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How Social Media Affects How Front Offices Act

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The impact of signaling in trade markets and what teams can do.

(photo via SB Nation)


The real-time nature of platforms such as Twitter, but also of Facebook and Instagram, have completely upended sports journalism, and as a result, has also changed the way fans have consumed their media. It’s also no secret that these same platforms are looking for further integration via live streaming rights. However, social media has also changed the way front offices are operating, and may continue to do so, as they reach the so-called economic equilibrium in the new world order.

One way that social media can affect front office decisions is through signaling.


A Primer On Signaling

While the linked paper focuses on the job market, signaling theory applies to many other aspects of life — including free agency in sports and trade market (which essentially boils down to a job market anyways).

Signaling is exhibited in markets where there is asymmetric information — that is, when one party has more information than the other. In Spence’s model, education acts as a signal to employers about their capabilities. If the employer has the perception that a college degree is more likely to result in a good employee, they will also have a more positive outlook on a job applicant with a college degree.

This is actually extremely valuable in the real-world, where both sides benefit: good applicants are more likely to invest in education (with bad applicants being less likely to invest due to the costs of signaling), and employers are more likely to gain, with the assumption of costly signals.


Signaling in the Trade Market

Signals also appear in sports, particularly in both the trade and free agency market. My focus here will be on trades.

A good example applies to players who are being shopped on the trade market.

If a team is actively looking to trade a player, it is because they are not receiving sufficient value from them — the cost being either the monetary value (which especially matters in salary cap leagues, but also in non-salary cap leagues), playing time, or a negative effect on culture. If there are two teams, A (the giver) and B (the receiver), and B knows that Team A has been looking to trade a player, it can act as a signal that there is something wrong with them.

Perhaps this player is mean to his/her teammates. Maybe they don’t practice very hard. Either way, there is some invisible information that is being conveyed when the player is being shopped.

Since all teams are looking to extract maximum value out of trades, it is rational that Team A would downplay trade rumours, which would decrease their own leverage in trade negotiations.

We saw this happen just last year in the NBA, when Kings GM Vlade Divac adamantly denied claims that his team’s franchise player, DeMarcus Cousins, was on the trade market — just two weeks before trading him during the 2017 All-Star Weekend.

And these denials are less effective than ever: in sports such as the NFL, NBA, NHL, and MLB, where reporters such as Adrian Wojnarowski consistently break trades, rumours, and signings, teams (and fans) are less likely to be fooled by general managers’ and team officials’ attempts to protect their player’s value.


How Signals Can Be Used for Good

Or, rather, how teams can leverage signaling theory for their own advantage.

If we split player value into tangible performance (i.e.: goals, points, assists, etc.), and intangible performance (i.e.: leadership, competitiveness, work ethic, etc.), it becomes immediately clear that, while intangible performance is important, measuring it also becomes a qualitative and imprecise science.

Much like the practice of hiring employees in traditional labor markets, measuring intangible performance comes down to the use of signals.

Signals including number of teams the player has played on, draft position, body language, and interviews all contribute to the evaluation of a player — whether this evaluation is implicit or explicit.

Since a team’s utility function will only comprise of observed variables, and since this model is more likely than not to be a mental model, front offices will place a greater weight on what they can see.

With math, there are many techniques to control for the effect of unobserved variables. Techniques such as instrumental variables and first differencing exist to help with this problem.

But if a team primarily uses mental models to evaluate intangible performance, this simply isn’t possible.

Consider this example: if there are only three possible variables to be used in evaluating intangible performance — leadership, competitiveness, and work ethic, but one of those variables are masked (say work ethic), a greater weight will be placed on the remaining two variables. Any signal that indicates leadership ability or competitiveness will be factored into an evaluation of a player, while work ethic will be ignored.

In this example, if a player’s work ethic is poor, the prospective team would have no way of knowing this.

Similarly, this can also be used in real trade markets — when unfavourable information about a given player is released, a team should release more information such that it acts as a positive signal and counterbalances the negative signal. This ensures that the negative effect of the unfavourable information on the player’s value is mitigated.

While much of this is the responsibility of many individuals on the team staff, a large burden of the responsibility will fall on the team’s public relations team. It’s one reason why good, effective PR matters! Effective PR tactics will provide value to all teams, and influence a team’s success, beyond just marketing.


