International Sports: The Economic Benefits of NFL London

Last month, the National Football League (NFL) started looking into development of an expanded football team in London.  Reported by BBC UK, the plan is a long term goal reasoned from increased involvement at university level and attendance of NFL games held in London over the past five years.  American football participation within the university level has increased over 50% in the last five years with an annual growth of 10%.  Numerous members from both the British American Football Association (BAFA) and the NFL believe this growth could be positive.  The NFL would gain permanent and consistent exposure over the course of entire NFL seasons.

Currently, the NFL has held a game in London for 5 consecutive years.  Each of these games has seen near sell-outs, giving NFL team owner John York optimism for the future, which starts with increasing London based games to 2 in upcoming years.  As stated above, the long term goal is to increase the interest in the NFL, which many believe to be an untapped market overseas.   

What This Means

Expansion of an NFL team takes strategic planning and development to integrate the team into the league.  The concept of an international based NFL team seems extremely far-fetched. 

On paper, the numbers seem to show that American football interest and involvement is higher than ever in the UK.  But there are both the supply and demand factors that need to be accounted for explaining why this could work.

The Demand for American Football

The article describes the American football growth in the UK.  With university American football developing, youth are further exposed to the sport.  Exposure to a sport is one of the necessary steps to gaining both fan following and participation. 

What the NFL is looking into is breaking through the cultural sport barrier, which can be similarly compared to what soccer has attempted to accomplish in the United States.  As seen in the US, the exposure to soccer has affected the growth of fan interest in the American soccer league, Major League Soccer, and the English Premier League (EPL).  The key difference is that American football to the UK has a greatly different standing than soccer has on the US.  Soccer is a sport that has been well established through participation, and while the US had not accomplished a successful professional league, the fan interest existed among the youth.  The NFL must figure out a way to push past the participation barrier and find a way to bring American football culture to the UK.

Lastly, the matter that the NFL has only partaken in a five year, annual football game in London is concerning.  While the games have essentially sold out, building consistency every week is a concern.  The future expansion of 2 games per year in London would further engage UK fan interest.

The Supply for American Football

Here is the biggest problem that the article doesn’t address.  What are the costs behind expanding an NFL team internationally?  The international market can be a great location to grow, but the costs to establish a team across the Atlantic Ocean will be time and cost heavy. 

The London NFL team will need to travel extensively to the United States to play other teams.  Costs would skyrocket with not only London’s travels, but the away teams who will have to travel to Wembley Stadium for the eight home games held in London.  The travel costs seem ridiculous, on top of the time constraints that are put on teams who must prepare for both the game that week and the recovery for the following week.

There is a reason EPL and MLS do not compete within the same league.  The costs don’t outweigh the benefits.  Airline travel isn’t getting cheaper, and no matter how successful financially the NFL may become in the US, convincing players, coaches, and media to the burdens of an international team in the same league is troublesome. 

Final Statement

The UK may enjoy some additional revenue by the team, but the costs to provide a team in London is a huge weight on the entire NFL.  Currently, there isn’t enough evidence that the team would be sustainable.  As a whole, the further investment in the BAFA would seem more logical and allow a better connection from fans to players across the league.

Do you believe a NFL team could be located in London? What economic effects does this have on the NFL as a business? What would the effect be on London and the UK?

Reference: “National Football League outlines British team plan”. BBC UK. 20 Oct. 2011.

Post by Evan Amano

About 6,000 troops to guard 2012 London Olympics

The budget for the 2012 London Olympics continue to rise as additional security continues to be added.  Reuters UK reports that about 6,000 troops have been recruited to add to security for the Summer Olympics.  The troops are being considered to work the games because of the already added private firm G4S’s 10,000 (and likely increasing to 22,000) civilian guards for the two week long event.  

The London Organising Committee (LOCOG) is responsible for hiring G4S, as well as working with the government to create a safe and secure Olympics.  The LOCOG budget went from initially 29 million pounds to 432 million pounds.  The government security budget is also listed at 475 million pounds.

What This Means
The costs of hosting the Olympics is extremely expensive.  In recent years, the Summer Olympics typically spend around 5 to 8 billion dollars in order to build the proper facilities, methods of transportation, and other accommodations for Olympians and spectators alike.  

For 2012, the security is extremely necessary.  These reports come only months after the country experienced riots, which were fairly prominent in Greater London.  For precautionary reasons, this seems logical to have as many security on reserve as possible.  The Olympic games are meant to be a glorious event that brings together countries, but as history has shown, these events have not gone without danger. 

For the economics viewpoint, having security at its maximum may seem to be wasted budget, but the costs that may occur by having too few of security would be a much greater harm to the United Kingdom.  Perceived image of the country by spectators viewing around the world is extremely important; if people see that London is in great condition, many may consider traveling to the United Kingdom, improving tourism for the country.  This is crucial for countries that are always competing for additional revenue to bring into their economy.

"About 6,000 troops to guard 2012 London Olympics"

Reuters U

Post by Evan Amano

"Cuba Passes Law Allowing Private Home Sales"

Cuba has passed a law that now allows for private home sales, as reported by BBC.  This law has been placed by President Raul Castro, who has started to open up the Cuban market since taken over for his brother, Fidel.  BBC states that this is the first time that private homes have been able to be sold since 1959.

What This Means

Allowing private houses to be sold will not only allow for a more open market within Cuba, but the overall morale of citizens should rise with it.  The social consequences over the past 5 decades are astronomical.  Generations of families have been forced to live in a single house due to housing shortages and the lack of ability to purchase homes.

