Do we have any football fans here? I know of one for sure and that would be my brother, Gary. Mention the Dallas Cowboys or the Oklahoma Sooners and he can probably tell you just about anything you need to know. It’s not much of a secret that professional sports is a big business. I don’t know how exactly much a ticket to a game costs, but I know it is expensive. Not only does sports bring in revenue from the games, but apparel and memorabilia also gather dollars from the fans who are willing to lay out the cash for jersey’s, pennants, etc., all from their favorite teams. That even starts at the college level and if you go into such a store in our area, you will find Arkansas Razorback and OU Sooner materials galore. According to a report on CNN, retail sales of licensed NFL merchandise in 2007 totaled around $3.2 billion in the US and Canada. The combined sales of football, baseball, hockey, basketball, and soccer was over $9 billion.
The National Football League (NFL) is well known for controlling the access
to all things NFL. I know of one website that was devoted to OU running back Adrian Peterson that had to remove some of it’s videos after Peterson went to the Minnesota Vikings. The NFL claimed ownership of some of the videos of Peterson, after he entered the NFL. You can view the videos only if you purchase them from the NFL. That starts sounding a bit cutthroat to me, but there isn’t much a fan can do about it. I mention this as a means to show you just how controlling the NFL is.
Now, let’s get to the case at hand, American Needle v. National Football League. American Needle is an apparel company who used to be able to negotiate with each individual team for licensing and apparel contracts. Here is a summary of the case, from CNN:
The case involves a lawsuit from American Needle Inc., an Illinois-based sports apparel maker that was one of several companies with long-standing contracts with NFL Properties, a separate corporate entity that develops, licenses and markets the intellectual property of each team.
But in 2001, the league entered into an exclusive 10-year contract with Reebok to manufacture hats, jackets and other clothing featuring team logos. American Needle is no longer able to negotiate with individual teams.
American Needle complained that the deal violated a 120-year-old antitrust law designed to limit cartels and monopolies, and to foster fair competition in the marketplace. The key section of the law bans business rivals from conspiring to blunt competition or hurt consumers, by either increasing prices or limiting choices.
So, what do you suppose happened after the NFL entered into this exclusive contract with Reebok? As you may guess, the prices of the merchandise went up.
NFL IS 32 TEAMS
The lawsuit went against American Needle in the 7th U. S. Circuit Court of Appeals, but the U. S. Supreme Court ruled yesterday that the teams making up the NFL should be considered 32 individual teams, instead of one entity. The ruling was unanimous and causes the lawsuit to be sent back to the lower courts to work out a licensing agreement that would be possibly favor American Needle.
What are the implications of this ruling? The first one that comes to mind has to do with America’s pastime, baseball. As it stands right now, baseball is the only sports league that enjoys complete antitrust protection and this ruling may threaten that status.
The court allowed a lawsuit against the league to continue, saying the licensing of intellectual property “constitutes concerted action” that is not part of the broad antitrust protection enjoyed by professional baseball. Such protection allows individual teams to act as one business when making a host of financial decisions, including marketing their logos and trademarks.
I have to wonder why baseball is treated differently than any other sports league. I fail to see the difference between the two entities, when it comes to a case such as this. Maybe someone can enlighten me, but until then, it would seem to me that this ruling should affect baseball as well.
This ruling could also affect companies such as credit card companies and their network of banks and they had weighed in on the side of the NFL. Also in question is the affect it will have on the players and their unions, concerning contract negotiations. As you can see, there is much more to this case than just sports and the business of sports and it’s implications could be far-reaching.
I have thought about this whole “revenue sharing” of the NFL in the past. If I am not mistaken, the money that is taken in from merchandise is distributed equally among the teams so that teams in smaller markets will be able to compete for players with teams in larger markets who make more money. Needless to say, I normally have a problem with this notion of “spreading the wealth around” but when you think about the NFL as a whole it is a little different. The NFL is a private company, with their own rules. Owners buy into the system knowing what the rules are, so this makes it more acceptable to me. But there is still that part of me that believes if a team can’t make it in a market, they should either fold or move.
On the surface it would appear as if this ruling would make the NFL more like a free market enterprise more than the socialistic enterprise they have always been. The NFL is so controlling that if a radio station is holding a contest to give away Superbowl tickets the radio station is not allowed to say the word “Superbowl,” because the NFL holds the rights to that term, they call it the “big game.”
Why baseball enjoys the snti-trust exemption I do not know, but you are right that this ruling could extend over to baseball eventually.
I guess I didn’t really answer any of your questions, but it is an interesting topic, and one that I have thought about on occasion.
I’m with Steve, the implications aren’t entirely clear. I would agree with him that while the NFL has some “wealth redistribution,” it actually is transparent, and the owners know what they’ve gotten into.
It ought to be interesting to see how this unfolds.
I have to admit this is a very interesting case. I’m with Steve on this. It will be very interesting to see how this will flow. How will it impact non-sporting entities? Good post Larry.
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Thanks for the comments, guys. Steve raises a very good point about how controlling the NFL is. They have their fingers on every little detail, it seems. The idea of them owning the word “Superbowl” would be funny, if it wasn’t so outrageous.
One of my main questions about this is how it will apply to baseball. I am still not clear as to why their is such a difference in how the two sports are treated. It seems plain to me that there is no difference, but maybe there is something I am missing.
I don’t know why either, sorry. Maybe this ruling will eventually be used to remove baseball’s antitrust exemption sometime in the future. I am not sure how or why baseball was exempted in the first place.
If it will help the Giants win the SuperBowl then I’m in favor. Otherwise I don’t care.
Boo!Hiss!
I think it’s a small step in the right direction. I think ip and copyright is ridiculous. I’ll be posting on the subject later tonight or tomorrow morning. I’ll be sure to link this post!
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