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The September 24 Monday Night Football game between the Green Bay Packers and the Seattle Seahawks may one day be looked at as the beginning of the end for the 92-year-old National Football League. Three weeks into a regular season under the direction of substitute officials – a result of an NFL-imposed lockout of its 121-member referees union – the Packers-Seahawks game ended in farce. On the game’s final play, the substitute officials missed a Seattle penalty and erroneously awarded a touchdown swung the game (and millions in wagers) in the Seahawks’ favor.
Three days later, the NFL ended its lockout after agreeing to a new eight-year contract with their regular officials, who returned to a hero’s welcome in Baltimore on September 27. Steve Czaban, a longtime Washington sports radio host and critic of NFL management, proclaimed triumphantly, “This will go down as one of the most spectacular sports business defeats ever, something akin to the military blunder of Napoleon’s decision to invade Russia.“
Nobody would confuse NFL Commissioner Roger Goodell for the late French emperor, but the metaphor is still useful. Goodell, the son of a former U.S. senator, took over the league in 2006 after spending his entire career as a faceless bureaucrat. Goodell’s predecessor, Paul Tagliabue, was a reserved figure who largely avoided the limelight during his 17-year tenure. In contrast, Goodell has made himself the center of media and public attention. He’s determined to spread the NFL’s reach on a global scale, not to mention his own authority to control the lives of its employees.
The hallmark of Goodell’s administration has been his efforts to construct an internal judicial system along the lines of a federal regulatory agency. Indeed, the title of “commissioner” befits a quasi-governmental entity rather than a corporate or trade association CEO. Like the Federal Trade Commission, Goodell is empowered to act as prosecutor, judge, jury and appeals court over any perceived infraction of the league’s complex governing documents.
Many libertarians don’t like to question the decisions of “private” businesses. Yet little about the NFL is private or compatible with free markets. Most of the league’s stadiums are heavily subsidized by state and municipal governments. The NFL enjoys special tax and antitrust privileges. And a good deal of the league’s revenue and political authority is derived from intellectual property.
More importantly, there’s a clear cultural alignment of the NFL towards the state and its institutions. For example, Goodell recently announced the NFL would donate $30 million to the government-run National Institutes of Health to study “serious medical conditions prominent in athletes and relevant to the general population.” Goodell noted this wasn’t just about helping current and former players – many of whom are now suing the league over brain damage they suffered during the careers – but this research would also help the military, which of course is one of the few occupations even more dangerous than professional football.
In reality, the NFL’s decline probably began with the September 11 attacks. It was the only time in modern history, aside from labor strikes, where the NFL had to postpone scheduled regular-season games. The attacks also enhanced the NFL’s existing ties to militarism and nationalism. Pat Tillman, a respected NFL player, left the field to join the Army Rangers, where he died under still-mysterious circumstances and became a martyr. The NFL actively embraced the new security state, assaulting fans at games TSA-style and lobbying Congress to approve unmanned drones in American airspace.
Most people would laugh at any suggestion the NFL is in decline. Profits and television ratings continue to increase with no end in sight, they say. But the numbers don’t tell the whole story. The NFL is a monopoly, or more accurately a monopsony buyer of football talent, which in turn comes from a single source – large, mostly government-controlled universities that sponsor college football. The other major North American sports can draw upon substantial foreign markets in addition to colleges. The NFL has never successfully developed an overseas market. And as American universities face dwindling state support and budget crises, football will become less and less relevant – especially as potential liability from brain-injury lawsuits increase.
The NFL’s revenue model is also antiquated. It depends on three basic sources – intellectual property, network television contracts and, of course, stadium receipts. The latter is the most vulnerable. Thanks to the cheap debt of the 1990s and 2000s, the NFL overbuilt its stadium capacity. In markets like Washington – where a stadium was built in a poorly chosen suburban Maryland neighborhood – ownership has been forced to reduce capacity. The league tries to maintain the myth of 100% demand by imposing television “blackouts” of any home game that doesn’t sell out, but even that standard was relaxed to 85% in some markets starting this season.
Television remains the real power center of the league. Networks continue to spend billions on NFL rights. These have never been highly profitable deals for the broadcasters. The conventional wisdom has always held that you break even or lose money on football because the giant weekly audience provides a platform to advertise other network offerings. This is why, in the early 1990s, a then-upstart Fox Network paid a premium to wrest the most lucrative part of the NFL contract away from CBS. Fox never planned to profit from football; it simply needed the lure of NFL games to attract local affiliates away from CBS, which it did. A few years later, CBS scrambled to outbid NBC for its NFL contract.
If not for Fox, the NFL of the 1990s would have looked quite different. Television revenue and ratings might well have flatlined. The NFL itself is a bureaucracy, not an innovator. Fox didn’t just bring new money; it also revolutionized the presentation and packaging of the league, much as ABC did in the early 1970s when it developed Monday Night Football. This led other broadcasters to respond with their own advancements.
The question becomes, What happens when one of the networks goes bust or simply gets out of the football business? The four-network system is not long for this world. NBC, which currently holds the NFL’s Sunday night contract, is probably the weakest link. But all traditional broadcasters are vulnerable to sudden collapse as the entertainment world shifts to internet-based, on-demand distribution. Even ESPN, the all-sports network that holds the lucrative Monday Night package, is facing revolt from cable systems weary of its astronomical per-subscriber fees.
That leaves the league’s intellectual property, the value of which is tied to its brand and reputation. This is where Goodell’s leadership, or lack thereof, will ultimately pay off negative dividends. Goodell’s single-minded obsession with his own authority has not driven customers away from games as such, but it’s made the product much less enjoyable for the average fan. Bureaucracy always results in higher costs and lower quality, even when it’s not immediately perceptible.
Ultimately, Goodell and the NFL may well follow the model of other 20th century legacy industries and seek a full-scale government bailout. Once the brain-injury lawsuits become a serious threat to the NFL’s bottom line, Goodell (or his replacement) will inevitably seek some degree of federal immunity – in exchange for which Congress will get to create a new bureaucracy to oversee the “health and safety” of professional football. That will be the moment the NFL really dies, even if the games themselves continue for several more decades.
