The NFL receives much credit for achieving the highest degree of
competitive balance among American team-sport leagues. This is after all the
league that shares all television broadcast revenue equally among its teams and
strictly enforces a hard salary (actually payroll) cap. Any number of methods
used to assess competitive balance confirm the competitive
balance superiority of the NFL relative to the other major American team-sport leagues. Yet after further review, the two primary reasons just given for
the league’s success at maintaining a relatively even distribution of talent
across clubs do not hold water. This post will discuss the sharing of broadcast
revenue, with the salary cap’s effect to be evaluated in a future post.
Much credit for the level of competitive
balance, and the assumed corresponding financial success, in the NFL is given to the
decision to sell collectively and share equally all television broadcast
revenue. The financial advantage is certainly the case as the league controlled sales generate
considerable market power and price is manipulated by regulating output; monopoly
profits result. Commissioner Bert Bell realized the economic advantages of monopoly
limits on the availability of televised games through league controlled rights the 1950s. However, he was
thwarted by federal antitrust law. League sale of broadcast rights was ruled a violation
of the Sherman Antitrust Act prior to
the enactment of the Sports Broadcasting Act of 1961. Nonetheless the upstart
challenger American Football League, formed in 1960, boldly sold their broadcast
rights collectively, and without a successful legal challenge. Facing a competitive disadvantage the NFL, through recently appointed Commissioner Pete Rozelle, aggressively lobbied Congress
to enact the SBA as a statutory exemption to federal antitrust laws. Under the Act antitrust laws do not apply to
any agreement allotting broadcasting rights made by a professional league comprising only the sports of football, baseball, basketball, and hockey. Though not required by the law
the NFL and the other three major American sports leagues have chosen to split league
collected revenues equally among clubs. Only the NFL has assumed full ownership
of television broadcast rights at the league level.
With NFL broadcast revenues equalized
across teams beginning in 1962, the first year of league sales and equal revenue sharing, conventional wisdom suggests that the
distribution of talent would also have leveled as the advantages of media market size were
significantly curbed. However, the examination of two key dimensions of
competitive balance does not support this position. The frequent claim is made
is that the league’s broadcast revenue distribution allows the smallest markets
to compete on an even playing field with the largest. However from inception in 1922 to 1961, the Green
Bay (WI) Packers, representing the NFL’s smallest media market through all except the very early part of this
history, accumulated more league championships, at seven, than any other club. (The Packers were league champions in 1962 as well.) Green Bay and other smaller market clubs have accumulated
titles since, but small market success hardly parallels the sharing of
broadcast revenues. Championships in the before SBA period, as they have been
since, were quite well distributed. From the largest markets the Chicago Bears earned six
titles and the New York Giants four championships. Among the rest, the Detroit
Lions won four championships, while the Philadelphia Eagles and the Cleveland
Browns claimed three titles each. For those clubs with significant membership tenures in the league during this period, only the Pittsburgh
Steelers and San Francisco 49ers were denied titles.
Economists prefer a more scientific approach
for evaluating the distribution of talent, with the standard deviation of win
percent each season commonly employed. (Standard deviation is adjusted to account for the number of scheduled games per
season by creating an actual to ideal ratio of dispersion, the RSD. The closer to one the ratio, the better the competitive balance.) Again using the more specific metric, the
claim that the SBA and collective rights sales improved balance is specious.
Comparing the adjusted standard deviations averages of the before and after SBA periods in their
entirety does reveal modestly better balance in the latter period. The RSD averages 1.74 for forty years before and improves to 1.57 for the fifty years after the Act’s passage.
However a closer look, comparing the shorter periods directly before
and after passage, reveals a different story. For the eleven preceding years, 1950 to 1961—the period
beginning with the merger of the NFL and AAFC—RSD for the NFL was 1.53. RSD for
the eleven years, 1962-1973 following the Act’s passage measures 1.74. Competitive balance actually became worse in
the immediate aftermath of the SBA!
Of course there are several factors that
potentially influence the distribution of talent across teams in a sports
league. Moreover, much besides the enactment of the SBA will likely differ
between any arbitrarily compared eras. Included are shifting demographics,
collective bargaining provisions, league expansions and mergers, changes in
post season opportunities, etc. Notwithstanding, there is no evidence that the equal
sharing of the proceeds from national television broadcast rights sales improved competitive balance in the NFL.
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