For the reasons set out in my last post, there is nothing like a perfect free market operating in any American professional sport. However, there are a range of options for the economic model, with the following two as the extremes:
- PURE SOCIALISM: In this model, all revenues are divided equally among the clubs, including gate receipts and the proceeds from any local TV contracts. Less successful teams are given advantages in the draft. There is a salary cap, but an enforceable floor, as well. Minimum salaries for players are relatively high. Free agency opportunities are typically limited.
- CAPITALISM: This isn’t a genuinely free market, but there are no salary caps, and revenue sharing is limited at best. Most revenues come from gate receipts and local TV contracts. There is no salary cap, and no floor. Free agency is permitted on a fairly liberal basis.
The socialist option emphasizes competitive balance and the welfare of the average player; the more capitalist option favors large market teams and a handful of outstanding players at the expense of the masses. How do these translate to reality in America’s professional sports leagues? That will be the subject of one of tomorrow’s posts.