In praise of 'socialism with cheerleaders'
By Steven Pearlstein
Washington Post Staff Writer
Saturday, February 19, 2011
Don't get too worked up over those talks between the NFL owners and players and the threat of a locked-out season. The National Football League is one of the most sucessful monopolies in history, on a par with OPEC in oil and DeBeers in diamonds.
The various participants in the football cartel - and in that, I include the players - now seem to have some disagreements over how their monopoly profits are to be divided. My guess, however, is that none is stupid enough to jeopardize $9 billion in annual income over a percentage point or two.
The secret to the NFL's success is its ability to maintain the legal structure of 32 supposedly independent teams while operating with most of the advantages of a single business entity. As with many successful monopolists, its focus has been on expanding its market without having to lower its prices. In a very disciplined way, it has added teams, extended the length of the season and increased the number of nationally televised games each week of the season. It has been so skillful in playing one city off another that it squeezed taxpayers for $500 million a year in stadium subsidies for many years. And it has so cleverly structured the sale of television rights that networks routinely wind up overbidding, allowing the league to capture virtually the full value of its monopoly.
Equally impressive is the way the NFL has avoided unproductive competition among members of its cartel. This includes an agreement in which 80 percent of league and team revenue is pooled and shared equally among the 32 franchises. It also includes a salary cap and salary floor for all teams, along with some limits on free agency, which ensure that all clubs can retain "franchise players" and field a competitive team. Even the players are incentivized to focus on "growing the pie," with a unique collective-bargaining agreement that guarantees them 60 percent of all revenue beyond the first $1 billion.
(More here.)
Washington Post Staff Writer
Saturday, February 19, 2011
Don't get too worked up over those talks between the NFL owners and players and the threat of a locked-out season. The National Football League is one of the most sucessful monopolies in history, on a par with OPEC in oil and DeBeers in diamonds.
The various participants in the football cartel - and in that, I include the players - now seem to have some disagreements over how their monopoly profits are to be divided. My guess, however, is that none is stupid enough to jeopardize $9 billion in annual income over a percentage point or two.
The secret to the NFL's success is its ability to maintain the legal structure of 32 supposedly independent teams while operating with most of the advantages of a single business entity. As with many successful monopolists, its focus has been on expanding its market without having to lower its prices. In a very disciplined way, it has added teams, extended the length of the season and increased the number of nationally televised games each week of the season. It has been so skillful in playing one city off another that it squeezed taxpayers for $500 million a year in stadium subsidies for many years. And it has so cleverly structured the sale of television rights that networks routinely wind up overbidding, allowing the league to capture virtually the full value of its monopoly.
Equally impressive is the way the NFL has avoided unproductive competition among members of its cartel. This includes an agreement in which 80 percent of league and team revenue is pooled and shared equally among the 32 franchises. It also includes a salary cap and salary floor for all teams, along with some limits on free agency, which ensure that all clubs can retain "franchise players" and field a competitive team. Even the players are incentivized to focus on "growing the pie," with a unique collective-bargaining agreement that guarantees them 60 percent of all revenue beyond the first $1 billion.
(More here.)
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