Please ensure Javascript is enabled for purposes of website accessibility

Tag: economics

Navigating the New Economics of Baseball: Inside The Colorado Rockies’ Most Strategic Play Yet

“Tinkers-to-Evers-to-Chance” is the rhythmic phrase describing the legendary double-play troika presented by three Chicago Cubs infielders during the early 1900s.

The players — shortstop Joe Tinker, second baseman Johhny Evers and first baseman Frank Chance — so reliably broke the hearts of opposing teams by dispatching groundballs that the poet Franklin Pierce Adams memorialized their work in a 1910 poem.

In “Baseball’s Sad Lexicon,” Adams told the tale from the vantage point of a fatigued New York Giants fan as he lamented the ruthless predictability of this infield trio.

That was then. But 124 years later, we’re blithely updating the phrase to describe a new formula underlying the modern business of baseball. We’ll call ours “Tickets to Airwaves to Chance.”

READ: Working in Colorado’s Professional Sports Industry is Not as Glamorous as You Think

Clever, huh?

As in: Three key economic pillars that support the ability of baseball stewards like Charlie Monfort, the owner and general partner of the Colorado Rockies, to pay their bills and, ideally at least, make some money.

Tickets

The “tickets” part is what it has always been: revenue flowing from the rental of ballpark seats, along with spillover spending from live attendees on munchies and merchandise. The latest estimate from magazine publisher Forbes (for the 2022 season) is that the Rockies took in $75 million in gate receipts, representing just over one-fourth of the team’s $286 million in total revenue.

The ”tickets” part is vital given the deterioration of a second contributor to baseball’s coffers: airwaves.

Airwaves

For the past two decades or so, teams like the Rockies have been blessed by large sums of money paid by regional sports networks (RSNs) — a once-thriving component of what had been a lucrative pay TV ecosystem. Per Forbes, 2022 RSN rights payments to the Rockies amounted to $57 million.

READ: Altitude Vs. Comcast — The Changing Economy of Sports Media

Now, the RSN kingdom is a withering vestige of what it used to be.

Erosion of traditional pay TV subscriptions has cut these sports networks down to their knees. Pay TV used to present a reliable money stream — basically everybody with a cable or satellite TV subscription kicked in money for sports networks, regardless of whether they wanted to. Now, the RSN category is on life support as millions of Americans cut the pay TV cord, and in doing so, choke off a good share of the money flowing to RSNs.

The tea leaves lately have read so dour that some RSN operators, including longtime area provider AT&T SportsNet Rocky Mountain, have called it quits altogether.

Worry not, Rockies fans: The mothership MLB organization reportedly has been plotting to take over the task of producing and distributing Rockies games this season. But that’s a stopgap.

Over time a new video model is likely to arrive, whereby teams and their media partners put together a mix of old-school pay TV distribution coupled with newfangled streaming packages and arrangements to televise some games the old-fashioned way: via free, over-theair TV.

Right now, however, this is all a work in progress. And it’s this exact same uncertainty over baseball-media economics that leads us to the “Chance” part of our expression.

Chance

Here, the term refers not to Franklin Leroy Chance, the Chicago Cubs infielder whose professional career began in 1898, but to a red-hot sports gambling category. Legalized betting and the fervor surrounding it is seen by many sports industry figures as a salvation for a deteriorating media environment.

To be sure, teams like the Rockies don’t directly benefit from the large sums wagered by sports bettors. (Last July, for example, Coloradans bet close to $105 million on baseball, per the Colorado Department of Revenue, with winners pocketing $98 million in payouts.)

The Rockies don’t operate a casino in Black Hawk or accept bets from the Will Call window. Rather, the proceeds go mainly to sports books like FanDuel and BetMGM Sportsbook, which rake in the bets, dole back winnings, keep some of the spoils, and pay taxes to state governments.

READ: Live from Colorado — The Future of Sports Betting 

But teams benefit in other ways.

