The Five Biggest Developments That Shifted The Business Of Sports

Over the past fifty years, sports have risen from a little side show to an entertainment and cultural powerhouse. Its prominence is partly measured by the revenue generated, but, even more so, by the status it now has in television programming as well as in daily life whether through fantasy sports, podcasts, or water cooler conversations. I decided to try to highlight a few of the game changing decisions, events, or outcomes that have driven this rise to financial and cultural success. At first, I thought it would be hard to sort out, but, after some thought, five items stuck out above all others.

Monday Night Football: On September 21, 1970 the Jets played the Browns in Cleveland, setting the stage for the NFL to become the king of sports in the U.S. At the time, baseball still held that title, but the incredibly successful marriage of football with television changed everything. Oh, there were precursors such as the 1958 NFL Championship Game between the Colts and Giants and the initiation of the Super Bowl at the end of the 1966 season and the associated merger between the AFL and NFL. But, the move to prime time changed the status of the NFL from a Sunday afternoon snack into a mainstream meal. In spite of MNF’s success and the media-savvy sense of Commissioner Pete Rozelle, the league and broadcasters only slowly realized what they had in their hands. The Super Bowl didn’t move to the evening hours until the 1978 version between the Cowboys and Broncos, but the game drew nearly 80 million viewers, almost a 30% jump from 1977 and nearly a 75% jump from 1970 viewership and all other leagues were looking uphill at the new king.

MLB Free Agency: In 1975 pitchers Andy Messersmith of the Dodgers and Dave McNally of the Expos played out the “option year” on their contracts with those teams without signing a new contract. After the ruling of an arbitrator and federal court appeals, both players became eligible to sign with any team for the 1976 season. Sports labor markets would never be the same. MLB’s “Reserve Clause” had granted teams rights over player movement throughout their careers and other sports operated under similar restrictions. There were precursors here also to the watershed event. Dodgers ace pitchers Sandy Koufax and Don Drysdale jointly held out for higher salaries before the 1966 season. The same year, the players officially formed a union and negotiated a collective agreement in 1968. Two years later, St. Louis Cardinal Kurt Flood sued MLB over the Reserve Clause in a case that reached the Supreme Court. Although Flood lost, the Court opinion exposed weak points of sports’ leagues’ labor restrictions. It was 1975, however, when the dam really broke. Eventually, all major professional sports leagues adopted some form of free agency, resulting in player salaries and movement that would have been unthinkable in earlier eras.

ESPN: Few would have imagined that a start-up cable network would have such a profound impact on sports and culture. Today, the world is packed with 24/7 sports programming and information ranging from NBC Sports Network, CBS Sports Network, FS1, FS2, MLB Network, NFL Network, NBA TV, NHL TV, the Tennis Channel, Big Ten Network, SEC Network, and the list goes on. It all started in September of 1979 in Bristol, Connecticut. At the outset, their programming consisted primarily of college basketball and some alternative sports. Had anyone in the U.S. ever heard of Australian Rules Football before? ESPN’s main attraction was its nightly “SportCenter” which CNN tried to emulate for a few years. Chris Berman and later Dan Patrick, Keith Olbermann, Stuart Scott, Scott Van Pelt, and others became household names if not cultural icons in some cases. The rise of ESPN was greatly boosted by the next development.

1984 Supreme Court NCAA Decision: Almost everything that has occurred of financial consequence in college sports over the past 35 years can be traced back to this decision. In prior years, the NCAA had limited how many times football teams could appear on television. Most Saturdays, there was one nationally televised games and at most two. Two schools, Oklahoma and Georgia, sued the NCAA over this restriction and won. Immediately, the number of games expanded with ESPN benefiting. The decision set the stage for the five-year $38 million deal that Notre Dame signed with NBC in 1991 and and then for the whirlwind of conference re-shuffling over the past three decades. The rise of the mega-conferences and the revenues that they pull in from football, today’s “Power 5,” depends critically on the growing importance of the breadth of television markets that flowed out of this decision. Indirectly, even the transition from the old bowl system to the Bowl Championship Series and now to the college football playoff system connects back to this 1984 decision.

Splitting Revenue with Players in CBA: From 1972 to 1994, MLB experienced eight work stoppages. From 1968 to 1987, the NFL had five. The NBA experienced two in the 1990s. The NHL also had two in the 1990s and lost an entire season in 2004. The acrimony and work stoppages have diminished considerably with the advent of revenue splits with the players (none in MLB since the 1990s, 1 each in the NBA and NFL). The initial move occurred in 1983, when the collective bargaining agreement between NBA owners and players contained a salary cap that the owners liked but also provided that 53% go 57% of revenues would go to player salaries. This is less a date marking a watershed than the beginning of a process. It took some time for this kind of revenue sharing between players and owners in concert with salary caps to catch on across sports leagues, but it is now the norm. As leagues adopted the practice and the revenue split stabilized in each league, much more harmony between owners and players emerged. In the language of economics, the revenue split provides more “incentive comparability. Even without it, players can be indirectly hurt by actions that diminish league revenues, but revenue splits make the connection tighter and concrete. Contentious issues continue to arise, and there are always voices among owners or players, along with some in the media, who seem to take the view that CBA negotiations aren’t legitimate without acrimony and hard-line stances. The revenue split drowns out a lot of these more strident voices.

(The data on sports work stoppages is from this CNN article)