Bring Back the Replacement Referees?

Lance Easley is a Vice President of small business banking for Bank of America in California. Just over a week ago, he was merely a little well known employee in the financial services industry. After last week’s Seattle Seahawks/Green Bay Packers game, however, he has infamously become a celebrity almost instantly overnight. Yes, we are talking about the same Lance Easley who served as a replacement referee for the game, signalling the highly controversial touchdown on the Hail Mary pass by the Seahawks.

No doubt we have all read our fair share of Facebook statuses and Tweets from angry NFL fans wishing for the quick return of locked-out referees. As Yashwant pointed out in an earlier blog post, the NFL is a clear loser in this situation due to compromise in the integrity of both the brand and the game. Believe it or not though, there is a hidden winner: the television networks. In fact, it can be argued that Lance Easley is merely fulfilling his duty as a member of capitalist America: providing the supply for the endless demand for professional football.

The controversial calls made by the replacement refs have created some of the most buzz in televised sporting events in recent years. ESPN has gone so far as to describe the popularity of current games using a concept we have all learned in the first few weeks of Microeconomics class: inelastic demand. Football is so heavily integrated into the American culture that demand will remain constant regardless of changes in price or perceived value. It may surprise many to know that viewership for ESPN’s Monday Night Football program drew a 29% year-over-year increase in viewership for the Seahawks/Packers game. Consumer behavior experts have claimed that the controversial calls have increased interest in the NFL by creating awareness among new spectators and building support for league teams among existing fans.

So as Stephen Colbert cleverly point out, “The free market has spoken.” Dare I say it? Could there actually be a reason which might justify bringing back the replacement referees?

- Yannan Qiu

Major Sports and Entertainment Empire AEG Up for Sale

(Picture of Philip Anschutz and the LA Kings after the team won the Stanley Cup earlier this year)

There has been a lot of buzz lately in the media and entertainment sector about the sale of Anschutz Entertainment Group, or more commonly known as AEG. Now for all the sports fans out there, you are probably more familiar with this firm than you might think. AEG owns sports teams including the LA Kings, who just recently won their first Stanley Cup, the LA Galaxy, with star players Landon Donovan, Robbie Keane, and David Beckham, as well as part of the LA Lakers. In addition, AEG also owns the Staples Center in LA, the famous O₂ Arena in London, as well as a number of other venues in various cities and countries. So the sale of this giant empire has attracted a lot of attention.

Currently, AEG is controlled by the 72-year-old billionaire Philip Anschutz from Denver. The company has hired Blackstone Group as their financial adviser on the deal and the President of AEG, Cannon Harvey, has announced that they are “focused on selling it whole”. This might be a disappointment to many buyers who are only interested in parts of the overall empire.

The company has also been planning bring the NFL to Los Angeles through building a new $1.2 billion stadium, Farmers Field, which is now awaiting for final approval from the city council. Once built, the company hopes that Farmers Field would be home to one, or possibly two NFL teams. AEG’s CEO Tim Leiweke said that the “new owner will have the historic opportunity to benefit from [this] strategy to reunited Los Angeles with the NFL”.

Many rumors of potential buyers have surfaced, including the Dolan family, which controls Madison Square Garden and the NY Knicks, along with Patrick Soon-Shiong, the biotech tycoon with a net worth of $7.3 billion, and Larry Ellison, Oracle’s CEO; both of these individuals were interested in the earlier bid for the LA Dodgers but were unable to succeed. Other interested corporations include Comcast, NBC, AXS cable channel, Liberty Media Corp, News Corp, and Live Nation, the largest concert promoter ahead of AEG in the US.

As this deal progresses, there will no doubt be extensive media coverage of the following stages and we'll keep you updated here at Finance Society as well.

~ Jennifer Zhang

The Losers and Losers of the NFL’s Referee Strike

 

In past weeks, the replacement refs in the NFL have been a popular topic of jokes and Facebook memes. Some fans think these refs are so bad that they don’t even want to watch football anymore because they are destroying the integrity and spirit of a good, old-fashioned game of football. Monday night’s Packers vs. Seahawks game was the epitome of all that is wrong with the replacement refs. Missed penalties, conflicting calls, and terrible spots have been seen throughout the last three weeks and especially in this last game. The last hail-mary play in that game has sparked so much controversy throughout the sports world; this might give the NFL the push they need to re-negotiate the terms of their deal with referees.

