N.F.L. vs. M.L.B. as a Labor Market: A Freakonomics Quorum

It’s a widely held perception that the professional athletes who constitute Major League Baseball and the National Football League have different levels of power — i.e., players have more juice in M.L.B., while it’s a team’s ownership that has more power in the N.F.L., often at the expense of individual players. Is this true?

We put this question to a handful of insiders: Vince Gennaro, Darren Rovell, Stan Kasten, and Andrew Zimbalist. Here are their responses:

Vince Gennaro, sports consultant and author of Diamond Dollars: The Economics of Winning in Baseball:

The radically different business models of the “egalitarian” N.F.L. and the “Darwinian” M.L.B. favor different constituents. With less variability in its revenue streams and a salary cap limiting player compensation, the N.F.L. structure tends to favor the owners. Meanwhile, the M.L.B. model leads to more revenue risk, and allows greater leverage and thus greater compensation for players. Pro football teams engage in a “national” business, with national broadcast rights making up the largest portion of their revenue stream.

As such, about 80 percent of the nearly $7 billion of the N.F.L.’s annual revenues are divided evenly among all 32 teams. Before the New York Giants or Kansas City Chiefs ever play a game, they’re each entitled to about $150 million in annual revenue. According to a Forbes estimate, all but one N.F.L. team brought in between $182 and $255 million in 2006 (only the Redskins exceeded $300 million). With the Jets and Giants in the middle of the pack, earning less revenue than Tampa Bay, Carolina, or Denver, it is clear that market size has little impact on the revenue base of an N.F.L. club.

By contrast, an M.L.B. team is essentially a local business. Less than 25 percent of all revenues are distributed evenly among the 30 teams. More than three-quarters of the $6 billion in annual revenues are earned and kept at the local level, with a disproportionate share going to teams in large markets with strong team brands and greater on-field success. Unlike the stable, “money-in-the-bank” revenues of an N.F.L. team, the primary revenues of a baseball team – attendance, ticket price increases, luxury suite rentals, and local broadcast ratings and subsequent rights fees — can rise and fall with winning and losing seasons. (I discuss these nuances in depth in my book, Diamond Dollars.) I’d estimate the 2007 Yankees generated nearly $400 million in annual revenue, while the Tampa Bay Devil Rays barely generated $100 million.

We need only to look at broadcast ratings of the two leagues’ respective championships to underscore this local-national dichotomy between baseball and football. The Super Bowl’s broadcast ratings have virtually no connection to the participating teams, while World Series ratings rise and fall with the size of the market of the N.L. and A.L. champs. Whereas both leagues have seen solid appreciation in franchise values in recent years, the lower variability associated with N.F.L. revenues and costs yield a more favorable risk adjusted return than the up-and-down fortunes of an M.L.B. owner.

Baseball tends to favor the players, both stars and journeymen alike, with higher compensation, longer careers, and contracts that are guaranteed in the event of an injury. Also, because baseball is without a salary cap and many teams depend on winning to drive the revenue engine, owners tend to award lavish contracts to an impact player in the hopes that he will carry the team deep into October, unlocking future revenues. Baseball’s Alex Rodriguez has agreed to a contract worth nearly $30 million per year, while N.F.L. stars Peyton Manning and Tom Brady each make about $10 million per year. So it may pay to groom your young one to become a big league baseball player, but be sure to tell him to invest his spoils in the ownership of an N.F.L. team.

Darren Rovell, a CNBC sportswriter and commentator:

This perception comes, of course, from the the fact that, over a period of the last three decades, the baseball union has clearly beaten the owners in labor negotiations while championing free agency and avoiding a salary cap, while N.F.L. players play their brutal, most profitable game under the cap system without the guaranteed contracts that exist in the other sports.

Case in point: this offseason, Alex Rodriguez’s 10-year, $275 million contract guarantees him more than nine times more than any N.F.L. player makes in his contract.

Despite some recent power shifts in these player-owner dynamics (more extensive drug testing by the baseball owners; the ability of the N.F.L. union to get higher payouts thanks to tying salaries to a higher percentage of revenues, the definition of which includes more line items than ever before) the perception is the reality.

