Monday, March 14, 2011

Rethinking the NFL

The current labor dispute in the NFL will be negotiated and litigated over the coming months. At its core though it is not just players against owners, but rather a three way negotiation featuring the players, against the small market owners, against the large market owners, against the players.

This of course is not an original insight, but a point that is important to keep in mind as we think about what the NFL could look like. If the litigation all actually goes to judges and juries for final decisions and the appeals are all exhausted, one possible, out come, is that the NFL is declared, by law, to be acting as an illegal monopoly in violation of anti-trust law. If this occurs, then what have become standard labor practices, such as the draft and the salary cap, will essentially be banished forever. It is worth considering what the NFL becomes in that situation, if for no other purpose, than for all parties to understand what is at stake so they can get back to the bargaining table and put a new CBA together.

Once all 32 NFL teams are prohibited from working together to set the labor market for professional football players, there will be teams who go high (imagine Jerry Jones with no salary cap) and some will go low (imagine Mike Brown with no salary floor). Economic theory and common sense both actually agree on the outcome here - a league with a few very good teams that dominate competition and  a few awful teams that do not even have a reasonable chance to win 4 or 5 games a season.

One this situation is reality, then the league will either become unwatchable (how many times do you really need to see the Globetrotters beat the Generals) or they can move to a radically different league structure. There is of course a workable league structure for a league with this type of financial structure that is in practice in many parts of the world: hello relegation!

In an NFL with relegation, we could have three divisions, with the top 12 teams in the first division, the next 12 in the the second division, and whoever is left, or wants to start a team in the third division.

In a relegation/promotion league, teams can play anyone and earn points based on the quality of teams they beat (a win against a first division opponent is worth more than a win against a third division opponent). Teams that earn the most points either stay in the first division or get promoted up to the first division and teams that do not maintain a high enough point total over a season get relegated down to lower divisions. Each division can have its own playoff system so even the Bengals can have a shot at a playoff game every once in a while.

Then there is what I'll refer to here as the Ellison Effect. Imagine if anyone could just start a professional football team and start competing in the Third division. WOuld Larry Ellison (or any of the other billionaires laying about) be interested in perhaps starting a team or two or three in Las Angeles? Perhaps an extra team in Chicago? Sure they would take some losses as they started up and tried to move up the division ladder, but the financial promise of the First division would be more than enough to tempt a few wealthy business folks to give it a try.

I could not begin to put a probability on this scenario, but it is one that is intriguing to me, because I think the drama of teams starting up and recruiting players as well as seeing teams compete to keep their place in the higher divisions would be exhilarating.

From the perspective of most of the owners though this is probably a less than enticing scenario. They have grown to enjoy their multi billion dollar TV contracts and packed stadiums. The prospect of  having to hope to fill a 20,000 seat stadium in the third division (I'm looking at you Buffalo) is probably not something that too many owners really want. Players too, at least as a collective, probably don't love the idea that half of the high paying (and high minimum contract) jobs could be gone. So with that incentive, I invite the various groups of owners and players to continue their negotiations, and not make the judges decide the future of the NFL.


  1. Aaaaand, that's exactly what revenue sharing is about...precisely the issue you mention in the last paragraph.

  2. I've thought that relegation would eventually come to baseball, where the incredible salary discrepancies have been the norm for over two decades now. Who would think it might actually happen in football--the most economically-competitively balanced sport--first.