America's Sports Monopolies
Why do our professional sports leagues operate they way they do?
In both English soccer and the leading American professional leagues, owning a team is a status symbol. Team owners sit in the arena’s or stadium’s best luxury box or court side; they dispense choice tickets to celebrities and friends; they are the face of the franchise; they raise championship trophies above their heads on television at the end of a successful season; and they make important decisions about managers and players. In English soccer we know owning a team is a status symbol because England’s Premier League soccer teams are notorious for losing money.
When Ryan Reynolds and Rob McElhenney purchased Wrexham FC in 2020, they expected to lose money, which is why they created the Welcome to Wrexham television documentary. The documentary had the potential to offset their losses, and has certainly succeeded in doing so. Reynolds and McElhenney bet that the joy of sitting in the owners box during a Wrexham victory, with a full stadium singing, surrounded by their celebrity wives and friends, would be worth any remaining losses the documentary failed to cover. Because owning a team confers status, and people are willing to pay for status, basic economics suggests that, over the long run, owning a professional sports team should result in a monetary loss. And this monetary loss should be equal to the gain in status owning the team is perceived by its owner to convey. This is exactly what occurs in English soccer as well as numerous other sports leagues around the world. Sports fans welcome this arrangement, as it is one of few occasions in modern life in which the extremely wealthy spend their money in a way that benefits the many. What could be better than an owner spending their own money on better players for your hometown team in sums that far exceed revenue?
In the United States, owners of Major League Baseball (MLB), National Football League (NFL), and National Basketball Association (NBA) franchises do not lose money in the long run. They almost always make money in the long run. The business arrangements of the leagues are designed for owners to make an operating profit each year and for the value of their club to increase each year, which benefits the owners when they sell the team. The leagues achieve this via a variety of anticompetitive strategies, including salary caps or luxury taxes, revenue sharing, and restrictions on the number of teams competing in the leagues. Mark Cuban purchased a majority stake in the Dallas Mavericks in the year 2000, for an amount that valued the club at $285 million. In 2023, Cuban sold the stake at a valuation of $3.5 billion. His massive profit is not unusual. Team owners win twice: year over year via operating profits — though variable, the NBA team average, to pick an example, is usually in the $20 million range — and at the time of sale due to higher valuations.
Here in America, we bestow the same status advantages on team owners as English soccer does, but require none of the financial sacrifice. MLB/NFL/NBA owners sit in the best luxury boxes or court side; they lift championship trophies on television after a successful season; they take credit for high profile decisions; they give choice tickets to friends, celebrities, and business associates. Rather than the extremely wealthy engaging in behavior that benefits the many (i.e., spending their own money to improve team performance), we have the reverse: we ask the many to sacrifice so that the extremely wealthy can get a bit wealthier. We pay higher prices than we should for tickets. Few of our cities get MLB/NFL/NBA teams, and those that do are frequently coerced to provide public subsidies for stadiums and infrastructure. There are no second or third or fourth tier teams that are the heart and soul of local communities, as is the case for Wrexham and so many towns in England and Wales.
MLB, the NFL, and NBA are run by what should be called “cartels”. Per Merriam Webster, a cartel is “a combination of independent commercial or industrial enterprises designed to limit competition or fix prices”. The teams in these leagues are independent commercial entities, and they explicitly limit competition in a number of ways. The billionaire Michael Bloomerg could not, for example, sign the 15 best basketball players in the world, field a team in New York, build a stadium for that team, and then compete in the NBA; the NBA would not allow his team to join the league. Rob Walton, the Wal-Mart heir and owner of the NFL’s Denver Broncos, cannot sign the best 52 NFL players to increase the chances of the Broncos winning the Super Bowl; he must abide by the league’s salary cap. MLB’s New York Yankees cannot sign the ten most promising American teenage pitchers and house and train them to be professionals in their Tampa, Florida training facility; they must wait until they graduate high school and are eligible for the amateur draft. All of these restrictions are anticompetitive.
