nfl logoThe National Football League should go down in history as the purest monopoly ever. Nevermind De Beers, Standard Oil, or Boardwalk & Park Place. The NFL is in charge. Here’s why:

In order to become a monopoly you have to take control of the market you’re in. The NFL did that in the late 60s by merging with the American Football League. The AFL had teams like the Miami Dolphins, Oakland Raiders, and the New England Patriots. When this merger occurred, the NFL eliminated all competition from football around the planet (a given since it’s largely an American sport). Since this merger, the NFL has controlled the market for professional football.

Other entrants have tried to come in. You have the APFL which does indoor football and has a shorter field. Then there’s the defunct XFL and the quickly dying UFL. Canada has the CFL which is actually okay to watch, but it mostly serves as a development league for the NFL. With no real competition, the NFL is able to charge virtually whatever they want when it comes to selling TV rights, tickets, and merchandise. The only substitute goods are two similar monopolies, the NBA and MLB. But the NFL still trumps all.

Here’s how amazing the NFL is. They’re organized as a 501c nonprofit. Its specific line in the tax code was developed just for the league thanks to some genius lobbying. It’s right in the tax code:

(6) Business leagues, chambers of commerce, real-estate boards, boards of trade, or professional football leagues (whether or not administering a pension fund for football players), not organized for profit and no part of the net earnings of which inures to the benefit of any private shareholder or individual.

Their abuse of government isn’t limited to the tax code either. It’s pretty much standard fare now for teams to bully their way into having state and local governments subsidize them further. Despite quite comfortable profitability, teams regularly have cities and states help pay for renovations or build new stadiums. The NFL will tell a city if they build and awesome stadium they’ll maybe get to host the Super Bowl someday. And local politicians just eat that up.

But they’re real use of power comes in how they treat the players. If you’re good at football, and want to make money, your only option is the NFL. So in order to get in you have to declare for the draft. The draft is system designed to divvy up talent to all the teams equitably. But players get the short end of the stick. They aren’t allowed to pick what team they’d like to play for. You have to be willing to play for any other them. This also limits your ability to negotiate pay since you only have one employer (whoever drafts you).

Speaking of pay, there’s another rule in the NFL designed around “equity”: the salary cap. The salary cap limits how much a team can spend on their roster in a given year. Again this helps keep the teams even. But what it also does is establish an artificial ceiling on how much a talented player can make. In economics terms, the NFL limits the scope of the market so that the “market value” of a player is diminished. We like to think athletes are overpaid, but in a free market many are underpaid.

All the major sports leagues in the US enjoy some of the same benefits as the NFL. But the NFL enjoys the most, and uses their power to reap the best rewards for the team owners. The economics enthusiast in me is torn. One is side somewhat proud of what they’ve been able to do in an open market for sports. But the other is disgusted at their gross abuse of power in the marketplace. Then there’s the sports fan in me that just loves football.

Let’s just hope somehow they’re taken down a few notches.  How though, I’m not sure.

Be Sociable, Share!
categories: business, government, sports