Will “Parity” Kill The NFL?

There has been a change in the NFL over the past couple of decades.  The NFL used to be a “5-tier league”; there were elite teams at the top; there were pathetic teams at the bottom; and there was sufficient variation in the middle to carve out three categories of teams.  True, teams could improve or “deprove” as the season progressed and move from one tier to another, but it was usually possible to discern 5 different levels.  That is just not the case today.

The NFL is now a “3-tier league”.  You can call that “parity” or you can call that “mediocrity” or you can call that “evolution”; putting a label on it really does not matter.  What you have today is a grouping of teams whose records and whose on-field performances are just better than the rest of the league; let me call them the “Category 1 Teams”.  As of this morning I would make this grouping:

  • “Category 1 Teams”:  Pats, Steelers, Eagles, Vikes, Saints, Panthers, Rams, Seahawks.

At the other end of the line, we can pull together the list of bottom-feeders for 2017; let me call them the “Category 3 Teams”.  As of this morning, here is my grouping:

  • “Category 3 Teams”:  Niners, Bucs, Bears, Giants, Broncos, Colts, Texans, Browns.

By default, everyone else falls into “Category 2”; all the teams in “Category 2” are better than the teams in “Category 3” but nowhere near as good as the ones in “Category 1”.  And unlike 20 years ago, it is nigh onto impossible to separate the “Category 2” teams into a more fine-grained structure.  Moreover, if you look at the “Category 2 Teams”, you probably would have a hard time convincing yourself that perception might change in the final weeks of the season such that any of the “Category 2″ teams might wind up in either “Category 1” or “Category 3”.  And to make it worse, half of the league is in that amorphous “Category 2”.

To the extent that NFL football’s popularity has declined in the 2017 season, I suggest that this “parity” among the teams and the unlikeliness of any change in category for any team is part of the problem.  I look at this “parity” situation as “mediocrity”; when I turn on a game between two “Category 2” teams”, the game lacks a compelling tone.  What I see on my TV screen is good-but-not-great football; and in my mind, I know that the outcome of this game is really not all that important.  I continue to watch about the same amount of NFL games as I did in prior years, but I wonder if others are tempted to do “other stuff” because the product on the air is too often mediocre.

My theory is that the cause of this situation is the fiscal success of the NFL.  Writers and commentators love to spin the narrative about the competitive desire of owners to field championship teams and how they will “do anything to bring a championship home to the fans”.  Really?  I suspect that owners of teams that do not win championships – or even win more than half their games – can apply a psychic balm to their injured competitive spirit when they look at the books and see that they netted a profit in the 8-figure range last year plus Forbes says that the value of their franchise just went up in the 8-figure range.  Owners – and by extension their teams – have gotten fat, dumb and happy.  That is analogous to Dean Wormer’s assessment of the frat boys in Animal House and that is not a good way to go through life.

To my mind, the epitome of a team having more profit than brains is the Cleveland Browns and their Front Office dominated by people who have had some success managing baseball teams.  There is a line of thinking in organizations that someone who can manage one thing well can manage anything well.  I have seen so many examples that disprove that line of thinking that I wonder how it maintains currency – – and then I look at the Cleveland Browns’ Front Office and the fact that the owners there set it up that way and …  Now, I ask myself why the Browns’ owners need to change anything because they are not losing money and they have a franchise worth $1.9B (according to Forbes) for which they paid $987M.

Here in the DC area, fans have a team mired in mediocrity.  The franchise is worth something north of $3B; Forbes puts last year’s earnings at $145M before all of the accounting legerdemain of amortization and depreciation and all that stuff.  Juxtapose those numbers with the fact that the owner cannot find a way to provide the team a field to play on that has live grass on it after late November.  Why should he care?  Why should he care if the team wins 8 games this year or only 6?  He will probably make another $145M next year too.

I said above that “to the extent that NFL football’s popularity has declined in 2017 …” and I used that wording specifically because I wonder just how much it has.  The narrative goes that the NFL is in decline; the 800-lb. gorilla in the world of professional sports in America is aging and is fast approaching its expiration date.  That narrative allows commentators to list and complain about all the evils of the NFL.  You know the list; here are a few items that are always good for a column or a hot-take:

  1. Concussions/CTE:  Mamas, don’t let your babies grow up to play football…
  2. Domestic violence:  Players do it; the league ham-handles it.
  3. Anthem protests:  The league is squarely in the middle of the country’s culture wars.
  4. Officiating blunders:  Been happening for years; will continue to happen; live with it.
  5. Obscene salary for the Commish:  An employee is worth what his employer pays him/her.

