Reforming American Professional Sports: A Proposal

Please see this article at the LeagueOfFans.org, a consumer advocacy group founded by Ralph Nader and part of the Center for Responsive Law.

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When many people think about professional sports, they think “it’s just a game”. They do not think too much about the organization of our largest leagues and likely would not consider anything to be wrong with the economies of pro sports in America. To most, everyone should be happy to be making whatever money they are already making.

Yet in actuality they are not just games but rather a massive multi-billion dollar industry that has benefited from “It’s just a game” to stifle the economic rights of both its labor and any potential competitors, directly harming consumers and public finances. In a closed sports system, current team owners alone control who is allowed to enter a league and are permitted to place extreme and onerous entry requirements upon any potential entrants.

There is no modern justifiable reason that leagues like the NFL or NBA should enjoy a monopoly and be permitted to prevent new businesses from joining the competition. Whereas the granting of antitrust exemptions were fruitful in the initial development and stabilization of pro sports in America, the industry has grown beyond their need and these protected corporations currently abuse their exempted status.

Considering the rapid evolution of pro sports over the last 40 years, Congress should remove all anti-trust exemptions given to pro sports and pass legislation to ensure that new entrants to each sport are permitted based on objective standards and identifiable criteria. The closed-system leagues must not be allowed to construct subjective and shifting barriers to entry into a marketplace and fandom should never trump the public benefits of economic competition.

Creating an open sports system for America would result in national and regional economic growth heretofore unforeseen and untapped, increased competition and resulting benefits to consumers, increased economic empowerment to minority communities, diversity of ownership of professional teams, the alleviation of the inequities of the NCAA and greatly benefit public finances.

If an investment group or an individual desires to start a sports team and can meet a pre-determine standard with reasonable threshold requirements for capital funding, business structure, etc., then they should not be required to seek the permission of already established entities to compete. The leagues can adjust their structures accordingly to their desire to meet an influx of new entrants.

Open Sports Systems Internationally

Around the world, we are provided countless examples of open sports systems that thrive within nations with weaker or less stable economies. The most prominent example is the league hierarchy system, more commonly known as promotion and relegation and widely used in Europe. Within this system, teams competing in the top league must earn their right to remain in the top league through their on-field performance. This is because the three teams that finish at the bottom of the standings at year’s end are subject to relegation to the next lower league.

Correspondingly, the three teams that finish at the top of the next lower league are promoted to the top league. This process is repeated throughout a multi-league structure with the total number of leagues depending upon how many eligible teams there are within the overall system. In England for example, there are currently five leagues considered professional national leagues atop a vast network of lower regional leagues.

The English Football System via englishsoccerguide.com

This process ensures that every team is incentivized to always compete and never ‘tank the season,’ as suffering relegation would cause them to miss out on large payouts, derived from media rights and profit sharing, that will be given to the teams in the top league in the next season. Instead, the relegated teams will receive an apportionment equal to other teams in the next lower league. Which is usually an amount much less than the apportionments given in the top league.

Other open systems merely employ a multiple conference or large group play system with an expanded playoff format but lack the quality of play benefits of a league hierarchy system.

Yet in all open systems, never are private corporations permitted to arbitrarily limit the number of competitors in the marketplace.

Economic Benefits Of An Open System

Every team created, like any business, means jobs and tax income based off of those jobs. As an example, the NBA has thirty teams, thirty administrative staffs, thirty coaching staffs and player rosters. In total, a few thousand people involved in the sport, deriving incomes they spend in their communities and taxable to local, state, and federal authorities. Along with the direct employees, many thousands more rely on the income the sport creates including support staff, stadium vendors, merchandise manufacturers, hotels workers, security staffs, local law enforcement agencies and so forth.

Overall, in our nation of over 300,000,000, the US sports industry represents only a tiny fraction of our GDP and employment, tallying approximately $14.5 Billion in earnings per year (less than 0.001% of US GDP) and contributing 456,000 jobs (0.3% of all US Jobs). (http://www.economicmodeling.com/2013/07/09/not-just-a-game-the-impact-of-sports-on-u-s-economy/)

England, a comparable economy and culture to the United States, has only a population of 50,000,000 but uses open sports systems. Though their population and GDP is less than one-sixth of the United States, their sports industry generates $24 Billion USD (1.9% of England’s GDP) and 400,000 full-time equivalent jobs (2.3% of all jobs in England). (https://www.sportengland.org/media/3465/economic-value-of-sport.pdf). If the labor percentages between these nations were equal, it would translate to an additional 2.8 Million American jobs. Under our current system, the United States is not close to fully tapping the incredible potential of the economies of sports to grow further in the future.

