A General Theory of Professional Sports Leagues

The evolution of free agency in professional sports leagues spans two decades from the 1972 Flood v. Kuhn decision in Major League Baseball (MLB) to the 1992 McNeil, et al. v. NFL decision in the National Football League (NFL).1 In spite of the apparent relaxation of eligibility requirements for free agency, ancillary institutional arrangements have severely limited player mobility during these two decades in all leagues but MLB. As part of a revolutionary partnership, National Basketball Association (NBA) players agreed to a league-wide payroll cap for team salaries in 1984 in exchange for a guaranteed 53 percent of NBA designated gross revenues (DGR).2 The ostensible purpose of the NBA payroll or salary cap was to control spiraling salaries and generate competitive balance within the league, but since its inception, the payroll cap has served to limit player mobility under free agency, and its effect on competitive balance is subject to question.3 Although free agency eligibility requirements have been lenient in the NFL, strict compensation rules have thwarted player movement until McNeil. In spite of free agency concessions by NFL owners following McNeil, movement of players among teams will continue to be limited under The Collective Bargaining Agreement of 1993, because of the concurrent imposition of a payroll cap at 64 percent of league-wide DGR beginning with the 1994 season.4