For those of you who don’t know what has been going on with the NFL referee situation, let me recap. About a month ago, the NFL wanted to change how NFL referees received retirement benefits. They wanted to switch from a defined pension plan, which is a fixed, stable source of retirement revenue to a defined contribution plan, which is a fluctuating source of revenue based on future investment earnings after someone retires. The referees are obviously unhappy with this because they would much rather prefer a retirement plan that has less risk and fluctuation. Thus, they went on strike to prove a point that they are necessary to run a game of football, and they should be treated with more respect.

I think they proved their point. Many fans are threatening to stop watching NFL because the games are becoming more about the farcical nature of replacement refs rather than the sport. Many articles are commenting on the inefficiencies caused to everyone by these replacement refs. For example, InvestorPlace quoted that the NFL is projected to generate $9.5 billion in revenue this year. Not only will the NFL lose fans due to the poor performance of these amateur referees, they might lose their sponsorships as well. The NFL has enormous partnerships with CBS, FOX, NBC, and Nike. The potential value of losing these partnerships is a lot greater than the $18 million they owe the refs in salaries and the extra $4 million it would cost them to settle the disputes. The NFL, as an organization, has the obligation to maximize the value to their stakeholders. By not successfully negotiating the deal to bring back professional referees, the NFL is compromising their stakeholder value, and they may lose even more fans and potentially even their relationships with other companies. In the end, this is a lose-lose situation and the NFL should just give in to the demands of the referees and give them what they want so they can appease their stakeholders.

-By Yashwant Chunduru

The controversial hail-mary play referred to earlier in the post: http://www.youtube.com/watch?v=wHsUc2zm0KI.

Economic side effects of Senkaku Island dispute

Japan’s claim of Senkaku Island property right has brought itself an enormous wave of anti-Japanese protests in China. The Senkaku dispute not only brings about political conflicts and military tension, but also, most importantly economic downtown, as China is Japan’s top two-way trade partner since its two-way tradegrows to $266.4 billion dollar in 2008. Japanese automobiles, electronic products, animated cartoons and video games are all popular Chinese imports. Japanese economy has always been relying on Chinese markets and the number one victim of the Senkaku dispute would be Japanese exporters. Major Japanese exporters such as Honda, Toyota, Sharp, Sony, and Panasonic are all facing dramatic sales and revenues decrease, and huge decline in stock price. Sony and Panasonic are even considering industrial transition and selling its LCD business to the Chinese and Korean producers. Losing its biggest importing country, Japanese export industry devastates in long-term even though Japanese politicians cannot feel this pain.

      The anti-Japanese protest broke out on the 19^th of August, starting from Shenzhen, Xi’an, Jinan and Chengdu. The protests spread to other big cities such as Zhengzhou, Shanghai and Beijing, etc. when the Japanese government continues to assert its control of Senkaku Island by bidding it for 2.5billion RMB. This “extremely unfriendly move” intensifies the relationship between the Chinese and Japanese government. To fight against Japan’s unfriendly behaviors and under the pressure of countless protestors, the Chinese government increases its import tariffs and largely raises its Japanese product quality standard. Although China itself will be harmed through these trade barriers, as consumers in China lose their consumption in cheap and differentiated Japanese products, and domestic Chinese producers take over the market of imports and produces in a high margin cost, which is not economically efficient to the nation as a whole. However, national pride and defense, rather than economic efficiency is what China is pursuing in the Senkaku island dispute. In order to exert pressure on Japanese government economically, the most efficient way to achieve this noneconomic goal is through placing high trade barriers while receiving more tax revenue.
Ruijia Tan.

QE3- Its Mechanisms & Effectiveness

Quantative Easing is always a hot topic in the news.  How much do you know about the recent QE3 announced by the Federal Reserve?  This blog aims at discussing the operations of quantitative easing and the impacts of QE3 on various aspects.

The Fed launched a new bond-buying program on September 13.  The image below by Wall Street Journal gives a very clear illustration on how the Fed expects to boost the economy by buying more mortgage-backed securities and Treasurys.

