Beckham & Star economics
Beckham & Star economics
by Popov on Wed Jan 24, 2007 12:39 am
January 21, 2007
Economic View
Star-Struck on the Soccer Field, and in the Boardroom
By DANIEL ALTMAN
PRODUCERS sign stars to save movies. Boards hire star chief executives to save companies. Can a star soccer player save an entire industry?
Put aside the question of whether Major League Soccer, the modest circuit in the United States, is really in need of saving. The signing of David Beckham, whose salary with bonuses could exceed the entire payroll of the rest of the league, shows an overwhelming faith in star economics, where the leading lights of an industry wield disproportionate influence.
The basic principle of star economics is that an enterprise can’t distinguish itself just by maintaining a high average in the quality of its work force. It has to have a star, a breakaway figure, to attract the attention of customers and to inspire its own employees. Moreover, the received wisdom is that a business can’t do all the things that we now think are so important — “taking it to the next level,” “thinking outside the box” or “beating expectations” — without a star leading the way.
The economy certainly seems to be producing more stars. The highest-paid Americans are leaving the rest of the work force further behind almost every year. A combination of factors is behind the trend: the huge opportunities offered by globalization, the sudden popularity of hedge funds, the heady climate of innovation in high technology, the enormous pay packages offered to top executives, and more. The economy creates stars. And the more that employers chase them, the greater their radiance.
Yet one could argue that in corporate America, at least, the heyday of the star system has already passed. Even Jack Welch, the nation’s favorite management guru, now has his critics.
And look at some of the names that crashed to earth — names like Carleton S. Fiorina, a victim of unpopular strategy at Hewlett-Packard, and Albert J. Dunlap, forced out amid an accounting scandal at Sunbeam, to say nothing of stars-turned-convicts like L. Dennis Kozlowski, Bernie Ebbers and Jeffrey K. Skilling.
Now corporate America often looks to established, old hands — rather than stars with flair to spare — to solve big problems. Alan Mulally, formerly of Boeing, is now aiming to turn around the Ford Motor Company, and Gordon Bethune, formerly of Continental Airlines, is advising creditors of Delta. It’s substance over style.
Soccer is ultimately an entertainment industry, and stars were bred in radio, films and television long before soccer became such big business. Hiring David Beckham is a lot like returning to the studio system of the 1940s, when a star would be expected to lend his talents to a string of movies, all for the same company and perhaps even the same director. But that system didn’t last in Hollywood, since actors asserted their bargaining power. And it hasn’t really worked in soccer, either.
The old North American Soccer League, which closed down in 1984, was the star system carried to an extreme. Aging magicians of the game — even Pelé, its reigning legend — were collected from around the world to play matches in football stadiums. But the opportunity to see men who were household names, at least for soccer fans, in the dusk of their careers did not create enough momentum for the league to survive. A previous attempt to bring an unquestioned star of the European game, Lothar Matthäus of Germany, to American shores ended quickly and in acrimony a few years ago.
Mr. Matthäus was offered far less money than Mr. Beckham, though, and Mr. Beckham is a different sort of commodity. He is a marketing powerhouse, and the Beckham name is known to many people who have little interest in his athletic talents. Nevertheless, his allure as a salesman may slacken once his ability on the field ebbs away.
Anna Kournikova, the Russian tennis player, became an object of ridicule when, despite or perhaps because of her many modeling jobs and photo shoots, she failed to win a tournament on the women’s tour. The fizzling of Alex Rodriguez, perhaps the only player in any sport whose contract ($252 million over 10 years) is even roughly comparable to Mr. Beckham’s, has been a source of ire and bitterness for many a Yankee fan, both here and abroad.
Mr. Rodriguez’s contract didn’t seem quite so outlandish in the context of his team and teammates. The Yankees had already boasted baseball’s most bloated payroll for several years before his arrival. Yet covering his salary may be much easier than covering Mr. Beckham’s target for annual compensation, which could reach $50 million a year. The Yankees have a minimum of 162 games a year, and usually more in the playoffs. Their games are simulcast all over the world. Their merchandise is just as ubiquitous. The same isn’t true for Major League Soccer. Say it receives $10 for every extra jersey or ticket Mr. Beckham helps to sell. Even if his total earnings come partly from endorsements — and those do the league little good by themselves — he will have to sell millions of tickets and jerseys to live up to his billing. That will be tough in a league where teams play a maximum of about 40 matches, often in half-full stadiums, with minimal coverage overseas.
