Here at the Olin Business School at Washington University in St. Louis - just recently ranked the top undergraduate business program in America - it's that time of year for students to start cramming for their final exams.
And with the NFL's TV ratings taking a nosedive in 2016, perhaps it's time we give NFL executives a little Economics 101.
As a Microeconomics professor, one of the topics covered is a discussion of the "utility" (or satisfaction) which consumers derive from their various purchasing decisions.
Invariably, one of the universal truths in the study of economics is the law of diminishing marginal utility. Simply defined, this law suggests that the additional satisfaction we obtain from consuming the next unit of some good or service (i.e. marginal utility) will eventually decline as we consume more and more of the same good/service.
Coincidentally, this implies we are willing to pay less and less for additional units of a particular good/service. The logic is fairly clear. Marginal utility is a proxy for the value we assign with consuming a particular good, and in this way, is a proxy for how much we would be willing to pay for that last unit consumed. If I'm starving, I'd pay $1 for that first donut. But once my hunger is satiated, I'm not willing to pay another $1 to eat a second donut immediately after the first.
The NFL's TV ratings in 2016 have taken a Cam Newton-like beating. Below are Sports Business Daily's figures from the NFL's Week 13, which shows all NFL networks saw reductions in ratings.
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NFL WEEK 13 SUNDAY OVERNIGHT RATINGS
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NET
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'16 WINDOW
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RAT.
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'15 WINDOW
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RAT.
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% +/-
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CBS
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(single)
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11.1
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(single)
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11.2
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-0.9%
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Fox
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(regional)
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7.8
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(regional)
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11.0
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-29.1%
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Fox
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Giants-Steelers (85%)
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16.6
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Panthers-Saints (61%)
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18.2
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-8.8%
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NBC
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Panthers-Seahawks
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11.5
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Colts-Steelers
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12.2
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-5.7%
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Going back to late October, Sports Illustrated reported that Monday Night Football was down 24% from 2015, Sunday Night Football was down 19% and Thursday night was down 18%.
More recently, there has been some discussion of whether the NFL should abandon Thursday night football games. Citing Mike Florio from Pro Football Talk:
With mounting criticism of the quality of every-week Thursday football, scattered suggestions have emerged in recent weeks that the NFL could pull the plug on the experiment. Those suggestions are stronger than that; per a source with knowledge of the situation, the league will be considering the possibility of ending, or at least limiting, Thursday Night Football.
The truth of the matter is that there are probably numerous reasons why ratings are down this year. From sub-par match-ups, the Trump-Clinton show, fallout from public relations issues associated with whether players stand for the national anthem, or reductions in the quality of play because players don't practice as much due to concussion fears, all of these explanations could be plausible.
But to this economist, there is no question that diminishing marginal utility has to play a significant role as well.
With games on Thursday, Sunday, and Monday night, and with games all day Sunday, is it possible that we've reached a tipping point in just how much NFL football we can consume?
The NFL's Red Zone channel is likely also a contributing factor to ratings decline. In this A.D.D. society we live in, time is money...more so than ever before. If diminishing marginal utility has set in, we are willing to spend less time watching games. The NFL Red Zone is the perfect way for busy consumers to cram their NFL game-watching experience in a tight 30-minute package. If I watch the Red Zone from 3:30 - 4 PM EST, for example, I'll see the crescendo of all the early games. I can do the same thing from 6:45-7:15 PM EST for the late games.
The NFL has oversaturated the market with its product.
The resulting decline in TV ratings, consequently, have fallen.
At least in part, diminishing marginal utility is a likely explanation as to why.
