Cost of Doing Business Sometimes Doesn’t Reflect Actual Costs to the Business


In the latest issue of Bloomberg Businessweek there’s a piece by Paul M. Barret, Will Brain Injury Lawsuits Doom or Save the NFL?, that discusses what should probably be considered a negative externality.

Even as an expected 110 million Americans take to their couches for the 47th Super Bowl on Feb. 3, Locks is waging a legal battle that represents the most serious threat to the viability of big-time football since an outbreak of fatal skull fractures back in the leather-helmet days. Locks and a group of allied plaintiffs’ lawyers are suing the National Football League on behalf of more than 4,000 former players and their wives who accuse the $9.5 billion-a-year business of covering up life-altering brain injuries.

Despite—or perhaps because of—its inherent brutality, football remains America’s most popular sport by far. Not only is the NFL the country’s single most lucrative sports enterprise, the league and its 32 teams also provide an atrophying television industry with its most profitable programming and an ideal vehicle for selling cars, beer, and erectile-dysfunction remedies. (The teams evenly share broadcast and licensing revenue. Ticket sales are split in a manner favoring home teams.)

I’ve posted a bit about at least one negative externality, namely start-up and operating costs of stadiums, which Sports Franchises benefit from since many of those costs are covered by public funds.  This piece is describing how the costs of player injuries isn’t borne by the NFL, and that the industry might have actually stifled knowledge about Football related head injuries through proprietary research which it has actively promoted.  The latter, as I’ve talked about in past posts, falls under publication bias.

The basic idea here is that, if we were to factor in the full start-up and variable costs of the industry, we might have a more accurate picture of the actual profitability of the industry.  What we consider to be profitable entertainment industries (e.g. Pop Music, Sports) will look far less “sustainable” and be less likely to function as a foil to the supposedly failing, unprofitable, unsustainable, or “broken” Performing Arts economic models.


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