Capitalism for the
Cooperative: The NCAA
and NFL Model of Parity
and Profit
Is equality among teams better
for league organizers?




Do NFL Owners wants parity?
Why?
Do NCAA members want parity?
Why?
NFL objectives
Does this sound like capitalism?
•NFL Commissioner Paul Tagliabue describes his league’s
organizational structure as a prototypical capitalistic market
that favors “the little guy.”
•NFL owners are earmarking nearly two thirds of their revenue
to employees; athletes/employees are agreeing to salary
limitations to benefit their employers, companies are sharing
revenue with their competitors, and competitors are
agreeing to standardize output.
Goal: to maximize league profits.
NFL strives for cooperation between members!
NCAA objectives



Non-profit agency
Safe environment for athletes
Set rules on and off the field
Goal: level the playing field so that all
members can compete

The NCAA a model of cooperation!
Not the typical cartel.
NFL teams and NCAA member
institutions need competitors to
maximize profit
How can these sports
oriented organizations
inspire equality?
Fixing games typically does not work? They
engage in collusive behavior. How?
1. Spread out the best players?
The NCAA limits scholarships
The NFL has franchise players and salary
caps.
New sports have attempted this approach.
2. Monopsony behavior

NCAA: players can not be paid Brown
(1993) estimated the value of a Div I football
player.
NFL: Salary Cap
Vrooman (1995) payroll cap is a form of
“cost sharing collusion.”
Players receive a max of 64.25% of
Defined Gross Revenue in 2004 range
was $75 million to $63 million

3. Side Payments

Side Payments are necessary to
maintain the loyalty of all members.
NCAA: Revenue Distribution Plan
In 2003 they distributed $264 m

- Top 6 (of 31) Conferences received 50%
- BCS is guaranteed revenue for major conferences
- Negotiates tournament television contracts
NFL: Revenue Sharing
Media Revenue/ 32, away gate receipts pooled/ 32
League merchandise profits /32

Other side-payment methods
developed to keep members happy?
- Allow each sports entity to set their
own ticket prices




Arkansas student price $1
Notre Dame student price $24
Patriots average price $75
Bills $31
- Sponsorships, luxury boxes, other
sources of revenue are not shared.
4. Limiting Supply


NCAA: sets schedule, official start dates and ending
tournaments
NFL: sets number of games, official start dates and playoffs.
5. Monitoring Cheating


