The NFL is being devoured by its own economic model.

[Direckshun]

The whole story is good, but I bolded the indispensible parts of the story.

https://www.sbnation.com/2017/9/19/1...s-owners-money

The NFL is being devoured by its own economic model
by Spencer Hall @edsbs
Sep 19, 2017, 8:00am EDT

This is a very boring, simple explanation as to why the NFL’s ratings are declining. It is not an opportunity for you to shoehorn in your feelings about Colin Kaepernick protesting the game. No one really cares about your feelings about Colin Kaepernick’s protest, because if you are the kind of person who gets really offended by Colin Kaepernick’s protest, then your feelings in 2017 are the most boring and predictable thing about you, and telling on you in a deeply unflattering light.

The simpler and also boring systemic problem with the NFL that might actually explain something is its success, and how that success made the ownership class in the NFL fat, lazy, and locked into a business model they have no real reason or incentive to change, even with falling TV ratings.

The absence of real risk of failure is a start. Stakeholders in the NFL cannot lose—at least not under the league’s current structure. Owners split money from the league’s massive TV deals and other media revenue streams. That stream is so dependable, so huge, and so guaranteed that it’s done what large, intractable pools of cash have done since the invention of markets. It has altered and distorted the very thing that created it, and broken the basic exchange between consumer and seller that made the NFL successful in the first place.

It’s a form of laziness, and a special kind different from the standard laziness in the NFL. Laziness bred from prosperity isn’t a new problem for NFL ownership and management. For every old-school Rooney or Mara or Hunt family intent on making at least an honest show of competing, producing a good product, and paying at least paltry attention to the demands of the consumer, there has been a Culverhouse or a Smith, owners who ran their franchises with the least possible effort and expenditure. The slumlords of the NFL took their rent, often without providing anything close to a finished building.

Note: This may be literally true of the 1970s and 1980s Buccaneers, whose stadium sort of looked like concrete that never set exactly right, so they just went with it and said, “yeah, it’s supposed to be shaped like a melted frisbee.” What you call a mistake, the 1970s called architecture.

That approach towards maximizing your dollar with the bare minimum of effort became more sophisticated over time. As the league’s revenues boomed, they became something less like points of civic pride run as passion projects by the locally wealthy, and something more like attractive investment properties with a promising rate of return for billionaires — particularly those billionaires who entered the NFL as strangers to the league, but as intimate familiars of a corporate culture dependent on squeezing every profitable dollar, and trimming every wasteful one from the budget.

For instance: The legend of Dan Snyder tells a story of someone who was “passionate” about the Washington franchise on a personal level. It sometimes leaves out his ruthless economizing of the franchise, a focus on the bottom line interrupted periodically by splashing free agent signings to keep fans semi-interested in the team. That he keeps them in the worst stadium in the league, charges for everything short of oxygen, and rolls out a consistently mediocre product doesn’t matter: His great gift as an NFL owner, after nearly 20 years, has turned out to be a deep understanding of knowing exactly how little actual quality he could slip into the product without breaking the customer’s dependence completely.*

*Side note: Dan Snyder would be an amazing MDMA dealer.

That level of sophisticated coasting in the name of profitability became a laudable thing for owners. Jerry Jones, in particular, emphasized profitability and value for the league, leaning hard on new television contracts, stadium deals, corporate tie-ins, and whatever else he could grab in order to boost the value of the Cowboys to its limit. The momentum for moving the Raiders — one of the league’s oldest recognizable brands, with one of its most insanely loyal fanbases — from Oakland to Las Vegas came largely from Jones, and mostly for the holy grail of profitability. Jones is the crowning example of the NFL’s gargantuan gains in the financial weight room: Since buying the Cowboys for $140 million in 1989, Jones has grown the value of the franchise to $4.2 billion. The team makes a publicly declared $227 million a year.

The NFL was able to do this because, at a certain point, wealth outstrips the power of the assets that created it. In 2017, the league split over $7.8 billion between teams. The money and the success the league enjoyed became so huge that they attained their own gravity, and became separate from the main product that built the league in the first place: professional football.

