Question

What are some similarities and differences between the MLB and NFL salary cap?

Answer 1

Major League Baseball (MLB) and the National Football League (NFL) are as big of corporations as any Fortune 500 company, and the business model behind both is quite fascinating.

MLB and NFL both work as two different models of markets. The MLB would be similar to a free market society, whereas the NFL operates more as one with market regulation.

The main difference is that the NFL is one organization. Teams may be owned by individuals, but ultimately they fall under the umbrella of the NFL. This means the NFL redistributes some of the overall revenue on broadcast rights and merchandise back to all teams equally, despite if they are winning or losing. On top of that, the NFL has a salary cap and other regulations.

This is why many say that NFL favors the owners of the teams over the players. In comparison to another business, this is like The GAP and Old Navy. They are owned under the same company, Gap Inc., but each are just under different brand names. MLB, on the other hand, is completely opposite.

All baseball teams are their own companies - all competing against each other. Teams that win get greater attendance, more media coverage and therefore more money. This would be like Qdoba vs. Chipotle - both make pretty similar burritos, but they compete against each other for customers.

Working as a free market, there is no salary cap on that the team must uphold, and the theory is that the more an owner puts into the players and the welfare of the team; the better the baseball team is, the more money it will make. Both markets have their issues.

The market regulations the NFL places on the teams create this idea of redistribution of equality, as political scientist Josh Sager puts it. Each major league team is in a different city with different sized markets. So small markets have a harder time at getting the more expensive players because they simply don’t have the access to this money.

This is why the same teams seem to make it far in baseball year after year, where NFL teams are generally more random. However, NFL has its own drawbacks. MLB players sign a contract and the MLB Union, Major League Baseball Player’s Association, has worked to where when a player signs they are guaranteed a certain amount of money regardless of whether they play or not due to an injury.

Many economists consider the MLB to favor the player over the owners, and this is why, and it also serves as a contributing factor to why MLB players stay in longer. Partially due to the salary cap, the NFL does not have this. Football is arguably a more dangerous sport than baseball and has more injuries. With this, contracts are more vague on what is promised to a player if they get injured or are traded.

Progressive economists in favor of a more liberal approach to the economy favor the NFL’s system. One that distributes wealth more fairly. More conservative economists favor the MLB’s approach - one that rewards hard work and individualism. Either way, it just goes to show you that everything is a business, and when it comes to sports, there is no such thing as a free game.