With an open system, there would not be only 30 or so professional teams across each sport. The amount would be determined by how many teams the American sports market could sustain. Accordingly, there would be multiple the number of executives, managers, trainers, vendors, manufacturers and athletes. The economic expansion of professional sports may be the largest short-term job creation vehicle available to our nation. Job creation that would also benefit the many minority groups which represent a large percentage of the labor within the sports industry.

For many cities like Austin and Louisville or states like Iowa or West Virginia, an open system is the only method by which they are ever likely to have a pro-sports team. Within England, there are thousands of professional football clubs in the interconnected league system, each ensured the same opportunity, based on performance, to enter into to the top league.

Is there any city in America with more than 150,000 people that would not have at least one professional sports team placed into an overall open system like England’s? Per the 2010 Census, there are over 170 cities in America with more than 150 000 people. Green Bay, the 283rd largest city in America and only the 153rd largest metropolitan area already hosts a professional sports team whereas metropolitan areas like Providence (38th), Louisville (44th) and Birmingham (49th) host none. Cities or metropolitan areas like New York, Chicago, and LA could likely sustain many multiple teams. By example there are over 30 professional football clubs in London alone, six of which currently compete in their nation’s top league.

Diversity of Ownership of Sports Teams

Creating objective standards to entry and enforcing capitalistic principles of fair competition would also eliminate long-standing concerns regarding diversity of ownership of sports franchises. In order to compete and start a franchise, minority or female ownership groups would no longer need permission from rich men maintaining their monopoly.

Public Financing of Stadiums

Beyond job creation or concerns regarding diversity of ownership, ending this system of corporate protectionism would end the game of exploitation teams routinely play with local governments when asking for handouts to build new stadiums. We allow these professional leagues to limit the number of entrants and their individual teams are able to hold cities and towns hostage with the threat of departure. As there can only be so many teams in the leagues in a closed system, the threat of a team leaving leaves local populations with the tough choice of coughing up millions or saying goodbye to professional sports with little hope of its return.

This scheme of public exploitation would not exist if these protected businesses knew a new entrant could immediately fill the market they left. Cities and towns would not feel as compelled to hand over money, often previously allocated to schools and social services, to a private business. Rather than be able to dangle the threat that a town would be permanently left without a sports franchise, the towns would know that if their market can support a franchise, another ownership group would come along.

via deadspin

The current system places all the negotiating leverage with private businesses and they use their leverage to extort local politicians. Requiring objective standards to entry within the sports marketplace would switch the dynamic and place the leverage with public officials and save billions for cities and towns across America.

The NCAA Monopoly

Open systems would also greatly alleviate many of the economic inequities that persist within the NCAA by providing alternative paths to professional sports. The NCAA owns a monopoly on the path to professional football and basketball and use it to profit immensely from the work of young Americans while exercising draconian rules against their behavior and holding their career hopes hostage. For a university, a scholarship and a dorm room, or simply not charging a student, is cheap currency. Yet, for the athlete, they must take a nominally compensated gamble on their future while actively doing an activity that generates millions in profits.

As we have seen among the many open systems in Europe, removing barriers to entry allows enough entrants into the marketplace that the paths to finding employment within the overall industry also multiply, from lower division or smaller teams holding tryouts to larger teams creating development academies to scout and sign young talent. With this system, young athletes are provided with a choice of whether to enter the workplace and receive compensation for their services immediately after high school or continue to college for an education while also playing sports.

Women’s Pro Sports

An open sports system would also have profound effects on women’s professional sports in America, which has failed to develop in comparison with our European counterparts. Many of America’s professional female athletes seek employment abroad because of the lack of opportunities within the major team sports in America. All notable attempts to start female sports leagues in the United States have been in the form of closed systems with similar obstacles placed upon new entrants to protect the already established entities and prevent open competition from any outside groups.

As such, there is no incentive for individuals or groups to invest in new female teams unless they are provided assurances they will be allowed to enter the closed system or unless they intend to invest sufficiently to establish an entire league themselves. Since the already established entities limit and control competition to protect their investments and since seeking out sufficient investment to form an entire league is an incredibly high burden, the current dynamic works to dissuade new investment into female sports and limits the potential growth of the overall industry in America.

An open system of female sports would provide a stable and reliable structure for which new entities can enter the market and compete against already established entities upon meeting certain objective standards and criteria. Doing so would promote new investment into female sports since new teams would never need permission from established entities to enter the marketplace and never need to seek out sufficient capital to form an entire league.

