The secret to the NFL's success is its ability to maintain the legal structure of 32 supposedly independent teams while operating with most of the advantages of a single business entity. As with many successful monopolists, its focus has been on expanding its market without having to lower its prices. In a very disciplined way, it has added teams, extended the length of the season and increased the number of nationally televised games each week of the season. It has been so skillful in playing one city off another that it squeezed taxpayers for $500 million a year in stadium subsidies for many years. And it has so cleverly structured the sale of television rights that networks routinely wind up overbidding, allowing the league to capture virtually the full value of its monopoly.
Equally impressive is the way the NFL has avoided unproductive competition among members of its cartel. This includes an agreement in which 80 percent of league and team revenue is pooled and shared equally among the 32 franchises. It also includes a salary cap and salary floor for all teams, along with some limits on free agency, which ensure that all clubs can retain "franchise players" and field a competitive team. Even the players are incentivized to focus on "growing the pie," with a unique collective-bargaining agreement that guarantees them 60 percent of all revenue beyond the first $1 billion.
"Socialism with cheerleaders," is how the Chicago Tribune once described it.
During the recent recession, however, the NFL has hit something of a wall, as revenue growth has slowed, profits have declined and some of the air has come out of inflated team values.
Financially pressed cities and states are no longer willing to subsidize new stadiums or stadium upgrades.
A number of teams have encountered price resistance from ticket holders, particularly season ticket holders, whose overall number is declining.
Perverse competition has developed around the signing of draft picks, resulting in pay for untested rookies that exceeds that of star veterans.
Meanwhile, some of the more aggressive and innovative owners, who have found ways to increase their teams' revenue, are starting to resent how much of that revenue they are forced to share with other teams.
It is against that backdrop that the current contract negotiations are playing out.
To justify future increases in ticket prices and television rights, the owners want to extend the regular season by converting two preseason outings into games that count. The players moan and groan about the additional injuries that might result but, in the end, will allow themselves to be bought off with more money for post-retirement medical care. Nor will they offer much resistance to a proposal to cap rookie salaries, which would benefit lower draft picks and veterans near the bottom of the pay scale.