Report critical of competitive climate in big leagues

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This article was published 27/06/2011 (5188 days ago), so information in it may no longer be current.

The notion of a level playing field in North-American professional sports is mostly ‘lip service’ according to the latest analysis by The Conference Board of Canada.

With free agency beginning on July 1 for both the National Hockey League and National Basketball Association, the latest report – ‘Pro League Competitive Conditions and How the NHL Stacks Up’ – assesses how the NHL compares to Major League Baseball, the National Football League and the NBA in making its league more competitive.

“All the major pro sports leagues pay lip service to the concept of ensuring a level playing field. While all the leagues “talk the talk,” there are wide disparities among them when it actually comes to walking the walk,” said Glen Hodgson, Senior Vice-President and Chief Economist, and co-author of the publication. “What a league does to implement a level-playing field says a great deal about its business philosophy and distribution of economic power within the league.

“Sports fans who eagerly hand over their money – and their hearts – to their favourite team should keep in mind the fact that the underlying competitive conditions are not always equal.”

The idea of a level playing field is applied to issues that directly affect the players, including:

• Salary caps – limits on player payrolls that prevent teams from out-spending their competitors. The NHL and NFL have ‘hard’ caps that limit total salaries, but MLB and the NBA have ‘soft’ caps that still allow the wealthier teams to scoop up the best free-agent talent.
• Access to new talent through an entry draft of new talent, used by all four major North-American pro sports leagues
• Free agency
• Revenue sharing – the leagues take widely different approaches here. The NFL shares 80 per cent of revenues, for example, while the NHL has only limited revenue sharing. The NHL has used subsidies to assist franchises.

“Overall, the NHL’s approach to revenue-sharing is messy and creates conditions for divisiveness among franchises,” said Hodgson. “The primary reason for the NHL’s approach to revenue-sharing appears to be to maintain teams in existing cities, thereby protecting the current and future value of all other franchises. The bankruptcy of any franchise is not a good signal to send to potential investors, and simply moving franchises between cities means there are no expansion fees to share.

“Only when all other options appear to be exhausted in an existing market does relocation becomes an option for the NHL. This threshold was recently crossed when the league approved a transfer of ownership of the Atlanta franchise, resulting in the return of an NHL team to Winnipeg for the upcoming season.”

The latest Conference Board of Canada is the fifth in the ‘Playing in the Big League: What Makes a Professional Sports Team Successful in Canada?’ series.