MR. BECKHAM’S arrival could raise the profile of Major League Soccer, but his advent also raises questions about just what the league is trying to accomplish. It began by trying hard not to repeat the North American Soccer League’s mistakes, seeking instead to provide a career path for the nation’s best young players. It has made some headway, with many players going on to success in Europe. As a tightly controlled business with a habit of moving its best players around, it has even picked up a reasonable fan base.
In the meantime, Americans who wanted a piece of soccer’s huge international marketing clout went abroad instead, buying up the brand names of Manchester United and Aston Villa. But it seems that Mr. Beckham is being called upon to transform Major League Soccer into something newer and bigger, the way a star chief executive might be expected to transform a company or even an entire industry.
It was never going to be easy, given that he is already on the natural downward slope of a competitive athlete in his 30s. After Mr. Beckham’s new deal made the headlines, Fabio Capello, his coach at Real Madrid, didn’t hesitate to bench him. If corporate America’s lessons about the star system are to be believed, the task could be even more difficult than Major League Soccer expects.
January 21, 2007
Economic View
Star-Struck on the Soccer Field, and in the Boardroom
By DANIEL ALTMAN
PRODUCERS sign stars to save movies. Boards hire star chief executives to save companies. Can a star soccer player save an entire industry?
Put aside the question of whether Major League Soccer, the modest circuit in the United States, is really in need of saving. The signing of David Beckham, whose salary with bonuses could exceed the entire payroll of the rest of the league, shows an overwhelming faith in star economics, where the leading lights of an industry wield disproportionate influence.
The basic principle of star economics is that an enterprise can’t distinguish itself just by maintaining a high average in the quality of its work force. It has to have a star, a breakaway figure, to attract the attention of customers and to inspire its own employees. Moreover, the received wisdom is that a business can’t do all the things that we now think are so important — “taking it to the next level,” “thinking outside the box” or “beating expectations” — without a star leading the way.
The economy certainly seems to be producing more stars. The highest-paid Americans are leaving the rest of the work force further behind almost every year. A combination of factors is behind the trend: the huge opportunities offered by globalization, the sudden popularity of hedge funds, the heady climate of innovation in high technology, the enormous pay packages offered to top executives, and more. The economy creates stars. And the more that employers chase them, the greater their radiance.
Yet one could argue that in corporate America, at least, the heyday of the star system has already passed. Even Jack Welch, the nation’s favorite management guru, now has his critics.
And look at some of the names that crashed to earth — names like Carleton S. Fiorina, a victim of unpopular strategy at Hewlett-Packard, and Albert J. Dunlap, forced out amid an accounting scandal at Sunbeam, to say nothing of stars-turned-convicts like L. Dennis Kozlowski, Bernie Ebbers and Jeffrey K. Skilling.
Now corporate America often looks to established, old hands — rather than stars with flair to spare — to solve big problems. Alan Mulally, formerly of Boeing, is now aiming to turn around the Ford Motor Company, and Gordon Bethune, formerly of Continental Airlines, is advising creditors of Delta. It’s substance over style.
Soccer is ultimately an entertainment industry, and stars were bred in radio, films and television long before soccer became such big business. Hiring David Beckham is a lot like returning to the studio system of the 1940s, when a star would be expected to lend his talents to a string of movies, all for the same company and perhaps even the same director. But that system didn’t last in Hollywood, since actors asserted their bargaining power. And it hasn’t really worked in soccer, either.
The old North American Soccer League, which closed down in 1984, was the star system carried to an extreme. Aging magicians of the game — even Pelé, its reigning legend — were collected from around the world to play matches in football stadiums. But the opportunity to see men who were household names, at least for soccer fans, in the dusk of their careers did not create enough momentum for the league to survive. A previous attempt to bring an unquestioned star of the European game, Lothar Matthäus of Germany, to American shores ended quickly and in acrimony a few years ago.