What's Distinguishes QE3 from the previous QE1 and QE2?

The biggest differentiation would be the "open-endedness" that the Fed has promised.  Under the QE3 program, the Fed would buy $40 billion mortgage-backed securities each month in an open-ended effort until there is a sustained improvement in the job market.  Therefore, on top of the $45 billion a month the Fed is already spending on Operation Twist through the rest of this year, the Fed is spending $85 billion per month to boost the economy.  Moreover, the Fed also said that the federal funds rate would stay near zero "at least through mid-2015," in order to "support continued progress toward maximum employment and price stability."  However, another open-ended question here concerns the targets for jobless rate or high inflation.

Effectiveness of QE3
While it is a new move for the Fed to develop an open-ended quantitative policy, I am concerned with the actual impact that this round of QE3 could make on the economy.  I believe the Fed is taking more risk than the opportunity.  When we look at the economy and try to figure out the factor that is holding back consumption and leading high unemployment, it does not appear that more easing would change the situation.  Indeed, lower interest rates, cheaper money can promote borrowing, but I don't see how this solves the problem.  

Look at the diagram above.  Unemployment and inflation rise to the original level after our previous quantitative easing programs.  Remember, every new QE program signals the Fed's admission to the failure of achieving goals' of the previous QE program.  Yes we have QE1, QE2, and Operation Twist, but unemployment is still above 8%.  While macroeconomic factors such as European Debt Crisis might have affected the US recovery, I believe the Fed is bearing more inflation risk than the possible return- lower unemployment.

~Sophie Tam

GM Invests in China

Already a large player China, the world'd largest auto market, GM made another leap to secure their leading market share. Along with its joint venture partners SAIC Motors, GM spent $252.5 million to build the largest proving ground in the country.

Essentially a large test track for new cars, the proving ground will make introducing and improving vehicles made for the Chinese market that much easier. Without having to ship cars to South Korea, the United States, or any other tracks, GM will save both time and money when it comes to the creation, inspection, and final sale of the car. GM China President Kevin Wale stated, "When we look forward, our volumes are going to increase significantly and to win in the market place you have to introduce more products and introduce them quicker and better than the competition". This investment will allow them to continue building on the leading 14% market share they held last year. This move clearly shows that GM wants to control the Chinese market and prevent any other competitors from breaking the barrier.

 While the Chinese auto market is currently slowing, GM is looking at their long-term prospects in a market projected to move from $12 million to $30 million in sales by the end of the decade. The building of this track is a deep seed in China that will make it much more efficient for GM to operate.

GM’s initiative to develop vehicles faster comes with understanding the Chinese culture. "Speed is everything in China," Wale states. "The market moves quickly and you've got to adapt quickly." GM is clearly showing its ability and motive to act quickly and take a more commanding lead in the Chinese Market. While smaller cars are the bulk of sales for GM, the growth of wealth in China will allow for new SUV and luxury cars to be developed.

-Rishi Chheda

A bad bite of Apple?

Has any of your friends got a new iphone 5? Does s/he use maps on the cell phones a lot? If so, you must be hearing them complaining all days about their new babies, more specifically, about the map app.

It seems that Apple's decision to replace Google Maps by its own product has now come to such an embarassment so quickly. The two Silicon Valley giants were once good alliances until Apple realized Google's android phone as a dangerous rival for iphone. From then, Apple started to cut down or even cut off their dependence on Google. Apple tried to find the alternatives for each popular Google apps in their iTunes store. They no longer see each other as a partner.

But now the feedbacks from thousands of consumers proved Apple's failure. It's just too anxious to escape from Google's control. Almost all new iphone users find the new map system as a joke because mislabeled landmarks, missing roads and streets and misplacement of lots of famous constructions. In a word, it would never bring you to the right place. And this is not only in America, consumers in Japanese and Hong Kong find these problems as well, along with language problems since some locations in Japan are only described in Korean.

Although Apple is responding actively and promise to improve maps as soon as possible, most of the consumers still begin to demand adding back of Google Map. Perhaps the new map system is not a bad trial , but Apple should be more patient, patient enough until all its tuition fee has been paid. Google has developed its map system for almost 10 years. No one is expecting Apple to build another Rome in one day.

--Oscar Zhang