For one thing, sportsbooks spend hundreds of millions of dollars on advertising and sponsorships, with a good share going to media partners and TV networks that, in turn, pay teams to license their games. Separately, interest stirred up by betting opportunities further bonds fans to teams and games, contributing to TV viewership, ticket sales, player merchandise, and edge-of-the-seat interest for those wagering whether Rockies shortstop Ezequiel Tovar will ground out during his final at-bat.

There are direct partnerships, too, like the sponsorship alliance the Rockies struck last August with the sports betting company bet365.

The point being: The new mix of economics, and the entrance of gambling as a revenue generator, isn’t happening in a vacuum.

If baseball owners weren’t worried about long-term attendance trends, shifting demographics and the decay of an old-school pay TV model, I’m not sure legalized gambling would cast quite the same spell. But conditions change, and so do business models.

As Rockies President and Chief Operating Officer Greg Feasel told a Colorado Business Roundtable audience recently, “You survive by adapting.”

The new rules of the sports-business road demand just that. It’s like the Chicago Cubs double-play formula of old: A shifting interplay of “tickets, airwaves and chance” represents a new twist on an old ambition: how to get your team out of a jam when trouble’s brewing.

The Economics of Homelessness: A Potential Win-Win-Win-Win 

The most fulfilling job I ever had was working for a mental health agency developing housing and job opportunities for its clientele. Many of the clients were, or had been, homeless and my team was tasked with providing them with a bridge to recovery, which meant being housed and largely self-sufficient in an environment with wrap-around support. The medical and clinical staff helped clients deal with their disorders through therapy and dispensing psychotropic drugs that were becoming more effective. Unfortunately, we all had to deal with the tendency of some clients to self-medicate with drugs and alcohol and had to learn the skills of de-escalation.

Given my role of creating jobs for people suffering from mental illness, I chose to hand out business cards instead of spare change to the “homeless” I encountered on the street. During the month I tried this approach, only one young woman accepted the offer. Unfortunately, she called on her start date telling me she would not be coming to work as her boyfriend threatened to beat her if she did.  

The economics of homelessness are complex. According to the Colorado Coalition for the Homeless (CCH), only 1 percent of homeless individuals live unhoused by choice. Fifty-three percent have jobs and simply cannot afford housing. Other sources indicate most of the homeless are over the age of 25 and male with a rapidly growing age cohort being 50 to 64 who need access to more affordable health care in addition to housing.

The majority of homeless women escaped domestic violence. Thirty percent of the homeless are part of a family. Less than a third are addicted to drugs and alcohol, approximately 14 percent are veterans, and 25 percent suffer from some sort of mental illness. With more resources dedicated to veterans in the last decade, the number of homeless veterans has been cut in half. Unfortunately, the affordable housing crisis is having a negative impact across the board and the legalization of sports betting promises to exacerbate addiction problems, pushing more young people into homelessness.  

Development of more supportive housing programs holds promise to assist those experiencing long-term homelessness. The CCH reports the cost of supportive housing and services to be $13,400 per person annually compared to $21,000 to $40,000 spent for a range of services delivered on more of a revolving-door basis such as health care, incarceration, detox treatment and shelter services.

Unfortunately, false narratives on negative impacts of supported housing on surrounding communities are often exaggerated. The biggest concern centers on criminalized vagrants or abnormal behaviors such as loitering, which can escalate with poorly trained responders. A recent study of Colorado inmates found former homeless inmates are less likely to be incarcerated for violent crimes and more likely to have drug offenses and trespassing convictions. Such narratives combined with a lack of funding hinder expansion of such programs. 

Summit Economics recently documented the socio-economic impacts of the Fort Lyon supportive housing facility on Bent County. Systematic higher crime levels resulting in arrests were not evident in the data. There is greater demand for health services as the homeless moving into supportive housing have often gone years with inadequate medical care except at expensive emergency rooms. We found many local residents appreciate supportive housing given the positive impact on individual lives and the surrounding community. Community engagement among those who graduated from Fort Lyon and stayed in Bent and Otero counties is impressive. In fact, the local American Legion Post is the first in the country established by formerly homeless individuals.  

