I’m taking a bit of a break from talking about Ukraine. Viewed purely as a business, American professional sports leagues are extraordinary, for the following reasons:
- THEY’RE CARTELS: You can’t just invest a lot of money in players and facilities and join the club; you have to be welcomed in by the other owners.
- THEY DEPEND ON A REASONABLE DEGREE OF COMPETITIVE BALANCE: While GM, for example, would do very nicely without Ford, every game involves two teams. If there is no suspense about the outcome, because one of the teams isn’t a credible opponent, there is no reason to watch.
- THEY ARE HEAVILY SUBSIDIZED BY THE PUBLIC: At a minimum, this involves parking, road improvements, and mass transit for the fans. More typically, the local government pays for a large chunk of the stadium, too. Cities are willing to do this because fans support local bars and restaurants and because sports teams are good entertainment and morale boosters for local residents.
As a result of these unusual features, all professional sports leagues are characterized by a large element of corporate socialism. Just how much varies from league to league. I will discuss the different models tomorrow.