NFL team revenue distribution and revenue sharing: a median voter theorem

Abstract

Purpose

Revenue sharing is ubiquitous among North American professional sports leagues. Under pool revenue sharing, above-average revenue teams of a league effectively transfer revenues to below-average revenue teams. Herein, the authors find and prove that a league will vote into policy a pool revenue sharing arrangement if and only if mean team revenue is greater than presharing median revenue, where this condition is equivalent to the presence of positive nonparametric skewness in a league’s distribution of team revenues. This represents a median voter theorem for league revenue sharing.

Design/methodology/approach

The authors consider the case of revenue sharing for the National Football League (NFL), a league that pools and equally shares national revenues among member teams.

Findings

The authors find evidence of positive and significant nonparametric skewness in NFL team revenue distributions for the 2004–2016 seasons. This distribution is observed amid annual majority rule votes of League owners in favor of maintaining the incumbent pool revenue sharing model (as opposed to no team revenue sharing). Distribution of revenues – namely the existence of outlying large market NFL teams – appears to consistently explain the historical popularity of NFL revenue sharing.

Originality/value

The median voter theorem uncovered in the case of NFL applies to all professional sports leagues and can be used predictively as well as descriptively.

Citation

Ehrlich, J., Ghimire, S. and Sanders, S. (2021), "NFL team revenue distribution and revenue sharing: a median voter theorem", Managerial Finance, Vol. 47 No. 4, pp. 525-534. https://doi.org/10.1108/MF-03-2020-0105