This was posted originally at The Sports Economist
On Friday we learned that NBA referee Tim Donaghy is under investigation by the FBI for betting on NBA games. Here is how this story has been described by various members of the media.
Adrian Wojnarowski, Yahoo! Sports
The nightmare has forever lurked in the reaches of commissioner David Stern’s mind… As the sun rose on the Vegas Strip this morning, where the best players in the world had gathered for a Team USA mini-camp, the doomsday scenario of fixed games hung over the league like an anvil.
Marc Stein, ESPN.com
There have been some scandals through the years in the league, but nothing like this. Nothing close. Sooner than later, all hell is going to break loose. The NBA will never be the same again.
Jack McCallum, Sports Illustrated.com
This can only be described as a horrific Friday for Stern and his National Basketball Association. The New York Post’s disclosure that a referee is being investigated by the FBI for betting on games and making calls to manipulate point spreads — a referee later identified by multiple ESPN sources as 13-year vet Tim Donaghy — will haunt this league for the foreseeable future.
In reading the coverage of this scandal you sense that the very future of the NBA is at stake. Here is a different perspective on this story.
The Black Sox Scandal
Let’s go back in time to the worst gambling episode in sports history. In 1919 members of the Chicago White Sox conspired to throw the World Series. This was not a few regular season games. This was the championship of baseball pre-determined by players and gamblers.
One would suspect that such an event would threaten the very survival of Major League Baseball. Fans of baseball would express their disgust with the sport and stay away in droves.
When we look at the data, though, this is not what we see. Here is a snapshot of average annual attendance of a Major League Baseball team, beginning in 1919 and ending in 1933.
– 1919: 408,277
– 1920: 570,055 (record)
– 1921: 537, 957
– 1922: 551,011
– 1923: 542,025
-1924: 599,755 (record)
– 1925: 596,285
– 1926: 614,561 (record)
-1927: 620,179 (record)
– 1928: 568,893
– 1929: 599,261
– 1930: 633,266 (record, not broken until 1945)
– 1931: 529,194
– 1932: 435,910
– 1933: 380,564
The scandal occurred in 1919, but was not made public until the latter 1920s. So the first year we would see a significant impact is 1921. The average attendance drawn by a Major League Baseball team did drop in 1921 by 31,098 fans. But one should remember that there was a significant recession in 1920-21, with real per-capita Gross Domestic Product dropping more than 5% (comparing 1921 and 1919). So it’s possible that the drop was caused by changes in the economy.
Further evidence of the role the economy played can be seen when we look at the next decade. A new record was set in 1924, 1926, 1927, and 1930. And then attendance – with the advent of the Great Depression — went into a decline. By 1933 average attendance was nearly 40% below what we saw in 1930. It wasn’t until 1945 that the record seen in 1930 was surpassed.
What is the point of bringing up all these numbers? The data tells us that the Black Sox scandal did not have much impact on consumer demand. At least, it appears that changes in the overall economy are much more important.
Apparently if you take away the fan’s money, the fans stop coming to the games. But as long as the fans have money – gambling scandals, player strikes, owner’s lock-outs, and even steroids – don’t seem to threaten professional sports.
This would be clear, if we understood the true nature of the game. The game that professional team sports are playing is providing entertainment to their customers. As long as the product is entertaining, and the fans have money, one should expect fans to be in the stands. And clearly fans are finding professional sports to be very entertaining lately. Major League Baseball, the National Football League, the National Hockey League, and the NBA have all set attendance records for their most recently completed seasons.
The NBA’s Integrity Problem
That the NBA is setting attendance records should be surprising to the “doomsday” voices in the media. Long before the referee scandal broke academic research had already questioned the integrity of the NBA’s contests. Beck Taylor and Justin Trogdon published research in the Journal of Labor Economics in 2002 detailing how NBA teams were systematically losing to enhance the team’s draft position. The research of Joe Price and Justin Wolfers suggested that the calls NBA referees made were influenced by the race of the player.
The research of Taylor and Trogdon –to the best of my knowledge – has never been addressed by the NBA. The NBA did commission a study to contradict the Price-Wolfers story. Initially it was reported that the NBA’s study refuted the Price-Wolfers research. Later on, though, it was revealed that the NBA’s results could be interpreted as being consistent with the Price-Wolfers study.
What has been the impact of all this research questioning the integrity of the NBA? My sense is nothing has happened. The NBA either ignores it or dismisses its claims.
