Internal Profit Contradiction

Posted by on Wednesday, August 31, 2016 in National Football League.

Interview with Sports Illustrated. 

SI: I thought it was high time I replied to several of your terrific observations/responses. Feel free to respond to MY responses with more sublime riffs:

Vrooman: “My first question is whether the hypothetical cataclysm is about the sudden absence of NFL football or NCAA D1 football or high school or pop warner…all of which could happen if soccer moms unite…”

SI: Football withers from the roots up: In the end it can’t survive the determined opposition of one the most powerful forces in nature: the banding together of concerned, organized mothers. When Moms forbid their sons to play Pop Warner; and later, when youth football goes away altogether and is replaced by flag; and later, when school boards start cancelling high school programs because the insurance has become exorbitant; this begins a drying up of the raw materials the major college programs, the NFL feeder clubs, have long relied on.

Does this sound plausible? I’d love to use your “holistic protective feminine wisdom” quote here but am wondering if you might paraphrase yourself, so I don’t use a quote identical to the one that ran on NPR …

Ironically the unregulated monopoly power of the scheming NFL cartel could ultimately be taken down from the inside out by the collective feminine wisdom of soccer moms united: one of the most powerful forces in nature.  If it wasn’t, we would self-destruct.

Vrooman: Are we talking about Texas where I grew up playing the game year round or SEC Country?

SI: Texas and SEC country are the final redoubts, the communities most willing to raise money for $1,500 helmets (http://www.wired.com/2016/01/the-zero1-flexible-football-helmet-may-save-players-brains/), and the (soon-to-be) prohibitive cost of insurance. (AIG, on the hook for $1 billion NFL concussion settlement, has already gotten out of the biz of insuring football head injuries). Football doesn’t totally go away, it sort of goes underground, possibly like dogfighting. Feel free to respond/elaborate/debunk

Vrooman: The battered NFL shield would probably survive the hypothetical cataclysm, but ultimately on its current course the League would devolve deeper into a darker world of mercenary gladiatorism.

 The game of North American football has itself been technologically and commercialized and economically sold out from the top down, but perhaps it can somehow be saved in an alternate non-commercial form from the grass roots up.

 Professional NFL and Power 5 college football are ultimately trapped in a closing economic circle by the internal contradiction of corporate greed and the double-edged sword of technology.

 The protective football helmet that was ostensibly designed to gentrify and civilize the violent game has paradoxically become a weapon that can ultimately destroy the game, regardless of post-facto symptom treating rules about helmet spearing. American football has become a metaphor for the boomerang paradoxes and internal contradictions of our economic technology—faster, bigger, stronger, but ultimately self-destructive.

Vrooman: The adverse economic cataclysm is also probably exaggerated precisely because the NFL monopoly cartel is a self-sustaining perpetual motion money machine that is disconnected from the cultural fabric and the economic grid. The League has ethically and economically sealed itself off from the rest of the social network.

SI: I truly savored this reply, which reminded me that every January, in the wake of the holidays, the NFL has lawyers send cease-and-desist letters to churches advertising Super Bowl get-togethers. Can you elaborate on how the league is disconnected from the economic grid?

Vrooman: The basic profit max of a monopoly cartel is to charge less than half as many people more than twice as much. The NFL exploits this monopoly power over its fans in the exclusive economic architecture of its opulent new venues and siphons vertically integrated media production and explosive media rights fees from its carriers and viewers.

 The League wields considerable take-it-or-leave-it  monopsony power over its players and it extorts maximum public funding concessions by threatening relocation from its erstwhile home markets. On top of all of that the NFL shifts most of its player development expenses to the Power 5 conferences of NCAA D1.

 Over the last quarter century the value of an NFL franchise has grown at a compounded rate of 11.5 percent, more than twice the rate of the S&P 500 (5.3 percent) over the same period. The S&P 500 growth rate reflects the best target rate of return available in openly traded free markets.

 Monopoly Power.

 The NFL growth rate precisely reflects the incredible magnitude of its monopoly power in the closed market for American football. The NFL cartel is a self-contained risk-free economic island: a natural-born automatic money-making machine. All that is left of America’s game is being been lost in the process.

Vrooman: The new venues are hermetically sealed to capture all economic gains for the home club and the rest of the monopoly cartel. So ironically there are few if any economic spinoffs, multipliers or indirect effects because the League gets everything by economic design, while they pass the stadium funding bill to the local taxpayers.

SI: If football withers on a college level as well, how disastrous might this be for the bottom lines of athletic departments? Non-revenue sports would take a big hit too, do you agree?

Vrooman. In the land of the collegiate bottom line, all athletic departments (especially non-revenue sports) and many academic departments in Power 5 schools (FB budgets > $20 million) would probably suffer without their college football programs. That is the internal contradiction of Power 5 football.

NCAA D1 College Football is being unceremoniously split right down the middle into the ascending Power 5 conferences (top 64 college revenue teams) and the descending “Group of 5” Conferences (the remaining 60 or so schools). 

 The continental revenue divide is schools with football budgets above and those below approximately $20 million. The split will continue to widen as the TV revenue distributions explode for the Power 5 as they ride the ESPN CFP gravy train.

 Within the near future the revenue ripened Power 5 conferences will evolve into a pseudo minor league player development extension of the NFL (if they haven’t already), and the group of 5 will probably drift back into full amateur collegiate football status.

 In the not too distant future the Power 5 conferences could eventually evolve into a potential full blown media rival for the NFL. That would bring with it all of the attendant revenue distortions and profit max paradoxes that would further complicate and compromise the academic agenda.

 Then again, soccer moms could unite at the grassroots to save American football from internal contradiction and self-destruction.

V

Comments are closed.


Back Home   

Sports Econ Blog

V-Man Power Rankings

Chumpzilla Challenge

Sports Econ Publications

League Financials

Sports Econ Reference

Forbes Franchise Values

Salary Caps

Sports Econ Classics