READ: Housing Affordability Crisis in Colorado: Denver, Colorado Springs and Grand Junction See No Signs of Improvement

The strongest support in Bent County came from local businesses that, like most businesses today, struggle to find enough reliable workers. There were numerous accounts of Fort Lyon residents, present and past, filling jobs across the skills spectrum, and I sensed the potential for an emerging entrepreneurial culture among graduates. The only problem was similar to what I encountered when developing vocational opportunities years ago. The need for labor results in employers wanting recovering individuals to work full-time. This is not necessarily beneficial to people in early recovery as job stressors and money can trigger negative behaviors that took them to homelessness in the first place.  

Visiting with supported housing residents and graduates at Fort Lyon took me back to my days working in the mental health agency, giving people a place to live and more money that comes from even part-time employment. We found dramatic declines in the need for therapeutic and medical treatment for clients engaged in work or volunteerism who had a roof over their head. Dramatically reducing homelessness through supportive residential programs is a win-win-win-win for the individual, businesses, communities and society as a whole.  

 

Tom BinningsTom Binnings is a senior partner at Summit Economics in Colorado Springs. He has more than 30 years of experience in economic and market research for public policy, strategic planning, business analytics and project finance. He can be reached at [email protected]. 

Our Economy in 2023 — What to Expect

In 2023, the Federal Reserve will continue to battle inflation and hike rates reaching its terminal rate in the first half of the year, while inflation slowly dissipates. This will cause economic activity to slow, perhaps to a recession-like pace, causing financial markets to be choppy, yet producing positive returns.

Will the economy experience a soft landing, as the Federal Reserve is suggesting, or will stubborn inflation and rising interest rates cause the economic landing to be a bit bumpy?

We think the economic landing will be bumpy, experiencing a short-lived, mild recession…prepare for landing.

READ — 2023 Will Be the Year of the Earndown: What Every Colorado Small Business Owner Needs to Know

The events over the past few years have led to an economic environment plagued with uncertainty. We expect the economy to slow significantly with a high probability of experiencing a recession. Real GDP may be negative in the second or third quarter, however we expect GDP to be approximately 0.6% for the year. In 2023 there are numerous reasons why we expect the economy to slow and enter a recession:

Inflation

Persistently high inflation continues to be a threat to economic growth. Even though there are signs that peak inflation was in the spring and inflation is abating, inflation begins the new year at a stubbornly high level. A consolation is that lower inflation and weakening economic growth will convince central banks to slow the hiking cycle, pause, and pivot, moving to cutting rates.

A material risk to our forecast is if inflation moves lower slower than the Fed or the market expects, or if inflation comes down and gets “stuck” at a level higher than the Fed target. This would cause the Fed to react and more than likely shove the economy into a recession.

READ — 5 Ways Small Business Owners in Colorado Can Survive Inflation

Aggressive Monetary Policy

The Fed’s interest rate hiking cycle that began in March has been extremely aggressive. Understandably, since the Fed’s goal is combating spiking inflation. Consumption has been resilient, keeping the hopes of a soft landing alive. High interest rates will eventually weigh on consumers’ consumption behaviors and investment, particularly, residential investment slowing economic growth.

Historically, the only way the Fed orchestrated a soft landing was to lower interest rates. That would suggest the Fed will be hiking rates early in the year and cutting rates in the second half of the year. Unfortunately, the odds of a soft landing are stacked against the Fed.

We believe that the Fed’s aggressive tightening campaign will be the catalyst for a recession. Fed action has a pronounced lag — the full impact on inflation and the economy will not be felt until Spring/Summer of 2023. US consumers have an enormous amount of excess savings, and balance sheets are clean, leading us to forecast the recession will be short-lived and mild.

COVID

COVID no longer appears to impact consumer consumption in the US. However, China continues its zero-COVID policy. As China shuts down regions, cities and ports, the global economy suffers due to shortages and inflation. If lockdowns continue, economic activity slows. However, it appears the Chinese will relax their COVID policies in 2023, this could be a positive catalyst for economic growth around the world.