Rather than permit the development of women’s pro sports to be constrained by closed systems that serve only the interests of a select few, it would be supported by a stable overall structure that allows it to grow organically with the free market determining where in America teams could thrive.

Conclusion

In summation, the potential benefits of reforming the economies of sport could be far reaching for many Americans. Unfortunately, the potential impact and benefit to us all through quality of play, economic growth, direct or indirect employment, tax revenues, consumer benefits, youth and minority economic empowerment, or public finances is prevented to preserve the status quo of current monopolies in our closed sports system.

Thus, I present this for your consideration: to urge Congress to reform the structures of American professional sports with the creation and enforcement of an open and inclusive sport system.

 

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The Effects of Promotion and Relegation on American Sports

When thinking about it there is no reason major sports leagues like the NFL and NBA should keep their anti-trust exemptions and be protected from outside competition. Doing so is anathema to the ideals of capitalism and limits the economic growth of each sport, hurting the consumer and the sport itself. Gosh darn it, it hurts America! Switching to a system of promotion and relegation would multiply the economic reach of each sport within our country as well as increase the quality of the athletics for the spectator. It might even lead to a World Cup trophy one day.

If you do not know how relegation and promotion works within a league, we will use England’s Premier League system as an example. This same system is repeated across every team sport in almost every country in the world.

The Premier League is comprised of the twenty best teams in English football (soccer). The twenty teams competing in the Premier League each year have no right to be in the league other than the right they have earned through past performance. The three teams which finish at the bottom of the standings at year’s end are subject to relegation to a lower league. Oddly, England’s second tier league is called “the Championship”. Teams which finish at the top of the Championship are promoted to the Premier League. This process is repeated throughout the multi-league structure. How many leagues are there? It depends on how many eligible teams there are within the overall system. In England, there are currently five leagues considered professional national leagues. Below, there are seemingly countless divisions of professional and semi-professional leagues, eventually split among geographic regions.

Levels_9–10_Football_League_areas_in_England

Levels 9 and 10 of the pyramid of English football

The beauty of this system is it is open, inclusive, and creates natural incentives for success. It allows the sport to grow unconfined by the top league. If you or I wanted to own a professional football club in England, we can start one without having to save billions to buy an existing team. It does not mean you can get ten of your friends together and start playing.   Each country’s association sets up different requirements for starting a new franchise. This usually involves approving an organizational structure, modest stadium or field requirements and perhaps capital requirements to ensure the new entity has money to survive a season or two. But this is far from the 40,000-person stadium and capital reserves of 1 Billion or more it requires to get an expansion franchise in American sports. Starting on the bottom league generally means having a field with a seating capacity of the 10,000 with capital requirements affordable to entrepreneurs or small business ownership groups.

Not exactly Old Trafford

Not exactly Old Trafford

So why do this? Why shake up everything? After consideration of the benefits there are no reasons to not. I dare say logic and the current state of our economy require it be done. We will talk more about the economy below but let us first focus on how relegation and promotion is likely to affect the quality of athletics.

In this system there are no Cleveland Browns or Jacksonville Jaguars stinking up the field every year and making us wonder how a team could be so bad for so long. You do away with pathetic losers. They and their inept management would be shifted down the league rungs accordingly until they were placed in a league commiserate with their abilities.

Perhaps just a league or two above these guys

Perhaps just a league or two above these guys

I know it may be harsh to call those teams pathetic losers. Especially when the truth is current league structures create no incentive for bottom teams to compete. They can collect a check in last place. Why worry about winning too much? The Florida Marlins are a prime example of this business model: spend nothing on the franchise; sell successful players at every opportunity; lose the vast majority of years but always rake in profits. Every now and then you may luck out and still win it all (not if you’re Cleveland though). These businesses are designed to earn money and not win games because the system makes it so that they can earn money without winning games. The incentives are misaligned and we all suffer because of it.

Relegation and promotion ends this nonsense. In the Premier League each team receives around 50 million pounds for its operations derived from joint revenues, TV rights, etc. This revenue sharing is similar to the NFL except of course if you lose too many games you are booted from the Premier League. Contrastingly, you can go 2-15 forever in the NFL and always collect your check. The Jaguars are laughingstocks but at least they are rich laughingstocks.

Yes, I'm jealous.

Yes, I’m jealous.