Perhaps a more intriguing question to consider is, “Why, from an economic perspective, could this be?” After all, we can’t simply credit the fact that the baseball union negotiators and the N.F.L. owner negotiators are just better over so many years. Thus, it’s worth bringing up at least two factors that explain why the upper hand might “naturally” exist in both cases.

1. Scarcity. The baseball union could have greater leverage because professional baseball players are more scarce. Baseball has 25 professional players on each of their 30 rosters. N.F.L. teams carry more than double (53 players per team) that amount of players on their 32 rosters.

2. Turnover. So many are surprised by the fact that the N.F.L. doesn’t have guaranteed contracts. Well, guaranteed contracts make a little bit more sense in M.L.B. than in the N.F.L., where the average player plays about three and half seasons, roughly two seasons shorter than the average Major Leaguer. This could be because of injuries, or perhaps because owners and team personnel think the difference between a veteran and a cheap drafted rookie is minimal.

Both of these factors could lead one to conclude that M.L.B. owners are forced to care more about cultivating a relationship with their players, while N.F.L. owners, on a larger scale, can afford to tell their players why it’s still so good for them in the N.F.L.

Stan Kasten, president of the Washington Nationals:

I can’t say that I would agree with this statement. I think all teams, in all professional sports, are run along similar principles, and these principles are essentially the same as those used by successful companies outside of the sports world. Every team needs a clear leadership structure, with the best possible people in every position, from owner to third-string player. There also needs to be a distinct vision in each organization, clearly communicated throughout the ranks, in order to achieve the desired results — in our case, winning.

Professional baseball may have greater individual player identification than football, but this is largely due to structure — baseball has only twenty five players per team, compared with double that for football. Many football players play positions which, though important, aren’t nearly as readily visible as the positions on the baseball field. (For this reason, basketball players are even more visible.) And let’s not forget the all-encompassing football uniforms, which obscure the faces of all but the most celebrated stars.

Still, I really don’t think the role, effectiveness, or impact of N.F.L. owners is fundamentally different from M.L.B. owners. And let’s face it: the most well-known owners are mostly so well-known because they’re also active as GMs. But have you ever heard of a fellow named George Steinbrenner?

Andrew Zimbalist, professor of economics at Smith College and author of several books on sports economics, including May the Best Man Win: Baseball Economics and Public Policy (co-authored with Bob Costas):

Why would anyone ask this question? Major League Baseball and the N.F.L. are organized by the owners. The owners in each league elect a commissioner who acts in the best interests of the owners, or, at least, endeavors to do so. Each league is a monopoly and exercises significant market power by, inter alia, extracting significant public subsidies for the construction of facilities.

The players in each league share in the monopoly booty. However, since there are 45 active roster players on an N.F.L. team 25 on an M.L.B. team, the average salaries in baseball are roughly twice as high in M.L.B. as they are in the N.F.L. ($2.9 million vs. $1.5 million). Similarly, with only 12 members per team in the N.B.A., roughly half the number in M.L.B., basketball salaries (average at $5.1 million) are almost double those in baseball.

As for labor unrest, wave it goodbye in all leagues, and tip your cap to Marvin Miller.


It isn't the system of drafting players that stinks of indentured servitude, but rather the path players are forced to take to get to the respective leagues that should be looked at. It appears to me that the NFL and NBA are colluding with the NCAA to restrict the flow of talent from the amateur ranks to the pros. By enacting rules that place limits on the access potential players have to available jobs the leagues are forcing players to enter into indentured servitude at the collegiate level, where they risk catastrophic injury for little compensation for the chance to be considered for professional employment after one or two years.

Bill Dawers

Take a look at Jared's comment up there at #9. This discussion has been poorly framed and perpetuates a media climate of incomplete information regarding the labor market. If a simplistic term like "professional" is used to describe baseball players, then the discussion needs to include anyone who is being paid to play baseball, and that would include maybe thousands of minor leaguers who are contractually affiliated with major league teams.

