August 24, 1999
MEDIA CONTACT: Pat Caraher, 509/335-1247, [email protected]
STORY CONTACT: Rodney Fort 509/335-1538, [email protected]
PRO TEAM SPORTS ARE MONOPOLIES, ECONOMISTS SAY
PULLMAN Wash, --Professional team sports leagues today operate as cartels in the form of monopoly leagues. Unlike other industries, they are largely immune from the free play of competitive forces.
"The monopoly power of leagues is at the root of essentially every problem that plagues pro team sports, from competitive balance to out-of-sight player salaries to the blackmailing of cities," says Washington State University Professor Rodney Fort. He and fellow economist James Quirk, retired California Institute of Technology professor, are co-authors of Hard Ball, The Abuse of Power in Team Sports. Published earlier this year by Princeton University Press, the book examines abuses in all four major pro team sports--baseball, basketball, football and hockey.
Fort and Quirk note they are not alone is seeking solutions. Others include consumer advocate Ralph Nader, Minnesota's attorney general Hubert Humphrey III, and U.S. Sen. Patrick Moynihan.
Legislative action, lawsuits and public relations are largely ineffective ways to correct abuses, according to the authors. They recommend "entry into the industry by outside firms seeking a share of the excessive profits from the controlling monopolies. The heart of the business structure of pro sports leagues is the "exclusive territorial franchise" assigned to the owner of each member team, and the owners' ability to preserve league-wide market power, Fort says.
"The monopoly power exercised by leagues has been used to bring pressure on local governments around the country, with threats to move teams if stadiums or arenas are not built," the authors say. Between 1950-97, 47 pro sports franchises changed cities. Thirty-four new stadiums or major renovations of existing facilities came online between 1992-98. Through "sweetheart" rental agreements in pro team sports, almost all the cost of facilities are shifted to the tax-paying public, while the teams reserve all or most of the revenues. How are sports leagues able to sustain their monopoly power? They restrict the number of franchises in order to increase league-wide profits, as well as the franchise values of member teams. The leagues have been able to expand sufficiently to deter entry. Yet, they preserve enough vacant sites to make the threat of moving teams believable. "The current team is the only game in town," says Fort, "and the political support for its presence is practically guaranteed."
If there were active rival leagues, any city that could support a team in that sport would find a league willing to locate in the city. There would be no need for public subsidies or intrusion of politicians or the political process into the picture.
"Given the market power that does exist, local politics typically isn't able to overcome the advantages that leagues have in the stadium game," the author says, "and Congress has no interest in limiting those advantages, either." The authors favor eliminating the monopoly power of leagues. Such action would eliminate the sources of revenues that provide for high player salaries, and also would do away with the lack of competitive balance in a league due to the disparity in drawing potential among league teams. The ultimate goal is to transfer power from the insiders, owners and players alike, to the outsiders, fans and taxpayers. To do this, the authors suggest breaking up existing leagues like the American League and National League in baseball, the National Basketball League, the National Football League and the national Hockey League along conference (division) lines and make each a separate, new league.
The book contains case studies, anecdotes and a wealth of statistical data, including team payrolls, average salaries and operating income, and media revenue. The authors devote chapters to pro sports' main protagonists--media, unions, players, owners, politicians and leagues.
On the positive side, Fort and Quirk find most attractive in professional team sports the fact that championships are decided in open competition. The team that plays the best the longest wins.
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