NCAA self regulates
NFL: teams must spend on minimum, violators are fined or
loss draft picks
How can the NCAA and the
NFL measure their success?
On the field parity
 NCAA: in basketball over the past 22 years:
17 different winners in basketball, 38 teams
to the final four
NFL: Since 1993
 16 different teams played for the Super Bowl,
8 different winners, 23 of the 32 have a
chance with three weeks left
How can the NCAA and the
NFL measure their success?
Television contracts measures fan
approval.
NCAA: up 62 percent in 5 years
NFL: a new multi-billion contract with NBC,
Fox, CBS, ESPN, Direct TV worth ????
NFL Annual Television Contract
(in million $) (in million $)
Agreement
Old
New
ABC
ESPN
Monday night
550
1,100
NFC
Fox
550
Fox
712.5
AFC
CBS
500
CBS
622.5
Sunday night
ESPN
600
NBC
600
Direct TV
Total
Increase
400
2,600
44%
700
3,735
1,135
Their Asset Valuation
NCAA Balance Sheet
Statement of Financial Position as of August 31, 2004
with Aummarized Financial Information as of August 21, 2003
2004
2003
Assets
Cash and cash equivalents
$6,305,039
$2,946,475
Investments
207,754,000
199,970,089
Prepaid expenses
1,971,051
1,762,924
Receivables:
Accounts receivable
7,240,501
5,483,616
Contributions receivableother, net
157,626
1,837,990
Contributions receivablefacilities, net
52,591,639
52,848,253
Total receivables, net
59,989,766
60,169,859
Properties, net
14,142,943
15,447,826
Othe assets
1,332,324
999,660
Total
$291,495,123
$281,296,833
NCAA Balance Sheet
Liabilities and Net Assets
2004
Liabilities:
Accounts payable and
accrued liabilities
$12,434,660
Distribution payable
14,566,479
Cable television royalties payable
1,980,655
Deferred revenue and deposits
8,749,563
Bond payable—net
12,829,641
Accrued lease expense
3,317,057
Total liabilities
53,878,055
Net assets:
Unrestricted
184,086,552
Temporarily restricted
53,382,913
Permanently restricted
147,603
Total net assets
237,617,068
2003
$10,306,441
31,085,438
1,980,655
4,010,476
13,389,178
2,675,046
62,336,085
162,598,479
56,215,668
146,601
218,960,748
NFL Profit
Table 1
NFL Teams
Washington Redskins
Dallas Cowboys
Houston Texans
New England Patriots
Philadelphia Eagles
Denver Broncos
Cleveland Browns
Chicago Bears
Tampa Bay Buccaneers
Baltimore Ravens
Miami Dolphins
Carolina Panthers
Green Bay Packers
Detroit Lions
Tennessee Titans
Pittsburg Steelers
Seattle Seahawks
Profit Capacity Percent
2003
2002
69.6
94.20%
37.5
97.10%
55.5
100.60%
30.5
100.60%
44.3
99.90%
42.8
99.30%
59
100.10%
33.1
86.00%
25
101.00%
34.8
100.40%
32.1
96.50%
17.3
97.60%
23.4
97.40%
25.1
94.20%
22.2
100.40%
35.3
94.30%
6
94.10%
Table 1
NFL Teams
Kansas City Chiefs
St Louis Rams
New York Giants
Jacksonville Jaguars
New York Jets
Cincinnati Bengals
Buffalo Bills
San Francisco 49ers
New Orleans Saints
Oakland Raiders
San Diego Chargers
Indianapolis Colts
Minnesota Vikings
Atlanta Falcons
Arizona Cardinals
League
Profit
2003
24
21.8
20.2
16.6
26.5
14.2
28.5
29.4
7.8
26.1
22.5
13.6
4.1
6.4
-4.9
Capacity Percent
2002
98.40%
100.10%
98.20%
77.10%
98.20%
80.50%
92.60%
97.10%
99.20%
96.00%
88.40%
101.00%
99.90%
96.70%
56.00%
94.70%
Table 2
NFL Team Valuations in million $
1998
Washington Redskins
403
Dallas Cowboys
413
Houston Texans
New England Patriots
252
Philadelphia Eagles
112
Denver Broncos
320
Cleveland Browns
Chicago Bears
237
Tampa Bay Bucs
346
Baltimore Ravens
329
Miami Dolphins
340
Carolina Panthers
365
Green Bay Packers
244
Detroit Lions
312
Tennessee Titans
322
Pittsburg Steelers
300
Seattle Seahawks
324
1999
607
663
2000
741
713
2001
796
743
2002
845
784
460
318
427
464
329
471
557
319
532
479
472
513
337
378
506
414
407
524
405
540
598
362
582
544
508
574
392
423
536
468
440
571
518
604
618
540
606
607
553
609
474
509
551
557
534
2003
952
851
791
756
617
683
695
621
671
649
638
642
609
635
620
608
610
462
544
514
522
512
507
458
463
481
421
447
419
437
407
374
601
602
573
569
567
562
564
568
585
576
561
547
542
534
505
313
502
408
446
488
320
293
369
397
399
Kansas City Chiefs
123
353
367
412
St Louis Rams
322
390
418
448
New York Giants
288
376
387
419
Jacksonville Jaguars
294
419
460
500
New York Jets
259
363
384
423
Cincinnati Bengals
311
394
423
479
Buffalo Bills
252
326
365
393
San Francisco 49ers
254
371
379
419
New Orleans Saints
243
315
324
371
Oakland Raiders
235
299
315
351
San Diego Chargers
248
323
393
416
Indianapolis Colts
227
305
332
367
Minnesota Vikings
233
309
322
346
Atlanta Falcons
233
306
321
338
Arizona Cardinals
231
301
305
342
average growth
Data Source: Team Valuation data was found at www.forbes.com/lists/results
2004 growth
1100
173%
923
123%
905
14%
861
242%
833
644%
815
155%
798
43%
785
231%
779
125%
776
136%
765
125%
760
108%
756
210%
747
139%
736
129%
717
139%
712
120%
709
708
692
688
685
675
637
636
627
624
622
609
604
603
552
476%
120%
140%
134%
164%
117%
153%
150%
158%
166%
151%
168%
159%
159%
139%
181%
Table 3
MLB Team Valuations (in millions $)
Team
1998
2004
New York Yankees
$362
$832
Boston Red Sox*
$230
$533
New York Mets
$193
$442
LA Dodgers
$236
$399
Seattle Mariners
$251
$396
Atlanta Braves
$299
$374
San Fran Giants
$188
$368
Chicago Cubs
$204
$358
Houston Astros
$190
$320
St. Louis Cardinals
$174
$314
Texas Rangers
$254
$306
Baltimore Orioles
$323
$296
Cleveland Indians
$322
$292
Colorado Rockies
$303
$285
Philadelphia Phillies
$131
$281
AZ Diamondbacks
NA
$276
130%
132%
129%
69%
58%
25%
96%
75%
68%
80%
20%
-8%
-9%
-6%
115%
-5%
Team
Chicago White Sox
Cincinnati Reds
Chicago White Sox
Cincinnati Reds
Anaheim Angels
Detroit Tigers
Pittsburgh Pirates
Oakland Athletics
Milwaukee Brewers
Florida Marlins
Kansas City Royals
Toronto Blue Jays
Minnesota Twins
Tampa Bay D’ Rays
Montreal Expos
average growth
1998
$214
$136
$214
$136
$157
$137
$133
$118
$127
$159
$108
$141
$94
NA
$87
2004
$248
$245
$248
$245
$241
$235
$217
$186
$174
$172
$171
$169
$168
$152
$145
16%
80%
16%
80%
54%
72%
63%
58%
37%
8%
58%
20%
79%
-32%
67%
54%
Summary:
The Goal of Parity
•Gene Upshaw, Executive Director of the NFL Players
Association stated “when we started this process, there were
14 teams above the average and 14 teams below, and everyone
was close enough to keep it fair.”
•Both entities have constructed regulations that appear
contrary to pure capitalism to promote parity as a means of
accomplishing their diverse goals.
When it comes to sports, off-the-field cooperation leads to
on-the-field parity, on-the-field parity leads to more fans,
more fans leads to greater asset valuation.
The End!!