Mr. Matthäus was offered far less money than Mr. Beckham, though, and Mr. Beckham is a different sort of commodity. He is a marketing powerhouse, and the Beckham name is known to many people who have little interest in his athletic talents. Nevertheless, his allure as a salesman may slacken once his ability on the field ebbs away.
Anna Kournikova, the Russian tennis player, became an object of ridicule when, despite or perhaps because of her many modeling jobs and photo shoots, she failed to win a tournament on the women’s tour. The fizzling of Alex Rodriguez, perhaps the only player in any sport whose contract ($252 million over 10 years) is even roughly comparable to Mr. Beckham’s, has been a source of ire and bitterness for many a Yankee fan, both here and abroad.
Mr. Rodriguez’s contract didn’t seem quite so outlandish in the context of his team and teammates. The Yankees had already boasted baseball’s most bloated payroll for several years before his arrival. Yet covering his salary may be much easier than covering Mr. Beckham’s target for annual compensation, which could reach $50 million a year. The Yankees have a minimum of 162 games a year, and usually more in the playoffs. Their games are simulcast all over the world. Their merchandise is just as ubiquitous. The same isn’t true for Major League Soccer. Say it receives $10 for every extra jersey or ticket Mr. Beckham helps to sell. Even if his total earnings come partly from endorsements — and those do the league little good by themselves — he will have to sell millions of tickets and jerseys to live up to his billing. That will be tough in a league where teams play a maximum of about 40 matches, often in half-full stadiums, with minimal coverage overseas.
MR. BECKHAM’S arrival could raise the profile of Major League Soccer, but his advent also raises questions about just what the league is trying to accomplish. It began by trying hard not to repeat the North American Soccer League’s mistakes, seeking instead to provide a career path for the nation’s best young players. It has made some headway, with many players going on to success in Europe. As a tightly controlled business with a habit of moving its best players around, it has even picked up a reasonable fan base.
In the meantime, Americans who wanted a piece of soccer’s huge international marketing clout went abroad instead, buying up the brand names of Manchester United and Aston Villa. But it seems that Mr. Beckham is being called upon to transform Major League Soccer into something newer and bigger, the way a star chief executive might be expected to transform a company or even an entire industry.
It was never going to be easy, given that he is already on the natural downward slope of a competitive athlete in his 30s. After Mr. Beckham’s new deal made the headlines, Fabio Capello, his coach at Real Madrid, didn’t hesitate to bench him. If corporate America’s lessons about the star system are to be believed, the task could be even more difficult than Major League Soccer expects.
Copyright 2007 The New York Times Company
Economic View
Star-Struck on the Soccer Field, and in the Boardroom
By DANIEL ALTMAN
PRODUCERS sign stars to save movies. Boards hire star chief executives to save companies. Can a star soccer player save an entire industry?
Put aside the question of whether Major League Soccer, the modest circuit in the United States, is really in need of saving. The signing of David Beckham, whose salary with bonuses could exceed the entire payroll of the rest of the league, shows an overwhelming faith in star economics, where the leading lights of an industry wield disproportionate influence.
The basic principle of star economics is that an enterprise can’t distinguish itself just by maintaining a high average in the quality of its work force. It has to have a star, a breakaway figure, to attract the attention of customers and to inspire its own employees. Moreover, the received wisdom is that a business can’t do all the things that we now think are so important — “taking it to the next level,” “thinking outside the box” or “beating expectations” — without a star leading the way.
The economy certainly seems to be producing more stars. The highest-paid Americans are leaving the rest of the work force further behind almost every year. A combination of factors is behind the trend: the huge opportunities offered by globalization, the sudden popularity of hedge funds, the heady climate of innovation in high technology, the enormous pay packages offered to top executives, and more. The economy creates stars. And the more that employers chase them, the greater their radiance.
Yet one could argue that in corporate America, at least, the heyday of the star system has already passed. Even Jack Welch, the nation’s favorite management guru, now has his critics.
