SHIN SPLINTS REDUX – Parity or Dynasty

This new series is guest blogged by Doug Logan.

Doug Logan is an Adjunct Professor of Sports Management, at New York University.

He was the CEO for USATF from 2008 until September 2010.  He was also the CEO, President and Commissioner for Major League Soccer from 1995 to 1999.  To read more about his background and involvement in Track, Soccer, Rugby and the Music industry, read my Freelap Friday Five Interview

This is his 14th article. Click here for his entire series.

SHIN SPLINTS REDUX

Parity or Dynasty

The late pre-eminent American sportsman, Lamar Hunt, used to have the philosophy that early August was the best time to get football and soccer entrepreneurs to agree to things. I can remember him saying that immediately before a season commences,”…everyone is undefeated; everyone likes and gets along with his competitors.”

This month will see the opening games played by the two richest and most powerful sports combines, the National Football League (NFL) in the US, and the Barclay’s Premier League (BPL) in England. These leagues enjoy the highest sporting viewership, strongest per game attendance and immense marketing might in their respective countries. The franchises that comprise these sports business juggernauts dominate the rankings of most valuable teams as measured by the worth of their assets. The 2013-14 season will see the proliferation of BPL matches on television in the US due to a historic arrangement made by NBC.

Despite their comparable strengths in their respective home markets, these enterprises have significantly different business and competitive models. The BPL almost oozes tradition. They play their matches in modern stadia but cater to an audience that is very tribal and team-loyal. Rooting interests are passed down from generation to generation; chants and songs remain the same year after year; former star players are lauded as warriors. The BPL has no championship game; the winner in the team standings at the end of the season is deemed the champion. There is little sharing of commercial revenue, no cap on player salaries, and the law of the jungle applies to the signing of new players.

This model has produced a dynastic system where one can be sure that certain powerful and/or wealthy teams will be at the top of the standings at the end of the year. Manchester United, Chelsea, Liverpool, Arsenal and Manchester City will likely contend for the crown, with the possible intervention of an interloper or two. Fans of the also-rans become motivated to attend by the possibility of knocking off Goliath or achieving a moral-victory draw.

The NFL, on the other hand, seems obsessed by the goal of competitive and fiscal parity. Former Commissioner Pete Rozelle convinced the owners to enter into a novel revenue sharing agreement over 50 years ago. This compact assures each team over $100M in television and marketing revenues each year before they sell a single ticket. There is a hard salary cap that has been negotiated with the NFLPA, the player’s union. This prevents the wealthiest teams from acquiring and stockpiling the majority of the best players. Finally, new players are dispersed through a draft system where the teams with the poorest records draft first and the champion is last.

This quest for parity has worked. In the last 10 years there have been seven different Super Bowl champions, with only the New England Patriots, New York Giants and Pittsburgh Steelers winning twice. More importantly, there is a phenomenon known as “last to first”; a team that goes from last in their division to first from one year to another. This has occurred 34 times in the past 45 years and 15 times in the past 10 years. The most recent team to accomplish this feat was the Washington Redskins in 2012-13.

As an aside, the aforementioned Lamar Hunt is credited with inventing the name Super Bowl. The first two such contests were named the “AFL-NFL World Championship Game”. Hunt, the owner of the Kansas City Chiefs, and one of the most powerful owners of his time, hated the name. One day in 1968, at his home in Dallas, he noticed his sons playing with a small rubber ball that had an incredible high bounce. He asked them what they were playing with and they answered that it was called a “Superball”. He then thought to himself, “Superball…Superball… ah, Super Bowl”. Thus, the naming of one of the most valuable sports properties ever.

When we formed Major League Soccer (MLS) in 1995, we had a vigorous debate on the issue of parity versus dynasties. Kevin Payne, the able General Manager of DC United at the time, forcefully suggested that we should follow the English traditions and make room for dynasties. In fairness, I should point out that his DC United teams, coached by Bruce Arena, in fact won the first two MLS Cups in 1996 and 1997. The pendulum at MLS, however, swung the other way. Our business model, the “Single Entity” ,was extraordinarily centralized and paternalistic. The league owned all the teams, all the trademarks and contracted with all the players. Players were distributed to each local team by the league and the league made all the national television and sponsorship deals. This was the antithesis of the English “free market” system.

Bill Simon, the financier and former Treasury Secretary was approached about making an investment in the league. After looking at the Offering Statement he responded, “I’m not investing in this. It’s communism.”

Both these systems appear to work well in their respective markets. At the end of the day, if you have an exciting product, market it aggressively and treat it respectfully you can achieve success with the sporting public.