Fixed Income

We think the Federal Reserve will continue hiking short-term interest rates, affecting the economy in 2023. We expect a step-down in rate hikes, back down to 0.25% per hike, and Fed Funds to peak at 5.0%. We then expect the Fed to pause and hold rates constant for the remainder of the year. Along the way, the Fed’s narrative may cause turbulence in the financial markets.

The long end of the yield curve believes the Fed will be successful in fighting inflation. The 10-year Treasury yield of 3.6% at the end of November suggests the financial markets believe that inflation will be transitory. The bond market experienced a difficult year in 2022, we expect the 10-year Treasury yield to end 2023 around 4.0% and once again see positive returns in the bond market.

Equities

The financial markets have been discounting a meaningful slowdown in 2023. In September of 2022, the S&P 500, being a leading indicator, was down 25% pricing in an economic slowdown or recession. Given the Fed is hinting at a softer rate-hiking approach, we believe that 2023 will see positive returns in risk assets.

We expect the S&P 500 to end 2023 between 4,200 and 4,400, or a 5-10% total return. We expect a bumpy flight, with market volatility.

The Bottom Line

Prepare for landing. The global economic cycle is transitioning from an environment of accommodative monetary and fiscal policy, supporting moderate growth, to restrictive monetary and fiscal policy, supporting a contraction in growth. We expect the economy in 2023 to be affected by the projected real GDP, which is less than 0.6%. Additionally, anticipate a short-lived, mild recession.

Risk-based assets are expected to produce positive returns and be one of the best-performing asset classes. Our S&P 500 target at end the year is between 4,200 and 4,400 or 5-10% total returns. We expect to see volatility in the equity markets, with corrections greater than 10%.

Interest rates will be on the rise and inflation is expected to subside. We think the entire yield curve will shift higher, Fed Funds will end 2023 around 5.0% and the 10-year Treasury yield will move modestly higher to close the year at 4.0%.

Prepare for landing…buckle up.

 

KC Mathews, CFA, is the Chief Investment Officer at UMB Bank.

A Zero is Not OK: Some Colorado Representatives are Failing Us on Energy

With ballots hitting millions of Colorado mailboxes last week, it can be tough to sift through the countless resources voters now have (or receive) when casting their votes. Perhaps too much information can be a bad thing.

But with energy touching nearly every facet of every business, it’s arguable that energy is the most important indicator of a candidate’s alignment with business interests. How our elected leaders vote on energy and environmental issues, and the impact it has on our personal pocketbook and a business’s bottom line, says a lot.

READ — America’s Energy Future Depends on Cultivating the Next Generation of Talent

The American Energy Alliance (AEA), a not-for-profit organization, and its American Energy Scorecard is becoming a go-to source for understanding where our elected members of Congress stand.

The website is simple and only requires a visitor to click on a state or type in a zip code to pull up scores.

While history indicates the party of the sitting incumbent president should lose seats in the House and Senate during the 2022 midterm election, as the leader of the Democratic party, President Joe Biden doesn’t carry the responsibility of how individual elected leaders vote in their respective chambers.

To be honest, it doesn’t look too pretty for the Democratic party here in Colorado.

Aea 2022 Scorecard Colorado

While many members failed to achieve a perfect score for various reasons, the most concerning scores are from those representing districts or states where the energy industry is a major economic driver and job creator like Colorado. Colorado’s energy industry contributes billions to our state’s economy and supports hundreds of thousands of reliable, good jobs.

READ — Water Pipeline Back in Play? — The Future of Colorado’s Water Distribution

Some of our elected leaders in Colorado scored 0%, putting them at the very bottom of the body.

It also cannot be considered an accident. AEA notifies all members in advance of votes they will be scored.  A member disagreeing with AEA’s position on one or two votes might be understandable, but four of our U.S. House Representatives look like they didn’t even show up. A zero is not OK in Colorado. Representatives DeGette, Neguse, Crow and Perlmutter have some explaining to do. Senators Bennet and Hickenlooper, you’re next.

