BigJim® said:
I agree with the responses that a good labor deal by the NFL will have ZERO impact on "increasing commercial interruptions, sponsor mentions, and product placements." The expectation that it could completely wipes out this guy's credibility. It was already pretty questionable when he complains he can't afford "tickets, parking, seat licenses" on a teacher's salary, as if any of that would ever change as long as there are 60,000 people who can afford it. What color is the sky in this guy's world?
This is an interesting comment, but I don't think one that is consistent with the facts.The question I would ask is why do we have increased "commercial interruptions, sponsor mentions, and product placements" in the first place? If these are inherently good or necessary, why weren't these around in 1970 (even if the amount of money they would raise is much smaller)? Owners wouldn't leave free money on the table, and these means of raising money were used elsewhere already. Clearly the cost of doing so outweighed the benefits.
So these things bring costs (i.e., aren't inherently good for the overall product of the sport), didn't see them before,
but we see them in huge quantities today. Why?
Ignoring for the moment cost considerations [raised by the lawyer], one reason, if obvious, may be that the product on the field is simply higher than it was in 1970 (or whatever period we're comparing). Maybe our tastes have changed. Maybe other "competitors" have fallen away [baseball, as an example] and the market size has increased. In any case, one can think of our "demand" for football is higher now and that we are willing to pay a higher price (in the form of these inconveniences) for the privilege of watching.
[Note: sponsors may find that the NFL is now a good avenue to advertise to reach a large audience. But, given that the price they pay for advertising is commensurate with the audience, a trend towards more sponsoring and the higher demand for football, are one and the same.]
But this still doesn't answer the question. After all, it seems the more efficient way of capturing this higher demand is simply raising the price of tickets [i.e., involve less hassle than with contract negotiation, costs of changing sponsors, training staff to implement these changes, etc that are associated with sponsoring].
While ticket prices
have gone up, why don't they just go up a little higher? Owners have resorted to this form of revenue generation for some reason. If not higher costs, what? Maybe with the growing demand/fanbase there is simply a greater share of fans who now prefer (for whatever reason) to watch from home, and now its more feasible (due to the higher demand) to tap into this revenue stream. Well that's market segmentation -- just as the lawyer describes.
Maybe at some point, if prices are high enough,
some people just don't go to the game anymore [and partly empty stadiums suggests this is happening in some locations]. In this case, instead of them paying at the gate, the owners can now get them to pay at home (even if its a lot less) in terms of time through these inconveniences. But this implies that people have different preferences for the sport, and that they are willing to pay different prices. Again, this is consistent with the market being segmented.
So the market is segmented. Big deal. What does a new labor deal mean for fans? Would there be an impact?
Clearly, if games are lost as a result, then fans lose out to some degree. In the long-run however, a few missed games may be a small upfront cost for any long term benefits that might accrue.
What could be the benefits?
Well, the prices at the gate (or in one's home) may fall in the short run (or long-run) for a couple reasons:
- If there is a drawn out battle, and overall interest for the NFL dwindles (i.e. demand falls), the remaining football fans
may see lower prices [for the precise, but opposite reasons we discussed above] both at the gate, and at home. So a labor deal might actually reduce these "inconveniences." But what if it's resolved quickly and demand remains unchanged?
- Lower labor costs. Price is determined not entirely by demand [unless one approaches the matter from an Austrian perspective, but I digress]. It does not matter if demand is large if there is no way to feasibly provide the good or service. But costs don't drive price entirely. If production costs were negligible there could still be high demand, and thus a high price (just think of toner cartridges, razors, etc). So neither cost nor demand work on their own in determining prices - its these factors together. It stands to reason that a lower cost structure, would reduce prices, all else equal. The real question is -
by how much? Part of this is tied to market structure -- the less competitive the industry, the less the price would fall. Even if one were a monopolist, though, the price would still fall by some. This idea that a monopolist will "pocket the difference" doesn't recognize that
more money can actually be made by lowering prices when costs fall. A monopolist just can't charge anything he wants - with lower costs, he benefits on the margin for more consumers using his product [whether it be more watchers on TV, or at the gate, in the case of teams struggling with blackouts].
There may be other benefits for fans too- perhaps most value an 18-game season more than a 16-game season. Maybe lower rookie salaries will prevent teams from clinging to bad draft choices [and thus improve team outcomes].
In any case, the NFL is a very complicated market structure. It is at once a very competitive market, as well as an oligopolistic one. How sponsoring and various other contracts affect different teams, the degree of central authority vs. franchise autonomy, etc... there are a lot of factors at work. I won't say I'm an expert on modeling it.
But as an economist I hope to a least add a certain perspective, focusing on broad trends, which both supports and contrasts with this lawyer's positions.
If you own a car lot, and there's a car lot across the street, and you can lower your costs/overhead etc., then you might lower prices. it makes sense in a competitive marketplace. If you have the only car lot in the world, and everyone in town wants a car, why are you going to lower prices again?
If you own a car lot, and there's a car lot across the street, and you can lower your costs/overhead etc., then you might lower prices. it makes sense in a competitive marketplace. If you have the only car lot in the world, and everyone in town wants a car, why are you going to lower prices again?
If you own a car lot, and there's a car lot across the street, and you can lower your costs/overhead etc., then you might lower prices. it makes sense in a competitive marketplace. If you have the only car lot in the world, and everyone in town wants a car, why are you going to lower prices again?
