Revenue Sharing and Agency Problems in Professional Team Sport: The Case of the National Football League

in Journal of Sport Management
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Although initially developed as cartels of independently owned and operated clubs joining to produce a sports product for spectator consumption, professional sports leagues have emerged as monopolies wielding significant economic power. By increasing revenue-sharing practices, and thus attempting to align owner interests, leagues have become single-business entities that maximize wealth for the league as a whole. Over the past four decades, the National Football League has implemented such practices to become the most popular team sport in North America. Using agency theory, this paper examines how the NFL's former commissioner, Pete Rozelle, and the League Executive Committee used these practices in order to increase League revenues and decrease opportunistic behavior by team owners. However, certain owners continue to act entrepreneurially, to the detriment of the League as a whole. This behavior is congruent with the tenets of agency theory, which contend that interests will diverge within a principal-agent relationship (e.g., the NFL— NFL teams). Until such time that team owners realize that the welfare of the other League clubs, along with their competitive equality, is paramount in retaining interest in and producing the League product, professional sports leagues will continue to be plagued with problems such as unnecessary franchise relocations and other acts of maverick owners.

Daniel S. Mason is with the Faculty of Physical Education and Recreation at the University of Alberta, Edmonton, AB T6G 2H9.

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