ABC The Drum

As Republicans gather in Florida and Americans tee up for football

As Tropical Storm Isaac passes over Florida, Republicans are waiting to start the stylised national convention in Tampa that will endorse a highly conservative policy platform and nominate Mitt Romney as their candidate for president.

While the convention will be avidly followed and heavily scrutinised, it is likely that most locals will be far more obsessed with the fate of their gridiron team, the Tampa Bay Buccaneers, as the new National Football League (NFL) season gets under way in early September.

Some may make the connection between these spheres, with millionaires mercilessly laying into one another, seeking victory at all cost, with every move captured on TV and cheered on by fanatical supporters.

Given the phenomenal growth and commercial success of the NFL, however, it is remarkable that its business model is rarely imitated by other industries. This is probably because the principles and practices underlying the management of America's favourite sport involve everything that American entrepreneurial culture normally disdains as 'socialist': heavy central regulation, high levels of taxation, and substantial redistribution of wealth.

In hyper-partisan, bitterly divided America, pretty much everything is treated like a 'political football' these days except, well, American football. While baseball has been known as 'the National Pastime' since the 1850s, there is little argument that the National Football League (NFL) now reigns supreme.

Not only do 180 million people watch the annual Super Bowl championship, but 25 million watched the first round of the NFL draft on TV, in which the leading collegiate players are dispersed among the 32 NFL teams, with the worst teams selecting first.

According to Forbes Magazine, the league generated $US8.3 billion in revenue in 2010, with almost half of that guaranteed for player payments under the latest collective bargaining agreement (CBA).

Over the past decade, the average value of NFL franchises has increased by 122 per cent despite the S&P 500 Index flatlining over the same period. Bottom lines are greatly assisted by the fact that many stadiums and practice facilities have been wholly or partly financed by taxpayer dollars.

Under the current contract ending in 2013, a consortium of TV networks (CBS, NBC, Fox and ESPN) will have paid the NFL a total of $US20 billion in broadcast rights. The same four networks have won the rights from 2014 to 2022, paying $US40 billion.

As a consequence, the average NFL team is now worth just over $US1 billion, with the Dallas Cowboys valued at nearly double that figure. While major market teams like the New York Giants and New England Patriots also exceed the average, the Green Bay Packers, based in a Wisconsin town of only 100,000, is the ninth most valuable franchise — and the only one that is publicly owned, with a large and diverse shareholder base. The Tampa Bay Buccaneers, representing the host city of the Republican convention, falls in the middle of the ladder, at 19th place, with a valuation of $981 million.

Even the relatively least valuable teams, such as the Buffalo Bills and the Jacksonville Jaguars, are worth more than $700 million, and always operate in the black, so teams rarely change hands. This stands in stark contrast with the other primetime professional sports in America, such as basketball, baseball and ice hockey, where most owners claim to be losing money and league offices sometimes have to step in before a new owner with deep pockets is found.

The central organising principle of the NFL is parity. All teams share equally in the national TV rights pool, as well as in other 'football-related income', including the sale of jerseys, hats and other branded merchandise, and even receive a portion of the receipts from away games. A 'hard cap' is maintained on annual player salaries, so that no team can out-spend the others and talent is more widely spread.

By way of contrast, Major League Baseball and European soccer operate according along more laissez faire lines. There is effectively no limit on player salaries and little or no revenue sharing, so that perpetually cashed-up teams like the New York Yankees, the Texas Rangers (previously owned by George W Bush), Manchester United, Barcelona and Real Madrid can readily buy most of the highest priced talent. The bestseller Moneyball was based on the attempt by a small market baseball team, the Oakland Athletics, to find a way to compete with the economic powerhouses using advanced statistical methods to identify under-rated and under-paid players.

Even NFL draws are determined on the parity principle. Since teams play only 16 regular season matches, not every team plays each other in a particular year. Schedules are partly constructed on the basis of the previous year's rankings, with teams matched against those of a similar calibre. Thus, the New York Giants' reward for being the Super Bowl champions is the most difficult schedule in the coming season, with some experts speculating that this factor might cause the team to miss out on the playoffs.

The NFL relied upon its collectivist nature in defending a lawsuit in 2010, arguing that the 32 teams constituted a 'single entity' which should be exempt from anti-trust laws. The NFL succeeded in the lower courts, but the argument was rejected by the US Supreme Court, which ruled that "concerted activity inherently is fraught with anticompetitive risk", and that while a certain amount of collaboration is required to run a successful league, NFL teams are competitors on and off the field and operate as "independent centres of decision making".

NFL owners don't seem to appreciate the irony of enjoying this level of financial success through a quasi-socialist organisation of their business affairs. A recent study found that most of the owners are major donors to political parties and candidates — with the great bulk of their largesse going to conservative Republicans.