This piece has been presented to you by SMU’s Master of Science in Sport Management.


Front Office Sports is a leading multi-platform publication and industry resource that covers the intersection of business and sports.

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Daniel is a writer at Front Office Sports, primarily covering sponsorship marketing and technology trends in the sports industry. Currently a Data Scientist at Bell Canada, Daniel has also worked at IMG and Wasserman in both strategy and consulting capacities.

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Meet the WNBA’s New Boss

Deloitte CEO Cathy Engelbert will become the first commissioner of the WNBA and the first woman to lead a Big Four professional services firm in the U.S.

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Photo Credit: Jennifer Buchanan-USA TODAY Sports

*This piece first appeared in the Front Office Sports Newsletter. Subscribe today and get the news before anyone else.

For the first time ever, the WNBA will have a commissioner. Before now, all of the league’s previous leaders like Val Ackerman and Lisa Borders were given the title of president. 

Cathy Engelbert, the current CEO of Deloitte, will take control of the role on July 17th and will report directly to Adam Silver. 

What should you know?

1. By the time she is done at Deloitte, Engelbert will have spent more time at the company (33 years) than the WNBA has been a league (23 years)

2. Engelbert is the first female to lead a Big Four professional services firm in the U.S.

3. She is the fifth person to lead the league after Val Ackerman (1997-2005), Donna Orender (2005-10), Laurel Richie (2011-15) and Lisa Borders (2016-2018)

4. Engelbert has spent the past four years in charge of Deloitte’s U.S. operation.

Basketball is in her blood…

Although she might be an accountant by trade, Engelbert is no stranger to the game of basketball. 

According to Bob Hille of Sporting News, she played at Lehigh for Hall of Fame coach Muffet McGraw and was a team captain as a senior. Her father Kurt also played and was drafted in 1957 by the Pistons.

What are they saying?

“Cathy is a world-class business leader with a deep connection to women’s basketball, which makes her the ideal person to lead the WNBA into its next phase of growth. The WNBA will benefit significantly from her more than 30 years of business and operational experience including revenue generation, sharp entrepreneurial instincts and proven management abilities.” – Adam Silver on the hiring of Engelbert

“I think that’s probably one of the reasons I was selected for this role, to come in and bring a business plan to build the WNBA into a real business and a thriving business, quite frankly.” – Engelbert to ESPN’s Mechelle Voepel

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Adam Silver Wants More Gender Diversity

The NBA commissioner states his desire to get more women into the sports industry. The NBA currently has a 31.6 percent ratio of women in team management.

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Photo Credit: Bob Donnan-USA TODAY Sports

*This piece first appeared in the Front Office Sports Newsletter. Subscribe today and get the news before anyone else. 

If Adam Silver has his way, 50 percent of the new incoming NBA officials will be women.

That number applies to coaches too, Silver said speaking at the Economic Club of Washington.

How do the leagues stack up?

The following numbers, outside of MLB, come from 2018 reports put together by The Institute for Diversity and Ethics in Sports (TIDES) at the University of Central Florida. MLB is the first league to have a report done on it this year.

1. NBA – 31.6% of team management are women / 37.2% of team professional admins are women

2. NFL – 22.1% of team senior admins are women / 35% of team professional admins are women

3. MLB – 28.6% of team senior admins are women / 26% of team professional admins are women

4. MLS – 26.5% of team senior admins are women / 31.6% of team professional admins are women

5. WNBA – 48.6% of team VPs and above are women / 58% of team managers to senior directors are women

6. NHL – No report done

Quotes from Silver… 

“It’s an area, frankly, where I’ve acknowledged that I’m not sure how it was that it remained so male-dominated for so long. Because it’s an area of the game where physically, certainly, there’s no benefit to being a man, as opposed to a woman, when it comes to refereeing.”

“The goal is going forward, it should be roughly 50-50 of new officials entering in the league. Same for coaches, by the way. We have a program, too. There’s no reason why women shouldn’t be coaching men’s basketball.”

That’s not all Silver wants to see change…

Silver, who has been adamant about getting rid of the one-and-done rule, provided some clarity as to when that might be achieved.

