Question

In a forbes.com column, Patrick Rishe, an economist at Washington University, noted that in recent years, the National Football League has significantly expanded the number of games it broadcasts. As a result, he argued: "The NFL has oversaturated the market with its product.... TV ratings, consequently, have fallen. At least in part, diminishing marginal utility is a likely explanation as to why." Briefly explain his reasoning.

Short answer

Patrick Rishe suggests that the NFL, by broadcasting more games, may have triggered 'diminishing marginal utility' amongst viewers. This means that as viewers watch more games, they derive less satisfaction from each additional game. The result could be a decrease in viewership reflected in falling TV ratings.

Step-by-step solution

Understanding Marginal Utility

Marginal utility is an economic concept that explains the value a consumer gets from consuming one additional unit of a good or service. It states that for each additional unit consumed, the level of satisfaction (utility) gained tends to decrease.

Applying to the NFL

In this case, the NFL (the provider of a service - football games) is increasing the number of these services (games it broadcasts). According to the principle of diminishing marginal utility, as consumers (viewers) consume more of this service (watch more games), the satisfaction they receive from each additional game tends to decrease.

Correlating to TV Ratings

TV ratings generally measure the popularity and reach of a show, in this case, the NFL games. If viewers are deriving less satisfaction from watching more games (due to diminishing marginal utility), they might choose to watch fewer games or switch off entirely, leading to a fall in TV ratings.

Key concepts

marginal utility in entertainment

Marginal utility is an important concept in economics that applies to various fields, including entertainment. It describes the additional satisfaction a consumer receives from consuming one more unit of a good or service. In the context of entertainment like sports broadcasting, this principle can help explain how people enjoy watching events over time. For example, when a new season of your favorite sports league starts, you might be very excited to watch the games.

Initially, the enjoyment or satisfaction from watching these games is quite high. However, as more games are broadcasted, your enthusiasm might start waning. This declining excitement represents diminishing marginal utility. Once you've watched a few games back-to-back, each additional game provides less joy than the previous one.

This trend can explain the decrease in TV ratings. As entertainment providers, such as the NFL, increase their broadcast frequency, the additional satisfaction viewers receive from each new game broadcast decreases.

consumer satisfaction

Consumer satisfaction is vital for businesses, including those in entertainment like sports leagues. It represents how well a product or service meets or surpasses consumer expectations. The goal is to keep viewers happy and engaged, which in turn supports business success. When people are satisfied, they're more likely to remain loyal to the brand or continue using the product.

In sports broadcasting, maintaining high levels of viewer satisfaction can be challenging, especially with the risk of oversaturation.

• Oversaturation occurs when too many games or events are available, exceeding the audience's capacity or desire to watch.
• This can lead to diminished interest, as it becomes more difficult to see each game as special or unique.

To maintain consumer satisfaction, sports leagues need to strike a balance between offering enough content to meet demand while avoiding oversaturation that might drive viewers away.

economic principles in sports broadcasting

Several economic principles come into play within sports broadcasting, significantly impacting how the industry operates and how content is consumed. One primary principle is supply and demand, which affects pricing, availability, and consumer interest. In sports broadcasting, understanding consumer demand is crucial. When the supply of sports games exceeds demand, issues like diminishing marginal utility and reduced viewer satisfaction arise.

Another principle is opportunity cost, which refers to the benefits a consumer misses out on when choosing one alternative over another. In watching a sports game, the opportunity cost might relate to other forms of entertainment or activities a viewer might enjoy. As more games are broadcast, viewers may start weighing their options differently, particularly if each additional game offers less satisfaction.

Pricing strategies are also affected by economic principles. Advertising rates, for example, depend on viewer interest and ratings. Lower interest and ratings can lead to lower revenue from advertisers. Understanding these principles helps broadcasters make strategic decisions about game schedules, advertising, and how to maximize viewer enjoyment and business profitability.