That separation of the product from the wealth it creates should be familiar to any American consumer. A large company takes control of an entire economy, becomes so large it cannot fail, and thus has no real incentive to do anything but seek rent on that endless, belching pipeline of cash. The product produced generally does not improve, and often without the pressure of competition doesn’t have to improve at all. It might even get worse, or at least watch things like customer service and satisfaction take nosedives.

It’s not exactly a monopoly, but it’s also not-not exactly a monopoly, either.

The value in that kind of behavior doesn’t come from the product. That flatlined in terms of utility a long, long time ago. (The Patriots remain unusual for not only trying, but trying intelligently to produce a good product.) An NFL owner no longer needs that to continue to boost the value of the franchise using anything that happens on the field. Value comes from getting a new stadium someone else paid for, moving the franchise to a more valuable piece of real estate and doubling the value of the franchise overnight. Value comes from leveraging and re-leveraging your existing assets, not by creating anything new.

If you see an NFL franchise as just another asset to be maximized and squeezed for every dime, being good at football — i.e. producing a good product — doesn’t matter. It’s not even rational to put effort towards anything but “value creation,” i.e. shuffling around pieces of the franchise until they sit in the most profitable positions. The Rams doubled their value overnight by leaving St. Louis and moving to L.A. They are a miserable football team run by a despised owner playing in an empty stadium, but the Rams could care less. The fourth most valuable team in the NFL sucks by design, and shines bright enough on the balance sheet to eliminate any real concerns about how bad the product is on the field.

The Rams, the 49ers, and the Washington team are all in the top 10 most valuable NFL franchises. There are other reasons for that besides their efficient disinterest in making a good on-field product — the real estate and cost of doing business in expensive places like L.A., the Bay Area, and D.C. being a huge one — but the lesson for anyone acquiring an NFL team as an asset is pretty clear. Strip the place to the frame, gorge on TV money, and only do the bare minimum to keep people interested.

That distancing of the product — and its overall quality as an experience — from revenue makes for a dysfunctional exchange between the consumer and the producer.

What does that mean, exactly? It means that because the Rams don’t have to worry about quality, they can slog into the Coliseum, wait for a new stadium to be built, and bill themselves as a content company while playing in front of hundreds of bored fans. It means that being good, for a lot of teams, is an accident, or a periodic spasm to regain fan interest spaced between long troughs of minimal effort.

*The NFL is you at work! Congrats, you too could be America’s most successful sports enterprise.

This explains why the NFL now functions less like an open market business, and more like a cartel. (Not a cartel exactly, economics pedants, but cartel-ish.)

A cartel really doesn’t care what you want. It knows what you need, and has it. All behaviors from that point forward only protect the cartel and its control of supply and delivery. There will be no innovation, no new ideas not in service of that maintenance of revenue streams, and no serious competition between cartel members. In fact, they’ll all cut the quality of the product wherever possible to take home the most possible cash.

The NFL isn’t alone in this in sports, and not even in football, either. The disease of guaranteed revenue has bitten college football, too. Texas, the most profitable athletic program in the nation, is a prime example of the strange incentives huge profits can create within a sports franchise. The more money the program makes, the less consistent or important the quality of the product has been to the priorities of those at the top running the cash machine.

But as the most popular sport in America — and one that pools profits — it is the most visible, and most visibly prone to this leveling by the demands of the spreadsheet. Even a distancing by slight degrees, like turning your basic exchange from one of fans opting into an experience into one of a television product given to captive subscribers, is enough to change how ownership behaves.

There is a structural reason live audiences aren’t even necessary anymore: Ticket sales make up such a shrinking percentage of team revenue that the Rams and 49ers might as well play on sound stages, if you think they don’t already. The distance between the sport and the mammoth business it built will only grow, and in that space will be those who loved the NFL, but now watch the condensed version of the NFL on RedZone, and those who make it begrudgingly while looking to the next successful investment opportunity.

That next something might be something like eSports, which the owner of the Patriots just dropped $20 million on via investment in an Overwatch league. When will we know eSports made it? When there are commercial breaks after load screens, fights over gaming arenas being paid for with public money, and a class of owner looking for nothing more than the next grandiose and guaranteed font of cash. eSports is lucky, for the moment: Kraft seems to enjoy making a quality product. It’s when the Haslams and Stan Kroenke* show up that gamers should panic.