And look at some of the names that crashed to earth — names like Carleton S. Fiorina, a victim of unpopular strategy at Hewlett-Packard, and Albert J. Dunlap, forced out amid an accounting scandal at Sunbeam, to say nothing of stars-turned-convicts like L. Dennis Kozlowski, Bernie Ebbers and Jeffrey K. Skilling.
Now corporate America often looks to established, old hands — rather than stars with flair to spare — to solve big problems. Alan Mulally, formerly of Boeing, is now aiming to turn around the Ford Motor Company, and Gordon Bethune, formerly of Continental Airlines, is advising creditors of Delta. It’s substance over style.
Soccer is ultimately an entertainment industry, and stars were bred in radio, films and television long before soccer became such big business. Hiring David Beckham is a lot like returning to the studio system of the 1940s, when a star would be expected to lend his talents to a string of movies, all for the same company and perhaps even the same director. But that system didn’t last in Hollywood, since actors asserted their bargaining power. And it hasn’t really worked in soccer, either.
The old North American Soccer League, which closed down in 1984, was the star system carried to an extreme. Aging magicians of the game — even Pelé, its reigning legend — were collected from around the world to play matches in football stadiums. But the opportunity to see men who were household names, at least for soccer fans, in the dusk of their careers did not create enough momentum for the league to survive. A previous attempt to bring an unquestioned star of the European game, Lothar Matthäus of Germany, to American shores ended quickly and in acrimony a few years ago.
Mr. Matthäus was offered far less money than Mr. Beckham, though, and Mr. Beckham is a different sort of commodity. He is a marketing powerhouse, and the Beckham name is known to many people who have little interest in his athletic talents. Nevertheless, his allure as a salesman may slacken once his ability on the field ebbs away.
Anna Kournikova, the Russian tennis player, became an object of ridicule when, despite or perhaps because of her many modeling jobs and photo shoots, she failed to win a tournament on the women’s tour. The fizzling of Alex Rodriguez, perhaps the only player in any sport whose contract ($252 million over 10 years) is even roughly comparable to Mr. Beckham’s, has been a source of ire and bitterness for many a Yankee fan, both here and abroad.
Mr. Rodriguez’s contract didn’t seem quite so outlandish in the context of his team and teammates. The Yankees had already boasted baseball’s most bloated payroll for several years before his arrival. Yet covering his salary may be much easier than covering Mr. Beckham’s target for annual compensation, which could reach $50 million a year. The Yankees have a minimum of 162 games a year, and usually more in the playoffs. Their games are simulcast all over the world. Their merchandise is just as ubiquitous. The same isn’t true for Major League Soccer. Say it receives $10 for every extra jersey or ticket Mr. Beckham helps to sell. Even if his total earnings come partly from endorsements — and those do the league little good by themselves — he will have to sell millions of tickets and jerseys to live up to his billing. That will be tough in a league where teams play a maximum of about 40 matches, often in half-full stadiums, with minimal coverage overseas.
MR. BECKHAM’S arrival could raise the profile of Major League Soccer, but his advent also raises questions about just what the league is trying to accomplish. It began by trying hard not to repeat the North American Soccer League’s mistakes, seeking instead to provide a career path for the nation’s best young players. It has made some headway, with many players going on to success in Europe. As a tightly controlled business with a habit of moving its best players around, it has even picked up a reasonable fan base.
In the meantime, Americans who wanted a piece of soccer’s huge international marketing clout went abroad instead, buying up the brand names of Manchester United and Aston Villa. But it seems that Mr. Beckham is being called upon to transform Major League Soccer into something newer and bigger, the way a star chief executive might be expected to transform a company or even an entire industry.
It was never going to be easy, given that he is already on the natural downward slope of a competitive athlete in his 30s. After Mr. Beckham’s new deal made the headlines, Fabio Capello, his coach at Real Madrid, didn’t hesitate to bench him. If corporate America’s lessons about the star system are to be believed, the task could be even more difficult than Major League Soccer expects.
January 21, 2007
Economic View
Star-Struck on the Soccer Field, and in the Boardroom
By DANIEL ALTMAN
PRODUCERS sign stars to save movies. Boards hire star chief executives to save companies. Can a star soccer player save an entire industry?
