Introduction

In employment, people’s values to a company are defined by their salary. That is similar to hockey players in the National Hockey league. Like other firms, the NHL team’s management to give their limited resources efficiently to build the best team. This in turn helps to build a strong team based on the amount of money they spend when buying players. I focus on. Centers are the most important on the hockey team. Widely considered the core of the team, the better the group of centers the better results you can expect. In 2017 – 2018 Stanley Cup Champion capitals, the Washington capitals have been a dominant team in the last ten years. Their ice success has brought the franchise valuation to increase from $100 million to 625 million after one season. (“The Business of Hockey”, 2018).

Using a combination of players’ yearly performance and salary data sets for the 2017 – 2018 NHL season provided by CKM sports Management, I utilize a multilinear regression as a prediction model consisting of a set of 17 different variables each representing different performance metrics, I deem important for a center. The results of the model will assign a predicted salary unit to a center based on their efficiency during the 2017-2018 season, which can be compared to their actual salary to identify the most underpaid and overpaid centers.

The initial steps will look at the NHL and the salary cap, together with a literature review related to the topic of NHL player valuation. The second section outline data I used and the process I took to transform the data into a useful resource,. The third section breaks down the empirical methodology I utilized to build the predictive model and come up with some theoretical justification. The fourth step is to display the regression pipeline and interpretation as of results from the model. the fifth discusses the robustness of the model. the final section discusses the findings of the paper and its implications. However, the NHL is not only a sports league, it is a multibillion-dollar entertainment industry.

Background

The national hockey league is a hockey team consisting of NHL players. iTis the largest team of players in terms of popularity and revenue of 31 teams from both the USA and Canada.

: Results

Infographics

Below is a graphical representation of the data I sourced.

Figure 1: Size of NFL players over time

Figure 2: America’s weird taste in sports

Figure 3: Highest-paid public employees in the USA

Figure 4The most popular high school sports

One of the primary reasons why football is famous in the USA is due to the way schools manage the sport. Millions of dollars are pumped into the sport by academic institutions to attract lucrative television broadcast contracts. It is with these contracts that teams from schools tend to market their home institutions. To date, most of the games organized by the learning institutions do not generate positive net revenue for the institutions but are rather a marketing campaign for the institutions (Mondello, 2017). More than one of the top 1000 NFL players earn more than 1,000,000 in a year. This shows that the sport is very developed in the united states. The estimated average pay of NFL players in the U.S. is about USD 2,000,000. Comparing these figures with the MLB, a contrast is evident. MLB players earn an average of USD 3,000,000 per year (Hersch et al., 2020). The highest single-season salary in MLB History was paid to Alex Rodrigues, who was paid a whopping 33 million USD in 2010. However, these numbers were not the same in the last few centuries. It is with the popularization of the American football sport and the NFL in general that saw the development of the sport throughout the country. Of all the salaries in the country, the annual salaries of the NFL coaches surpass all the public servant’s salaries. Bill Belichick of the Patriots received approximately USD12 million in salary in 2020’s season. However, the concept of the bloated college sports system in the USA has been a major issue of concern over the years. So much money is spent by colleges to cater to the salaries of the employees in their teams in the united states.

How does the NFL Make Money?

The national football league is the governing body of the football sport in the country. It is considered by far the most successful sports league ever in the country, given that football is the most popular sport in the country. The big four sports in North America include baseball, hockey, basketball and at the top is football (Eckstein 2019). In 2015, due to widespread criticism, the NFL dropped its tax-exempt status that it acquired and held from 1947. Today, the NFL is regarded to be a trade association that comprises of thirty-two member teams. Ownership of these teams is private and individual. In terms of television contracts that the NFL enjoys, the majority of the revenue earned is retained by the NFL. Based on the Statista model of 2015, more than half of the generated income rose from television contracts. Even though the viewership has reduced since 2015, the growth in revenue of the NFL is steady and has been steady over the years. An approximated 6% growth per year drives the revenues higher every year, and by the year 2027, Commissioner Rodger Goodell estimates that the NFL will hit its target revenue of $25 Billion.

To further understand how the NFL generates income, the national governing body, and regulatory institution groups its revenue streams into two broad categories; the national and the local revenue. Based on Eckstein’s (2019) observations, the national revenue includes revenue collected from television deals, licensing contracts, and product merchandising. It is at the national level that these contracts are agreed upon with various stakeholders, partners, and sponsors. Green Bay Packer estimates that over $8.1 Billion was earned by the NFL in 2018 (Mondello, 2017). This translates to approximately USD225 million earned by every team in the league. This figure is arrived at since all the teams playing in the league receives an equal amount of all the generated national revenues. Being the most viewed sport in the United States, there is a large marketing opportunity due to the attractive nature of the sport to the American audience. Purchasing the rights to broadcast the matches requires heavy investment from the media companies. Live broadcasts take place on three days of the week, primarily Sundays, Mondays, and Thursdays. Today, the NFL has sealed television deals with media giants such as CBS, NBC, and Fox (Mondello, 2017). These companies have bought the rights to broadcast Sunday Night Football, and partial deals to stream the Super bowls are signed on and of annually. The total contribution of the NFL

The second broad category of revenue sources of the NFL is the local revenue. The local revenue is earned through the localized sales of tickets to matches, through money from sponsors, and through the sales of merchandised products through partnerships.