By offering an open market, there can be speculation that the growth of housing may increase.  However, I believe that due to the socialist status of the government, economic growth will lack what could be a huge boom in the Cuban economy.  This change is one of many movements President Raul Castro is initiating to make Cuba a better place to live.

“Cuba passes law allowing private home sales”

BBC News UK

Post by Evan Amano

Greece and the Euro: Is the Worst Yet to Come?

With the recent development in Greece’s debt crisis (a real shocker), the Euro has gone for quite a tumble this past week.  Investors have started to question whether or not the broken country will be remaining a part of the European Union.  This in turn has put the currency into a free fall that only began to even out in the past day.

Reuters reported Monday that Greece’s bond rating has been dropped from a BB- to B on the Standard and Poor’s bond ratings.  This is considered by most investors as a junk bond.  At this time, investors in the Euro realized this is a time to sell to a more stable currency.  The Euro dropped over .05 to the US dollar in a matter of two days of trading.  While it has not been completely detrimental in terms of the value it has been seeing over the past few months, the concern remains what the EU will do with Greece’s economic struggle.

What began to happen after hearing the possibilities of a haircut for investors in Greek bonds, investors starting looking to commodities to salvage potential loses by the hurt bond.  While experts are stating there is no immediate worry for any countries in the EU to default, investor confidence is far bigger concern for the Greece, EU countries, and the Euro itself.  

As for my own investments in the foreign exchange market, holding the Euro with the GBP and USD was completely destructive.  The lack of diversification that I inexplicably held has hurt the amount of equity I hold, and in the future, I plan to invest more wisely.  Blunders in the currency market were bound to happen when having only traded for a single month, and I hope that my failures will eventually lead to understanding and future success.

What I am most curious is what Greece is going to do with their current and continuing economic struggles.  The Euro doesn't seem to be benefiting them at all (except for bailing them out), and the inability to devalue their currency as the European Central Bank controls the Euro makes it near impossible for Greece to fix their own problems.

What do you think will happen to the Euro in the near future?  With all the troubles Greece has experienced over the past year, is it truly worth it for them to remain in the EU?

References: "Timeline: Greece's debt crisis". Reuters. 9 May 2011.
                    "FOREX-Euro off 3-week lows on commodities, debt concerns a drag"
                    Reuters. 9 May 2011.

(Post by Evan Amano)

Not the Global Currency, But the National Currency

Here is a nice piece of writing by Daisuke Ito, a member of the Global Economics Team, about the potentials of a universal currency:

Every country has developed a currency of their own. Nowadays, as transportation systems and internet technologies continue to improve, the global economy is growing closer together. A company can transfer goods and services to anywhere in the world. This situation leads to new types of financial risks. Some researchers say that abolishing national currencies and setting a global currency will result in a good effect on the world economy. Although a global currency could get rid of currency exchange risks, it would lead to three negative impacts on the global market: degenerating economy, losing identities, and difficulties in management. 

Supporters of the global currency claim that the currency can end the risks associated with currency exchange rates. Actually, a global currency may make world business pick up in the short run. However, establishing a global currency will result in economic degeneration. A currency is valued by people. If people trust a government, they regard $100 as $100. However, if a country faces a scandal or a crisis, investors will transfer money from that currency to another currency in order to keep their asset values. Moreover, when a global currency is settled and the value of the currency drops, investors will buy real assets such as gold or silver instead of holding the currency. In this situation, it is difficult to value gold or silver when there is only a single currency to base off of. Therefore, introducing a global currency will result in an inconvenient way of economic trade, and world business will degenerate. 

Supporters of the global currency also argue that currencies’ roles are not a representative of national identity but a tool of economic trades. The national currencies represent national identities; most of the world currencies are printed with historic important persons, national heritages, national parks, and architectures. These things make a currency part of national identity. In addition, there are many memorial coins or currencies in the world. In fact, the United States publishes and creates varieties of coins and currencies. These coins and currencies have two roles: celebrating personal accomplishment, and forming the national identity. Furthermore, if a global currency replaces national currencies, central bank will lose their identities. A central bank has an essential role of keeping the national safe. The bank has to maintain a balanced national economy by adjusting the interest rate and adjusting the quantity of the currency. 

The final argument advanced by supporter of a global currency supporter is that a global currency leads to the difficulty of management. When a world organization sets a global currency like Euro, it is hard to set money exchange rates from the national currencies to the global currency. Now, the world currencies exchange rates change day by day. It means that we cannot decide which currency has a higher value or which currency has a lower value. However, the organization has to establish the world exchange rates in order to set a global currency. In addition, the global currency organization, which will maintain the global currency by using adjustment of the interest rates and adjustment of the quantities of a global currency policy, will face difficulty in managing the world economy. When the organization makes a decision to lower central bank interested rates because of recession in one country, the country’s economic situation will get better. However, another country where business is brisk will suffer from inflation. 

Moreover, the organization committees should be constituted by people from all over the world in order to avoid a country possessing monopolized power. No matter how this situation is achieved, the organization will face hardship to unify the opinions because philosophies and situations vary from country to country. For instance, the United State is a right wing country, but Germany is a left wing. These two countries have far different opinions about economic policies. The German government takes care of people very well while the United States principles are based on self-responsibility. 

A global currency seems to be one solution to the world currency problem. However, the system has both negative and positive impacts on a country, and either impact appears depending on their economic situations. Moreover, the governing organization will face a decision making dilemma and a hardship of achieving an international consensus. Overall, setting a global currency is nothing but a negative spiral. 

Written by Daisuke Ito