Put aside the question of whether Major League Soccer, the modest circuit in the United States, is really in need of saving. The signing of David Beckham, whose salary with bonuses could exceed the entire payroll of the rest of the league, shows an overwhelming faith in star economics, where the leading lights of an industry wield disproportionate influence.
The basic principle of star economics is that an enterprise can’t distinguish itself just by maintaining a high average in the quality of its work force. It has to have a star, a breakaway figure, to attract the attention of customers and to inspire its own employees. Moreover, the received wisdom is that a business can’t do all the things that we now think are so important — “taking it to the next level,” “thinking outside the box” or “beating expectations” — without a star leading the way.
The economy certainly seems to be producing more stars. The highest-paid Americans are leaving the rest of the work force further behind almost every year. A combination of factors is behind the trend: the huge opportunities offered by globalization, the sudden popularity of hedge funds, the heady climate of innovation in high technology, the enormous pay packages offered to top executives, and more. The economy creates stars. And the more that employers chase them, the greater their radiance.
Yet one could argue that in corporate America, at least, the heyday of the star system has already passed. Even Jack Welch, the nation’s favorite management guru, now has his critics.
And look at some of the names that crashed to earth — names like Carleton S. Fiorina, a victim of unpopular strategy at Hewlett-Packard, and Albert J. Dunlap, forced out amid an accounting scandal at Sunbeam, to say nothing of stars-turned-convicts like L. Dennis Kozlowski, Bernie Ebbers and Jeffrey K. Skilling.
Now corporate America often looks to established, old hands — rather than stars with flair to spare — to solve big problems. Alan Mulally, formerly of Boeing, is now aiming to turn around the Ford Motor Company, and Gordon Bethune, formerly of Continental Airlines, is advising creditors of Delta. It’s substance over style.
Soccer is ultimately an entertainment industry, and stars were bred in radio, films and television long before soccer became such big business. Hiring David Beckham is a lot like returning to the studio system of the 1940s, when a star would be expected to lend his talents to a string of movies, all for the same company and perhaps even the same director. But that system didn’t last in Hollywood, since actors asserted their bargaining power. And it hasn’t really worked in soccer, either.
The old North American Soccer League, which closed down in 1984, was the star system carried to an extreme. Aging magicians of the game — even Pelé, its reigning legend — were collected from around the world to play matches in football stadiums. But the opportunity to see men who were household names, at least for soccer fans, in the dusk of their careers did not create enough momentum for the league to survive. A previous attempt to bring an unquestioned star of the European game, Lothar Matthäus of Germany, to American shores ended quickly and in acrimony a few years ago.
Mr. Matthäus was offered far less money than Mr. Beckham, though, and Mr. Beckham is a different sort of commodity. He is a marketing powerhouse, and the Beckham name is known to many people who have little interest in his athletic talents. Nevertheless, his allure as a salesman may slacken once his ability on the field ebbs away.
Anna Kournikova, the Russian tennis player, became an object of ridicule when, despite or perhaps because of her many modeling jobs and photo shoots, she failed to win a tournament on the women’s tour. The fizzling of Alex Rodriguez, perhaps the only player in any sport whose contract ($252 million over 10 years) is even roughly comparable to Mr. Beckham’s, has been a source of ire and bitterness for many a Yankee fan, both here and abroad.
Mr. Rodriguez’s contract didn’t seem quite so outlandish in the context of his team and teammates. The Yankees had already boasted baseball’s most bloated payroll for several years before his arrival. Yet covering his salary may be much easier than covering Mr. Beckham’s target for annual compensation, which could reach $50 million a year. The Yankees have a minimum of 162 games a year, and usually more in the playoffs. Their games are simulcast all over the world. Their merchandise is just as ubiquitous. The same isn’t true for Major League Soccer. Say it receives $10 for every extra jersey or ticket Mr. Beckham helps to sell. Even if his total earnings come partly from endorsements — and those do the league little good by themselves — he will have to sell millions of tickets and jerseys to live up to his billing. That will be tough in a league where teams play a maximum of about 40 matches, often in half-full stadiums, with minimal coverage overseas.