And why does the NBA take this action? The NBA is not in the “truth” business. The NBA is in the “entertainment” business. Because providing entertainment is the actual game the NBA is playing, these stories – which clearly question the integrity of the game – are swept under the rug.
And these efforts are largely successful. Again, the NBA set an attendance record in 2004-05. This was followed by another record in 2005-06 and 2006-07. Taylor and Trogdon have found evidence that the NBA’s losers were not doing their best to win games since the 1980s. But like the Black Sox scandal, the NBA’s integrity problems have had no apparent impact on consumer demand.
Crying Wolf
The media has an incentive to sensationalize each story it covers. We have heard that player strikes and lock-outs threaten the future of sports. Competitive balance in baseball must be resolved or baseball will be doomed. Steroids must be addressed or baseball will be forever harmed. And now, the NBA will never be the same because a referee has a gambling problem.
When we look at the attendance data we see that the media is often “crying wolf.” The reaction of fans is just not consistent with the dire predictions of media members. And this is a problem. Although the media is also in the entertainment business, its consumers expect that journalists are also interested in the “truth.” But time and time again, members of the media exaggerate the significance of the stories they cover. Perhaps that is the true “integrity” problem we should be talking about.
– DJ
Wages of Wins Journal 
danyel
July 22, 2007
much needed persepctive, yes. and thx for the linx. but i am quite heartbroken, and feel like i have to “grow up” suddenly. I’m a new-ish (female) NBA fan, and so, for the last three years have been experiencing the League with the zeal of a convert (I’m a Dallas and a GSW fan). Now? Even wih the Bonds drama, I’d rather watch the MLB. Go, Mets.
Matthew
July 22, 2007
Television revenues are about as important as attendance and that is falling off quickly. I don’t think that’s caused by scandals though, but by people not interested in watching sports on television as much as they used to be. I think the doomsday scenarios are exaggerations of course, but the NBA losing out in the ratings to reruns of unpopular shows is a bad sign for sure.
bjk
July 22, 2007
Sportswriters get sick of reporting the latest KG trade rumours. They’d much rather wring their hands about some tragedy like the serious editorial writers. They suffer from severe prestige deficit.
dberri
July 22, 2007
Matthew,
Something to note about television ratings… there has been a significant increase in the number of games broadcast. So that has hurt the ratings for each individual game. There is also much more to watch on television than there used to be. And increased competition also hurts ratings.
Tom
July 22, 2007
“But time and time again, members of the media exaggerate the significance of the stories they cover.”
In the book Fooled By Randomness, by N. Taleb, that is
that is one of the points the author makes over and \\\
and over again.
Pacifist Viking
July 22, 2007
Paul Hornung was suspended from the NFL for one year for associations with gambling. Bobby Layne allegedly prevented his own team from attempting a game winning field goal in order to go for a fourth down touchdown–to beat the point spread that he had gambled on (the game ended in a tie, and he was traded that week).
Hornung and Layne are both in the HALL OF FAME.
I’ve noted this in the past to suggest character only occasionally matters to the Pro Football Hall of Fame selectors. I’m noting it now to suggest gambling scandal only occasionally matters to reporters.
Jed
July 23, 2007
Hi DJ,
Very interesting article, as usual, and also one that’s in line with my thoughts in this issue.
I had a request for a future blog post and wasn’t sure where to put it, so apologies in advance if this is out of place–or if it’s been covered before.
I’m wondering how, if at all, your methodology for ranking players’ productivity in the NBA would translate to fantasy basketball. From an admittedly small sample size, it seems to me like lots of fantasy players, myself included, have a tendency to overvalue scoring and, to a lesser extent, rebounding and assists, while not giving steals, blocks, TOs and FG% their due. Perhaps this analysis would shed additional light on the way scouts and GMs evaluate and pay for talent in the NBA, too.
Given the brewing scandal about Tim Donaghy, I should state that this question is not about making money at all, and solely about whomping on my friend in next year’s (free) Yahoo! fantasy sports league.
Ruey
July 23, 2007
It a bit comforting to see a non-doomsday outlook to the future of the NBA. All historical evidences aside, it’s important, in my opinion, to also note that there are many more past time alternatives in recent years compared to the past. The recent NHL lockout has really killed its standing in the US partly due to the prominence of NASCAR as a major sport (taking away the TV time on ESPN for the NHL…not to mention the NHL’s bad TV contract). Now you have Beckham in the US to try to raise the profile of MLS (which is still quite a long shot to take off). Anyhow, as long as this scandal is more or less localized (just a few bad refs and/or possible players) then the NBA should be fine.