In England (and the world), teams who get relegated will receive the apportionment equal to every Championship team but it is much less than the amount given to Premier League teams. These apportionments continue in decreasing amounts down the league rungs until at some level there is no apportionment. Those lower teams must survive economically on their own and based on their own management/ownership skills. The apportionment is usually only given to teams in national leagues since it is important in offsetting travel expenses. A system of relegation and promotion would replace bottom feeder teams with new, hungry, successful teams that have earned their spot through their recent success. Out with the old and lazy and in with the new and ambitious.

Another complaint many raise about the NFL is the style of play is not diverse unlike college where teams which run standard NFL-style schemes play against whacky high-flying Mike Leach offenses or run-read-option teams and everything in between. Across several professional leagues styles of play and innovations to the game would certainly be as diverse as college athletics. Likely more diverse since the coaching staffs would not be constrained by NCAA time limitations about meetings and practices.

Popular players like Tim Tebow or Vince Young or Michael Sam would not have to ride the bench or be excluded from the sport if they cannot find a job for one of thirty teams. There would be hundreds of teams available to these players whether it be in the top league, second league, or seventh league. The debates amongst obnoxious talking heads opining about the capabilities of said players would be settled on the field. This is true for every sport.

The best part for the spectator is the drama. More meaningful games at the top and bottom of each league means more last minute drama and magic moments. Tense finishes would unfold across each league towards the end of every season as the next round of relegation and promotion approaches. Teams desperate to advance and desperate to avoid relegation provide some of the best moments often from lower leagues. Remember how Manchester City won the Premier League in 2013, scoring two goals in the final five minutes of their last tie to edge Manchester United. It was heralded as the most dramatic final day in Premier League history.

But there was better drama in the league below. My personal favorite is this ending from the Championship a few days after Aguero’s famous winner for Man City, between Leicester City and Watford. Both teams were fighting for a spot in the Championship final and potential promotion to the Premier League. It’s 2-2 on aggregate with Leicester City already in the ascendancy based on away goals. Watford desperately need a goal but Leicester City has been awarded a dodgy penalty in the 95th minute, much to the overwhelming anger and dismay of Watford fans….

Love that celebration!

Broaden the sport and you broaden the fun for spectators by creating more magic moments.

While increased competition, innovative coaching, creative playing styles, great drama and removal of consistent losers should be enough to get every fan of team sports on board, there is a more important reason to support relegation and promotion: economic impact. America needs it.

In the NBA there are thirty teams, thirty owners/ownership groups, thirty GMs, thirty accompanying staffs and player rosters.  It all adds up to a few thousand people involved in the sport making incomes they spend in their communities and taxable to local, state, and the federal governments. Along with the direct employees paying their bills and taxes, there are many thousands more whom rely on the income the sport creates including support staff, stadium vendors, merchandise manufacturers, hotels workers, security staffs, local law enforcement agencies and so forth. With all of these people getting paid, they pay their taxes and buy the goods and services we all do and which helps our economy.

Professional sports are not just innocent pastimes anymore. They are major economic forces which affect a lot of lives. Unfortunately, the potential economic impact and benefit to us all either through direct or indirect employment or tax revenues is limited to preserve the status quo of current monopolies.

In a system of relegation and promotion, there would not be thirty professional basketball teams. There would be hundreds broken accordingly into various leagues both national and then regional stacked in a clear hierarchy. Accordingly, there would be multiple the amount of executives, managers, trainers, vendors, manufacturers and athletes needed in such a broad system. Concerns regarding minority ownership of sporting franchises would be resolved by broadening the sports to allow for new teams in every city in America. The expansion of professional sports may be the largest one-off job creator our country could muster. And unlike other industries, these jobs cannot be exported to China. If that ever happens please take the Jaguars first.

Is there any city in America with more than 100,000 people that would not have a professional basketball team placed in the overall league system? Per the 2010 Census, there are 298 cities in America with more than 100 000. Cities like New York, Chicago, and LA would likely have more than ten. By example there are over 30 football clubs in London in the top eight leagues, six of which are currently in the Premier League.

Further, American players not able to make the roster for an MLS or NBA team will no longer have to travel to South America, Asia, or Europe for development. Granted only those in the top league would make the audacious salaries we all would want on our paycheck but they and their team would have a direct path to the top league with promotion providing the incentive. If you want that payday, then win enough and you will get it.

Jackie Moon

Make Semi-Pro a reality!

Television revenues would increase exponentially. Although the amount of parties taking a cut would also grow, stations would have an over abundance of sports programming to fill every day of the week. While national broadcasters may not pay for and carry every game of a third tier league, regional broadcasters and local broadcasters of involved teams would reap the benefits of this expansion as well as online providers.