MR. BECKHAM’S arrival could raise the profile of Major League Soccer, but his advent also raises questions about just what the league is trying to accomplish. It began by trying hard not to repeat the North American Soccer League’s mistakes, seeking instead to provide a career path for the nation’s best young players. It has made some headway, with many players going on to success in Europe. As a tightly controlled business with a habit of moving its best players around, it has even picked up a reasonable fan base.
In the meantime, Americans who wanted a piece of soccer’s huge international marketing clout went abroad instead, buying up the brand names of Manchester United and Aston Villa. But it seems that Mr. Beckham is being called upon to transform Major League Soccer into something newer and bigger, the way a star chief executive might be expected to transform a company or even an entire industry.
It was never going to be easy, given that he is already on the natural downward slope of a competitive athlete in his 30s. After Mr. Beckham’s new deal made the headlines, Fabio Capello, his coach at Real Madrid, didn’t hesitate to bench him. If corporate America’s lessons about the star system are to be believed, the task could be even more difficult than Major League Soccer expects.
Copyright 2007 The New York Times Company
Re: Beckham & Star economics
by old goat on Wed Jan 24, 2007 7:57 am
Too much to read right now... I will have to check it out later...
Though I am sure it is something to do with big sports and bigger dollars. I say they are such an elite group, those who make it to the Big Leagues, those who distinguish themselves in sports, compared to all who are playing at various levels, that they deserve whatever the market can give them.
They only get a few short years at the top before they are used up physically for the games they play, why shouldn't they get top dollar if someone is willing to pay it?
Though I am sure it is something to do with big sports and bigger dollars. I say they are such an elite group, those who make it to the Big Leagues, those who distinguish themselves in sports, compared to all who are playing at various levels, that they deserve whatever the market can give them.
They only get a few short years at the top before they are used up physically for the games they play, why shouldn't they get top dollar if someone is willing to pay it?
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Re: Beckham & Star economics
by iluvfreebeer on Wed Jan 24, 2007 3:35 pm
I don't see how an over the hill limey soccer boy who's married to a spice girl can be worth $1millon a week! From an economic standpoint, this is just STUPID on the part of MLS.
In order to justify that at current gate prices, soccer attendace at their league games would have to go up more than 400%.
Not very likely.
In order to justify that at current gate prices, soccer attendace at their league games would have to go up more than 400%.
Not very likely.
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Re: Beckham & Star economics
by Popov on Wed Jan 24, 2007 6:41 pm
hey - read the article first 
it's an investment into the future, the whole point of the article is to point out that it IS risky, and that it WONT bring in the benjamins in the beginning. the whole point is that the owners of the LA Galaxy decided to take a risk in the hope that Beckham will attract enough attention for the MLS to get revamped, more popular, and more attractive to good players - by becoming more popular it will boost ticket prices and tv revenues thus allowing for higher salaries etc. it should be a profitable chain reaction, and the article debates the common practice nowadays to overpay people who have the potential to put the company or industry as a whole on the right track - once again - read the article ! It's a good read, that's why I posted it.
it's an investment into the future, the whole point of the article is to point out that it IS risky, and that it WONT bring in the benjamins in the beginning. the whole point is that the owners of the LA Galaxy decided to take a risk in the hope that Beckham will attract enough attention for the MLS to get revamped, more popular, and more attractive to good players - by becoming more popular it will boost ticket prices and tv revenues thus allowing for higher salaries etc. it should be a profitable chain reaction, and the article debates the common practice nowadays to overpay people who have the potential to put the company or industry as a whole on the right track - once again - read the article ! It's a good read, that's why I posted it.
Re: Beckham & Star economics
by iluvfreebeer on Wed Jan 24, 2007 10:10 pm
They're pissing away money and they know it.
How many cluster bombs could be dropped on Mecca and Riyadh with $250Million?
That would be a better way to spend the money!
How many cluster bombs could be dropped on Mecca and Riyadh with $250Million?
That would be a better way to spend the money!
"Support Bob Barr for President, or I'll come to your house and give you my constipated stare." -- Steven Seagal
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