The Economics of Fantasy Football

Via CapX, an interesting look at the impact of fantasy sport on real-life attendance and the multi-billion economic cost of fantasy sports obsession:

After a long summer without football, the return of the Premier League is nearly upon us. Although I’m not too optimistic about the prospects of Manchester United, I am much more sanguine about the fortunes of my fantasy team, Chicken Tikka Mo Salah. Just like millions of other people around the world, I have been tinkering with my team, looking at the first few fixtures and various statistics in order to determine which players to sign.

In addition to being an interesting diversion, fantasy football can also teach us a few things about economics. For the uninitiated, fantasy football involves people picking a squad of real life players, who then win or lose points based on their performance in actual Premier League matches.

In an ideal world, one would simply have all the players who are most likely to receive the highest points in their starting 11. However, each manager has a budget of £100 million, and the most valuable players cost the most money. As such, choices need to be made. For example, this season I found that I could not have both Raheem Sterling and Sergio Aguero in my team without making serious compromises in the quality of other players. After much agonising, I went for Sterling and other high quality players at the expense of Aguero.

This brings us to one of the most fundamental concepts in economics: opportunity cost. It expresses the relationship between scarcity and cost and means that, in the real world, getting one thing often involves foregoing something else.

The vast majority of people will be familiar with the concept of opportunity cost in one way or another. Given that most people have limited budgets, they have to make choices about what they will buy and what they won’t get as a result. Fancy jetting off to Spain this year for your summer holiday? Great, but it probably means that you can’t also go on holiday to Italy as well. Or, taking out a Netflix subscription? You’ll get to watch shows and films on demand, but that’s a few extra pints each month you will have to go without.

The public gets this. Unfortunately, all too often, governments don’t. The money they have comes from taxpayers and it is not unlimited. Again, choices need to be made. Should they raise extra revenue through increasing taxes or focus on growing the economy? Should they improve local transport infrastructure or instead squander billions on HS2? Should local authorities spend money caring for the elderly and people with disabilities, or should the council chief receive a pay rise? Too often this most fundamental concept of economics is ignored by politicians, and it is ordinary people who suffer as a result.

In fantasy football, managers can trade players once the season has started. However, the price of a player changes based on their performance. A high performing player is likely to see their price increase as the season goes on. This is undeniably frustrating for managers who did not sign the player at the start of the season and now either have to sacrifice other players to afford the star player or accept that they will probably not top their league.

However, it reflects another fundamental concept of economics: supply and demand. Imagine if a very hyped player has a run of bad games, managers will decide that he’s not worth the cost and so will trade him for a player who is earning more points. Conversely, say a player is having a remarkable season, earning lots of points. His price will increase as more managers scramble to sign him. Prices act as signals, and allow people to judge the value of goods and services in a market. Imagine a game where there was a cap on the price of top players and a price floor for the worst. The game would be both unfair and dysfunctional.

Again, this is intuitively understood by the public, but not always by the government. History is littered with examples of government attempting to control the economy by imposing price caps. The Mesopotamians, the Egyptians, the Greeks, and the Romans in antiquity, the French revolutionaries and the Allied powers in Germany in more modern times, and most recently the murderous Maduro regime in Venezuela have all tried price controls. It has always ended in disaster. Closer to home, Theresa May’s plans to lower energy bills by introducing price caps has been ineffective at best.

As well as being intriguing from a theoretical point of view, fantasy football also has a significant impact on the economy in its own right. The economics of fantasy sports (and sports in general) has tended to focus on the United States and on sports such as NFL and Major League Baseball. However, there is no reason to assume that fantasy football does not have a similar impact.

In 2010, Todd Nesbit and Kerry King looked at the impact of fantasy NFL on match attendance. They found that fantasy NFL had an impact on match attendance, with fantasy players attending between 0.22 and 0.57 more games per season. They also looked at the impact of fantasy baseball on match attendance and found that fantasy baseball attendance does positively influence Major League Baseball attendance. This is obviously important as increased attendance at matches means increased revenue for teams – money which they can invest back into the team.

Nesbit and King also looked at the impact of playing fantasy sports on television viewership. Again they found that participating in fantasy sports leads to an increase in the number of games watched on television. Increases in demand should lead to an increase in the value of advertising spots, again bringing in more revenue for clubs.

However, it’s not all good news. For example, research into the impact of fantasy NFL participation found that in 2015, it cost firms $16 billion in lost productivity due to workers obsessing over their teams. Despite this, the study found that it is not as productivity-destroying as other office distractions such as Facebook or Twitter, and in fact encourages interaction, conversation, competition, and collaboration.

So, fantasy football is not just a hobby for the football and or statistics enthusiasts among us. The evidence suggests that it has a significant impact, both positive and negative, on the economy. What is more, politicians would do well to remember the basic economic lessons it teaches us.



This entry was posted on Thursday, August 8th, 2019 at 1:24 pm and is filed under Blog.  You can follow any responses to this entry through the RSS 2.0 feed.  You can leave a response, or trackback from your own site. 

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