With all those issues as a backdrop to games on TV that are not compelling, you could conclude that an implosion is imminent.  However, there is some contrary evidence that does not support the narrative and seems to have gotten scant attention.  Mediapost.com tracks issues related to the financial aspects of the media; they reported the following:

“The NFL’s October take was stronger in national TV ad dollars versus a year ago.

“Confirming other recent reports, the NFL is picking up steam when it comes to higher national TV advertising revenues. October TV dollars grew 3% over the same month the year before.

“Across all TV networks, national TV advertising grew to $757 million in October 2017 against $738 million in October 2016, according to Standard Media Index. From the start of the season — early September through November 6 — national TV advertising totaled $1.76 billion against $1.44 billion, according to iSpot.tv.

“In October, across all five NFL TV networks, the average unit 30-second commercial rate rose 7% to $482,000 in October 2017.”

Could the prevailing narrative be “overstated”?  Is it even possible that the prevailing narrative is “dead wrong”?  The NFL economy is driven by advertisers on its programming; when advertisers buy time and pay premium prices, networks pay premium TV rights’ fees.  Talk about how that revenue will dry up due to “cord cutting” and “streaming” is interesting if you believe that the NFL will give “streaming services” a free ride as opposed to whatever rights fees they have come to enjoy from networks.  It also assumes that fans will not find ways to watch games even if they cut cords.

For the record, I buy into part of the narrative about NFL economics.  I do not believe that the growth rate in revenues/profits or that the growth rate in terms of franchise value can be sustained at the current level for long.  Using the example of the Browns from above, the current owners bought the team in 2012 and have – approximately – seen the franchise value double in 5 years.  That represents a growth rate of about 14.5% per year; that is not sustainable over the next decade; if that were to be the case, the Browns would be worth $7.6B in 2027.  Personally, I don’t see that happening.

However, I also do not believe that parents will not allow their kids to play football to an extent where the talent pool dries up.  The US population today is about 325 million folks; for the NFL as it is currently constructed, the league needs about 60 players per team totaling a little less than 2000 players.  Even if you can imagine a future where the number of high school football players is halved from today’s level, the NFL will still be able to find 2000 “employees” for their enterprise – particularly if the league’s economics continue to support a salary structure where the minimum salary for rookies is $450K per year.

I also do not believe that the NFL’s blatantly stupid handling of domestic violence incidents – or more generally its handling of anti-social behaviors by its players/coaches/others – will doom the league.  Another popular narrative making the rounds today is that women are now feeling empowered sufficiently to call out powerful and famous people for sexual harassment/assault.  Some commentators have even said that we have reached a tipping point here and if that is the case, then there is no going back.  That is what happens if there is really a tipping point…  If that empowerment is real, then it ought not to be very long until women also no longer tolerate domestic violence incidents or other manifestations of anti-social behavior by men in general and football players in particular.  In other words, if the trend afoot among women today is real and continues on its trajectory, the “domestic violence issue” for the NFL will likely resolve itself with or without any impetus from the league.

I believe that the biggest threat to the NFL and its economic dominance resides in its relationship with its players as seen through the lens of collective bargaining.  Other than social hot button issues on which just about every rational human being agree, the NFL and the NFLPA are at odds with one another.  I find this to be amazing.  One of the foundations of the trade union movement in the US over the past century or so has been that workers wanted to share in the economic bounty that their labors produced.  For a time, the idea of “profit sharing” was an important union goal in negotiating new contracts with management.

In 2017 – and for the last two decades or so – profit sharing is precisely what NFL players have.  Strip away much of the verbiage that makes the Collective Bargaining Agreement into a tome approaching 100 pages; the CBA defines classes of “shared revenue” and after audits of those classes of income for each season, a fixed percentage of that revenue must be paid to players as salary.  That is the source of the “salary cap” and the “salary floor”.  What this means is that the NFL and the NFLPA are business partners not adversaries.  When revenues go up, salaries must also go up.  When revenues decline, salaries must also decline.  The league and the union may squabble over the exact percentage paid to players from one CBA to another; they can argue about how fines and suspensions are adjudicated; however, they must recognize that they are squabbling and arguing with a “partner” and not an “evil opponent”.