*Okay, go ahead and panic, gamers. Stan Kroenke is already there.

[Calcountry]

I think the NFL's real problem is structural. The median age of its audience is graying big time. Young people, some call them "Millennial's", just aren't watching.

[tk13]

Originally Posted by Calcountry

I think the NFL's real problem is structural. The median age of its audience is graying big time. Young people, some call them "Millennial's", just aren't watching.

I'm interested to see how this develops. Millennials get blamed for killing everything, but it's often overblown. I'd like to see what millennials are actually watching. It's pretty obvious soccer has gained in popularity. And a lot of MLB and NBA teams are now selling "pass" style tickets, where you pay less than a season ticket but get guaranteed tickets to every game, delivered to your phone on gameday. I saw the Dolphins were offering a cheaper standing room only ticket this year to try and pull some of that audience in.

[Discuss Thrower]

Originally Posted by tk13

I'm interested to see how this develops. Millennials get blamed for killing everything, but it's often overblown. I'd like to see what millennials are actually watching. It's pretty obvious soccer has gained in popularity. And a lot of MLB and NBA teams are now selling "pass" style tickets, where you pay less than a season ticket but get guaranteed tickets to every game, delivered to your phone on gameday. I saw the Dolphins were offering a cheaper standing room only ticket this year to try and pull some of that audience in.

If people younger than 35 aren't playing fantasy football at a rate close to the age bracket older, that would be a warning sign.

[Calcountry]

Originally Posted by tk13

I'm interested to see how this develops. Millennials get blamed for killing everything, but it's often overblown. I'd like to see what millennials are actually watching. It's pretty obvious soccer has gained in popularity. And a lot of MLB and NBA teams are now selling "pass" style tickets, where you pay less than a season ticket but get guaranteed tickets to every game, delivered to your phone on gameday. I saw the Dolphins were offering a cheaper standing room only ticket this year to try and pull some of that audience in.

Have you looked at Disney stock lately? DIS ticker.

ESPN is in free fall. They talk of cord cutters, but my daughter and son are, if I can borrow a cheesy line from a cheesy Disney sports movie that was shamelessly pimping their new hockey team, they are "NEVER WAS". As in, they never had a cord to cut. They are over the top consumers of content, all day, every day. No cords to cut, cause they never subscribed to ESPN in the first place.

Anecdotal to be sure, but there are sure to be more like them.

[Reerun_KC]

Originally Posted by mnchiefsguy

Drop Thursday night football. Instead just keep the MNF doubleheader all year long.

Absolutely. Yes!


Sent from my iPhone using Tapatalk

[tk13]

Originally Posted by Discuss Thrower

If people younger than 35 aren't playing fantasy football at a rate close to the age bracket older, that would be a warning sign.

Yeah, and I don't feel like that's happening, but maybe it is. I get the feeling a lot of people enjoy fantasy football more than the actual games. For some people the NFL only exists to create statistics for fantasy teams.

[Bugeater]

Originally Posted by tk13

Yeah, and I don't feel like that's happening, but maybe it is. I get the feeling a lot of people enjoy fantasy football more than the actual games. For some people the NFL only exists to create statistics for fantasy teams.

I ****ing hate those people

[Calcountry]

Anyone remember the movie, "The last boyscout". The opening music was "Friday nights a good night for football", with the opening scene having a half back making sure he scored a touchdown by pulling out a gun and opening a few holes.

One of my favorite football scenes in movies. lol.

[tk13]

Originally Posted by Calcountry

Have you looked at Disney stock lately? DIS ticker.

ESPN is in free fall. They talk of cord cutters, but my daughter and son are, if I can borrow a cheesy line from a cheesy Disney sports movie that was shamelessly pimping their new hockey team, they are "NEVER WAS". As in, they never had a cord to cut. They are over the top consumers of content, all day, every day. No cords to cut, cause they never subscribed to ESPN in the first place.