A regressive analysis of NFL Expenditure

NFL expenditures are enormous. The profit margins that the NFL and the various teams enjoy are so slim compared to the amount of money required for the management of the sport. Most of the money spent in terms of input and investment ought to be recovered to attain the profitability of the business. Since the NFL is a private company, most of the deals it gets into remains to be somewhat a secret to the general public, but close evaluation and leakage of information to the public is often inevitable.

A regressive analysis of aplayer’s valuation over time.

In the National Football league, players are often valued based on a variety of factors. These factors are perceived to be the selling point of a player’s input into the NFL. The quality of players depends on the ability of players to attract a larger fan base and a large audience. This narrows down further to certain qualities that players often have to possess. However, there are so many uncertainties when it comes to evaluating a player’s future performance in the league. For instance, it becomes difficult to predict an individual’s performance by looking at their college performance. College performance could not reflect or add up to the expectations of the NFL, or astonishingly talented individuals could become better at playing in the NFL compared to the college performance (Nicolozakes et al., 2018). In the college environment, numerous factors contribute to individual performance, such as work ethics the team integration; hence, a player’s performance in the NFL, beginning at the rookie-level, is one of the most reasonable ways to value players. New talent is essential to the team’s performance over time and enhances the continuity of the sport. However, the selection process could result in good players finding an under-performing team that could not bring out desirable personal performance.

The law of diminishing returns is one of the parameters that guide the evaluative process of selecting players suitable for the NFL. The selection process of NFL teams revolves around finding the right value for the players. It is a priority to have the rookies get adequate pay as well as sustain the pay of the elite member of the squad. However, as LaFriandra (2020) reveals, with time, several factors come into play, redefining the real value the player has to offer the team. Human labor tends to appreciate in terms of value over a certain period of time. This eventually reaches some statistical maxima where the player’s output reaches its very best. For star players, this marks the beginning of the deterioration of the spark of their career. As players get older, several challenges show up, which eventually do not add up towards the profitability of the sport. Another factor that plays a pivotal role in the valuation of players by the NFL teams is the general health and injury history of a player (Alosco et al., 2018). Players who suffer severely could lose value to the team. Career-ending injuries have seen players fall into depression and anxiety, with the uncertainty of their futures given the loss of livelihood posing a great financial challenge to them. The NFL has represented the player’s medical issues over the years. However, players have had a fought for the opportunity to seek a second opinion from other healthcare practitioners. It is true that the NFL is a dangerous sport given the close contact, despite the safety measured provided. The health implications of concern, however, are not primarily physical in nature but rather mental. As other tissues in the body survive the impact from collision, the brain tends to take in so much damage, which is often manifested over long periods of time of continued professional play. Numerous scholars such as Alosco et al. (2018) have proven a positive correlation between deteriorating health and long-term exposure to hits during NFL playoffs over time. Both physical and mental deteriorating health of a player contributes to the reduction of the value of players over time.

Based on the information provided in figure 1 above, the national football league players are becoming larger in size and height over a span of a century. Larger and taller players are expected to perform better during matches, compared to shorter and smaller players. Since football involves a variety of activities and lots of body contact, an individual advantage over other teams becomes of the essence to the survival of the team through a season. In the 1920s through the early and mid-19th century, the average height of players was about 5’6″-5’8″. Today, the average height of players is about 6’2″ tall, and the average weight is about 250 pounds. For the defensive tackles and the offensive linemen, the average height is observed to be about 6’4,” and the average weight is approximately 300 pounds. This growth over the years is attributed to the performance factor, which eventually makes the sport attractive to the audience. Larger players seemed much more efficient in handling the ball and defending during attacks, and taller players proved to be better sprinters than shorter players. This discovery by the NFL teams led to the development of a preferred taste of players. As new generations of players emerged, the selection criteria for the teams were aligned to both purchase and nurture talented team players who met the desired height and weight for the various roles in the teams. The older generation of players soon become less appealing to the audience and consequently become of less value to the NFL teams.

