Sports Economics

By Tom Donelson, BASN Staff Reporter
Updated: February 12, 2012

IOWA CITY, IOWA (BASN)-–The NFL has long ago found the right formula in approaching the sport entertainment business. The late Pete Rozelle theory began with the strength of the NFL coincided with the weakest of NFL franchise and thus the goal of revenue sharing between teams was to ensure the survival of all franchises.

Without revenue sharing, there would be no Green Bay Packers and the importance of Green Bay is as much historical as anything since Green Bay represents a connection between the old NFL of pre-World War II and the modern times. While many critics considered this as a form of socialism, they miss the point but Rozelle did not, for the NFL competes for entertainment dollars with other sports and other forms of entertainment. Washington Redskins may compete with the Dallas Cowboys on the field, they don’t compete for market share against each other but they do compete for market share against other sports entity just as Major league baseball Texas Rangers and NBA Washington Wizards. When NFL begins their season, baseball is marching toward the World Series with playoff runs by teams and starting in November, the NBA begins their season.

Other sports are starting to catch on to the fact that to survive, the whole league must be stronger and they are beginning to adopt their own version of revenue sharing to strengthen their leagues but NBA or Major league baseball have not match NFL when it comes to developing strong teams from top to bottom. In the NFL, every teams at least has a chance to succeed every year and fans of even the weakest franchise know that they at least have a chance.

In Major league baseball, there are teams that are essentially out of the running by July and while teams like the Oakland A’s had successes by using unorthodox methods to stay near the top this ended with teams like the Boston Red Sox adopted the Oakland A’s method with a higher budget. Moneyball combined with big salaries equals championship runs year end and year out. Red Sox adoption of Billy Beane methods produced their first World Series since the days of Babe Ruth strolling in the outfields and on the pitching mounds of Boston.

In the past, major league baseball had to take over the management of Montreal ; before moving the franchise to Washington and NBA is running the New Orleans Hornets. The latter has produced its own conflict of interest when David Stern vetoed Chris Paul to the Lakers before allowing Paul to go to Lakers’ rival, the Clippers. NFL is the only league in which every team actually makes money and there are no weak franchises when it comes to revenues, only poorly managed franchises.

Another difference between the NFL and other sports is that the NFL promotes the NFL. While there are superstars, the league takes precedence whereas in other sports, superstars often take precedence over the league.

Individual sports like golf, Tennis and NASCAR have also learned that they must face the new economics. The reality about sports is that there is no monopoly of media to determine what gets watch. Over the last thirty years, televisions networks and stations have multiply and the networks have ceded much of the sports broadcasting to cable with the exception of the NFL, which still have the majority of its games on network television. Sports not only compete for entertainment dollars but entertainment viewership and many sports have even adopted their own networks to increase interest among their fans. Tennis, Golf, major baseball and the NFL have their own networks in which selected sporting events as well as background of its sports can be broadcast.

Boxing, the sport I cover the most, is way behind the curve when it comes to developing a business plan to compete in the 21st century. What is missing from boxing is a central authority that can negotiate contracts and set up consistent rules or even figure out who are the champions. Golf, Tennis and NASCAR have their own central authority that sets up events and the rules for everyone to follow and it allows them to capture niche market share and when superstars arise, to take advantage of the increase viewership. Tennis has a working relationship with ESPN as well as the networks to cover their crown jewels, the majors. Golf has their own relationship with the networks along with NASCAR, who had added coverage on ESPN and Showtime.

MMA through the leadership of Dane White now has a working relationship with Fox and its various cable networks while NHL has managed to work out deals with NBC and its cable outlets. While boxing has its own working relationship with ESPN and both Showtime and HBO, it would even be better with one central authority.

Here is the take home message, sports compete with other sports and other form of entertainment and the NFL domination of sport world began with the genius of a commissioner, Pete Rozelle, who realized that his league were not individual franchises but one league, NFL Inc., with 32 franchises or divisions located in key market locations to attract fan base. The strength of the league has allowed it to negotiate great deals for the league with the networks and cable. Football means fans and fans means ratings, ratings means increase ad revenues for the networks and cable. And it also means many fans are perfectly willing to spend their Sundays at home or at bars on a Sunday afternoon watching football instead of going to the movies.