Anecdotal to be sure, but there are sure to be more like them.

There's little doubt of that. There's a whole other conversation you could have here about young people and their ability to find well paying jobs, student loan debt, etc. And whatever you make of that, it's something that exists. You're eventually going to have to get people who spend 8 bucks a month on TV to drop hundreds on Sunday Ticket.

Plus, there are a lot of people who just genuinely don't give a crap about live TV, even with an antenna. Netflix has created a system where you don't need live TV to be entertained, and there are so many shows being created by TV networks that you can never watch them all. Plus you can watch them whenever you want, without commercials. You aren't bound by a noon kickoff time, and you don't have to sit through 6 minutes of commercials sandwiched around a kickoff that sails through the endzone for a touchback.

[Discuss Thrower]

Last night was kind of a bell ringer on commercials: the shitty thing about them isn't the length of time they take up as a portion of the broadcast.

It's the ****ING FACT IT'S THE SAME 4-5 COMMERCIALS THAT ARE ANNOYING AS ALL MOTHER OF ****.

ESPECIALLY THAT BUTT****ING AMAZON COMMERCIAL WITH THE TWO BIT SARAH MCGLAUGHLIN VOCALIST AND THE ****ING GOLDEN RETRIEVER BEING TORTURED WITH A FAKE ASS LION'S MANE.

[Calcountry]

Originally Posted by tk13

There's little doubt of that. There's a whole other conversation you could have here about young people and their ability to find well paying jobs, student loan debt, etc. And whatever you make of that, it's something that exists. You're eventually going to have to get people who spend 8 bucks a month on TV to drop hundreds on Sunday Ticket.

Plus, there are a lot of people who just genuinely don't give a crap about live TV, even with an antenna. Netflix has created a system where you don't need live TV to be entertained, and there are so many shows being created by TV networks that you can never watch them all. Plus you can watch them whenever you want, without commercials. You aren't bound by a noon kickoff time, and you don't have to sit through 6 minutes of commercials sandwiched around a kickoff that sails through the endzone for a touchback.

Precisely, so what we have here, is a marketplace that is in flux looking for a new equilibrium, which, due to the long term nature of TV contracts and player salaries will take some time to come into balance.

I honestly cannot see spoiled on air talent protesting against over half their paying audience and NOT having the market react, this in addition tot he other structural long term issues that this market is dealing with. There is an oversupply, as you stated, of substitute product in the entertainment industry.

[tk13]

Originally Posted by Bugeater

I ****ing hate those people

Yeah, it's pretty infuriating. But all these channels have Fantasy Football experts and are running player stats across the bottom of the screen all day. It's obvious where the $$ is.

Plus all these sports channels have fantasy football leagues on their website. So they can make money off of it too.

[Calcountry]

Originally Posted by Discuss Thrower

Last night was kind of a bell ringer on commercials: the shitty thing about them isn't the length of time they take up as a portion of the broadcast.

It's the ****ING FACT IT'S THE SAME 4-5 COMMERCIALS THAT ARE ANNOYING AS ALL MOTHER OF ****.

ESPECIALLY THAT BUTT****ING AMAZON COMMERCIAL WITH THE TWO BIT SARAH MCGLAUGHLIN VOCALIST AND THE ****ING GOLDEN RETRIEVER BEING TORTURED WITH A FAKE ASS LION'S MANE.

Which is why I only watch Free Chiefs games about an hour behind live. zap all the commercials and half time political commentary.

[Pablo]

Originally Posted by Calcountry

Anyone remember the movie, "The last boyscout". The opening music was "Friday nights a good night for football", with the opening scene having a half back making sure he scored a touchdown by pulling out a gun and opening a few holes.

One of my favorite football scenes in movies. lol.

No, you're probably one of a few people that remember that scene!

[BlackOp]

If I grew up in the real-time internet generation...I wouldn't give a flying **** about sports. They had their place in the 80's-early 90's. There was nothing else to do. It's not Hatfields vs. McCoys anymore.. the geographic rivalries arent important to them. They are playing video games with people from Taiwan, China and Australia...live.

They think sports are stupid...and for the geriatric crowd.