5

Economic Issues in the
1998—1999 NBA Lockout and the
Problem of Competitive Balance
in Professional Sports

Andrew Zimbalist

Smith College

The central problem of any professional team sports league is different from that of a typical industry. On the one hand, the National Basketball Association (NBA), the National Football League (NFL), the National Hockey League (NHL), Major League Baseball (MLB) and Major League Soccer (MLS) are each monopolies. On the other hand, unlike other monopolies, teams within each league compete on the playing field, but cooperate as businesses off the field. 1 Unlike General Motors and Chrysler, the Boston Red Sox would not benefit if competition drove the New York Yankees out of business. In fact, sports leagues need to cooperate in maintaining a certain level of competitive balance among their teams to preserve and enhance fan interest. That is, teams must be sufficiently equal in ability to ensure that the outcome of the games and season are in question.

The problem that professional sports leagues face in the 21st century is how to achieve this competitive balance when some teams represent cities that are eight times larger than the cities of their competitors, some teams play in state-of-the-art facilities and others do not, and some teams are owned by individuals or companies who potentially benefit from significant synergies between the team and their other businesses. While competitive balance is a longstanding problem in professional sports, it has taken on new dimensions since the advent of free agency in 1976, the introduction of the modern sports facility of the 1990s (which can increase team revenues by $20—$50 million or more a

-93-

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