Dave Berri was on MSNBC this morning with Rob Simmelkjaer, for a good, informative discussion of Adam Silver’s recent statement that a significant number of NBA teams are losing money. Berri pointed out that ownership of an NBA team confers unique business advantages. For example, a team’s labor costs are capped at 50% of revenue. Furthermore, as we’ve discussed around these parts many times, a large proportion of the arenas in which NBA teams play are substantially publicly subsidized (a double win for the owners, because franchises still capture the lion’s share of the revenue from those publicly-paid-for facilities). Notably, Berri said, the typical pro soccer team in Europe has labor costs closer to 75% of its revenue. This is, in part, a function of the fact that there is no salary cap, or maximum player salary (a feature unique to the NBA) in Europe. Europe also lacks a draft, a very specific and significant form of constraint on the sports labor market in North America. For these reasons, Simmelkjaer chimed in, even if a team somehow loses money on a year-to-year operating basis, the long-term investment of owning a pro sports franchise in one of the major North American sports is, in this day and age, about as close to a risk-free investment as one is likely to find.
All of which raises an interesting question – why are the captains of North American sports industry (and you can certainly throw the grand poobahs of the NCAA into this mix, times a hundred) so committed to such a radically statist, anti-free market, anti-individual freedom model for their businesses, especially in comparison with socialist Europe?
I kid, of course. It’s not an interesting question at all. Any capitalist business owner will happily sign on to a state-supported, anti-free market model as long as it makes them money.
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