According to the commissioner, the 2022 NBA Draft will likely be the first one since the 2005 NBA Draft to allow high school players to go straight into the league rather than playing a season in college first.

Citing “active discussions” with the NBPA, Silver noted that they are still “a few years away.”

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“I Thought This Was a Good Deal”: AAF Vendors Speak Out

Amidst the spring football league’s collapse, countless vendors are still waiting to get paid for services rendered.

Robert Silverman

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Ultimately, it was the little things that best told the story of how dire things had gotten for the Alliance of American Football (AAF), an ex-team social media manager said. Starting in Week Five, social media managers no longer traveled with the team for road games. Even before, they’d doubled up on hotel rooms. The final bit of penny-pinching was the most bizarre: For the eighth and final AAF game, social was told Getty’s photographers would not be in attendance. Instead they would have to rely on “generic images,” making the job vastly more difficult.

Less than a week later, on April 2, the chaotic, short-lived lifespan of the spring professional football league, launched in March 2018 by filmmaker Charlie Ebersol, the son of venerated TV producer Dick Ebersol, came to an abrupt end. A little over two weeks after that, the AAF filed for bankruptcy, as first reported by Front Office Sports.

In the aftermath, stories like the social media manager’s have become ubiquitous. A  former player was sent a medical bill for treatment received during training camp. Scores of others reportedly had to cover their own airfare or were sent four-figure bills for hotel rooms. There was the class-action lawsuit filed by two players, claiming that ownership misled them about the league’s long-term fiscal solvency. Founders pointed fingers at one another after the debt-ridden league came crashing down. All manner of now ex-employees, from team officials to players,  learned they were out of a job thanks to social media.

The league’s bankruptcy filing revealed that $48.3 million was still owed to a variety of creditors against a $11.3 million in concrete assets, a scant $536,160.68 of which remained in the league’s bank accounts. Moreover, the AAF informed the thousands of creditors that any attempts to recoup their losses would be pointless right now, because, per Sports Business Journal, its coffers are entirely bare… “If it later appears that assets are available to pay creditors, the clerk will send you another notice telling you that you may file a proof of claim and stating the deadline,” the filing states.

But like the social media manager, many of those selfsame creditors began to suspect the AAF was on rocky financial ground long before the league officially pulled the plug.

Shortly after Tom Dundon, the majority owner of the NHL’s Carolina Hurricanes, who built his financial empire on the backs of subprime auto loans, bought a majority share of the financially-strapped league, he started to cut corners, looking to pare down expenses by any means necessary according to a report by Sports Illustrated. “As soon as Dundon took over, our f——— expense reports were getting approved out of Dallas,” where Dundon Capital Partners’ office is located, a former mid-level AAF employee told the magazine. (Dundon did not respond to multiple requests for comment sent via the Carolina Hurricanes. The form to contact Dundon Capital Partners on their website was removed at some point in the past few months )

With the AAF bleeding millions each and every week it remained in existence, per USA Today, Dundon deemed it necessary to scrimp and save wherever possible including on the margins. So vendors—companies that supplied locker room supplies, traveling equipment and more—were approached hat in hand and offered less than the full amount owed by the AAF.

READ MORE: AAF Files for Chapter 7 Bankruptcy 

While AAF officials served as the point of contact, two sources involved with the negotiations told Front Office Sports that the debt-clearing plan was conceived and ordered by Dundon’s financial team. If that meant exploiting AAF officials’ pre-existing relationships with vendors and playing on the faith placed in the league, so be it. As one former AAF official told Front Office Sports, it was “just a shit situation.”

Some of the companies did take the lowball offers, but others refused to accept less, insisting on full payment. It didn’t matter. Both paths led to vendors getting stiffed by the AAF. Dundon’s financial team kept stalling, promising the equivalent of “the check’s in the mail,” right up until the moment when the AAF closed its doors for good.

Now those vendors have been reduced to poring over the bankruptcy filings. They know all too well that, despite being out five or six figures, they’re way at the back of the line, trailing giant conglomerates like MGM and Aramark which are owed millions. And they’re not happy about it.

“I definitely feel scammed,” one vendor said.

(more…)

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