Let’s call it what it is: the NFL is one of (if not the most) competitively balanced league in the world.
Competitive balance is measured by a number of things, but primarily, the number of teams who have won championships recently and teams outcome on the ladder year-to-year. For instance, a perfectly balanced league would have 20 different winners over 20 years. It may also be considered perfectly balanced if the ladder reversed year to year (i.e. those who finished in the top eight one year would finish in the bottom eight the next year). Of course, that’s next to impossible given all the factors involved but leagues establish mechanisms for making this more likely because no one wants to see one team dominate year after year – it’s bad for business.
Now the AFL has a “problem” (in quotes because, let’s face it, there are bigger problems in the world) because they don’t have a very balanced league, especially lately. Come clubs, like Geelong, Collingwood, and Hawthorn have consistently finished in the top eight/made it to the finals while other clubs, like Port Adelaide, Melbourne and the Bulldogs consistently finish in the bottom (NOTE: I don’t include GWS and Gold Coast in that list because they’re newbies – they’re not going to dominate right off the bat and no one expects them to).
So what do they do? Apparently, they want to go over to the US and meet with some of the NFL’s head honchos and have a chat about how they got to be so awesome. In fact… they’re already there. That’s all well and good but is a trip to the US really necessary? Probably not – the information is readily available online and I can tell you the answers to your questions.
How does the NFL maintain competitive balance? Like this… (As usual, this post will be long since it’s an economics post – but I’ll try to keep it short and sweet)
They have a salary cap. This is the obvious one, right? A salary cap is the limit a team can spend on player payments which usually include wages, signing bonuses, and… everything else. This ensures that all teams are worth the same amount of money no matter how rich it is. The NFL has a hard cap, meaning there are no ifs, ands, or buts about it – the limit is the limit (by contrast, for example, the NBA has a soft cap which means there are ways to get around it and pay your players more such as amortizing signing bonuses). Furthermore, they have a salary floor which is the lowest amount a club can spend on player payments. For 2013, the salary cap is $120 million and the floor is 88.8% of that (approx $106.6 million).
They have a reverse order draft. While I’m pretty sure everyone reading this blog knows what a draft is… in case you don’t (I’m looking at you, baby sister) a draft is where teams pick unsigned, usually rookie, players at the beginning of the season. A reverse order draft means the club that finished at the bottom of the ladder to pick first, the club that finished second-to-last to pick second and so on and so forth… Therefore, the club that finished number one picks last. This allows clubs that didn’t do so well last year to get the best players for their teams, since they get first choice.
They have a practically-perfect farming system. The NFL has the ideal environment from which to pick players. You may have heard of it… it’s called college football? *sarcasm* This is a great system because all the best players come together to play (you rarely find any great football talents who don’t play at some college level)… and they come together often. Pre-season, regular season, post-season and bowl games give scouts plenty of opportunities to evaluate athletes. Not to mention, a lot of the work is done for them – colleges and universities always keep stats on their players and all that information is usually available online. Otherwise… make a phone call. Even more beneficial is the relationship that scouts develop with college football coaches who can tip them off about a great player or advise them to stay away from someone with an attitude problem, for example.
… and that farming system provides them with hundred of players. There are… SO. MANY. college football players, it’s unreal. There are three different division based on size, then divisions based on location and there are thousands of universities across the US. It’s not as though it’s slim pickings (although teams usually compete for the top 20-50 players). Bar that, there are so many options to choose from. If you can’t find what you’re looking for then… you’re a terrible scout.
They can’t have one star player. This isn’t really a mechanism that has been put in place by the league so much as it just… exists. But one of the great aspects about NFL is that one player can’t dominate the game. Sure, you have stars… Tom Brady, Donovan McNabb, Peyton Manning… yes. They’re great players. But you can’t win a game with one player. This means that clubs can’t just get lucky by drafting one amazing player. It means all clubs have to spend on all types of talent and create depth in their benches (meaning if someone gets hurt, they’re got a backup). They also have to work more on creating a team mentality that focuses on working together rather than just depending on one person (Kobe Bryant and the LA Lakers are an example of one player being able to completely change a game).
They have free agency. Contracts are not guaranteed. Simple as that. Players can go to the team with more money and clubs can get rid of players who are deadweight. This gives players some of the power which allows them the option of winning a championship, no matter who drafted them. This is not ideal for teams, to be sure, but it’s fair to players.
They have a single-game elimination. Unlike the MLB, NBA and NHL, the NFL has a single-game elimination in the post-season, meaning one loss and you’re out – no chance to get that Super Bowl ring. This increases the chance of upsets/lower ranked teams beating higher ranked teams. It increases randomness. What are the chances that a lower-ranked team can outperform a higher-ranked team over seven games? Slim to none. Upsets, and uncertainty of outcome, make things interesting and improve competitive balance.
They have revenue-sharing. This is probably the biggest one and one of the mos controversial. Revenue sharing is… exactly what it sounds like. Teams pool revenue and it is redistributed equally among teams. It’s a case of taking from the rich and giving to the poor. Think of it the way you think of taxes: richer people are charged more because they earn more. And those people who don’t earn as much need money to survive, so the government takes the taxes that the rich people pay and gives it to those people (depending on your political persuasion you can see why some economists are for revenue sharing while others are against it). Right now, the NFL shares revenue from their broadcasting agreement and does a 60/40 split on ticket sales, with 60% going to the home team. All other revenue (merchandise, luxury box sales, concession) is kept by the team that earns it. It’s one of the best revenue sharing systems at the moment.
Whew. You can see why the NFL is balanced – they’ve put a lot of work into creating game and implementing tools that help to maintain competitive balance.
And how does the AFL compare? Well. That sounds like a post for another day, doesn’t it? I’m sure you’re tired. Because I am.