Why is the NFL so socialist? So that on “any given Sunday,” any team can win.

By Buddhika Rajapakse and Jacques Bassili

In our first article of this series, we looked at characteristics of socialism to provide a framework against which we could evaluate the NFL. We defined the key principles to be equality, democracy, individual freedom, self-realisation, and community or solidarity. We then looked at how the NFL distributes its broadcast rights and saw that the NFL prioritises “equality” amongst its broadcast partners. By doing so, it achieves both low commercial risk and extensive audience reach.

The NFL has a variety of “parity mechanisms” to promote equality of opportunity to compete and win amongst its own teams. These mechanisms are often proclaimed by the media to be the reason that “on any given Sunday” any team can beat any other team. In this article, we will investigate the mechanisms and evaluate whether or not they really make the NFL more competitive.

What are the NFL’s parity mechanisms?

The NFL has four main parity mechanisms: revenue sharing, salary cap, player draft, and schedule balancing.

• Revenue sharing: The NFL manages the sale of all media rights centrally. This revenue is pooled and distributed evenly to all teams.

• Salary cap: The NFL sets upper (and lower) spending thresholds for each team’s roster. The salary cap is dependent on the NFL’s (centralised) revenue. It has gone up every year, except for 2021 (thanks to Covid).

• Player draft: In April each year, NFL teams take turns selecting draft-eligible players, much like how school children select lunchtime football teams. The worst performing team of the past year picks first; the Super Bowl winner picks last.

• Schedule balancing: The NFL’s 32 teams are divided into eight divisions. Divisional standings determine who goes to the playoffs each year. The teams in each division all play the same schedule, except for three games that are determined by the previous season’s finishing position.

Is the NFL really more evenly balanced than other leagues? And, if so, is it really because of these parity mechanisms?

To answer these questions we looked at the competitive balance of the five major North American leagues, England’s top level of football, and two major leagues in Australia. In total, we looked at eight professional leagues covering seven sports. Most of these leagues are closed leagues, with only the EPL featuring promotion and relegation.

Are these parity mechanisms present in other leagues?

We analysed the presence and strength of parity mechanisms within each of our eight professional leagues. With the exception of schedule balancing, we saw a wide range of mechanisms: everything from strong mechanisms to completely absent mechanisms.

Element	NFL	NBA	MLB	NHL	MLS	NRL	AFL	EPL
Revenue sharing	⬤	◑	◕	⬤	⬤	⬤	◑	◑
Salary cap	⬤	◕	◔	⬤	⬤	⬤	⬤	𐩒
Player draft	⬤	◑	◑	◑	◕	𐩒	⬤	𐩒
Schedule balancing	◑	𐩒	𐩒	𐩒	𐩒	𐩒	◔	◑

Table 1: Strength of parity mechanisms across eight major sports leagues

Do these mechanisms actually work?

Where available, we analysed data stretching back to 1980 to evaluate each league’s competitive balance. We created a metric, CompBal, that measures the proportion of a league’s teams that placed in the top quartile of regular season wins at least once over the previous five seasons. The graph below shows CompBal averaged across all eight leagues. CompBal appears to consistently sit within a “Goldilocks Zone” of between 50 and 70%. A low score means a highly uncompetitive league, with largely the same teams consistently putting up the best winning records. A high score means more churn over the years as to which teams have the best winning records.

The NFL’s own CompBal is also consistently within this Goldilocks Zone, which is to say that the NFL is no more or less competitive than the average league. In fact, all leagues demonstrate remarkably consistent CompBals. And, almost every league’s CompBal lives within the Goldilocks Zone, with some exceptions (see below).

Our analysis period provides some natural experiments that allow us to evaluate the effect of each parity mechanism.

• Spending controls were introduced by the NBA in 1984, AFL in 1987, NFL in 1994, MLB in 1997, and NHL in 2004. These spending controls were hard caps, soft caps, or luxury taxes. None significantly affected its league’s CompBal.

• Revenue sharing was introduced by the NFL in 1961, which is outside our analysis range. But it was implemented by MLB in 2002, NHL in 2005, and NBA in 2013, all within our analysis range. None significantly affected its league’s CompBal.