When new players are signed into an NFL team, their wages are often a major issue of concern. Rookies are often considered young talent who is expected to give the team a fresh stream of energy and are expected to outperform and replace the current stars in the team. However, the rookies are often undervalued by the team. According to Keefer (2016), most of the decisions in matters of salaries used a predetermined formula which was subject to heuristic thinking. Rookie compensation is subject to the team’s performance, especially during cutoffs. The discontinuity of salaries on the first round could be as high as the average 36%, which translates to approximately US$ 240,000 to US$ 250,000. The second round discontinuity about 17% of a player’s season’s compensation. This translates to approximately US$60,000 to US$70,000. Given that rookie compensation makes up a big percentage of their career earnings, some players may be undervalued while others may be overvalued (Ivanstev., 2019). The imbalance of salary allocation could result in detrimental effects on the entire performance of the team, as players could desire to play for more lucrative alternative teams that would provide better deals for them.

In terms of performance and experience, rookies have a challenge when it comes to matching up with other players. One of the proxies of player productivity is based on player earnings. Individual player productivity results in the justification of the amount of money that they receive. It is important to note that there are instances where the player’s performance is not measured by the amount of time and the number of matches they play in a season. The reason as to why I arrive at this is due to the fact that the top cream of the selected rookies that join a team are often given a chance to play and start at most of the games in their first season in the game. The main reason for this is the belief that a young player, given adequate exposure and ability to practice more, could become exceptionally good at playing through gaining experience with a great team in the national league. Therefore, the opening games in a season tend to have special team players given a superior opportunity to hone their skills as they are expected to become the future of the team. Surprisingly, this trend pays off, given the fact that of all the 32 teams in the NFL, there are no permanent favorites when it comes to football. Champions are often downed by other teams that are considered inferior. This trend tries to even out the competitive nature of the sport so as to favor the teams that are still growing in terms of the fan base, team strength and performance, and economic prospects. Another factor that plays a pivotal role in the valuation of players by the NFL teams is the general health and injury history of a player. Players who suffer severely could lose value to the team. Career-ending injuries have seen players fall into depression and anxiety, with the uncertainty of their futures given the loss of livelihood posing a great financial challenge to them.

However, the appeal to the audience is a complex combination of both sportsmanship and popularity. What makes players popular is their ability and agility to outperform their opponents. Overall team performance and individual performance are designed to leave a spectacle to the players. This is how popularity is gained by teams and individuals. The reason why fans would purchase tickets and watch NFL matches is due to the urge to see the performance of their preferred star athletes and teams. However, over the years, the performance of NFL athletes deteriorates due to a variety of reasons. The most common reasons for the diminishing performances include aging, drug and substance abuse, injury, and also personal motivation (Bradbury, 2019). Sometimes the performance of the player is disrupted by improved rival team’s performance and the rise of other stars. This results in players losing popularity over time, given the respective fan base. With fewer stars in the teams over time, and before other stars become appealing to the audience, a reduction in the viewership is often observed. For instance, the injuries of players in the last five years contributed to the drop in viewership over time. Key stars such as J.J. Watt and Andrew Luck got injuries that led to them not being active in the sport, hence fewer fans were interested in watching the sport. Sometimes, a star player’s team does not offer a serene environment for them to fully develop their capabilities. In the cases of Russel Wilson and Eli Manning, their respective teams underperformed, hence undermining their full performance potential in the NFL. Besides individual performance, a team’s popularity is a crucial variable in sustaining the audience. Eckstein observes that the NFL began losing the audience base on such a high percentage of up to 20% in the 2017 season (Mondello, 2017). One of the reasons he points out was due to the failure of five out of the top ten most popular teams in making it through the playoffs. This led to a loss of interest from the audience, resulting in less viewership across the country.

Chapter 1: Conclusion

In summary, there is a positive correlation between the value of a player in the NFL over time. The rise of the value of a player during the first years is often due to the fact that they tend to rise to stardom, given the fact that new players tend to be nurtured to become better players than the existing players. Developing a criterion to evaluate the true value of a player is difficult; hence a risk of either undervaluing or overvaluing a player is significant. However, the evaluation process can be based on a pool of various aspects such as the health of players, their appearances in matches, the impact of a player in matches, and also the forecasting of a player’s development in terms of performance based on the level of improvement. It is vital to point out that the commercialization of sports is a newly developed concept that is less than a century old, and most of the fundamental principles governing the sport are being clustered to generate a better perspective of the nature of the sport. Aspects such as the law of diminishing returns on the progressive pay of players imply that upon reaching the peak of their careers, it is expected that the net income of players is expected to decline over the following seasons. However, this is often controlled by many more factors, such as the appeal of the player to the audience. Another variable is the ability of the player to sustainably maintain an outstanding career, hence extending the crest of success over a long period of time. It is inevitable that eventually, a player’s career will come to an end. The tradeoffs between their health, the salaries, the efforts, the retirement, and the dedication and passion towards the sport is often a bone of contention.

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