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Ottawa, Canada — The most popular professional sports league in North America, the National Football League (NFL), has the most “socialist” economic system of the four major leagues inNorth America, based on an assessment by The Conference Board of Canada – the latest in its series on the pro sports market.
“It is somewhat ironic that America, land of capitalism and free enterprise, is so fond of a league that has made sharing the wealth fundamental to its business model,” said Glen Hodgson , Senior Vice-President and Chief Economist.
In the National Football League, more than 80 per cent of league and club revenues are shared among the franchises. The NFL also has a “hard” salary cap that puts a ceiling on the amount of money franchises can pay players, one that applies equally to all teams. The one market-driven aspect is the NFL’s treatment of player talent- both in terms of the high salaries paid to top stars and the ease with which players can be discarded.
Moving from the economic “left” to “right”, the National Hockey League (NHL) is similar to the NFL in having a hard player salary cap. As part of the current collective bargaining agreement with its players – negotiated in 2005 and now expiring – the NHL has a salary floor and a complex revenue-sharing system. The NHL is willing to provide subsidies to its weaker clubs to protect the value of the stronger franchises, since bankruptcy of any team is not a good signal to prospective investors.
“The NHL model is a mixed economy which does try to equalize opportunity for all its franchises to be successful on the ice and profitable in the books,” said Hodgson. “The challenge for the NHL and its players in collective bargaining this year is to tweak this system without undue disruption to the business. Hopefully, both management and the players have learned from their experience in 2004-05 and they will not risk losing another season in these negotiations.”
Both the National Basketball Association and Major League Baseball operate much like a modern capitalist economy. In general, the financial playing field in these leagues is not level, and the largest, richest markets and teams tend to be the most successful. Top players command massive salaries, which leads them overwhelmingly to suit up for the wealthiest teams.
No league in North America, however, compares to European football (or soccer) for unconstrained capitalism. The presence of unbelievably wealthy owners, little sharing of revenue among teams and leagues, and eye-popping player salaries is reminiscent of the “robber baron” era of capitalism in the 19thcentury. Clubs are very much on their own. The current liquidation of the Scottish club Rangers FC – one of the most storied teams in Europe – shows there is little financial security or assistance to those that slip.