The Case for Professional Basketball, Article Review Example

In the world of professional sports the salaries of the players are astronomically larger than that of a counterpart working in the corporate sector.  A person in their early 20’s working an entry level profession job would be happy to make $40,000 a year while a player in the NBA of the same age and potentially less qualified to hold the same corporate position is making millions of dollars per season.  So the question is “Are professional athletes overpaid?”  In the same jest another question could be “Are professional athletes underpaid?” While the second may sound obtuse at first the reasoning behind it is the value they bring to the sport as well as the value they bring to the overall revenue to the team in which they play for.  LeBron James brings in crowds of fans, sells jerseys and creates a market for the Cleveland Cavaliers.  He sustains a brand image of what the sports team wants and helps sell tickets, souvenirs, concessions, supports jobs in the arenas, broadcasting and many other areas that could be extrapolated out.  In an example of marginal revenue product (MRP), if a player, also known as a worker, possesses monopoly power over labor supply, actual salaries may exceed competitive equilibrium salaries (Scott, Long and Somppi, 52).  This means that the value of the company is derived by a single individual, which means all revenue comes from that one individual and the salary of that person would exceed that of someone that is a contributor but not a primary source of the revenue.

The value of the company is derived by the product it delivers and the revenue that product achieves. Without key athletes the company would not make the expected revenue.  Talent brings a higher level of excellence and fans, buyers, are pulled toward winners.  Winners make money therefore the athlete deserves a share of that revenue.  So, is the player overpaid or underpaid?  That all depends on the perception of the person answering the question but in reality it can be solved by calculating a valuation of that player’s contribution and the revenue that is earned by that organization.  For example, in basketball a player scores points, gains rebounds and provides assists, all of which would contribute to the positive MRP for that player.  A player that detracts from that MRP could be committing fouls or creating turnovers that negatively impacts the organization’s chance of winning and thus creating a potential loss in revenue.  By calculating the players value based on positive impacts to the organization and subtracting the negative impacts, the player’s value or pay could be valued.  This, of course, is systematically separated from the negotiation process, agent influence and other outside variables that create an initial value for that athlete.

While a player can be overpaid when compared to a person of the same education, age, background and talent level it must be understood that a professional athlete is just that, a professional, the best of the best, the highest level of talent available for that particular organization.  The comparison between that of a corporate entry level executive and that of a professional athlete is a comparison attune to apples to oranges.  The true valuation of an athlete is based on expected results on the field, court or arena.  The willingness to pay a player multiples of millions of dollars is like an investment more than a salary to the ownership of the organization.  In a more scientific method, utilizing MRP can provide a baseline understanding of the value of an athlete and thus determine if he or she is overpaid or underpaid.

Works Cited

Scott, Frank, Long, James and Somppi, Ken. Salary Vs. Marginal Revenue Product Under Monoposony and Competition: The Case for Professional Basketball. Atlantic Economic Journal. 1985. Print.