Check the statements and the interactions and the legal battles between the NFL and the NFLPA over the past couple of years and ask yourself if that is the way “partners” deal with one another or if those pitched battles represent the behaviors of “opponents” or even “enemies”.  This is the area of concern for the NFL if it is going to continue as a growing enterprise in the entertainment industry.  [Aside:  The NFL economic success is built on the fact that it is a TV series more than a sporting event.  The NFL is the highest rated programming on all 4 of its “broadcast partner” networks.]  The NFLPA needs also to come to this recognition.  What that mutual recognition might accomplish is that both parties will act in such a way as to be sure that their actions do not offend significant portions of the audience.

The NFL has issues; but in too many places, those issues have been inflated beyond reality.  Consider:

  • TV ratings are down – – but ad revenues are up.
  • “Parity”/” Mediocrity” does not help TV ratings; we have lots of “Parity”/” Mediocrity”; that does not seem sufficient to kill the league.
  • There will always be sufficient numbers of players to provide the league with employees.
  • There is no cure to poor officiating.
  • People will get over the “obscene salary” paid to the Commish.

The big issue for the NFL is to find a way to reach a much more constructive relationship and modus operandi with the NFLPA.  That is a two-way street; the NFL cannot fix that alone; the NFLPA has to accept that its partnership with the NFL is not enhanced by obstinate opposition to the NFL on any and all issues that arise.  I think that is the most important challenge for the league that poses the greatest danger.  Given the adversarial history between Roger Goodell and DeMaurice Smith, is it optimal to have these two folks as the “point persons” to change the nature of the relationship?

But don’t get me wrong, I love sports………

 

7 thoughts on “Will “Parity” Kill The NFL?”

  1. I do not see how the revenue growth rate for the NFL is sustainable. Eventually the rising ad rates and ticket prices will lead to something akin to the Laffer curve and revenue will plateau , then begin an inevitable decline.

    There is also another phenomenon facing the NFL. College football is now being played every day of the week except Sunday. What is stopping NBC from luring Notre Dame to play one or more of its games on Sunday? Notre Dame fans might occasionally remote click to the NFL game to check the score, but will not be there long. If it works for ND, nothing stops ESPN from getting Alabama to play Auburn on a Sunday afternoon. Or Georgia to play Clemson on a Sunday opposite when the Panthers are playing in Charlotte and Falcons are playing in Atlanta in the same time slot.

    1. Doug:

      NBC’s highest rated show is Sunday Night Football. If they “lure” Notre Dame to play on Sundays, it might cost them the rights to Sunday Night Football. Perhaps that is the deterrent?

      For ESPN, change “Sunday Night Football” to “Monday Night Football”.

  2. Jack,
    Too much info for me to contemplate with my limited knowledge of the NFL economics. But I do understand the points you make on NFL popularity.
    One issue that never seems to get noticed is how the size and speed of today’s players have reached a point where the forces produced in the game exceed the body’s ability to accept them without consequence. From an anecdotal perspective there seems to be many more injuries today and more serious injuries which appear to validate my view.
    Just the other day Shazier of the Steelers received a spinal injury. Although the replay looks innocuous, it’s the speed that causes the damage. I’m sure a physicist could calculate the forces generated and opine on their dangers to the body. Some games are like watching a train wreck from an injury standpoint.That and the insufferable commercials, for injuries and regularly scheduled commercials, that take a 2 hour game at most into 3 to 4 hours discourages me to continue to watch. I used to watch most all games on TV. Today due to items I cited, I watch home team games and other games where the outcomes affects my home team standings.

    1. Rich C:

      Add delays for replays to your list of things that make games take longer than they need to take.

      Note that I did not even mention gambling or fantasy football as lingering items that will boost/maintain fan interest down the line.

  3. Jack,
    Great article!
    If the Supreme Court rules to allow sports betting the economics may see a dramatic increase. Jack

    1. Jack Neubeck:

      I have no doubt that the NFL – – and the other sports leagues too – – have plans in place to monetize any gambling ventures that could arise if the Supreme Court throws PASPA into the dumpster where it belongs.

  4. Two AFC teams and six NFC teams you listed. Is it possible that the NFC beats itself to a pulp and the clearly-weaker league walks away with the Lombardi Trophy?

Leave a Reply

Your email address will not be published. Required fields are marked *