Steve Johnson merges interest in sports and finance in an independent study project

Hello Duke fans! For this month’s issue, I thought it would be interesting to share Steve Johnson’s independent study project that examines the economics of the four major professional sports leagues.  Steve has worked closely with Professor Lori Leachman from Duke’s Economics Department to produce a detailed, 36-page paper that combines his interest in both sports and finance.  I recently talked to Steve about the project, his passion for sports and his economics background.

Steve’s Research Paper Summary

This paper examines the workings of the four major American professional sports leagues in the broader context of American business. These leagues differ from traditional firms due to special legal status and market power that has been consolidated and confirmed by American courts. An analysis of the professional sports industry structure and origin in addition to a discussion of labor markets, labor unions and payroll ceilings is provided. Additionally illuminated are the media and revenue sharing systems in professional sports leagues and their effect on the competitive balance of leagues. Lastly, a speculation as to league’s optimal practices as well as an inquiry into the reasoning behind why these procedures differ between leagues is provided.

Steve on His Project & Finance Interests

Talk about the independent study and how it came about.

I had Professor Leachman for Econ 51 during my freshman year and I obviously learned a lot in her macro economics class. I got the idea to explore labor markets in professional sports because I am interested in potentially working in the sports industry and pro sports generate a lot of revenue. Working with her, she is really knowledgeable, she helped me develop the three main topics I wanted to research, which were the structure of professional sports and how they act as monopolies, labor unions and salary caps, and market devices that impact the labor market overall.

How have your experiences in sports helped you with the paper?

I had a basic, working knowledge of all the professional sports leagues. Being a sports fan, I know about labor contracts. Having that basic knowledge gave me a leg up over someone who has never watched ESPN or knows anything about it.

How did you do your research for the paper?

There are so many econ sports journals because it is such a lucrative industry. There is literature everywhere about it so I did most of my research through the Duke library website.

Did Professor Leachman know a lot about sports and its labor markets before the paper?

No, so that was where I came in and we learned together. She ended up learning a lot along with me.

Steve on Sports & His Athletic Interests

You were a high jumper in high school and were actually recruited to Duke by the track team. Who do you think would make the best high jumper on the team?

Probably Mason and Miles, both of those guys are incredible athletes. I think Miles jumped 6’10” in high school so he would make a great high jumper.

What is the key to being a great high jumper other than incredible hops?

You have to be really flexible, have a lot of back bend, and great timing too.

In the paper you looked at the four major sports. Give me a rundown of your favorite team in each league.

Basketball- Nuggets. Football- Broncos. Hockey- Avalanche. And baseball- Rockies. All my Colorado teams.

Having played all four sports, which would you say is the toughest and which Colorado team is the best?

Probably football, you take a pounding and that beats up your body. The Broncos had a couple of great years in ’98 and ’99, won a couple of Super Bowls. Those guys all got injured, Terrell Davis ended up having to retire, John Elway too.

Who is your favorite player on your Denver teams?

Melo on the Nuggets, Troy Tulowitzki on the Rockies, Joe Sakic on the Avalanche before he retired, Champ Bailey right now on the Broncos.

Steve on His Future Goals in Sports/Finance

“Next year I hope to enroll in the MMS Masters program at Fuqua like Jordan.  I’d like to advance my understanding of finance and all it’s real-world applications.  After that, I plan to work in business, ideally for a firm with a sports-related focus.”

Working with Steve

“I really enjoyed working with Steve and getting to know him a bit.  We converged on the economics of the professional sports industry for our independent study.  We met weekly and used those meetings to review what he had read over the week, discuss ideas and how they might fit into the paper, and shape the direction the paper was taking.  By the end of term, our weekly meetings led to a completed piece that was informative and lucid.  I found Steve is be responsible and always on task and enjoyed working with him.  It is always a win for me if I learn something from my students and in this case I did.”
Lori Leachman
Professor of the Practice and Director of Research in Practice Program, Economics