As for Jed’s comment about wanting to get some fantasy basketball advice, I would just like to point out that fantasy basketball is MUCH, MUCH simpler than trying to model the actual game. All the rules and scoring in fantasy basketball are all clearly laid out and it is an easy strategy to try to capitalize on people’s overvalueing of scoring (generally just 1/8th or 1/9th of total importance in fantasy compare to much greater in real life). Anyhow, I would be interested in starting a test fantasy basketball league next season that uses Win Score.
I’ll end by offering fellow fantasy players a link to a nice stat website that let’s you rank players in just about anyway that you want: http://basketballmonster.com/
Tball
July 24, 2007
I think your cutting too wide a swathe of ‘integrity’ issues by lopping all of these problems in together.
The referee racial bias is viewed more as a society problem than as an NBA problem. The study stated no referee(s) stood out as an outlier, but the problem was consistent through every referee, indicating a nonconscious bias. That makes the problem a human race problem, an American problem, something more global than the NBA, and we can wish everyone would be able to behave without nonconscious bias, but we cannot material fault in an NBA that fails to solve normal human behavioral issues.
Teams intentionally losing to improve draft position is a problem. However, when the lottery was unweighted, there was an incentive for a playoff contender to tank for a chance at a #1 pick. Would Golden State have fought so hard for that 8th seed last season for a minimal chance at playoff success vs. a ~15% chance at a “franchise player.” The NBA has made a choice, they’d rather see Memphis and Boston tank as two of the five worst teams in the league than see a potential 7 or 8 seed tank (in fairness, I have no empirical evidence of playoff contenders tanking in the 80s).
I agree that fans will not abandon the game in droves. Wrestling succeeds in drawing fans despite the orchestration. Boxing has lagged, although it is hard to argue that lag is related to the number of assumed fixed matches that regularly occur. Fact is, if I told you next year referees were going to call fouls influenced by nonconscious racial biases, the fourth worst team in the league was going to tank its way to second, and one referee was going to manipulate the outcome of 50 games for gambling purposes, which issue would be the most disconcerting?
I’m looking forward to the economic study of how we can determine whether Donaghy fixed spreads, over/unders, etc. and how many other referees followed a similar pattern.
Charlie
July 24, 2007
Interesting take and well-reasoned. But I wonder if the comparison is really accurate. After all… in 1919, baseball didn’t have one-fiftieth the competition for the fans’ entertainment dollar that the NBA faces today.
Jon
July 26, 2007
I think this helps us to think not only how the numbers can be manipulated, but that any game of human beings will involve an element of error. When you play with the numbers, you have to be aware of that. That’s why Stern could say, “When you bet, you lose the benefit of the doubt.”
John Cole
August 2, 2007
TV Ratings for the NBA are down a lot and have been in a downward spiral for a very long time. Yes, we’ve heard the argument about the fact that there are more games broadcast which is all fine and good, but if people were truly interested, then they would be tuning in more. How about the playoffs then??? That’s the best barometer and as anyone can plainly see, the ratings for the NBA Playoffs have mirrored those of the regular season.
Also, the comparison to the Black Sox scandal is a VERY poor one given this fact: “The scandal occurred in 1919, but was not made public until the latter 1920s.” Whereas with the NBA scandal, it was happening here and now. It’s not being disclosed 10 years after the fact.
The problem of gambling in the NBA appears to be a very big one, as evidenced by the results of this ESPN poll done yesterday. The question asked was “Do You believe Tim Donaghy is the only NBA official involved in gambling?”
http://sports.espn.go.com/espn/otl/index
The results with 28,288 votes so far:
Yes: 21%
No: 79%
So, nearly 4 out of 5 people believe that the NBA’s gambling problem extends far beyond just Tim Donaghy. Given the fishy stuff I’ve seen go on more and more frequently in games the past five years or so, I can’t say I’m at all surprised. It has nothing to do with “media sensationalism,” and everything to do with what most of us true fans have suspected for quite some time.
Ned
July 1, 2008
Hey Mr. Berri,
Care to give your take on the Kevin Hassett article, which offers his “expert” take on home court advantage and referee favoritism of the home team in the ’07 and ’08 NBA playoffs?
Thanks