And if adopted, how this would affect the current sports hierarchy in this country?

It is unlikely the NFL would make such a dramatic switch. They are the kings of the sports landscape and have no incentive to change. Only an Act of Congress (removing the anti-trust exemption) could force the issue. And we are unlikely to get legislative action from our defunct Congress to do anything much less change a profitable and popular entity like the NFL for some zany foreign idea.

But while the NFL is king a rebellion in brewing. The various scandals and continuous rule changes continue to hurt their brand. This creates an opportunity for other sports leagues to broaden their base while the NFL fumbles the ball.

No sport would benefit more than American professional soccer and its top league, MLS. While the beautiful game has grown steadily in America since World Cup 94 it can never compete with the NBA or NFL. Even a self-loathing, scandal-ridden NFL will always win unless Roger Goo-doofus bans all hitting or something incredibly stupid. I am not ruling that out.  But as is, professional soccer is condemned to compete with hockey and nascar for fourth place.

By adopting relegation and promotion first, professional soccer would be the largest sport in America in terms of participants, teams and fan bases within a couple of years. This would be true as well for the NHL and moreso for the NBA. Soccer would not be the wealthiest though. Let’s not get too far ahead of ourselves. At least not yet. But they would be the largest sport in terms of scope and with that largess the sport would grow organically with fan bases growing around successful local clubs in every corner of the country.

Lots of room to grow

Lots of room to grow

There would be an immediate boost to the development, evolution, and depth of American players. Thousands of players leave collegiate athletics each year giving up their careers and ending their development at 21 or 22. For many this is a choice but for many others it is a reality without a choice. Not good enough to play in the MLS or NASL (or NFL or NBA) and without the means to locate a tryout abroad, their careers end not because they should but because the system we have created dictates they end. We do not have late bloomers in American sports because we extinguish them.

It is difficult to project a players future by the age of 21 or 22 or even 25. We search for the early prodigies at 18 and younger yet they often fail to develop as we hope. Promotion and relegation ends this and provides opportunities for the natural development of thousands of athletes who would not have had the chance otherwise.

The United States is the third largest nation on the planet in both population and landmass, spanning an entire continent and then some (Hooray for Hawaii!). Comparatively, England is tiny in both size and population yet there are hundreds of professional football teams in England. It is difficult to over-estimate how broadly professional soccer would grow its talent base, coaching pool and overall exposure by shifting to such a system. Its far-reaching effect on the sports landscape would only increase over time as the sport would enjoy a natural competitive advantage over NFL, NBA, and MLB.

This diversification of American soccer would allow for a quicker evolution of the best American players. Relegation and promotion creates a laboratory effect which judges different styles of play, management techniques and recruiting tactics. Kind of like capitalism. It rewards successful squads and smart management and punishes others. With teams around the country in an interconnected system of leagues and coupled with America’s natural diversity and size, we would get to see a variety of playing styles from Brazilian dribbling to German efficiency.

As the sport broadens and better teams move up in each league, interest will grow correspondingly. This fan interest is less likely to be from fickle fair weather fans but rather from those whose interest has grown along with their local club. They are likely to remain loyal to the team through thick and thin and remain interested in the overall sport through the long run, teaching their love of the game to the next generation.

But why would any current team owner of any league agree to do this? Wouldn’t they risk getting booted out the top league by voting for this? Yes. It is always about money.

Imagining MLS were not a single entity, take a look at the Seattle Sounders. The Sounders are the most marketable team in MLS with a large fan base. Currently, their estimated value is about 175 Million. Not too shabby but pale in comparison with the value of an NFL team, NBA team or MLB team. Forbes lists the cheapest NBA franchise (Bucks) at 405 Million. With the league constructed as is, the Sounders and every other team in MLS will always be worth fractions of the worst teams in other sports.

Worth more than twice the Sounders

Worth more than twice the Sounders

This will not change until professional soccer finds a way to grow the sport, market base and TV revenue. In doing so, they must compete directly against long established and successful American sports leagues. Promotion and relegation gives professional soccer a unique competitive advantage which mirrors and re-enforces long-standing American ideals of capitalism and merit-based advancement. An advantage which rewards bold and innovative coaching styles, successful talent scouting techniques and works to evolve and grow the sport organically over time.

Want to win the battle of the American sports marketplace? Promotion and relegation is low-hanging fruit which can pave the path to prosperity. The NFL is king today and for the foreseeable future but there is a way to steal their crown.

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