FanPost

Professional Football - Is it a bubble or ponzi scheme?


The professional football has enjoyed steady revenue growth and increasing popularity.  Each year, there are new ways to sell the this product, it's teams, stadiums, and the players to the fans.

There has never been a real 'recession' in the pro football product.  It has never downsized.  The economics of 2000's has exposed us to several major bubbles with real economic consequence.  Throughout recent economic downturns, pro football has become a more expensive product.  A closer look is required at what is going on...

The super sports agents are smart.  They are able to assess market value of players using current and future revenue streams.  Salaries continue to ramp up.  Rookie contracts now exceed the value of what a football stadium used to cost in early 1980's (Metrodome initial cost was only $68 million!)

A revenue stream which gets bigger every year comes from television and cable television.  Internet streams are now being added to the mix.  Advertisers want ratings and viewers for the quality pro football product.

What's going on is a very simplistic picture.  Perhaps this assessment is incorrect and would welcome feedback for a more accurate picture.

Pro Football administration & Owners can always 'bank' on increased revenue.

Players can 'bank' on increased salaries because of upward growth in pro football revenues.

Competitive broadcast media channels end up paying more to carry the product, which in turn enables the owners to 'bank' on the media.

Do we have a bubble here that's ready to pop in current state of disharmony?

or

Do we have an elaborate entertainment ponzi scheme with each party counting on revenue increases in tomorrow, which helps pay for the bills and debts of today? 

 

According to Associated Press, 2005 all professional football revenues was $6.49 billion.  Things have ramped up to a $8.88 billion pool in 2009, or approximately an 8% increase every year.  Assuming this rate of increase to 2020, all revenues could expand to $20.59 billion per year making today's deals affordable because everyone can 'bank' on tomorrow with a rosy 8% return.  A major halt in the payment cycle can turn this house of cards into a self-destructive cycle to make payments on debt obligations to players and stadium financing.  Everyone's investment in pro football will be burned.

Either way, bubble or ponzi scheme - it is apparent that things are out of control and full of dis-trust.  The professional football is not too big to fail and will not require a bail out.  A new reality will set in with lawyers soon to be claiming a portion of the multi billion pie to keep things moving and proper debt settlement of existing contracts. 

I'm not sure if pro football can afford a real 'recession' or that the economics can afford to double everyone's salary in 10 years with an 8% growth rate when the larger economy is growing at a low inflation or stagnant rate.

Something has to give and the burden does not belong on the fans.    The last work stoppage in 1987 lacked two major benefits we have today:  fan awareness and participation via the internet or audience growth explosion via cable or satellite.  These factors contributed to an unique fantasy football experience, an entertainment parallel universe to pro football.  Fantasy footballers greatly benefit from the continuation of today's team and roster storylines or it is fundamentally altered in re-forging a new emotional connection to the game.

The message is simple.  The professional league has to respect fans with continuity in the pro football game.  Settle differences to grow the game, or the undercurrents of a bubble or ponzi scheme will trigger a 'pro football recession' and reduce it to an affordable economics scenario with full financial transparency.  If there's real risk and loss of viewers and fans for a lower quality or re-organized product, why should the media channels pay a premium price in face of such ? 

The world is a much smaller place today with everyone being more interconnected.  The tragedy and loss in Japan now totals a staggering $250 billion and counting makes what we're dealing with pocket change.  We are fortunate to have an entertaining professional football league that can capture nearly 110 million viewers for it's championship.  Taking the game for granted with a sense of entitlement risks everything.  Everyone is all 'out' for resolution in the legal system spells bad news. 

I've been a Vikings fan since 1967 and am disappointed to see cooler heads are not prevailing in this matter.  We've had bubbles and ponzi schemes burst in the past 10 years.  Seriously, are we looking at one here where everyone is becoming co-dependent on increasing revenue projections?  What will happen to the league when in a given year football economics is only able to muster 4-5% growth and needs 7% to stay in business?

This FanPost was created by a registered user of The Daily Norseman, and does not necessarily reflect the views of the staff of the site. However, since this is a <em>community</em>, that view is no less important.

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