It's curious that so much of the media and the public seem to object to college basketball players "giving up on their educations" to receive multi-million dollar contracts (come on, who wouldn't?), but almost no attention is paid to the thousands of kids who come right out of high school and begin playing professional baseball (or other sports like hockey) at the most meager levels of compensation.


I would like to make an argument that is also supported by the above data. When you look at what baseball, football and basketball players get paid per year, it looks like football players are getting the short end of the stick.

However, if one was of the opinion that sports are entertainment and each game is an individual performance, than Football players earn far more than their brethren in other sports per appearance.

Football: 1.5 million average yearly salary divided by 16 games = $93750 per game
Baseball: 2.9 million average yearly salary divided by 162 games = about $17900 per game
Basketball: 5.1 million average per year divided by 82 games = $62195 per game


Two questions:

1. How do the pension/retirement/long-term care packages compare between the NFL and MLB? I'm thinking of this in reference to the average career length of the NFL vs. MLB.

2. If you compare the minor league aspect of MLB with the larger rosters of the NFL, how does annual salary compare on a per capita basis?


Football has a national presence whereas baseball is much more local market driven. In addition to the size of the TV contract, it has to be this way since football has 8 opportunities to generate local revenues whereas MLB has 81 opportunities to generate local revenues.

Also, how are large market vs. small market defined?

I recall in the early 90s Toronto was considered to be large market but now it has become a mid-market?

In contrast, Boston is considered to be a large market?


Answers ranked from best to worst:
1. Vince Gennaro- he went right to the point. The owners pay the salaries of the players relative to how much they pull in. If the owners in the NFL and MLB think a player will help them make more money, they will pay him more.
2.Darren Rovell- also answered the question. the power that the MLB union has is due to the fact that they don't have a salary cap and they have guaranteed contracts. I don't think he answered why things are like that, but he peeled one layer of the onion back.
3.Andrew Zimbalist-short, but insightful.
4. Stan Kasten- kind of weird to throw an owner into this conversation, and he was defensive. I guess that would be expected.

---I did some quick research to see if their are any people who are owners of NFL and MLB franchises, and I could not find any. If there are, it would be interesting to hear their take.


Yeah, this is a very very cool blog. ;-)
I just added you to my favorites.



How you view this depends on whether you take a macro or micro view. Zimbalist is correct in that "labor" as a collective whole is paid more or less in accordance with how many players there are in total. Football, due to both rules and injury rates, requires more players - thus each one earns less - it's not a function of player power, merely quantity, Zimbalist seems to be saying.

Most people, including myself, take the opposite view because we approach it from a micro perspective. For a given individual, no salary cap (allowing free spending teams to wildly overpay me) and guaranteed contracts surely indicate MLB players have more pull. Plus, longer average MLB career length makes it less costly to strike, my only real negotiating tactic against a monopoly.

So while NFL owners love to point to how much revenue as a percentage of the whole trickles down to labor (and they are indeed correct about this), what's best for me, Eric, is to be an MLB player.



Fundamentally, I think that winning or losing in Football is less important to economic success, because of the revenue sharing. This means that teams are free to collude and stick it to the players instead of competing with each other.

This takes many forms, including rules that result in high injury rates, and waiving players to get out of "contracts" whenever the players value drops below what was previously negotiated.

There are many other ways that Football teams act that show that they are really more committed to fitting into the group than winning. Strategies change slowly, and often coaches take the safe/conservative way out even when evidence begins to mount that an alternative strategy is better.


Not sure if I missed something, but doesn't MLB's farm system give the team a considerably larger roster? MLB franchises have exclusive contractual rights over all these players, who can be shuttled into and out of the major league roster quite easily. There must be a counter to this notion, so can anyone explain to me why minor league players don't affect the supply of major league players in terms of salary? Are all their salaries virtually identical and negligible?


I don't think that anybody really answered the question completely. Clearly players are now getting a pretty good deal, but that doesn't say whether the NFLPA or MLBPA is doing a better job. I've seen some discussions recently that salaries paid are down to around 40% of revenue for MLB while they are still up near 60% in the NFL, so does that say that the NFLPA is doing a better job now? The percentage of revenue that goes to payroll seems to me to be the most important aspect.

