottom line.

            Block Six Analytics does believe that sports organizations as a whole do provide significant benefits to states, counties, cities, and towns. In addition, public financing of sports organizations does make sense in the right circumstances – even in the current tough economic environment. Yet, actions like those taken by the Royals organization will make it increasingly difficult to secure and justify future public funding for sports organizations.   

How Orbitz Success and Failure With Data Mining Impacts Sports Organizations

            It has been a tough few weeks for users of Mac computers. First, Apple had to revise its official stance on its computers’ ability to prevent all viruses when 600,000 Macs were infected with a various called “Flashback” or “Flashflake”. Then, The Wall Street Journal reported that Orbitz was showing Mac users “different, and sometimes costlier, travel options than Windows visitors see.” Orbitz decided to use this segmented pricing strategy because it found that customers who use Mac computers spend up to 30% more per night on hotels because they were more likely to book four and five start hotels. This equated to $20-$30 more per night in bookings. Providing Mac users with higher priced hotels as the default option likely meant more revenues for Orbitz.

            Orbitz discovered that Mac users generated more revenue after reviewing purchasing behaviors of their customers. Only by having and mining the data did Orbitz identify a new opportunity to create a different customer buying experience for a particular demographic – in this case Mac users.

            Sports organizations can follow Orbitz example to try to maximize the revenue coming from more lucrative demographics – particularly when it comes to in-game attendance. Pricing has traditionally been a tricky problem for sports organizations to solve. In the past, many sports organizations have predominantly priced season and individual game tickets at the beginning of a season or academic year. Yet, demand for tickets is rarely static for a variety of reasons (i.e. team performance, rise of star players, weather, etc.). Therefore organizations have often not been able to capture the value that comes with the fluctuation in demand for tickets to games, events, or contests.

            The rise in popularity and security of the secondary ticket market created by companies like Stubhub has shown how ticket holders and organizations can monetize changes in demand. In addition, numerous sports organization, most notably the San Francisco Giants, have implemented dynamic ticket pricing technologies from companies like Qcue that monitor ticket demand and change pricing for individual game tickets.

            However, the secondary ticket market and dynamic pricing are more macro targeting strategies focused on increasing gameday revenue from a larger audience. from numerous different types of consumers for a game.  What Orbitz has done is implemented a microtargeting strategy focused on one specific demographic – in this case Mac users. B6A has written about a microtargeting in a previous post, but Orbitz shows exactly how sports organizations can use this practice to generate revenue. More importantly, it shows the affects of being able to collect data from online users who are making purchases on the company’s website. Sports teams and leagues often receive a significant amount of traffic to their sites both during the season and during the offseason. It is critical for organizations to capture this information using some form of analytics platform (most sites use some form of Google Analytics) to better understand and predict consumer behavior in similar way that Orbitz had done with Mac users.

            While it should be credited for using data mining to increase revenue from a specific demographic, Orbitz communication strategy has not matched the success of its new pricing tactics. A Reuters article proclaimed “Orbitz Sends Mac Users to More Expensive Hotels” and claimed “You have to pay a premium if you're a Mac owner.” CNBC asked is this “smart marketing or can it be perceived as misleading?” while Apple focused blog 9to5 Mac started its post about the topic by saying “Smug Alert: Orbitz shows Mac users higher priced hotels by default”. Upon hearing the news, many Orbitz customers left critical Facebook comments including “You hide the cheaper hotels so basically you are misleading the Mac customers. HOW DARE YOU!! I will never use Orbitz again!!!"

            CEO Barney Harford led Orbtiz efforts to try and complete damage control after the release of The Wall Street Journal article by focusing on how the new policy would enhance the overall user experience. For example, he stressed that Orbitz was improving its recommendation engine to provide its users with the best and cheapest options. For Mac users, four and five start hotels often better fit their lodging preferences. Yet, the company’s efforts at crisis management were mostly reactive and even though it knew article about this controversial pricing tactic would be published (its Chief Technology Officer was quote by The Wall Street Journal). By this point, the damage had been done and Orbitz has done significant damage to its brand that likely surpasses its potential increase in revenue.

            Sports organizations should take note of what can happen when an effective revenue generating tactic is not accompanied by an effective communication strategy. The lesson learn from Orbitz should not be throw the baby out with the bath water – i.e. do not complete data mining because their could be negative reaction to the results. Organizations should do the best possible job of anticipating criticism to determine the best proactive and reactive responses to potential criticism. By completing a thorough audience analysis of all key stakeholders (i.e. fans, media, sponsors, and employees) before implementing a decision based off data mining, sports managers can more likely mitigate blowback and fully take advantage of new revenue generating opportunities.