American professional sports teams do not operate this way because we, as a society, acting through Congress, determined doing things this way was in the best interests of society. The business arrangements of MLB/NFL/NBA are not codified in the Sporting Act of 1912. They are not regulated by the Federal Sports Commission. The Sporting Act of 1912 does not exist; the Federal Sports Commission does not exist. There was no Congressional action; there is no agency responsible for regulation. Rather, the leagues operate this way almost entirely because this is how professional baseball leagues operated in the late 1800s. Professional baseball in America came before the US’s landmark antitrust legislation. Being from the ruthless, robber baron era, owners of teams in baseball’s late 1800s National League began cooperating with one another: closing the League to new teams, restricting player movement between teams. This cooperation proved successful and professional baseball thrived as a business.
After the Sherman Antitrust Act of 1890 and the Clayton Antitrust Act of 1914, it seemed baseball, as with other monopolies engaged in anticompetitive behavior during this era, would be forced to reform. The Supreme Court considered an antitrust case in 1922 and, in a strange decision which was viewed by subsequent Supreme Courts as erroneous, gave professional baseball immunity from the relevant provisions of the Sherman and Clayton Acts. This immunity was reaffirmed in the 1950s when the Supreme Court ruled that, though the 1922 decision was made “in error”, the lack of action by Congress in the interim implied that it was correct, which allowed MLB (but not professional football or basketball) to continue to violate antitrust regulations. It was not until the reforms of the 1970s, brought about by collective action via players’ unions as well as other legal decisions, that players obtained basic rights. Many readers are probably familiar with the lawsuits brought by Curt Flood (against MLB) and Oscar Robertson (on behalf of the NBA players union, against the NBA) that led to free agency and other concessions to labor. The conventional wisdom today is that the reforms of the 1970s solved the problem: the professional players were given a fair set of rights as well as a share of the revenue generated by the leagues. Sports fans today rarely consider the business arrangements of the leagues. They should.
The reforms of the 1960s and 70s define labor to be the current professional players, as represented by each league’s players union. This definition allows the players and the teams to outsource player development — to colleges, high schools, competitive youth leagues, summer camps, parents, and others. The results have been terrible, for both players and the MLB/NFL/NBA. The winners in this arrangement are few — primarily team owners, now all billionaires, as well as fans in a handful of cities (e.g,, Green Bay, where the NFL’s Packers play).
There is another way. We need not operate America’s professional football, basketball, and baseball leagues in this manner. England has thousands of professional soccer clubs. And all of these clubs have the potential to play in England’s Premier League — alongside the famous clubs of Manchester United, Manchester City, Arsenal, Chelsea, and Liverpool. Fans of the television series Welcome to Wrexham have seen the tremendous joy that comes when a team that remains in a town — in good times and in bad — for generations. The connection between the people of Wrexham and its soccer team is special.
The actors Ryan Reynolds and Rob McElhanny purchased Wrexham FC in 2020 with the goal of making investments in the club and, eventually, taking them to the Premier League. This dream is unlikely, though not impossible. It is impossible in the United States. In England, not America, hard work, dedication, investment, and innovation can result in outsized success and outsized rewards for owners of sports teams. For all other commercial endeavors, it is America that allows this to happen. But not with sports. It is time for Americans to rethink how our leagues operate. Ryan Reynolds and Rob McElhenney should not have had to buy a team in Wales to have some fun and see if their innovative idea of offsetting operating losses via a documentary television series could succeed. They should have purchased a team in Scranton or Tucson or Riverside or Charleston (South Carolina or West Virginia). Wrexham’s wonderful story should be America’s wonderful story. Wrexham is a town of fewer than 100,000 with a struggling economy. But with a stroke of good fortune and a meritocratic sporting culture, Wrexham may one day have a soccer team competing in England’s most prestigious soccer league. We should allow Wrexham to happen in the US. Our sports leagues should embody the same ethos of competition, innovation, entrepreneurship, and meritocracy that we advocate for in nearly every other domain of American life.