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Socialism Works for American Football Fans and Owners

July 3, 2012

www.conferenceboard.ca

OTTAWA, July 3, 2012 /CNW/ – The most popular professional sports league
in North America, the National Football League (NFL), has the most
“socialist” economic system of the four major leagues in North America,
based on an assessment by The Conference Board of Canada – the latest in its series on the pro sports market.

“It is somewhat ironic that America, land of capitalism and free
enterprise, is so fond of a league that has made sharing the wealth
fundamental to its business model,” said Glen Hodgson, Senior Vice-President and Chief Economist.

In the National Football League, more than 80 per cent of league and
club revenues are shared among the franchises. The NFL also has a
“hard” salary cap that puts a ceiling on the amount of money franchises
can pay players, one that applies equally to all teams. The one
market-driven aspect is the NFL’s treatment of player talent- both in
terms of the high salaries paid to top stars and the ease with which
players can be discarded.

Moving from the economic “left” to “right”, the National Hockey League
(NHL) is similar to the NFL in having a hard player salary cap. As part
of the current collective bargaining agreement with its players -
negotiated in 2005 and now expiring – the NHL has a salary floor and a
complex revenue-sharing system. The NHL is willing to provide subsidies
to its weaker clubs to protect the value of the stronger franchises,
since bankruptcy of any team is not a good signal to prospective
investors.

“The NHL model is a mixed economy which does try to equalize opportunity
for all its franchises to be successful on the ice and profitable in
the books,” said Hodgson. “The challenge for the NHL and its players in
collective bargaining this year is to tweak this system without undue
disruption to the business. Hopefully, both management and the players
have learned from their experience in 2004-05 and they will not risk
losing another season in these negotiations.”

Both the National Basketball Association and Major League Baseball
operate much like a modern capitalist economy. In general, the
financial playing field in these leagues is not level, and the largest,
richest markets and teams tend to be the most successful. Top players
command massive salaries, which leads them overwhelmingly to suit up
for the wealthiest teams.

No league in North America, however, compares to European football (or
soccer) for unconstrained capitalism. The presence of unbelievably
wealthy owners, little sharing of revenue among teams and leagues, and
eye-popping player salaries is reminiscent of the “robber baron” era of
capitalism in the 19(th) century. Clubs are very much on their own. The current liquidation of
the Scottish club Rangers FC – one of the most storied teams in Europe
– shows there is little financial security or assistance to those that
slip.

This publication is the 13(th) in a series Playing in the Big Leagues: What Makes a Professional Sports Team
Successful in Canada?
A future publication will forecast the outlook for professional sports
in Canada over the next 25 years.

SOURCE CONFERENCE BOARD OF CANADA


Source: PR Newswire