I'd argue instead that MLB is now in the place that the NFL was in the 70s and 80s- growing rapidly and making money hand over fist. MLB players are satisfied because their salaries are still growing at 4-5% per year, but revenues have been growing faster than that. The NFL meanwhile has stopped aggressively growing and player salaries have now caught up.


In response to the draft question from earlier, baseball has been granted an exception to anti-trust laws.

You can find some brief information here: http://espn.go.com/mlb/s/2001/1205/1290707.html
or here:

However, the other leagues do not seem to have this exemption. I believe this type of "monopoly" activity is the argument Maurice Clarett used when suing the NFL when he was trying to go pro as a freshman, since it is, in essence, collusion. The point of the wikipedia article is that it is sketchy at best but since the leagues have CBAs with the players associations, the drafts are permitted. The draft only restricts "new-comers", so the players' associations don't have much incentive to fight the battle, so that is left up to individuals who are willing to fight (which are few and far between).

David W.

It has to do with player longevity. A baseball player may be playing baseball from the time they're 20 and into their 40s (Not everybody, but 40 year old baseball players aren't unheard of). Meanwhile, an average football player may last 3 to 5 years.

If the baseball union calls a strike and the players sit out a whole season, the team is hurt from lost revenue, but almost all players still have the ability to play the next season. If the football players call a strike and sit out all season, most of the players have lost a substantial part of their lifetime income.

In short, baseball players can afford to strike while football players cannot. Without the ability to strike, workers really don't have much leverage with their employers. Thus, the NFL owners get to call the shots.


Um, can these hypotheses be tested by applying them to other sports? How about basketball (small rosters, role of impact players, national audience) and hockey (player longevity, strong farm system, definitely a local market)?


Jared brought up the point I was thinking regarding Rovell's comment. Technically, MLB teams have a 40-man roster, while they can only utilize 25 at the Major League level up until the "September call-ups". Additionally, throughout the season, minor league ballplayers not on the 40-man roster tend to find their way onto it, bumping another one off. Their player pool is much larger, even when you consider the players on each NFL's scout team, which I admit to not knowing the exact number.


I'd like to second Garry's question at #7

In Europe, the economics of some sports like football have been disrupted by rulings on EU labour and market legislation that affect the relationships between players, teams and revenues.


I wish I could remember the numbers off the top of my head (and I'm not in a position to look them up), but it would be very interesting to look at MLB's farm system as well.

If I recall, the farm system is a lot like a drug-dealing gang. The vast majority of the players never make it to the big leagues and earn VERY small salaries, despite the dispropotionate amount of time they spend with the team. If they do make it into the Major Leagues, even for only a single game, then their minimum salary jumps to around $60 or $70k. Of course a very small percent make it for even that single game and even fewer make it to the point where they get to sign a 'modest' six-figure contract.

In other words, it's not a bad idea to train your kid to be a left-handed pitcher, but unless he's REALLY good, chances are he can make more working at the local grocery store.


Gennaro left out an important point when discussing the difference int he revenue structures of baseball and football teams. Market location does have an impact on the team's bottom line. While location does an impact, its impact is a function of stadium ownership. The reason the Giants and Jets are in the middle of pack regarding revenue and franchise value is because they do not own Giants stadium(New Jersey owns the stadium). The Redskins own Fed Ex Field so every dollar from in stadium ads, naming rights, parking, and concessions for every event held at the stadium goes to the Redskins. When the Giants and Jets build their own stadium they will be in a better position to take advantage of their location.

Geology Rocks

I think it can be directly correlated to the power that each player union has over the league. In baseball the players union really has major play in the way the league makes decisions. Alternatively in the NFL the players union is not as actively involved in administrative decisions.


One difference is that in baseball almost all of the success of a team is due to the players. If you switched the players of the Red Sox with the players of the Royals and left the management the same, the players would probably win almost as many games for their new teams as they did for the old.
In football this is much less true. The coaches and management are as important to winning football as quality football players are.
Since football players create less of the value of their teams they are payed less.