Posted by John Vrooman on Monday, February 1, 2016 in National Football League.

Interview with AFP. 

Graphs and Images (XLSX)

–  The NFL has experienced tremendous economic success but has been critized for its management of the CTE issue, domestic abuse cases and teams relocations. How would you assess the league management’s track record over the last few years ?

The NFL is as much an internal and external political failure as it is an economic success. In each of the constant stream of morality plays and public relations nightmares the League has slowly revealed an unraveling due to inept internal and external governance and the contamination of corporate greed.

– What are the main ingredients for its success ?

Former NFL owner Art Modell of the Baltimore Ravens (ne Cleveland Browns) aptly quipped that “NFL owners are a bunch of fat cat Republicans (right-wing conservatives) who vote socialist on football.”  This solidarity philosophy was called “league think” by the early NFL owners during the rival league war with the American Football League 1960-67.

The League is more properly described as a natural cartel, a group of several and separate clubs conspiring to act as a monopoly league. The cartel is a natural because of the mutual interdependence of teams in a sports league where any team is really only as strong as its weakest opponent.

The degree of NFL cartelization is roughly equal to the proportion of revenue that is shared equally among the clubs, which is now over two-thirds, which is easily the greatest of any NA sports league.

The NFL also expands it monopsony power through a salary cap for each of the clubs at less than one-half of League revenues. As a result of the extensive long-term media rights fees, the diversification effects of sharing revenue with a zero-sum opponent, and absolute player cost certainty the NFL is has become fully diversified risk-free money machine.

The value of an NFL franchise has increased at twice the rate of the S&P 500 over the last quarter century. A dollar invested in an open market S&P Index Fund he could have quintupled in the last quarter century without dividends. By stark comparison, ownership values in the NFL have increased by 15 times their value since 1991.

The NFL is an unregulated monopoly cartel that artificially limits it membership so as to maximize franchise value and extort maximum public stadium concessions from relatively powerless major American cities like St. Louis, Oakland and San Diego.

The NFL clubs have local monopoly power over their fans’ ticket prices and legislated national monopoly cartel power over TV Networks rights fees. On top of that they have monopsony power over their players through the draft, roster limits and the hard salary cap. The NFL has risk free revenue streams and net cash flow certainty. It is a perfect portfolio, more widely diversified than the US Federal Government and Wall Street combined.

Because of the extensive revenue sharing in the NFL cartel/syndicate, it doesn’t even matter in what market a NFL club pays as long as its playing in a new luxurious if not opulent stadium economically designed to charge half as many fans more than twice as much. The value of a NFL club would increase by 20 percent to 40 percent just by moving into a new venue– even on Mars. NFL ownership is automatic stone cold easy money. The NFL economic game is fixed, and NFL team ownership is virtually foolproof.

The NFL cartel currently boasts revenues of $12 billion and can easily hit its $25 billion target by 2027

– What could undermine its growth ?

A callous disregard for the health of its players, ignoring the best interests of its fans and ultimately placing owner greed before the game itself could bust the cartel that seems to be making up rules as it reactively pin balls from a morass of governance failures and moral crises. The popularity of the game and its fantasy derivatives is rapidly outstripping the ability of the NFL lords to control and govern the NFL realm.

The CTE issue for players and the comingling of the game with gambling could end the half-century honeymoon. 

– Can the CTE issue become something that harms its popularity ? If participation goes down among youth because of health concerns, can it affect its fan base over the long run ?

Yes, but the fans have to ultimately realize and recognize the careless disregard of the League toward its players as not so modern day gladiators.

– How much of the NFL’s success comes from TV and the way it presented itself, especially through NFL Films ?

NFL Revenues for 2016 are probably now well over $12 billion due largely to the new 10 year TV contract for $6.6 billion per year 2014-22. The rights fees for all sports programming including the NFL are now exploding across the board in North America because sporting events virtually the last live TV available to a new age audience that is streaming more new digital media.

The NFL is vertically and horizontally integrating all media within NFL Ventures. The broadcasting shift to the web for sports programming is moving at the rate of continental drift. One out of 100 of the last Super Bowl media viewers streamed from the internet. But how, when and where the media move is ultimately made the NFL will be there. The surprisingly shallow League is virtually made for the media, both new and old.

---