• Player drafts are staples of American sports leagues. All the major American leagues’ drafts were implemented before our analysis period. However, the AFL implemented its player draft in 1986. It did not significantly affect the AFL’s CompBal.

Schedule balancing is not a widely applied concept. The EPL has arguably the “purest” schedule because all teams play each other twice: once at home, once away. But, in many large leagues, it is impractical for all teams to play each other home and away. These leagues use “unbalanced” schedules that are not the same for every team, so some teams have more “difficult” schedules than others. The NFL and AFL are the only leagues that use the previous season’s standings to address this issue when determining schedules. The NFL’s schedule balancing affects only 17.6% of its games and the AFL’s a meagre 4.3%.

Does the above mean that these parity mechanisms have no effect on a league’s competitive balance? Individually, it would seem so. Collectively, it is a different story.

What about the exceptions?

We noted above that there are a few exceptions: leagues whose CompBals do not sit within the Goldilocks Zone. The first exception is newly formed leagues. The MLS and NRL were both formed during our analysis period. Their CompBals were initially very high (90%+), but normalised to the Goldilocks Zone within each league’s first decade.

The second exception is English football. Its CompBal was safely in the Goldilocks Zone until 1992, when it began steadily falling to 40%. Until 1992, the top flight of English football was Football League First Division; from 1992 onwards, it was the EPL. That English football’s CompBal fell off a cliff when the EPL was formed is likely not a coincidence.

What’s wrong with the EPL?

Before the EPL was formed, teams in the top four divisions of English football all received an even share of revenue. However, the biggest clubs saw that they could get a better deal. They formed the EPL and signed a lucrative broadcasting contract with British Sky Broadcasting (a.k.a. Sky TV). Crucially, this broadcasting revenue was unevenly distributed across the league: more money went to teams at the top of the table. This, combined with the EPL’s lack of spending controls, created a feedback loop that steadily eroded the EPL’s CompBal:

• The best EPL teams finished the season at the top of the league table;

• Teams finishing at the top of the table received a greater proportion of league revenue;

• Teams receiving more revenue spent more on players;

• Teams spending more on players finished at the top of the league table.

Thus, the best EPL teams continued to get better and English football’s CompBal suffered accordingly.

We can see evidence for this feedback loop in the graph below. For the 20 clubs in the EPL last season, it shows their transfer market spend aggregated from 1992 to 2023.

Comparing the biggest spender, Chelsea, against the 5th, 10th, 15th, and 20th biggest spenders makes the imbalance even more stark. Over the EPL’s life, Chelsea has spent 80.9% more than fifth-placed Tottenham Hotspur and more than three times tenth-placed Everton FC. It has spent nearly five times as much as fifteenth-placed Brighton & Hove Albion and a staggering 6.8 times as much as twentieth-placed Sunderland AFC. With spend ratios like this, it’s not surprising that the EPL’s CompBal sits so low.

Club	Spending table position	Spend ratio
Chelsea	1st	100.0%
Tottenham Hotspur	5th	180.9%
Everton FC	10th	301.6%
Brighton & Hove Albion	15th	493.6%
Sunderland AFC	20th	680.8%

Table 2: Chelsea’s spend ratio with other EPL clubs

What about promotion and relegation?

Promotion and relegation may play a contributing role to English football’s fallen CompBal. But, given that the Football League First Division also featured it, promotion and relegation cannot be the sole cause (although, it may exacerbate the EPL’s feedback loop if disproportionately low quality teams are being promoted up to the EPL).

So, what have we learned about parity mechanisms?

Ironically, for an article about the “socialist” NFL, it is the comparatively “capitalist” EPL that teaches us the most about levelling the playing field. Specifically, the EPL shows us what to do if we do not want parity: unevenly distribute revenue (rewarding high performance) and place no limitations on spending.

Conversely, if we do want parity, simply distribute league revenue evenly (or by rewarding poor performance) and / or have some form of spending controls. With either of these two mechanisms in place, a league’s CompBal should sit safely within the Goldilocks zone (50 to 70%).

So, what of the NFL's other “socialist” tendencies? In our next article, we will examine how the draft and game schedule have value over and above their impact on on-field results.