46
QUANTIFYING THE COSTS OF INTEGRITY BREACHES
FIGURE 4.7: INDIANA PACERS, ACTUAL VS. EXPECTED TEAM VALUE, 2003–2010
COSTS TO ENTIRE SPORTS
A sport itself may suffer when its governing authorities fail to respond quickly
or effectively to a significant integrity breach. Assigning a specific financial
cost to such an episode, however, is extremely difficult given the multitude of
variables in play. Is baseball losing popularity because of the steroids scandal?
(See sidebar.) Or are fans, especially the young, increasingly drawn to alterna-
tives? Is it because the structure of competition is unbalanced, with wealthy
teams based in the largest cities much more likely to flourish than smaller-city
clubs with lesser budgets? Or is it a combination of some or all of the above?
Looking at nonfinancial data may provide one indication of the costs of an
integrity breach to an entire sport. The recent history of the Tour de France
illustrates how scandal can seriously undermine the reputation of cycling’s
biggest event. In 2007, the Tour appeared to be on its last legs. Floyd Lan-
dis, the 2006 winner, had been stripped of his title after testing positive for
excessive levels of testosterone following an impressive stage win (a stage is
a segment of the race occurring on one day). In 2007, the leader and Stage
$250
$300
$350
$400
$450
2003
2004
2005
2006
2007
2008
2009
2010
Expected Club Value (Pre-Scandal)
1
Actual Club Value (Post-Scandal)
2
$170.5 MM
(38.8%) Value Loss
$280.0
$330.0
$349.5
$370.1
$391.9
$415.0
$333.0
$303.0
$281.0
$269.0
$439.5
$340.0
$324.0
$306.1
$311.0
$ Millions
Note:
1
Pre-scandal scenario assumes that Indiana’s actual value would have grown at the average rate of other NBA teams from
2005–2010 (5.9% CAGR);
2
Post-scandal value figures are based on
Forbes
published estimates.
Source:
Forbes
, ESPN.
© MONITOR QUEST LTD. 2011
GUARDING THE GAME Preserving the Integrity of Sport
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