While social issues can, and always will, remain subjective, economic factors are often more concrete and one of the most important, telling indicators for the business community is the price of energy. The price at the pump, almost doubling in the last two years, is just one of the main reminders we receive daily. And while the war in Ukraine, outrageous energy prices in Europe and China’s role in climate change may seem like distant topics, they, along with countless other issues, all affect the price of energy here in Colorado.

Before voters and business owners in Colorado cast their ballots, they ought to know where their representatives stand on affordable energy.

View the full Energy Scorecard and its methodology at AmericanEnergyAlliance.org/american-energy-scorecard.

 

Jon Haubert Hb Legacy Media Co 2Jon Haubert is the publisher of ColoradoBiz magazine. Email him at [email protected].

Eco-demics: Creating a fresh vocabulary for our new world

A few weeks back I got my June 8 & 15 edition of The New Yorker magazine (I’ve been a subscriber since I was a kid), and the cover drawing resonated with me. Beautifully drawn by the artist Richard McGuire, it depicts a COVID-19 New York street scene, with a walker, a bicyclist and people in windows all in quarantine, mostly wearing masks of course, but what stands out the most is that the drawing is displayed on the cover upside down. Titled “This Side Up,” the simple placement of this classic New Yorker cover art says everything about where we are right now.

The world is upside down.

As such, I believe the world needs different names for disciplines that have, frankly, failed us through this period of upheaval. For instance, I have heard a ton of interviews with university professors of economics of late who try to explain just what the hell is going on, but there is no context – even in long ago history – that offers any comfort, never mind explanation. When there is no precedent – 41 million-plus filing for unemployment, virtually every non-essential business closed, the price of oil dropping to less than $0 per barrel – news outlets could get just as much sense out of an economic interview with a ditch digger or a dog groomer than with an economics professor.

For the last 47 years every time there is a government scandal we attach “-gate” to it, a la Watergate, so in these unprecedented times I suggest we stop using the term economics and call it what it really is: Eco-demics. This is an ill economic situation foisted upon the whole world that turns everything the other way ‘round, maybe permanently. Like pandemic – which from the ancient Greek means literally “all people” – it carries an automatic pejorative.

And Eco-demics comes with its own subsets.

Have you noticed the odd price changes over the last several months? On the down side I have discovered that the base rate of my chain-barbershop went up some 25% during the coronavirus era. My favorite pizza joint upped the cost of the standard pie by about 20% as it transitioned to take-out-only and kept it there in the new social-distancing in-house dining. Meat prices have skyrocketed. Indeed, a ton of food prices have been on steady upticks. I am going to call this “Inflata-demics:” the eco-demic sting of higher prices in some sectors.

But it’s not all bad news. We are also experiencing what I am now calling “Deflata-demics”: the new laws of supply and demand caused by the pandemic. Just a few weeks ago I bought gasoline for $1.16 a gallon. I got a “relief payment” discount check in the mail from my auto insurance company. Air fares are flat. Hotel rates are slashed. Mortgage rates are ridiculously low.

One of the major Eco-demics subsets I have noticed is something I now refer to as “Ideo-demics”: drastic alterations of public sentiment brought about by the pandemic. For instance, who doesn’t feel sorry for all of the restaurants and service workers brought to the brink of disaster by COVID-19 fears; we gladly pay more for their offerings – and tip at a historically high rate – to try and help them through. Just recently some friends expressed some sympathy for what the oil companies are experiencing, and I now have somewhat of a warm feeling for my insurance company. My insurance company! Also, I sense that for the first time in memory people would actually gladly pay more for Made-in-the-USA products, if for no other reason than to screw China. These are truly unprecedented times.

We are going to be experiencing and studying Eco-demics for a long time, and it’ll probably take decades to sort it all out. I am offering myself as the world’s first Ph.D. in the subject, although I shudder to think, what with the pejorative nature of “-demics,” how people are thinking about academics.

After finishing my doctoral thesis on the subject, I discovered that having that first, higher-priced, Inflata-demic cocktail at a bar in months was just the perfect metaphor for this topsy-turvy world.

Bottoms up!